SHERATON HOHHOT HOTEL, CHINA THE WESTIN MUMBAI GARDEN CITY, INDIA

2011 proxy statement & 2010 annual report

LE MERIDIEN CHAMBERS MINNEAPOLIS, UNITED STATES THE ST. REGIS LHASA RESORT, CHINA

dear fellow stockholders

As any athlete knows, recovery is critical in the pursuit of peak performance. With that in mind, the Starwood team has worked tirelessly during the challenging economic conditions of the last few years to position the Company to Own the Upswing in 2010. Our 2010 results prove the success of that approach, and we believe we are in the early stages of what looks to be a multi-year, global recovery for lodging. The lodging recovery firmly took hold in 2010. Business travel, which drives 75% of our total revenue, rebounded sharply as companies began to scour the globe for growth opportunities. As expected, the recovery was driven by strong, late breaking business among transient and group travelers. For the full year, worldwide RevPAR grew by 9%, driven almost entirely by occupancy gains. Rates steadily improved throughout the year thanks mostly to a better mix of business at our hotels. With occupancies in many markets now back to prior peak levels, and with little new supply anticipated in developed markets through at least 2013, we expect rates to post strong increases in the coming years. Our group business improved sequentially throughout 2010 and we expect to enjoy healthy rate increases and higher volumes in 2011. We also expect 2011 corporate negotiated rates to rise high single digits after their 20% decline from peak levels. Most importantly, the momentum we experienced in 2010 has continued thus far into 2011. Our customers are telling us they plan to travel more in 2011. Were very pleased with our performance in 2010. Starwood gained share, grew faster than our competition, and converted higher revenue into higher profits. We added 72 hotels over the course of 2010, translating into 5% net unit growth. And roughly two-thirds of our portfolio of hotels is new or freshly renovated, so we believe we are well positioned to delight our guests as the recovery continues. Our Path to Peak program is well underway with a goal of our hotels reaching and then surpassing prior peak profitability through a combination of driving top-line growth while containing costs. Focus areas include revenue management, procurement, sales effectiveness, food and beverage initiatives and lean hotel operations. Our efforts are clearly paying off. In 2010, we grew our worldwide RevPAR index by approximately one percent, with our newly revitalized Sheraton brand leading the charge. This is a significant move for a system of more than 1,000 hotels. In North America, Sheratons RevPAR index jumped two percent, a monumental move in the first year of a brand relaunch. And despite hotels that are increasingly full, our Guest and Meeting Planner Satisfaction Scores hit record highs for the fourth year in a row. Worldwide owned margins increased by 1.6%, but we have a long runway ahead and are working hard to drive our hotels back towards peak profitability.

Global leGacy and reach Starwood has evolved to become the most global hotel company, operating in more than 100 countries. Today we have more hotels outside of the U.S. than inside, and we generate almost 60% of our lodging fees from non-U.S. markets. Our transformation will continue and, like many global brands, we expect to derive 80% of our profits from outside of the U.S. in the coming years.
Capitalizing on our global advantage is a key priority for Starwood. Approximately 70% of the worlds GDP growth over the next decade is expected to come from emerging markets. And with almost 80% of Starwoods pipeline outside of the developed world, we are growing where the world is growing. We have an important first-mover advantage in several key markets we entered the Middle East in the 1960s, Africa, Latin America and India in the 1970s, and China in the 1980s. Since that time, we have built long-standing relationships with owners and developers in their respective markets and cultivated local-smart teams that have decades of experience getting things done in different parts of the world. Starwoods success in China offers a powerful example of how we are leveraging growth opportunities in emerging markets. China recently became Starwoods largest hotel market outside of the U.S., and we expect that in 2011, one in every three new Starwood hotels will open in China. Today we have nearly 70 hotels in China and another 85 hotels in the pipeline. Importantly, demand continues to outpace supply and we still have significant opportunities for additional growth. There are nearly 200 cities in China with populations of more than one million, many of which do not yet have a major, international hotel. Globalization, and all that comes with it, including billions of new travelers and generations connected by social networks, translates into a truly global consumer base with an unprecedented appetite for our brands. This highlights the importance of building hotel brands that will capture the loyalty of increasingly brand-savvy global travelers. Gen Y will be the biggest consumer group in history, with a new and distinct take on design, technology, service and sustainability. We intend to lead the way in what hotel branding will mean to travelers. Our philosophy and approach to branding, innovation and design are what make Starwood special in the eyes of our associates, our guests and our owners.

busIness Model We continue to believe that the hotel fee business is one of the great business models in the capitalist world. To that end, during 2010 we made further progress in growing our managed and franchised business while reducing the size of our owned and leased hotel portfolio. But with over 21,000 owned rooms, located primarily in urban and resort locations, we still have a long way to go. Selling our owned portfolio may take time as we want to get the most value by selling at the right price, to the right partner, and with the right management contract. Rest assured, we are committed to our goal of having our profits be at least 80% fee-driven.
Looking ahead, growing our base of loyal guests will drive our success. After all, our business model boils down to owning the hearts and minds of our guests, and creating value for our owners. We work hard to keep our brands distinct and compelling, to meet the various travel needs of our customers around the world, and to create a great foundation for tomorrows growth. We recognize that our brands are at the heart of Starwoods competitive advantage, so despite a focus on cost containment over the past few years, we never stopped investing in innovation, design and loyalty.

critical asset for us. Last year the nearly 140,000 associates who responded to our survey told us that they have never felt more engaged. With almost 140 luxury hotels among the St. Regis, Luxury Collection and W brands, we offer our guests More Luxury in More Destinations. In fact, Starwood is the largest operator of four- and five-star hotels worldwide. Following a deep drop-off in 2008 and 2009, our luxury brands outperformed in 2010, and we are well positioned to benefit from the continued recovery in luxury. Consumers are increasingly choosing brands that share their sense of purpose. Put simply, sustainability is no longer optional. Starwood has the size, scope and spirit to affect positive environmental change, and we have set aggressive environmental goals in order to do our part. We are targeting a 30% reduction in energy use per available room and a 20% decrease in water consumption per available room by 2020. We have also established partnerships with Conservation International and UNICEF to develop our ongoing commitment to the environment and to the communities in which we operate. We are determined to make a difference for our communities, guests, owners, associates and, of course, our shareholders. Our strategy, which we refer to as the Journey, lays out our common goals and shared values in a way that each of our associates across the world can relate to. It remains very straightforward to attract excellent talent to our properties, deliver branded experiences that keep guests coming back, and leverage the strength of our global platform to build new hotels and generate great returns for all of our stakeholders. Our alignment around this strategy is playing a fundamental role in enabling us to become a better company which will continue to succeed over the long-term and outperform our competition. Starwood is uniquely positioned to leverage the powerful combination of our game-changing brands and industryleading global platform. We believe that through the recovery Starwood has become a stronger, faster and more disciplined company. Were extremely bullish on the Companys long-term future. We look forward to updating you on our progress and thank you for your continued support. We also look forward to having you stay with us!

leadInG Global brands Our approach remains centered on new innovations, migrating existing innovations to new geographies and adapting innovations across brands. One example of this is the Link@Sheraton, our lobby cybercafe for todays multitasking social traveler. With brands like W, Aloft and Element, all created for and by Gen Y, Starwood is ahead of the curve. We continue to lead the industry in design and opened our design headquarters in Manhattan a year ago.
SPG, our award-winning loyalty program, is powerful and growing, driving nearly one out of two guests to our hotels versus one in three in 2003. Importantly, just as our footprint grows outside of the U.S., so does our SPG enrollment. It is critical for Starwood to cultivate loyalty among global brand zealots who will have an increasingly outsized impact on the worldwide travel industry. For example, China continues to be the richest source of new, loyal travelers for us, as evidenced by the 58% jump in SPG enrollment in 2010, making China the second largest source of SPG members. Brand loyalty also comes down to delivering great experiences, and our guests tell us time and again that great service matters more than anything else. This is why we work hard on training and communicating with our associates. Having a culture of associates that are motivated and empowered to make our guests happy is a

Frits van Paasschen Chief Executive Officer

2011 proxy statement & 2010 annual report

starwood hotels & resorts Worldwide, Inc.

