HOTEL EXECUTIVE

Starwood Reports 3Q '08 Results

. October 26, 2008

WHITE PLAINS, NY, October 23, 2008.

Third Quarter 2008 Highlights

Excluding special items, EPS from continuing operations was $0.71. Including special items, EPS from continuing operations was $0.62.

Excluding special items, income from continuing operations was $129 million. Including special items, income from continuing operations was $113 million.

Total Company Adjusted EBITDA was $330 million.

Worldwide System-wide REVPAR for Same-Store Hotels increased 3.5% compared to the third quarter of 2007. System-wide REVPAR for Same-Store Hotels in North America decreased 0.5%.

Management and franchise fees increased 6.6% compared to 2007.

Worldwide REVPAR for Starwood branded Same-Store Owned Hotels increased 0.3% compared to the third quarter of 2007. REVPAR for Starwood branded Same-Store Owned Hotels in North America decreased 0.5%.

Margins at Starwood branded Same-Store Owned Hotels Worldwide and in North America decreased 208 and 151 basis points, respectively, compared to the third quarter of 2007.

Reported revenues from vacation ownership and residential sales decreased 11.0% compared to 2007.

The Company signed 36 hotel management and franchise contracts in the quarter representing approximately 8,000 rooms.

During the third quarter, the Company repurchased approximately 3.7 million shares at a cost of $134 million.

Starwood Hotels & Resorts Worldwide, Inc. ("Starwood" or the "Company") today reported EPS from continuing operations for the third quarter of 2008 of $0.62 compared to $0.61 in the third quarter of 2007. Excluding special items, which net to a charge of $16 million in 2008 and $14 million in 2007, EPS from continuing operations was $0.71 for the third quarter of 2008 compared to $0.68 in the third quarter of 2007. Excluding special items, the effective income tax rate in the third quarter of 2008 was 29.7% compared to 33.0% in the same period of 2007.

Income from continuing operations was $113 million in the third quarter of 2008 compared to $129 million in 2007. Excluding special items, income from continuing operations was $129 million for the third quarter of 2008 compared to $143 million in 2007.

Net income was $113 million and EPS was $0.62 in the third quarter of 2008 compared to $129 million and EPS of $0.61 in the third quarter of 2007.

Frits van Paasschen, CEO said, "While we can't control the economic environment, we can right-size our organization to offset the effects of slowing travel demand. Earlier this year we began a process to streamline our organization and reduce costs while continuing to invest in Starwood's future growth. I am confident that we will emerge from this downturn stronger than ever. Starwood is well-positioned with a strong balance sheet, and solid liquidity. In addition, our lodging teams are led by four divisional presidents with over 100 years of cumulative lodging experience. Thanks to a terrific brand portfolio, we enjoy a pipeline that will fuel global growth for years to come."

Operating Results

Third Quarter Ended September 30, 2008

Management and Franchise Revenues

Worldwide System-wide REVPAR for Same-Store Hotels increased 3.5% (0.3% using constant dollars) compared to the third quarter of 2007. International System-wide REVPAR for Same-Store Hotels increased 8.5% (2.0% using constant dollars). Worldwide System-wide REVPAR increases by region were: 13.8% in Latin America, 13.5% in Africa and the Middle East, 8.3% in Europe, 5.4% in Asia Pacific, and a decrease of 0.5% in North America. Worldwide System-wide REVPAR increases by brand were: Le M'eridien 8.8%, Four Points by Sheraton 7.5%, Sheraton 3.7%, Westin 1.7%, St. Regis/Luxury Collection 0.4%, and W Hotels 0.3%.

Management fees, franchise fees and other income were $218 million, up $5 million, or 2.3%, from the third quarter of 2007. Management fees grew 4.5% to $117 million and franchise fees grew 12.8% to $44 million.

Approximately 55% of the Company's management and franchise fees are generated in markets outside the United States.

During the third quarter of 2008, the Company signed 36 hotel management and franchise contracts representing approximately 8,000 rooms of which 33 are new builds and 3 are conversions from other brands. At September 30, 2008, the Company had approximately 470 hotels in the active pipeline representing approximately 110,000 rooms, driven by strong interest in all Starwood brands. Of these rooms, 66% are in the upper upscale and luxury segments and 62% are in international locations.

During the third quarter of 2008, 35 new hotels and resorts (representing approximately 7,533 rooms) entered the system, including the Sheraton Phoenix Downtown Hotel (Phoenix, AZ, 1,000 rooms), The Equinox Golf Resort and Spa (Manchester, VT, 192 rooms), The W Hong Kong (Hong Kong, China, 393 rooms), Westin Verasa Napa (Napa, CA, 180 rooms), aloft Minneapolis (Minneapolis, MN, 155 rooms) and the Element Lexington (Lexington, MA, 123 rooms). Seven properties (representing approximately 2,445 rooms) were removed from the system during the quarter.

