Starwood Net Income 4th Qtr of 2005 - Up 59% to $159 million

For the Full Year 2005, Starwood's Earnings Up 7% to $422 million

. October 14, 2008

WHITE PLAINS, NY, February. 2, 2006. Fourth Quarter 2005 Highlights:

EPS from continuing operations for the fourth quarter of 2005 increased 37% to $0.70, compared to $0.51 in the fourth quarter of 2004. Excluding special items, EPS from continuing operations increased 25% to $0.71 for the fourth quarter of 2005 compared to $0.57 for the fourth quarter of 2004. REVPAR at Same-Store Owned Hotels in North America and worldwide increased 12.2% and 9.4%, respectively, when compared to the fourth quarter of 2004. ADR increased 9.5% and 7.0% in North America and worldwide, respectively.

Margins at Starwood branded Same-Store Owned Hotels in North America improved approximately 140 basis points when compared to the fourth quarter of 2004, despite the negative impact of a significant 30% increase in energy costs in North America.

Globally, REVPAR for Same-Store Owned Hotels grew for W Hotels (18.9%), followed by Westin (8.4%), Sheraton (8.2%), and St. Regis/Luxury Collection (5.2%), with each of these brands experiencing both ADR and occupancy gains. Third-party management and franchise fees, including fees from the Le Meridien hotels from the acquisition date of November 24, 2005, increased 30.2% in the quarter when compared to 2004.

Excluding the fractional sales at the St. Regis Aspen and residential sales at the St. Regis in San Francisco, contract sales at vacation ownership properties were up 17.8% when compared to 2004. However, reported revenues from vacation ownership and residential sales decreased $5 million in the quarter when compared to 2004 primarily due to percentage of completion accounting for pre-sales at new timeshare projects.

Net income for the fourth quarter of 2005 increased 59% to $159 million, compared to net income of $100 million in the fourth quarter of 2004. Excluding special items, income from continuing operations increased 32% to $162 million in the fourth quarter of 2005 compared to $123 million in the same period of 2004.

Total Company Adjusted EBITDA increased 19.6% to $391 million when compared to $327 million in 2004.

For the thirteenth quarter in a row, total Company market share in North America increased for the Company's owned and managed hotels as well as for system-wide hotels. According to Smith Travel Research, system-wide market share in North America increased approximately 100 basis points for the full year 2005 when compared to 2004.

Starwood Hotels & Resorts Worldwide, Inc. ("Starwood" or the "Company") today reported EPS from continuing operations for the fourth quarter of 2005 of $0.70 compared to $0.51 in the fourth quarter of 2004. Excluding special items which net to a negative $3 million and primarily relate to severance related costs associated with the corporate restructuring in the quarter, net gains realized on the sale of several hotels partially offset by a hotel impairment charge and additional tax expense arising from the deposit with the IRS of funds for taxes claimed as a result of the 1998 disposition of ITT World Directories, EPS from continuing operations was $0.71 for the fourth quarter of 2005 compared to $0.57 in the fourth quarter of 2004. Income from continuing operations was $159 million in the fourth quarter of 2005 compared to $111 million in 2004. Excluding special items, income from continuing operations was $162 million for the fourth quarter of 2005 compared to $123 million in 2004. In connection with the announced sale of 38 hotels to Host Marriott Corporation, the Company's EPS in the fourth quarter was positively impacted by approximately $17 million or $0.05 per share associated with the cessation of depreciation of these assets held for sale. The Company's results continued to be negatively impacted by lost business in New Orleans, Cancun and Miami as a result of damage at its owned hotels from Hurricanes Katrina and Wilma. Although the Company has recorded expenses for its insurance deductibles associated with these storms, in accordance with accounting rules, it has not recorded any of its expected recoveries under its existing business interruption insurance policies. Net income (after discontinued operations) was $159 million and EPS was $0.70 in the fourth quarter of 2005 compared to $100 million and EPS of $0.46 in the fourth quarter of 2004. The effective tax rate for the fourth quarter of 2005 was 21.4%.