2011

ANNUAL MEETING OF STOCKHOLDERS PROXY STATEMENT

March 21, 2011 Dear Stockholder: You are cordially invited to attend Starwoods Annual Meeting of Stockholders, which is being held on Thursday, May 5, 2011, at 10:00 a.m. (local time), at The St. Regis Atlanta, 88 West Paces Ferry Road, Atlanta, Georgia 30305. At this years Annual Meeting, you will be asked to (i) elect eleven Directors, (ii) ratify the appointment of Ernst & Young LLP as Starwoods independent registered public accounting firm for 2011, (iii) approve, on a nonbinding advisory basis, the compensation of the Companys named executive officers, as disclosed in the compensation section of the proxy statement (a Say-on-Pay vote), and (iv) vote, on a non-binding advisory basis, on how frequently the Company should hold a Say-on-Pay vote. You have the opportunity to request a Say-on-Pay vote every year, every two years, or every three years, or abstain from voting on the matter completely. As owners of Starwood, your vote is important. Whether or not you are able to attend the Annual Meeting in person, it is important that your shares be represented. Please vote as soon as possible. Instructions on how to vote are contained herein. We appreciate your continued support and interest in Starwood. Very truly yours,

Frits van Paasschen Chief Executive Officer and President

Bruce W. Duncan Chairman of the Board

DATE: TIME: PLACE:

NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS OF STARWOOD HOTELS & RESORTS WORLDWIDE, INC. A Maryland Corporation May 5, 2011 10:00 a.m. (local time) The St. Regis Atlanta 88 West Paces Ferry Road Atlanta, Georgia 30305 1. To elect eleven Directors to serve until the next Annual Meeting of Stockholders (Annual Meeting) and until their successors are duly elected and qualified. 2. To consider and vote upon the ratification of the appointment of Ernst & Young LLP as Starwood Hotels & Resorts Worldwide, Inc.s (the Company) independent registered public accounting firm for the fiscal year ending December 31, 2011. 3. To have a non-binding advisory vote on approval of the compensation of the Companys Named Executive Officers, as described in the Compensation Discussion and Analysis, compensation tables and narrative discussion included in the accompanying proxy statement. 4. To have a non-binding advisory vote on the frequency (every year, every two years, or every three years) of future advisory votes to approve the compensation of the Companys Named Executive Officers. 5. To transact such other business as may properly come before the meeting or any postponement or adjournment thereof. Holders of record of the Companys stock at the close of business on March 10, 2011 are entitled to vote at the meeting. The Companys 2010 Annual Report on Form 10-K (Annual Report), which is not a part of the proxy soliciting material, is enclosed. The Annual Report may also be obtained from the Companys website at www.starwoodhotels.com/corporate/investor _ relations.html. Stockholders may also obtain, without charge, a copy of the Annual Report by contacting Investor Relations at the Companys headquarters. It is important that your shares be represented and voted at the meeting. You can authorize a proxy to vote your shares by completing and returning the proxy card sent to you. Most stockholders can authorize a proxy over the Internet or by telephone. If Internet or telephone authorization is available to you, instructions are printed on your proxy card. You can revoke a proxy at any time prior to its exercise at the meeting by following the instructions in the accompanying proxy statement. Your promptness will assist us in avoiding additional solicitation costs.

ITEMS OF BUSINESS:

RECORD DATE: ANNUAL REPORT:

PROXY VOTING:

Kenneth S. Siegel Corporate Secretary March 21, 2011 White Plains, New York

TABLE OF CONTENTS WHO CAN HELP ANSWER YOUR QUESTIONS? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . THE ANNUAL MEETING AND VOTING QUESTIONS AND ANSWERS . . . . . . . . . . . . . . . . . . . . CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADVISORY VOTE ON EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADVISORY VOTE ON THE FREQUENCY OF THE VOTE ON EXECUTIVE COMPENSATION . . . . . BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS. . . . . . . . . . . . . . . . . . . . EXECUTIVE AND DIRECTOR COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMPENSATION DISCUSSION & ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMPENSATION COMMITTEE REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SUMMARY COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GRANTS OF PLAN-BASED AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS SECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OPTION EXERCISES AND STOCK VESTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NONQUALIFIED DEFERRED COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL . . . . . . . . . . . . . . . . DIRECTOR COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AUDIT COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION . . . . . . . . . . . . . . . . CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SOLICITATION COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HOUSEHOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii 1 6 8 13 13 14 14 16 18 18 19 33 34 36 37 38 39 40 41 45 49 50 50 51 51 52 53

WHO CAN HELP ANSWER YOUR QUESTIONS? If you have any questions about the Annual Meeting, you should contact: Starwood Hotels & Resorts Worldwide, Inc. 1111 Westchester Avenue White Plains, New York 10604 Attention: Investor Relations Phone Number: 1-914-640-8100 If you would like additional copies of this proxy statement or the Annual Report, or if you have questions about the Annual Meeting or need assistance in voting your shares, you should contact: D.F. King & Co., Inc. 48 Wall Street New York, New York 10005 Phone Number: 1-800-859-8511 (toll free)

ii

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

1111 WESTCHESTER AVENUE WHITE PLAINS, NY 10604

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 5, 2011

THE ANNUAL MEETING AND VOTING QUESTIONS AND ANSWERS Why did I receive these materials? Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the Company or Starwood), has made these materials available to you on the Internet or, upon your request, has delivered printed versions of these materials to you by mail, in connection with the solicitation of proxies by the Board of Directors (the Board) for use at the Companys 2011 Annual Meeting of Stockholders (the Annual Meeting), and at any postponement or adjournment of the Annual Meeting. The Company is first making these materials available (and is mailing the Notice of Meeting and Internet Availability of Proxy Materials) on or about March 21, 2011. This Notice contains instructions on how to access the Companys proxy statement and 2010 Annual Report and authorize a proxy to vote online. By furnishing this Notice, the Company is lowering the costs and reducing the environmental impact of providing its Annual Meeting. The Company intends to start sending paper or electronic copies of its proxy statement and 2010 Annual Report to its stockholders on or about March 21, 2011. When and where will the Annual Meeting be held? The Annual Meeting will be held on May 5, 2011 at 10:00 a.m. (local time) at The St. Regis Atlanta, 88 West Paces Ferry Road, Atlanta, Georgia 30305. If you plan to attend the Annual Meeting and have a disability or require special assistance, please contact the Companys Investor Relations department at (914) 640-8100. What proposals will be voted on at the Annual Meeting? At the Annual Meeting, the stockholders of the Company will consider and vote upon: 1. The election of eleven Directors to serve until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified. 2. The ratification of the appointment of Ernst & Young LLP (Ernst & Young) as the Companys independent registered public accounting firm for 2011. 3. The approval, on a non-binding advisory basis, of the compensation of the Companys Named Executive Officers, as disclosed in the Compensation Discussion & Analysis, compensation tables and narrative discussion contained in this proxy statement (a Say-on-Pay vote). 4. The approval, on a non-binding advisory basis, of the frequency (every year, every two years or every three years) of future Say-on-Pay votes. 5. Such other business as may properly come before the meeting or any adjournment or postponement thereof. The Board is not aware of any other matter that may properly be presented at the Annual Meeting that is not described above. If any other matter is properly presented at the Annual Meeting, the persons named as proxies on the enclosed proxy card will, in the absence of stockholder instructions to the contrary, vote the shares for which such persons have voting authority in accordance with their discretion on any such matter. 1

Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? Pursuant to the rules adopted by the Securities and Exchange Commission (SEC), we are providing access to our proxy materials over the Internet. Accordingly, we sent a Notice of Meeting and Internet Availability of Proxy Materials (the Notice) to our stockholders of record and beneficial owners as of the close of business on March 10, 2011. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found on the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. How can I get electronic access to the proxy materials? The Notice will provide you with instructions regarding how to: View our proxy materials for the Annual Meeting on the Internet; and Instruct us to send our future proxy materials to you electronically by email. Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual stockholders meetings on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it. Who is entitled to vote at the Annual Meeting? If you were a stockholder of record of the Company at the close of business on March 10, 2011 (the Record Date), you are entitled to notice of, and to vote at, the Annual Meeting. You have one vote for each share of common stock of the Company (Shares) you held of record at the close of business on the Record Date on each matter that is properly submitted to a vote at the Annual Meeting, including Shares: Held directly in your name as the stockholder of record, Held for you in an account with a broker, bank or other nominee, or Credited to your account in the Companys Savings and Retirement Plan (the Savings Plan). On the Record Date there were 195,121,899 Shares outstanding and entitled to vote at the Annual Meeting and there were 14,951 record holders of Shares. The Shares are the only outstanding class of voting securities of the Company. Who may attend the Annual Meeting? Only stockholders of record, or their duly authorized proxies, may attend the Annual Meeting. Registration and seating will begin at 9:00 a.m. To gain admittance, you must present valid picture identification, such as a drivers license or passport. If you hold Shares in street name (through a broker or other nominee), you will also need to bring a copy of a brokerage statement (in a name matching your photo identification) reflecting your stock ownership as of the Record Date to be admitted to the Annual Meeting. If you are a representative of a corporate or institutional stockholder, you must present valid photo identification along with proof that you are a representative of such stockholder. Please note that cameras, recording devices and other electronic devices will not be permitted at the Annual Meeting. 2

How many Shares must be present to hold the Annual Meeting? The presence in person or by proxy of stockholders entitled to cast all of the votes entitled to be cast at the Annual Meeting constitutes a quorum for the transaction of business. Shares of stockholders of record are counted as present at the meeting if you: are present in person at the Annual Meeting, or have properly executed and submitted a proxy card, or authorized a proxy over the telephone or the Internet, prior to the Annual Meeting. Abstentions and broker non-votes are counted as present for purposes of determining whether a quorum is present at the Annual Meeting. If a quorum is not present when the Annual Meeting is convened, or if for any other reason the presiding officer believes that the Annual Meeting should be adjourned, the Annual Meeting may be adjourned by the presiding officer to a date not more than 120 days after the Record Date. If a motion is made to adjourn the Annual Meeting, the persons named as proxies on the enclosed proxy card will have discretion to vote on such adjournment all Shares for which such persons have voting authority. What are broker non-votes? If you have Shares that are held by a broker, you may give the broker voting instructions and the broker must vote as you directed. If you do not give the broker any instructions, the broker may vote at its discretion on all routine matters (i.e., the ratification of an independent registered public accounting firm). For non-routine matters, including: the election of Directors, the Say-on-Pay advisory vote, and on the frequency of future Say-on-Pay advisory votes, however, the broker may NOT vote using its discretion. This is referred to as a broker non-vote. How many votes are required to approve each proposal? Directors will be elected by a plurality of the votes cast in the election of directors at the Annual Meeting, either in person or represented by properly authorized proxy. This means that the eleven nominees who receive the largest number of FOR votes cast will be elected as Directors. Stockholders cannot cumulate votes in the election of Directors. Broker non-votes will not have any effect on the election of Directors. See What happens if a Director nominee does not receive a majority of the votes cast? below for information concerning our director resignation policy. Ratification of the appointment of Ernst & Young as the Companys independent registered public accounting firm requires FOR votes from a majority of the votes cast on the matter at the Annual Meeting, either in person or represented by properly completed or authorized proxy. Brokers may vote uninstructed customer Shares on this matter. Abstentions will have no effect on the matter. If a majority of the votes cast at the Annual Meeting vote AGAINST ratification of the appointment of Ernst & Young, the Board and the Audit Committee will reconsider its appointment. Adoption of a resolution approving on a non-binding, advisory basis the compensation of the Companys Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion of this proxy statement, requires FOR votes from a majority of the votes cast on the matter at the Annual Meeting, either in person or represented by properly authorized proxy. Abstentions and broker nonvotes will not have any effect on the matter. If a majority of the votes cast at the Annual Meeting vote AGAINST the approval of the compensation of the Companys Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion of this proxy statement, the Board and the Compensation Committee will consider the outcome of the vote when making future compensation decisions. With respect to the frequency of future Say-on-Pay advisory votes, approval of a frequency requires votes for that frequency from a majority of the votes cast on the matter at the Annual Meeting, either in person or represented by properly authorized proxy. Because stockholders have four choices (one year, two years, three years or abstain) on the advisory approval of a frequency of future Say-on-Pay votes, it is possible that no frequency will receive a majority vote. If no frequency receives the affirmative vote of a majority of the votes cast, our Board intends to 3

regard the frequency receiving the greatest number of votes as the recommendation of our stockholders. Abstentions and broker non-votes will not have any effect on the matter. The Board and the Compensation Committee will consider the outcome of the vote when making its determination regarding how frequently (every one, two or three years) over the next six years the Say-on-Pay advisory vote will be held, after which period another frequency vote will be held. What happens if a Director nominee does not receive a majority of the votes cast? Under our Bylaws, a Director nominee, running uncontested, who receives more Withheld than For votes is required to tender his or her resignation for consideration by the Board. The Corporate Governance and Nominating Committee will recommend to the Board whether to accept or reject the resignation. The Board will act on the tendered resignation and publicly disclose its decision within 90 days following certification of the election results. The Director who tenders his or her resignation will not participate in the Boards decision with respect to the resignation. What is the advisory vote regarding executive compensation? The stockholders of the Company are entitled to cast an advisory vote at the Annual Meeting to approve the compensation of the Companys Named Executive Officers, as disclosed in this proxy statement in accordance with SEC rules, including the Compensation Discussion & Analysis, compensation tables and narrative discussion. While this stockholder vote on executive compensation is an advisory vote that is not binding on the Company or the Board of Directors, the Company values the opinions of its stockholders and will consider the outcome of the vote when making future compensation decisions. What is the advisory vote regarding the frequency of executive compensation advisory votes? The stockholders of the Company are entitled to cast an advisory vote at the Annual Meeting to determine how frequently an advisory vote to approve the compensation of the Companys Named Executive Officers, as disclosed in this proxy statement, should be held. The choices are every year, every two years, or every three years. While this stockholder vote regarding frequency is an advisory vote that is not binding on the Company or the Board of Directors, the Company values the opinions of its stockholders and will consider the outcome of the vote when making its determination regarding how frequently the Say-on-Pay advisory vote will be cast. How do I vote? If you are a stockholder of record, you may vote in person at the Annual Meeting. We will give you a ballot when you arrive. If you do not wish to vote in person or if you will not be attending the Annual Meeting, you may vote by proxy. You can vote your Shares by authorizing a proxy over the Internet by following the instructions provided in the Notice, or, if you request printed copies of the proxy materials by mail, you can also authorize a proxy to vote your Shares by mail or by telephone or Internet. Each Share represented by a properly completed written proxy or properly authorized proxy by telephone or over the Internet will be voted at the Annual Meeting in accordance with the stockholders instructions specified in the proxy, unless such proxy has been revoked. If no instructions are specified, such Shares will be voted FOR the election of each of the nominees for Director named in this proxy statement, FOR ratification of the appointment of Ernst & Young as the Companys independent registered public accounting firm for 2011, FOR the approval, on an advisory basis, of the Say-on-Pay vote on compensation of our Named Executive Officers, FOR the approval, on an advisory basis, of a frequency of 1 YEAR for future Say-on-Pay advisory votes on the compensation of our Named Executive Officers, and, in the discretion of the proxy holder, on any other business that may properly come before the meeting. If you participate in the Savings Plan and have contributions invested in Shares, the proxy card will serve as a voting instruction for the trustee of the Savings Plan. You must return your proxy card to the transfer agent on or prior to 11:59 p.m. (Eastern Time) on April 29, 2011. If your proxy card is not received by the transfer agent by that date or if you sign and return your proxy card without instructions marked in the boxes, the trustee will vote your 4