Owned, Leased and Consolidated Joint Venture Hotels

Worldwide REVPAR for Starwood branded Same-Store Owned Hotels increased 0.3%. REVPAR at Starwood branded Same-Store Owned Hotels in North America decreased 0.5%. Internationally, Starwood branded Same-Store Owned Hotel REVPAR increased 1.5% (down 6.9% using constant dollars).

Revenues at Starwood branded Same-Store Owned Hotels in North America decreased 1.5% while costs and expenses increased 0.5% when compared to 2007. Margins at these hotels decreased 151 basis points.

Revenues at Starwood branded Same-Store Owned Hotels Worldwide decreased 0.4% while costs and expenses increased 2.4% when compared to 2007. Margins at these hotels decreased 208 basis points.

Approximately 45% 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 $575 million when compared to $605 million in 2007. Reported revenues and operating income were impacted by the sale or closure of nine hotels since the beginning of the third quarter of 2007. These hotels had $2 million of revenues and $2 million of expenses (before depreciation) in 2008 as compared to $29 million of revenues and $23 million of expenses (before depreciation) in the same quarter of 2007.

Vacation Ownership

Total vacation ownership reported revenues decreased 27.4% to $183 million when compared to 2007. Reported revenues are impacted by the timing of the recognition of deferred revenues under percentage of completion accounting for projects under construction. During the third quarter of 2008, the Company was actively selling vacation ownership interests at 20 resorts and is also in the predevelopment phase of new fractional or vacation ownership resorts in California, Colorado, Hawaii, and Mexico.

Originated contract sales of vacation ownership intervals decreased 29.5% primarily due to the sellout of the Company's Westin Ka'anapali Ocean Resort North in Maui and an overall decline in demand. The average price per vacation ownership unit sold decreased 25.4% to approximately $19,000, 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 6.1% when compared to 2007.

The Company did not sell any vacation ownership receivables during the third quarter. As such, the Company did not recognize the previously anticipated gain of $10 - 15 million during the quarter. Conditions remain uncertain in the asset backed securities market, and it is unlikely that conditions will improve before year-end. As a result, the Company's full year guidance no longer includes any gains from securitizations in 2008.

Given declining sales in the vacation ownership business, the Company is resizing the existing cost structure. The Company has closed three sales centers and is in the process of reducing overhead to better fit the revised expectations for the business.

Residential

Residential fees in the third quarter of 2008 totaled $43 million compared to $2 million in the same period in 2007. Residential fees in the 2008 period include license fees in connection with the St. Regis Singapore Residences, which opened in the third quarter of 2008. This project opened earlier than expected and the Company had previously included those fees in its implied guidance for the fourth quarter of 2008. Residential fees in the third quarter of 2008 also include a non-refundable license fee received by the Company in connection with a St. Regis project currently under development.

Selling, General, Administrative and Other

Selling, general, administrative and other expenses decreased 1.7% to $113 million compared to the third quarter of 2007. The decrease was primarily due to the Company's continued focus on reducing its cost structure.

In the third quarter, the Company completed the first phase of its overhead cost reduction program, making significant reductions across several corporate departments. The Company anticipates completing the review of the other functional areas, and implementing reductions in those areas by the end of the first quarter of 2009.

Restructuring Charges

During the third quarter of 2008, the Company recorded a $22 million charge in connection with its ongoing initiative of rationalizing its cost structure in light of the decline in growth in its business units. The charge primarily related to costs associated with the closure of a vacation ownership call center and two sales centers as well as severance costs associated with the reduction in force at the Company's corporate offices.

Asset Sales

During the third quarter of 2008, the Company completed the sale of one hotel for net cash proceeds of $15 million. The Company recorded a gain of $4 million in connection with this sale. The Company still anticipates closing on the sales of three hotels in Venice as well as the Westin Turnberry by the end of October, with additional proceeds of approximately $325 million.

Capital

Gross capital spending during the quarter included approximately $72 million in renovations of hotel assets including construction capital at the Sheraton Steamboat Resort, Sheraton Fiji Resort, W Times Square, Phoenician Resort, aloft Lexington and element Lexington. Investment spending on gross vacation ownership interest ("VOI") inventory was $78 million, which was offset by cost of sales of $36 million associated with VOI sales during the quarter. The inventory spend included VOI construction at the Sheraton Vistana Villages in Orlando, the Westin Lagunamar Ocean Resort in Cancun, the Westin Riverfront Mountain Villas in Avon, the Westin Nanea Ocean Resort Villas in Maui, the Westin Desert Willow Villas in Palm Desert, as well as construction costs at the St. Regis Bal Harbour Resort in Bal Harbour.

