Starwood Reports Fourth Quarter 2008 Results

Approximately 47% of Starwood’s Owned Hotel earnings (before depreciation) are generated from outside the United States.

Revenues at owned, leased and consolidated joint venture hotels were $504 million when compared to $631 million in 2007.

Vacation Ownership

Total vacation ownership reported revenues decreased 48.3% to $134 million when compared to 2007. Originated contract sales of vacation ownership intervals decreased 43.2% primarily due to an overall decline in demand and the sellout of the Company’s Westin Ka’anapali Ocean Resort North in Maui. The average price per vacation ownership unit sold decreased 31.1% to approximately $17,000, driven by a higher sales mix of lower-priced inventory, including a higher percentage of lower-priced biennial inventory in Hawaii. The number of contracts signed decreased 17.2% when compared to 2007.

The Company did not sell any vacation ownership receivables during the fourth quarter. Although conditions remain uncertain in the asset backed securities market, the Company is exploring a variety of avenues to sell vacation ownership receivables. However, given unpredictable market conditions, the Company does not expect any gains from securitizations in 2009.

As a result of the current economic climate and business conditions, the Company has undertaken a comprehensive review of its vacation ownership business. The Company has significantly scaled back its overhead to match reduced revenue expectations. This included closing five sales centers and terminating over 500 employees during the fourth quarter. In 2008 and early 2009, the Company closed nine sales centers and three call centers and terminated approximately 900 employees. Additionally, the Company has reset capital plans for this business. No new projects are being initiated and the Company has decided to discontinue further development of some projects that were in their early stages. As a result, development costs and land values at certain projects have been written down to their fair value, resulting in an impairment charge during the fourth quarter of 2008 of approximately $72 million.

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