Shares in the same proportion as other Shares held in the Savings Plan for which the trustee received timely instructions unless contrary to ERISA (Employee Retirement Income Security Act). How can I revoke a previously submitted proxy? If you are a stockholder of record, you may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting. You may submit a proxy again on a later date on the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the meeting will be counted), or by signing and returning a new proxy card with a later date, or by attending the meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote at the meeting or specifically request in writing that your prior proxy be revoked. What does it mean if I receive more than one proxy card? If you receive more than one proxy card from the Company, it means your Shares are not all registered in the same way (for example, some are held in your name and others are held jointly with a spouse) and are in more than one account. Please sign and return all proxy cards you receive to ensure that all Shares held by you are voted. How does the Board recommend that I vote? The Board recommends that you vote FOR each of its Director nominees, FOR ratification of the appointment of Ernst & Young as the Companys independent registered public accounting firm for 2011, FOR the approval, on an advisory basis, of the Say-on-Pay vote on the compensation of our Named Executive Officers, and FOR the approval, on an advisory basis, of a frequency of 1 YEAR for future Say-on-Pay votes on the compensation of our Named Executive Officers.

CORPORATE GOVERNANCE Starwood is committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business efficiently, serving our stockholders well and maintaining our Companys integrity in the marketplace. Board Leadership Structure and Risk Oversight We believe that the composition of our Board and its committees results in a strong leadership structure for our Company. As of the date of this proxy statement, our Board has eleven directors, comprised of one chairman (who is not the Chief Executive Officer and President of the Company), nine additional non-employee members, and the Chief Executive Officer and President of the Company. Biographies of our Directors can be found in the Election of Directors section beginning on page 8. The Board has the following four standing committees: (1) Audit, (2) Capital, (3) Compensation and Option and (4) Corporate Governance and Nominating. The current committee membership, the number of meetings held during the last fiscal year and the function of each of the standing committees are described in the Board Meetings and Committees section beginning on page 11. Each of the standing committees operates under a written charter adopted by the Board. All of the committee charters are available on the Companys website at www.starwoodhotels.com/corporate/investor _ relations.html. As part of its general oversight duties, the Board oversees the Companys risk management. The Board regularly invites key members of the Companys management to its meetings in order to inform the Board of any operational and/or financial risks that the Company is facing, and the Board reviews and directs management to address and mitigate such risks. In addition, one of the responsibilities of the Audit Committee is to discuss and review the systems of internal controls over financial reporting, accounting, legal compliance and our ethics policies, as established by the Board and/or management, in order to assess risk and oversee risk management. In setting compensation practices, the Compensation and Option Committee considers the risks to our stockholders, and the Company as a whole, and structures our incentive compensation to discourage the taking of excessive risks. Corporate Governance Policies In addition to our charter and Bylaws, we have adopted Corporate Governance Guidelines (the Guidelines), which are posted on our website at www.starwoodhotels.com/corporate/investor _ relations.html, to address significant corporate governance matters. The Guidelines provide a framework for the Companys corporate governance and cover topics including, but not limited to, Board and committee composition, Director Share ownership guidelines, and Board evaluations. The Corporate Governance and Nominating Committee is responsible for overseeing and reviewing the Guidelines and reporting and recommending to the Board any changes to the Guidelines. The Company has adopted a Finance Code of Ethics applicable to its Chief Executive Officer, Chief Financial Officer, Corporate Controller, Corporate Treasurer, Senior Vice President-Taxes and persons performing similar functions. The Finance Code of Ethics is posted on the Companys website at www.starwoodhotels.com/corporate/investor _ relations.html. The Company intends to post amendments to, and waivers from, the Finance Code of Ethics that require disclosure under applicable SEC rules on its website. In addition, the Company has a Code of Business Conduct and Ethics (the Code of Conduct) applicable to all employees and Directors that addresses legal and ethical issues that may be encountered in carrying out their duties and responsibilities. Subject to applicable law, employees are required to report any conduct they believe to be a violation of the Code of Conduct. The Code of Conduct is posted on the Companys website at www.starwoodhotels.com/corporate/investor _ relations.html. The Company has a Disclosure Committee, comprised of certain senior executives, to design, establish and maintain the Companys internal controls and other procedures with respect to the preparation of periodic reports filed with the SEC, earnings releases and other written information that the Company will disclose to the investment community. The Disclosure Committee evaluates the effectiveness of the Companys disclosure controls and procedures on a regular basis and maintains written records of its meetings. 6

The Board has a policy under which Directors who are not employees of the Company or any of its subsidiaries may not stand for re-election after reaching the age of 72. In addition, under this policy, Directors who are employees of the Company must retire from the Board upon their retirement from the Company. Pursuant to the Guidelines, the Board also has a policy that Directors who change their principal occupation (including through retirement) should voluntarily tender their resignation to the Board. The Company encourages all Directors to attend the Annual Meeting and believes that attendance at the Annual Meeting is as important as attendance at meetings of the Board of Directors and its committees. In fact, the Company typically schedules Board of Directors and committee meetings to coincide with the dates of its Annual Meetings. However, from time to time, other commitments prevent all Directors from attending a meeting. All but one of the Directors who were Board members at the time attended the most recent annual meeting of stockholders, which was held on May 13, 2010. The Company indemnifies its Directors and officers to the fullest extent permitted by law so that they will be free from undue concern about personal liability in connection with their service to the Company. This is required under the Companys charter, and the Company has also signed agreements with each of those individuals contractually obligating it to provide this indemnification to them. Director Independence In accordance with New York Stock Exchange (the NYSE) rules, the Board makes an annual determination as to the independence of the Directors and nominees for election as a Director. No Director will be deemed to be independent unless the Board affirmatively determines that the Director has no material relationship with the Company, directly or as an officer, stockholder or partner of an organization that has a relationship with the Company. The Board observes all criteria for independence established by the NYSE listing standards and other governing laws and regulations. In its annual review of Director independence, the Board considers any commercial, banking, consulting, legal, accounting, charitable or other business relationships each Director may have with the Company. In addition, the Board consults with the Companys counsel to ensure that the Boards determinations are consistent with all relevant securities and other laws and regulations regarding the definition of independent director, including but not limited to those set forth in pertinent listing standards of the NYSE in effect from time to time. As a result of its annual review, the Board has determined that all of the Directors, with the exception of Mr. van Paasschen, are independent directors. Mr. van Paasschen is not independent because he is serving as the Chief Executive Officer and President of the Company. In making this determination, the Board took into account that three of the non-employee Directors, Messrs. Aron and Daley and Ms. Galbreath, have no relationship with the Company except as a Director and stockholder of the Company and that the remaining seven non-employee Directors have relationships with companies that do business with the Company that are consistent with the NYSE independence standards. With respect to Mr. Duncan, the Board considered the fact that Mr. Duncan served as the Companys Chief Executive Officer on an interim basis from April 1, 2007 to September 24, 2007, and received a salary and other benefits for his services. As that service was more than three years ago, the Board determined that Mr. Duncan is an independent director. Yahoo! Inc., Buddy Media, The Huffington Post, Amazon.com, Inc., Burger King Holdings, Inc., The Gap, Inc., American Express Company and Intel Corporation are the only companies to transact business with the Company over the past three years in which any of the Companys independent directors served as a director, executive officer or is a partner, principal or greater than 10% stockholder. Mr. Hippeau is a director of Yahoo! Inc. and Buddy Media and the Chief Executive Officer of The Huffington Post; Mr. Ryder is a director of Amazon.com, Inc.; Mr. Youngblood is a director of Burger King Holdings, Inc. and The Gap, Inc.; and Ambassador Barshefsky is a director of American Express Company and Intel Corporation. In the case of each public company other than American Express Company, the combined annual payments from the Company to each such entity and from each such entity to the Company has been less than 0.5% of the Companys and/or each such other entitys annual consolidated revenues for each of the past three years. In the case of American Express Company, with which the Company co-brands the American Express Starwood Preferred Guest credit card, the combined annual payments from the Company to American Express Company and from American Express Company to the Company has been 7