Share Repurchase

During the third quarter of 2008, the Company repurchased approximately 3.7 million shares at a total cost of approximately $134 million. In the nine months ended September 30, 2008, the Company repurchased approximately 13.6 million shares at a total cost of approximately $593 million. Starwood had approximately 183 million shares outstanding (including partnership units) at September 30, 2008.

Balance Sheet

At September 30, 2008, the Company had total debt of $4.074 billion and cash and cash equivalents of $328 million (including $201 million of restricted cash), or net debt of $3.746 billion, compared to net debt of $3.229 billion at the end of 2007.

At September 30, 2008, debt was approximately 58% fixed rate and 42% floating rate and its weighted average maturity was 4.1 years with a weighted average interest rate of 5.73%. The Company had cash (including total restricted cash) and availability under the domestic and international revolving credit facility of approximately $1.910 billion.

Results for the Nine Months Ended September 30, 2008

EPS from continuing operations decreased to $1.60 compared to $1.84 in 2007. Excluding special items, EPS from continuing operations was $1.71 compared to $1.98 in 2007. Excluding special items, income from continuing operations was $318 million compared to $425 million in 2007. Net income was $250 million and EPS was $1.33 compared to $396 million and $1.84, respectively, in 2007. Total Company Adjusted EBITDA, which was impacted by the sale or closure of 13 hotels since the beginning of 2007, was $884 million compared to $995 million in 2007.

Outlook

The uncertainty surrounding the global economic environment and its impact on travel patterns continues to make it difficult to predict future results.

For the three months ended December 31, 2008:

Adjusted EBITDA is expected to be $250 million to $265 million assuming:

REVPAR change at Same-Store Company Operated Hotels Worldwide of -4% to -6% (-2% to -4% in constant dollars).

REVPAR change at Branded Same-Store Owned Hotels in North America of -9% to -11%.

North America Branded Same-Store Owned Hotel EBITDA will decline 20% to 25% with margin declines of 400 to 500 basis points.

Management and franchise revenues will be flat to down 2%.

Operating income from our vacation ownership and residential business will be down $50 million to $60 million (excludes potential gains on sale of vacation ownership notes).

Income from continuing operations, before special items, is expected to be approximately $65 million to $75 million, reflecting an effective tax rate of approximately 31%.

EPS before special items is expected to be approximately $0.36 to $0.42.

For the full year 2008:

Assuming a REVPAR growth at Same-Store Company Operated Hotels Worldwide of 2% to 4% and a REVPAR change at Branded Same-Store Company Owned Hotels in North America of -1% to 1%:

Adjusted EBITDA would be between $1.135 billion and $1.150 billion.

EPS before special items would be between $2.07 and $2.13.

North America Same-Store Branded Owned Hotel EBITDA will decline 5% to 10% versus 2007 with margin declines of 150 to 250 basis points.

Management and franchise revenue growth between 4% and 6%.

Operating income from our vacation ownership and residential business will decline $105 million to $115 million versus 2007.

Income from continuing operations before special items would be between $384 million and $394 million reflecting an effective tax rate of 30%.

Full year capital expenditures (excluding vacation ownership and residential inventory) would be approximately $500 million, including $300 million for maintenance, renovation and technology and $200 million for other growth initiatives. Additionally, net capital expenditures for vacation ownership and residential inventory, including Bal Harbour, would be approximately $275 million.

Full year depreciation and amortization expense would be approximately $357 million.

Full year interest expense would be approximately $233 million and cash taxes of approximately $50 million.

Full year weighted average diluted shares outstanding of 185 million.

The Company expects to open approximately 80 to 100 hotels (representing approximately 20,000 rooms) in 2008 and is targeting signing over 150 hotel management and franchise contracts in 2008.

For the full year 2009:

At the current time, given significant uncertainty in the global economy, it is very difficult to provide any definitive guidance looking out four quarters. What the Company can provide are some broad parameters being used for 2009 planning purposes. In the hotel business, the Company is of course planning on a decline in Worldwide REVPAR. The Company also anticipates another difficult year in the vacation ownership business with declines in originated sales. The Company expects to offset some of the impact of declining revenues by cutting costs at the hotel level, in the vacation ownership business and in corporate overhead. The Company is also significantly scaling back capital expenditures for owned hotels and the vacation ownership business.