Steven J. Heyer, CEO, said "I am very pleased with our results this quarter. We beat our top and bottom line expectations and for thirteen quarters in a row our market share has increased. We are moving full speed ahead with all of our strategic initiatives and with the brand building initiatives rolling out across our system, we expect our momentum to continue.

During the quarter we made significant progress toward reducing our investment in owned real estate, while maintaining long-term, attractive management agreements with an outstanding partner. I couldn't be more pleased with the results of this transaction and the future opportunities it creates for us. And, as we said when we announced the deal, it re-opened our window for share repurchases. Since our window opened, we have repurchased $373 million in stock, and we plan to be buyers of our stock throughout 2006.

We closed on the purchase of the Le Meridien brand, adding another upper upscale brand and 122 hotels to our system. The brand is very strong, and we are pleased with the quality of the hotel management teams in place. After these two transactions, our earnings become more balanced between hotel ownership and fee income. We expect to aggressively drive both businesses.

Entering into 2006, we have significant opportunities ahead of us. We will continue to work on unlocking the value in our owned real estate. Our core lodging business remains strong and supply continues to be constrained. Our pipeline continues to grow, outpacing our fair share, and we've added resources to aggressively pursue the opportunity. We are focused on our key initiatives and expect 2006 to be another great year at Starwood with our core business, on a comparable basis, growing approximately 15%."

Operating Results:

Fourth Quarter Ended December 31, 2005

Cash flow used for operations was $54 million compared to cash flow from operations of $201 million in 2004. The decrease in cash flows from operations was primarily due to the payment, in October 2005, of the deposit with the IRS associated with the 1998 disposition of ITT World Directories. Total Company Adjusted EBITDA was $391 million compared to $327 million in 2004.

Owned, Leased and Consolidated Joint Venture Hotels

REVPAR for Same-Store Owned Hotels in North America and worldwide increased 12.2% and 9.4%, respectively, when compared to 2004. REVPAR at Same-Store Owned Hotels in North America increased 18.9% at W, 11.7% at Sheraton, 10.5% at Westin, and 10.3% at St. Regis/Luxury Collection. REVPAR growth was particularly strong at the Company's owned hotels in New York, Atlanta, Houston, Chicago, and the Hawaiian Islands. Revenue from transient travel was up 16.6% in North America when compared to 2004. Internationally, Same-Store Owned Hotel REVPAR increased 10% after adjusting for the impact of foreign exchange. As reported, in US dollars, Same-Store Owned Hotel REVPAR increased 1.5%, with Latin America up 9.2% (REVPAR in owned hotels in Argentina, Brazil, Peru and resort areas in Mexico was particularly strong, excluding two hotels in Cancun which were closed due to damage from Hurricane Wilma), Europe up 1.6%, and Asia Pacific down 8.5% due to the fact that one of the four owned hotels in this region was under significant renovation during the quarter.

Total revenues at Same-Store Owned Hotels worldwide increased 6.6% to $843 million when compared to $791 million in 2004 while costs and expenses at the hotels increased 5.7% to $620 million in 2005 compared to $587 million in 2004. Total revenues at Same-Store Owned Hotels in North America increased 9.2% to $626 million in 2005 when compared to $573 million in 2004 while costs and expenses at these hotels increased 7.3% to $453 million when compared to $422 million in 2004. The increase in costs and expenses is primarily due to an increase in occupancy and a significant 30% increase in energy costs in North America.

System-wide REVPAR; Management/Franchise Fees

System-wide (owned, managed and franchised) REVPAR for Same-Store Hotels in North America, excluding Le Meridien hotels, increased 10.8%; W Hotels 17.9%, Sheraton 11.3%, Westin 9.8%, Four Points by Sheraton 9.3%, and St. Regis/Luxury Collection 6.9%. For the thirteenth quarter in a row, total Company market share in North America increased for the Company's owned and managed hotels as well as for system-wide hotels. According to Smith Travel Research, system-wide market share in North America increased approximately 100 basis points for the full year 2005 when compared to 2004. Total third-party management and franchise fees, including fees from the Le Meridien hotels from the acquisition date of November 24, 2005, were $104 million in the quarter, up $24 million, or 30.2%, from last year.