less than 1% of American Express Companys annual consolidated revenues for each of the past three years and payments from American Express Company were less than 4% of the Companys annual consolidated revenues for 2010, less than 9.5% for 2009 and less than 4% for 2008. Ambassador Barshefsky serves solely as a director of American Express Company and derives no personal benefit from these payments. These relationships are consistent with the NYSE independence standards. In addition, in the case of Mr. Quazzo, the Board considered that in January 2008 a fund managed by Transwestern Investment Company, LLC, of which Mr. Quazzo is the Chief Executive Officer, purchased the office building in Phoenix where the Company maintains an office. The Companys lease for the office space was originally negotiated and entered into prior to the acquisition with unaffiliated third parties at arms-length and was not amended in connection with the acquisition of the building by the fund. Mr. Quazzo has informed the Company that he did not derive any direct personal benefit from the office space lease, although his compensation does depend, in part, on Transwestern Investment Company, LLCs results of operations. In 2010, the building in Phoenix where the Company maintains an office was sold to a third party and Transwestern Investment Company, LLC no longer holds any interest in the building. Mr. Duncan, who was an independent Director prior to his interim appointment as the Companys Chief Executive Officer, has served as non-executive Chairman of the Board from May 2005 until March 31, 2007 when he was appointed Chief Executive Officer on an interim basis, and from September 24, 2007 to the present. Prior to March 31, 2007 and following September 24, 2007, Mr. Duncan, as Chairman, ran meetings of the Board. During Mr. Duncans appointment as Chief Executive Officer on an interim basis, the Chairman of the Corporate Governance and Nominating Committee presided at the meetings of the Board held in executive session. Communications with the Board The Company has adopted a policy which permits stockholders and other interested parties to contact the Board of Directors. If you are a stockholder or interested party and would like to contact the Board of Directors you may send a letter to the Board of Directors, c/o the Corporate Secretary of the Company, 1111 Westchester Avenue, White Plains, New York 10604 or online at www.hotethics.com. You should specify in the communication that you are a stockholder or an interested party. If the correspondence contains complaints about Starwoods accounting, internal or auditing matters or directed to the non-management directors, the Corporate Secretary will forward that correspondence to a member of the Audit Committee. If the correspondence concerns other matters, the Corporate Secretary will forward the correspondence to the Director to whom it is addressed or otherwise as would be appropriate under the circumstances, attempt to handle the inquiry directly (for example where it is a request for information or a stock-related matter), or not forward the communication if it is primarily commercial in nature or relates to an improper or irrelevant topic. At each regularly scheduled Board meeting, the Corporate Secretary or his designee will present a summary of all such communications received since the last meeting that were not forwarded and shall make those communications available to the Directors upon request. This policy is also posted on the Companys website at www.starwoodhotels.com/corporate/investor _ relations.html. Posted Documents You may also obtain a free copy of any of the aforementioned posted documents by sending a letter to the Companys Investor Relations Department, 1111 Westchester Avenue, White Plains, New York 10604. Please note that the information on the Companys website is not incorporated by reference in this proxy statement.

ELECTION OF DIRECTORS Under the Companys charter, each of the Companys Directors is elected to serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualified. Set forth below is information as of March 10, 2011 regarding the nominees of the Board of Directors for election as a Director, which has been confirmed by each of them for inclusion in this proxy statement. Each nominee has agreed to serve on the Board if elected. If a nominee becomes unavailable for election, proxy holders and stockholders may vote for another nominee proposed by the Board or, as an alternative, the Board may reduce the number of Directors to be elected at the meeting. 8

Directors Nominated at the Annual Meeting will be Elected to Serve Until the 2012 Annual Meeting of Stockholders and Until his or her Successor is Duly Elected and Qualified Frits van Paasschen, 50, has been Chief Executive Officer and President of the Company since September 2007. From March 2005 until September 2007, he served as President and CEO of Molson Coors Brewing Companys largest division, Coors Brewing Company, prior to its merger with Miller Brewing Company and the formation of MillerCoors LLC. Prior to joining Coors, from April 2004 until March 2005, Mr. van Paasschen worked independently through FPaasschen Consulting and Mercator Investments, evaluating, proposing, and negotiating private equity transactions. Prior thereto, Mr. van Paasschen spent seven years at Nike, Inc., most recently as Corporate Vice President/General Manager, Europe, Middle East and Africa from 2000 to 2004. From 1995 to 1997, Mr. van Paasschen served as Vice President, Finance and Planning at Disney Consumer Products and earlier in his career was a management consultant for eight years at McKinsey & Company and the Boston Consulting Group. Mr. van Paasschen has been a Director of the Company since September 2007. The Corporate Governance and Nominating Committee considered these qualifications, his significant public company managerial experience, his experience with the Company, and a requirement under his employment agreement that he serve on the Companys Board (subject to customary procedures and conditions to Board membership, including stockholder election) in making the determination that Mr. van Paasschen should be a nominee for director of the Company. Bruce W. Duncan, 59, has been President, Chief Executive Officer and Director of First Industrial Realty Trust, Inc. since January 2009, prior to which time he was a private investor since January 2006. From April to September 2007, Mr. Duncan served as Chief Executive Officer of the Company on an interim basis. He also has been a senior advisor to Kohlberg Kravis & Roberts & Co. from July 2008 to January 2009. From May 2005 to December 2005, Mr. Duncan was Chief Executive Officer and Trustee of Equity Residential (EQR), a publicly traded apartment company, and held various positions at EQR from March 2002 to December 2005, including President, Chief Executive Officer and Trustee from January 2003 to May 2005, and President and Trustee from March 2002 to December 2002. Mr. Duncan has served as a Director of the Company since April 1999, and was a Trustee of Starwood Hotels & Resorts, a real estate investment trust and former subsidiary of the Company (the Trust), since August 1995. The Corporate Governance and Nominating Committee considered these qualifications, his experience as Chief Executive Officer of other publicly traded companies, and his tenure with the Company in making the determination that Mr. Duncan should be a nominee for director of the Company. Adam M. Aron, 56, has been Chairman and Chief Executive Officer of World Leisure Partners, Inc., a leisurerelated consultancy, since 2006. From 1996 through 2006, Mr. Aron served as Chairman and Chief Executive Officer of Vail Resorts, Inc., an owner and operator of ski resorts and hotels. Mr. Aron is a director of Norwegian Cruise Line Limited, Prestige Cruise Holdings, Inc. and Cap Juluca Properties Ltd. In the past 5 years, Mr. Aron also served as a director of e-Miles LLC, FTD Group, Inc., Rewards Network, Inc. and Marathon Acquisition Corp. Mr. Aron has been a Director of the Company since August 2006. The Corporate Governance and Nominating Committee considered these qualifications, his significant experience in the leisure travel industry, his financial expertise, and his experience with the Company in making the determination that Mr. Aron should be a nominee for director of the Company. Charlene Barshefsky, 60, has been Senior International Partner at the law firm of WilmerHale, LLP, in Washington, D.C. since September 2001. From March 1997 to January 2001, Ambassador Barshefsky was the United States Trade Representative, the chief trade negotiator and principal trade policymaker for the United States and a member of the Presidents Cabinet. Ambassador Barshefsky is a director of The Estee Lauder Companies, Inc. since July 2001, American Express Company since July 2001, and Intel Corporation since January 2004. Ambassador Barshefsky is a member of the Council on Foreign Relations and a Trustee of the Howard Hughes Medical Institute. In the past 5 years Ambassador Barshefsky also served as a director of Idenix Pharmaceuticals, Inc. and of the Council on Foreign Relations. She has been a Director of the Company, and was a Trustee of the Trust, since October 2001. 9