Assuming North American and Worldwide Company-operated REVPAR declines 5% at today's exchange rates:

EBITDA would be approximately $1.0 billion.

EPS would be approximately $1.55.

A 1% change in REVPAR impacts Company-wide EBITDA by approximately $25 million, and a 1% change in the US dollar versus a basket of foreign currencies impacts Company-wide EBITDA by approximately $5 million.

Full year capital expenditures (excluding vacation ownership and residential inventory) would be approximately $225 million for maintenance, renovation and technology. Net capital expenditures for vacation ownership inventory would be moderately negative. Capital expenditures for Bal Harbour would be approximately $200 million.

Special Items

The Company's special items netted to a charge of $16 million (after tax) in the third quarter of 2008 compared to a charge of $14 million (after-tax) in the same period of 2007.

Starwood will be conducting a conference call to discuss the third quarter financial results at 10:30 a.m. (EDT) today at (913) 312-0967. The conference call will be available through simultaneous web cast in the Investor Relations/Press Releases section of the Company's website at http://www.starwoodhotels.com. A replay of the conference call will also be available from 1:30 p.m. (EDT) today through October 30, 2008 at 12:00 midnight (EDT) on both the Company's website and via telephone replay at (719) 457-0820 (access code 4490609).

Definitions

All references to EPS, unless otherwise noted, reflect earnings per diluted share from continuing operations. All references to "net capital expenditures" mean gross capital expenditures for timeshare and fractional inventory net of cost of sales. EBITDA represents net income before interest expense, taxes, depreciation and amortization. The Company believes that EBITDA is a useful measure of the Company's operating performance due to the significance of the Company's long-lived assets and level of indebtedness. EBITDA is a commonly used measure of performance in its industry which, when considered with GAAP measures, the Company believes gives a more complete understanding of the Company's operating performance. It also facilitates comparisons between the Company and its competitors. The Company's management has historically adjusted EBITDA (i.e., "Adjusted EBITDA") when evaluating operating performance for the total Company as well as for individual properties or groups of properties because the Company believes that the inclusion or exclusion of certain recurring and non-recurring items, such as revenues and costs and expenses from hotels sold, restructuring and other special charges and gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results. The Company's management also uses Adjusted EBITDA as a measure in determining the value of acquisitions and dispositions and it is used in the annual budget process. Due to guidance from the Securities and Exchange Commission, the Company now does not reflect such items when calculating EBITDA; however, the Company continues to adjust for these special items and refers to this measure as Adjusted EBITDA. The Company has historically reported this measure to its investors and believes that the continued inclusion of Adjusted EBITDA provides consistency in its financial reporting and enables investors to perform more meaningful comparisons of past, present and future operating results and provides a means to evaluate the results of its core on-going operations. EBITDA and Adjusted EBITDA are not intended to represent cash flow from operations as defined by GAAP and such metrics should not be considered as an alternative to net income, cash flow from operations or any other performance measure prescribed by GAAP. The Company's calculation of EBITDA and Adjusted EBITDA may be different from the calculations used by other companies and, therefore, comparability may be limited.

All references to Same-Store Owned Hotels reflect the Company's owned, leased and consolidated joint venture hotels, excluding condo hotels, hotels sold to date and hotels undergoing significant repositionings or for which comparable results are not available (i.e., hotels not owned during the entire periods presented or closed due to seasonality or hurricane damage). References to Company Operated Hotel metrics (e.g. REVPAR) reflect metrics for the Company's owned and managed hotels. References to System-Wide metrics (e.g. REVPAR) reflect metrics for the Company's owned, managed and franchised hotels. REVPAR is defined as revenue per available room. ADR is defined as average daily rate.

All references to contract sales or originated sales reflect vacation ownership sales before revenue adjustments for percentage of completion accounting methodology.

All references to management and franchise revenues represent base and incentive fees, franchise fees, amortization of deferred gains resulting from the sales of hotels subject to long-term management contracts and termination fees offset by payments by Starwood under performance and other guarantees.

Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with approximately 936 properties in more than 100 countries and 155,000 employees at its owned and managed properties. Starwood(R) Hotels is a fully integrated owner, operator and franchisor of hotels and resorts with the following internationally renowned brands: St. Regis(R), The Luxury Collection(R), W(R), Westin(R), Le M'eridien(R), Sheraton(R), Four Points(R) by Sheraton, aloft(SM), and element(SM). Starwood Hotels also owns Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. For more information, please visit www.starwoodhotels.com.

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