Vacation Ownership and Residential

Vacation ownership and residential revenue, which excludes gains on sales of notes receivable, decreased $5 million, or 2.5% to $192 million when compared to 2004. This decrease was primarily due to a larger portion of vacation ownership sales coming from pre-sales at new phases under construction at the Westin Ka'anapali Ocean Resort Villas in Maui, Hawaii and the Westin Kierland Villas in Scottsdale, Arizona which are recognized based on percentage of completion in accordance with US GAAP. Contract sales, excluding fractional sales at the St. Regis Aspen and residential sales at the St. Regis in San Francisco, were up 17.8% when compared to 2004. The average price per timeshare unit sold increased approximately 11.8% to $22,868, and the number of contracts signed increased approximately 5.3% when compared to 2004.

Residential sales continued in the fourth quarter at the St. Regis Museum Tower in San Francisco. The Company recognized revenues of approximately $42 million, an increase of $27 million compared to 2004. The St. Regis Museum Tower hotel and condominiums opened in November 2005.

In addition to its robust pipeline of existing vacation ownership inventory, the Company continues to evaluate its existing owned real estate for potential conversion to vacation ownership, fractional, or residential projects. For example, the Company is converting four floors of the St. Regis hotel in New York into fractional units and residences and has partially demolished the Sheraton in Cancun, Mexico, where it will build a timeshare development that is expected to have up to 73 units upon completion of the first phase. The Company is also working with its business partners to develop similar conversion opportunities at managed hotels.

Currently, the Company is working on new phases at the Westin Ka'anapali Ocean Resort Villas in Maui, Hawaii, the Westin Kierland Villas in Scottsdale, Arizona, the Sheraton Broadway Plantation in Myrtle Beach, South Carolina, and the Sheraton Vistana Villages in Orlando, Florida.

In addition to the expansion at the existing properties above, Starwood Vacation Ownership is in the predevelopment phase of several new vacation ownership resorts including one in Princeville on the island of Kauai, Hawaii. The Company is also working on a third St. Regis-branded fractional resort in Punta Mita, Mexico.

During the fourth quarter of 2005, the Company sold approximately $221 million of vacation ownership notes receivable and recognized gains of $25 million as compared to gains of $3 million in the same period of 2004.

Results for the Twelve Months Ended December 31, 2005

EPS from continuing operations increased 9% to $1.88 compared to $1.72 in 2004. Excluding special items, EPS from continuing operations increased 44% to $2.34 compared to $1.62 in 2004. Income from continuing operations was $423 million compared to $369 million in 2004. Excluding special items, income from continuing operations increased 51% to $526 million compared to $348 million in 2004. Net income (after discontinued operations) was $422 million and EPS was $1.88 compared to $395 million and $1.84, respectively, in 2004.

Cash flow from operations was $764 million compared to $578 million in 2004. Total Company Adjusted EBITDA was $1.417 billion compared to $1.150 billion in 2004.

Brand Development/Unit Growth

During the fourth quarter, the Company signed 42 hotel management and franchise contracts (representing approximately 15,000 rooms) including the W Las Vegas (Las Vegas, Nevada, 4,000 rooms), Westin Orlando Convention Center (Orlando, Florida, 603 rooms), and W Pudong (Shanghai, China, 400 rooms). In addition to the 122 Le Meridien hotels (representing approximately 31,700 rooms) that are currently in the system following the Company's acquisition of the brand in November 2005, nine new hotels and resorts (representing approximately 2,200 rooms) entered the system, including the Westin Paris (Paris, France, 438 rooms) and the Sheraton Haikou (Haikou, China, 341 rooms). Thirteen properties (representing approximately 3,500 rooms) were removed from the system during the quarter (4 Sheratons, 4 Four Points, 3 Westins and 2 unbranded). The Company expects to open more than 50 hotels (representing approximately 14,000 rooms) in 2006. The Company had approximately 220 hotels and approximately 65,000 rooms in its active global development pipeline at December 31, 2005, with roughly half of that number in international locations.