The Corporate Governance and Nominating Committee considered these qualifications, her significant public policy experience, and her tenure with the Company in making the determination that Ambassador Barshefsky should be a nominee for director of the Company. Thomas E. Clarke, 59, has been President of New Business Ventures of Nike, Inc., a designer, developer and marketer of footwear, apparel and accessory products, since 2001. Dr. Clarke joined Nike in 1980. He was appointed Divisional Vice President in charge of marketing in 1987, Corporate Vice President in 1990, and served as President and Chief Operating Officer from 1994 to 2000. Dr. Clarke previously held various positions with Nike, primarily in research, design, development and marketing. Dr. Clarke is also a director of Newell Rubbermaid Inc. since 2003, a global marketer of consumer and commercial products. Dr. Clarke has been a Director of the Company since April 2008. The Corporate Governance and Nominating Committee considered these qualifications, his expertise in brand marketing, and his experience with the Company in making the determination that Dr. Clarke should be a nominee for director of the Company. Clayton C. Daley, Jr., 59, spent his entire professional career with The Procter & Gamble Company, joining the company in 1974, and has held a number of key accounting and finance positions including Chief Financial Officer and Vice Chair for Procter & Gamble; Comptroller, U.S. Operations for Procter & Gamble USA; Vice President and Comptroller of Procter & Gamble International and Vice President and Treasurer. Mr. Daley retired from Procter & Gamble in October 2009. Mr. Daley is also a director of Nucor Corporation since 2001 and Foster Wheeler, AG since 2009. In addition, Mr. Daley is Senior Advisor to TPG Capital. Mr. Daley has been a Director of the Company since November 2008. The Corporate Governance and Nominating Committee considered these qualifications, his experience in corporate strategy and planning for a global consumer products company, his financial expertise, and his experience with the Company in making the determination that Mr. Daley should be a nominee for director of the Company. Lizanne Galbreath, 53, has been Managing Partner of Galbreath & Company, a real estate investment firm, since 1999. From April 1997 to 1999, Ms. Galbreath was Managing Director of LaSalle Partners/Jones Lang LaSalle where she also served as a director. From 1984 to 1997, Ms. Galbreath served as a Managing Director, Chairman and Chief Executive Officer of The Galbreath Company, the predecessor entity of Galbreath & Company. Ms. Galbreath has been a Director of the Company, and was a Trustee of the Trust, since May 2005. The Corporate Governance and Nominating Committee considered these qualifications, her expertise in real estate, and her tenure with the Company in making the determination that Ms. Galbreath should be a nominee for director of the Company. Eric Hippeau, 59, is the Chief Executive Officer of The Huffington Post, a news website, since June 2009. From 2000 to 2009, he was a Managing Partner of Softbank Capital, a technology venture capital firm. Mr. Hippeau served as Chairman and Chief Executive Officer of Ziff-Davis Inc., an integrated media and marketing company, from 1993 to March 2000 and held various other positions with Ziff-Davis from 1989 to 1993. Mr. Hippeau has been a director of Yahoo! Inc. since January 1996. Mr. Hippeau has been a Director of the Company, and was a Trustee of the Trust, since April 1999. The Corporate Governance and Nominating Committee considered these qualifications, his significant experience as a director including at many privately held companies, and his tenure with the Company in making the determination that Mr. Hippeau should be a nominee for director of the Company. Stephen R. Quazzo, 51, is the Chief Executive Officer and has been the Managing Director and co-founder of Transwestern Investment Company, L.L.C., a real estate principal investment firm, since March 1996. From April 1991 to March 1996, Mr. Quazzo was President of Equity Institutional Investors, Inc., a subsidiary of Equity Group Investments, Inc. Mr. Quazzo has been a Director of the Company since April 1999, and was a Trustee of the Trust, since August 1995. The Corporate Governance and Nominating Committee considered these qualifications, his expertise in real estate, and his tenure with the Company in making the determination that Mr. Quazzo should be a nominee for director of the Company. 10

Thomas O. Ryder, 66, retired as Chairman of the Board of The Readers Digest Association, Inc. in January 2007, a position he had held since January 1, 2006. Mr. Ryder was Chairman of the Board and Chief Executive Officer of that company from April 1998 through December 31, 2005. In addition, Mr. Ryder was Chairman of the Board and Chairman of the Audit Committee of Virgin Mobile USA, Inc. from October 2007 to November 2009. Mr. Ryder was President, American Express Travel Related Services International, a division of American Express Company, which provides travel, financial and network services, from October 1995 to April 1998. In addition, he has been a director of Amazon.com, Inc. since November 2002, and Quad/Graphics, Inc. since July 2010. Quad/Graphics, Inc. acquired World Color Press, Inc. in July 2010; Mr. Ryder was a director of World Color Press, Inc. from July 2009 to July 2010. Mr. Ryder has been a Director of the Company, and was a Trustee of the Trust, since April 2001. The Corporate Governance and Nominating Committee considered these qualifications, his financial expertise, and his tenure with the Company in making the determination that Mr. Ryder should be a nominee for director of the Company. Kneeland C. Youngblood, 55, is a founding partner of Pharos Capital Group, L.L.C., a private equity fund focused on technology companies, business service companies and health care companies, since January 1998. From July 1985 to December 1997, he was in private medical practice. He is the former Chairman of the Board of the American Beacon Funds, a mutual fund company managed by AMR Investments, an investment affiliate of American Airlines. He has also been a director of Burger King Holdings, Inc. since October 2004; The Gap, Inc. since November 2006; and Energy Future Holdings (formerly TXU Corp.) since October 2007. Mr. Youngblood has been a Director of the Company, and was a Trustee of the Trust, since April 2001. The Corporate Governance and Nominating Committee considered these qualifications, his experience as a director of large public companies, and his tenure with the Company in making the determination that Mr. Youngblood should be a nominee for director of the Company. The Board unanimously recommends a vote FOR election of these nominees. Board Meetings and Committees The Board of Directors held six meetings during 2010. In addition to meetings of the full Board, Directors attended meetings of individual Board committees. Each Director attended at least 75% of the total number of meetings of the full Board and committees on which he or she serves. The Board has established Audit, Capital, Compensation and Option and Corporate Governance and Nominating Committees, the principal functions of which are described below: Audit Committee. The Audit Committee, which has been established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the Exchange Act), is currently comprised of Messrs. Daley (chairperson), Aron, Clarke and Youngblood, all of whom are independent Directors, as determined by the Board in accordance with the NYSE listing requirements and applicable federal securities laws. The Board has determined that Meessrs. Daley, Ryder and Aron are an audit committee financial expert under federal securities laws. The Board has adopted a written charter for the Audit Committee which states that the Audit Committee provides oversight regarding accounting, auditing and financial reporting practices of the Company. The Audit Committee selects and engages the Companys independent registered public accounting firm to audit the Companys annual consolidated financial statements and discusses with it the scope and results of the audit. The Audit Committee also discusses with the independent registered public accounting firm, and with management, financial accounting and reporting principles, policies and practices and the adequacy of the Companys accounting, financial, operating and disclosure controls. The Audit Committee met nine times during 2010. Capital Committee. The Capital Committee is currently comprised of Mr. Quazzo (chairperson), Ms. Galbreath and Messrs. Hippeau and Ryder, all of whom are independent Directors, as determined by the Board in accordance with the NYSE listing requirements. The Capital Committee was established in November 2005 to exercise some of the power of the Board relating to, among other things, capital plans and needs, mergers and acquisitions, divestitures and other significant corporate opportunities between meetings of the Board. The Capital Committee met four times during 2010. 11

Compensation and Option Committee. Under the terms of its charter, the Compensation and Option Committee (the Compensation Committee) is required to consist of three or more members of the Board of Directors who meet the independence requirements of the NYSE, are non-employee directors pursuant to SEC Rule 16b-3, and are outside directors for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended. The Compensation Committee is currently comprised of Messrs. Aron (chairperson), Clarke, Daley, Ryder and Youngblood, all of whom are independent Directors, as determined by the Board in accordance with the NYSE listing requirements. The Compensation Committee makes recommendations to the Board with respect to the salaries and other compensation to be paid to the Companys executive officers and other members of senior management and administers the Companys employee benefits plans, including the Companys 2004 Long-Term Incentive Compensation Plan. The Compensation Committee met six times during 2010. Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee is currently comprised of Ambassador Barshefsky (chairperson), Ms. Galbreath, and Messrs. Duncan and Hippeau, all of whom are independent Directors, as determined by the Board in accordance with the NYSE listing requirements. The Corporate Governance and Nominating Committee was established in May 2004, combining the functions of the Corporate Governance Committee and the Nominating Committee. The Corporate Governance and Nominating Committee establishes, or assists in the establishment of, the Companys governance policies (including policies that govern potential conflicts of interest) and monitors and advises the Company as to compliance with those policies. The Corporate Governance and Nominating Committee reviews, analyzes, advises and makes recommendations to the Board with respect to situations, opportunities, relationships and transactions that are governed by such policies, such as opportunities in which a Director or executive officer or their affiliates has a personal interest. In addition, the Corporate Governance and Nominating Committee is responsible for making recommendations for candidates for the Board of Directors, taking into account suggestions made by officers, Directors, employees and stockholders, recommending Directors for service on Board committees, developing and reviewing background information for candidates, and making recommendations to the Board for changes to the Corporate Governance Guidelines as they pertain to the nomination or qualifications of Directors or the size of the Board, if applicable. The Corporate Governance and Nominating Committee met four times during 2010. There are no firm prerequisites to qualify as a candidate for the Board, although the Board seeks a diverse group of candidates who possess the background, skills and expertise relevant to the business of the Company, or candidates that possess a particular geographical or international perspective. The Board looks for candidates with qualities that include strength of character, an inquiring and independent mind, practical wisdom and mature judgment. The Board seeks to insure that at least two-thirds of the Directors are independent under the Companys Governance Guidelines, and that members of the Companys Audit Committee meet the financial literacy requirements under the rules of the NYSE and at least one of them qualifies as an audit committee financial expert under applicable federal securities laws. The Corporate Governance and Nominating Committee does not have a set policy for considering or weighing diversity in identifying nominees but does seek to have a diversity of backgrounds, skills and perspectives among Board members, and considers how the background, skills and perspectives of the nominee would contribute to the total mix of backgrounds, skills and perspectives that would be available to the Board as a whole. Annually the Corporate Governance and Nominating Committee reviews the qualifications and backgrounds of the Directors and the overall composition of the Board, and recommends to the full Board the slate of Directors to be recommended for nomination for election at the annual meeting of stockholders. The Board does not believe that its members should be prohibited from serving on boards and/or committees of other organizations, and the Board has not adopted any guidelines limiting such activities. However, the Corporate Governance and Nominating Committee and the full Board will take into account the nature of, and time involved in, a Directors service on other boards in evaluating the suitability of individual Directors and making its recommendations to Company stockholders. Service on boards and/or committees of other organizations should be consistent with the Companys conflict of interest policies. The Corporate Governance and Nominating Committee may from time-to-time utilize the services of a search firm to help identify and evaluate candidates for Director who meet the qualifications outlined above. 12

The Corporate Governance and Nominating Committee will consider candidates for nomination recommended by stockholders and submitted for consideration. Although it has no formal policy regarding stockholder candidates, the Corporate Governance and Nominating Committee believes that stockholder candidates should be reviewed in substantially the same manner as other candidates. Under the Companys current Bylaws, stockholder nominations of individuals to be elected as directors at an annual meeting of our stockholders must be made in writing and delivered to the Corporate Secretary, 1111 Westchester Avenue, White Plains, New York 10604, and be received by the Corporate Secretary no later than the close of business on the 75th day nor earlier than the close of business on the 100th day prior to the first anniversary of the preceding years annual meeting. In accordance with the Companys current Bylaws, in addition to other required information specified in the Bylaws, such notice shall set forth as to each proposed nominee (i) the name, age and business address of each nominee proposed in such notice, and a statement as to the qualification of each nominee, (ii) the principal occupation or employment of each such nominee, (iii) the number of Shares which are beneficially owned and owned of record by the nominating stockholder, and (iv) any other information concerning the nominee that must be disclosed of nominees in proxy solicitations regulated by Regulation 14A of the Exchange Act, including, without limitation, such persons written consent to being named in the proxy statement as a nominee and to serving as a Director if elected. The Company provides a comprehensive orientation for all new Directors. It includes a corporate overview, one-on-one meetings with senior management and an orientation meeting. In addition, all Directors are given written materials providing information on the Companys business. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires that the Companys Directors and executive officers, and persons who own more than ten percent of the outstanding Shares, file with the SEC (and provide a copy to the Company) certain reports relating to their ownership of Shares. To the Companys knowledge, based solely on a review of the copies of these reports furnished to the Company for the fiscal year ended December 31, 2010, and written representations from our Directors and executive officers, all Section 16(a) filing requirements applicable to its Directors, executive officers and greater than 10 percent beneficial owners were complied with for the most recent fiscal year, except that Mr. Duncan failed to timely file one Form 4 with respect to one transaction. This transaction report was filed late by the Company on behalf of Mr. Duncan. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board has appointed and is requesting ratification by stockholders of the appointment of Ernst & Young as the Companys independent registered public accounting firm. While not required by law, the Board is asking the stockholders to ratify the selection of Ernst & Young as a matter of good corporate practice. Representatives of Ernst & Young are expected to be present at the Annual Meeting, will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions. If the appointment of Ernst & Young is not ratified, the Board and the Audit Committee will reconsider the selection of the independent registered public accounting firm. The Board unanimously recommends a vote FOR ratification of the appointment of Ernst & Young as the Companys independent registered public accounting firm for 2011. ADVISORY VOTE ON EXECUTIVE COMPENSATION The Board of Directors is committed to excellence in governance and is aware of the significant interest in executive compensation matters by investors and the general public. The Company has designed its executive compensation programs to attract, motivate, reward and retain the senior management talent required to achieve our corporate objectives and increase stockholder value. We believe 13