In November 2005, the Company opened its third Remede Spa in the St. Regis hotel in San Francisco. The Company also had six Bliss spas at the end of 2005. In 2006, the Company plans to open 2 new Bliss spas in W hotels in Dallas and Los Angeles, with several other Bliss and Remede Spas in various planning stages.

Distribution

Starwood's central distribution systems gross bookings during the fourth quarter of 2005 increased approximately 10.1% when compared to 2004. Gross online bookings through proprietary branded websites increased 31.2% as compared to 2004, with gross dollar bookings from the proprietary branded sites increasing 38.3%. Gross online dollar bookings represented approximately 12.2% of the overall gross dollar bookings, with 78.6% of that coming from our proprietary branded websites, as compared to 10.4% of overall gross dollar bookings, with 74.6% of that from proprietary branded websites in 2004.

The above distribution figures do not include the Le Meridien hotels. The Company expects to integrate these hotels into the starwoodhotels.com and related websites by the end of the first quarter of 2006.

Capital

Gross capital spending during the quarter included approximately $99 million in renovations of hotel assets including construction capital at the Sheraton Hotel & Towers in New York, New York, the Sheraton Hotel & Marina in San Diego, California, and the Sheraton Royal Denarau Resort in Nadi, Fiji. Investment spending on gross VOI inventory was $36 million, which was offset by cost of sales of $35 million tied to VOI sales during the quarter. The inventory spend included VOI construction at the Westin Ka'anapali Ocean Resort Villas in Maui, Hawaii, the Sheraton Vistana Villages in Orlando, Florida, and the Westin Kierland Villas in Scottsdale, Arizona. Additionally during the quarter, further investment spending of $241 million included the purchase of the Le Meridien brand and the related management and franchise business, which was substantially offset by the return of the Company's previous investment in the outstanding senior debt of Le Meridien, as well as the development of the St. Regis Museum Tower in San Francisco which consists of 260 hotel rooms and 102 condominium units and which as discussed earlier, opened in November 2005. Construction of this project is substantially complete, and through December 31, 2005, the Company has invested $318 million in the project. The Company expects to realize gross proceeds of approximately $245 million from the sale of the project's condominiums and has recognized approximately $198 million in revenues through the end of 2005.

Share Repurchase

For the quarter ended December 31, 2005, the Company repurchased approximately 4 million shares at a total cost of approximately $253 million. At December 31, 2005, approximately $1.043 billion remained available under the Company's Board authorized share repurchase program. At December 31, 2005, Starwood had approximately 219 million shares outstanding (including partnership units and exchangeable preferred shares).

From January 1, 2006 through February 1, 2006, the Company repurchased an additional 1.9 million shares at a total cost of approximately $120 million.

Dividend

Starwood Hotels & Resorts (the "Trust") declared its annual dividend for 2005 of $0.84 per share, which was paid on January 20, 2006 to shareholders of record on December 31, 2005.

The Trust expects to declare a dividend for the first quarter of 2006 of approximately $0.21 per Share to shareholders of record as of a date in the latter part of February 2006 to be paid in early March 2006. The dividend declaration and the amount are subject to approval of the Trust's Board of Trustees.

Balance Sheet

At December 31, 2005, the Company had total debt (including debt classified as held for sale) of $4.145 billion and cash and cash equivalents (including $307 million of restricted cash) of $1.204 billion, or net debt of $2.941 billion, compared to net debt of $3.136 billion at the end of the third quarter of 2005.

At December 31, 2005, debt was approximately 69% fixed rate and 31% floating rate and its weighted average maturity was 4.4 years with a weighted average interest rate of 6.27%. The Company had cash (including total restricted cash) and availability under domestic and international revolving credit facilities of approximately $2.147 billion.

Asset Sales

In 2005, in addition to the sale of three hotels in joint ventures that we hold minority interest in, the Company sold ten wholly-owned hotels for cash proceeds of approximately $510 million. Additionally, in January 2006 the Company completed the sale of four hotels for proceeds of $234 million in cash. As previously announced, the Company entered into a definitive agreement with Host Marriott Corporation to sell 38 hotels for cash, assumption of debt and stock. As part of the agreement, the Company will manage the hotels for up to 40 years.

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