that our compensation programs are centered on pay-for-performance principles and are strongly aligned with the long-term interests of our stockholders. See the discussion of the compensation of our executive officers in the section entitled Compensation Discussion and Analysis beginning on page 19. We are asking our stockholders to indicate their support for our Named Executive Officer compensation disclosed in the Compensation Discussion & Analysis, compensation tables and narrative discussion of this proxy statement. The Say-on-Pay vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and related philosophy, policies and practices. Accordingly, we are asking our stockholders to vote FOR the following resolution at the Annual Meeting: RESOLVED, that the Company stockholders approve, on an advisory basis, the compensation paid to our Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion & Analysis, compensation tables and narrative discussion, in our proxy statement for the 2011 Annual Meeting of Stockholders. This Say-on-Pay vote is advisory, and therefore is not binding on the Company, the Compensation Committee or the Board of Directors. However, the Compensation Committee and the Board value the opinions of our stockholders and will consider the outcome of the Say-on-Pay vote when making future compensation decisions. The Board unanimously recommends a vote FOR the approval of the executive compensation program for the Companys Named Executive Officers as disclosed in the Compensation Discussion & Analysis, compensation tables and narrative discussion of this proxy statement. ADVISORY VOTE ON THE FREQUENCY OF THE VOTE ON EXECUTIVE COMPENSATION The Company is presenting this proposal, which gives you as a stockholder the opportunity to inform the company as to how often you wish the Company to hold a stockholder vote on a Say-on-Pay proposal. As a stockholder, you have the option to vote for one of the following choices, as indicated on the proxy card: to hold the advisory vote on executive compensation every 1 year, 2 years, 3 years; or to abstain from voting. The Board values constructive dialog on executive compensation and other important governance topics with our stockholders. The Board believes an advisory vote every year will provide an effective way to obtain information on stockholder sentiment about our executive compensation program. Accordingly, the Board recommends to the stockholders an annual frequency for Say-on-Pay votes. Stockholders may vote on their preferred frequency for voting on approval of executive compensation by selecting the option of one year, two years, three years or abstain on the proxy card when voting on this proposal. Please note that, when casting a vote on this proposal, stockholders will not be voting to approve or disapprove the Boards recommendation. Approval of a frequency of future Say-on-Pay advisory votes requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting. If no frequency receives a majority of the votes cast on the proposal, our Board will consider the option (one, two or three years) receiving the greatest number of votes to be the frequency approved by stockholders. Although the vote is advisory in nature and therefore will not bind the Board, the Board intends to carefully consider the outcome of the vote when making future decisions about the frequency for holding an advisory vote on executive compensation. The Board anticipates that its decision on the frequency (one, two or three years) of future Say-on-Pay advisory votes will apply for the next six years, after which period another vote on the frequency of the Say-on-Pay vote will be held. BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS The table below shows the number of Shares beneficially owned by principal stockholders who beneficially own more than five percent of our outstanding Shares as of March 10, 2011. The information in this table is based upon the latest filings of either a Schedule 13D, Schedule 13G or Form 13F as filed by the respective stockholder with the SEC as of the date stated in the below footnotes. 14

We calculate the stockholders percentage of ownership of Shares assuming the stockholder beneficially owned that number of Shares on March 10, 2011, the record date for the Annual Meeting. Unless otherwise indicated, the stockholder had sole voting and dispositive power over the Shares.
Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership Percent of Class

Waddell & Reed Financial, Inc.(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6300 Lamar Avenue Overland Park, KS 66202 T. Rowe Price Associates, Inc.(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 E. Pratt Street Baltimore, MD 21202 BlackRock Inc.(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 East 52nd Street New York, NY 10022 FMR LLC(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Devonshire Street Boston, MA 02109

......

19,318,597

9.90%

......

13,581,322

6.96%

......

11,429,398

5.86%

......

10,285,981

5.27%

(1) Based on information contained in a Schedule 13G/A, dated February 8, 2011 (the Waddell & Reed 13G/A), filed by Waddell & Reed Financial, Inc. (WDR), Waddell & Reed Financial Services, Inc. (WRFSI), Waddell & Reed, Inc. (WRI), Waddell & Reed Investment Management Company (WRIMCO), and Ivy Investment Management Company (IICO) (collectively Waddell & Reed) with the SEC, with respect to the Company reporting beneficial ownership as of December 31, 2010. The Waddell & Reed 13G/A reports that Waddell & Reed has sole voting power and sole dispositive power over 19,318,597 Shares as follows: WDR holds 19,318,597 Shares indirectly; WRFSI holds 7,687,394 Shares indirectly; WRI holds 7,687,394 Shares indirectly; WRIMCO holds 7,687,394 Shares directly; and IICO holds 11,631,203 Shares directly. (2) Based on information contained in a Schedule 13G, dated February 14, 2011 (the Price Associates 13G), filed by T. Rowe Price Associates, Inc. (Price Associates) with the SEC, with respect to the Company, reporting beneficial ownership as of December 31, 2010. The Price Associates 13G reports that Price Associates has sole voting power over 4,134,703 Shares and sole dispositive power over 13,581,322 Shares. These securities are owned by various individual and institutional investors which Price Associates serves as an investment adviser with power to direct investments and/or sole power to vote the securities. For the purposes of the reporting requirements of the Exchange Act, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. (3) Based on information contained in a Schedule 13G/A, dated January 21, 2011 (the BlackRock 13G/A), filed by BlackRock, Inc. (BlackRock) with the SEC, with respect to the Company, reporting beneficial ownership as of December 31, 2010. The BlackRock 13G/A reports that BlackRock has sole voting and dispositive power over 11,429,398 Shares. (4) Based on information contained in a Schedule 13G/A, dated February 11, 2011 (the FMR 13G/A), filed by FMR LLC (FMR) with the SEC, with respect to the Company, reporting beneficial ownership as of December 31, 2010. The FMR 13G/A reports that FMR has sole voting power over 772,850 Shares and sole dispositive power over 10,285,981 Shares as follows: Fidelity Management & Research Company (Fidelity), a wholly-owned subsidiary of FMR, holds 9,513,131 Shares; Edward C. Johnson 3rd and FMR, through its control of Fidelity, and the funds, each has sole dispositive power over 9,513,131 Shares; Strategic Advisers, Inc., a registered investment adviser and wholly owned subsidiary of FMR, holds 778 Shares; Pyramis Global Advisors Trust Company (PGATC), an indirect wholly-owned subsidiary of FMR, holds 401,062 Shares; FIL Limited, a foreign-based entity that provides investment advisory and management services to non-U.S. investment companies, holds 371,010 Shares. According to the FMR 13G/A, FMR and Edward C. Johnson 3rd, Chairman of FMR, each has sole dispositive power and sole voting power over 9,513,131 Shares. According to the FMR 13G/A, Edward C. Johnson 3rd and FMR, through its control of PGATC, each has sole voting power and sole dispositive power over 401,062 Shares. Through ownership of voting common stock and the execution of a certain stockholders voting agreement, members of the Edward C. Johnson 3rd family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR. 15

BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS The table below shows the beneficial ownership of our Shares of (i) each Director, (ii) each nominee for Director, (iii) our Chief Executive Officer, our Chief Financial Officer and each of the other three most highly paid executive officers and (iv) all directors and executive officers as a group, as of January 31, 2011. Beneficial ownership includes Shares a Director, nominee for Director or executive officer may acquire pursuant to stock options and other derivative securities that were exercisable at that date or that will become exercisable within 60 days thereafter. Unless otherwise indicated, the stockholder had sole voting and dispositive power over the Shares.
Name (Listed alphabetically) Amount and Nature of Beneficial Ownership Percent of Class

Adam M. Aron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Matthew E. Avril . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Charlene Barshefsky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thomas E. Clarke . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Clayton C. Daley, Jr. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bruce W. Duncan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lizanne Galbreath. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eric Hippeau . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vasant M. Prabhu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stephen R. Quazzo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thomas O. Ryder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kenneth S. Siegel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Simon M. Turner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Frits van Paasschen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kneeland C. Youngblood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All Directors, Nominees for Directors and executive officers as a group (17 persons) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47,124(1) 143,823(1) 38,171(1)(3) 22,705(1) 20,173(1)(3) 194,549(1)(3)(4) 45,991(1)(3) 70,813(1)(3) 348,355(1) 71,255(1)(5) 76,560(1)(3) 136,079(1) 189,076(1)(6) 496,507(1) 38,029(1) 2,056,616(1)

(2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) (2)

(1) Includes Shares subject to presently exercisable options, and options, restricted stock and restricted stock units that will become exercisable or vest within 60 days of January 31, 2011, as follows: 27,057 for Mr. Aron; 143,823 for Mr. Avril; 24,112 for Ambassador Barshefsky; 43,185 for Mr. Cava; 17,918 for Mr. Clarke; 13,631 for Mr. Daley; 58,448 for Mr. Duncan; 34,680 for Ms. Galbreath; 46,500 for Mr. Hippeau; 74,221 for Mr. McAveety; 331,297 for Mr. Prabhu; 41,104 for Mr. Quazzo; 46,295 for Mr. Ryder; 96,563 for Mr. Siegel; 169,118 for Mr. Turner; 494,476 for Mr. van Paasschen; and 29,200 for Mr. Youngblood. (2) Less than 1%. (3) Amount includes the following number of phantom stock units received as a result of the following Directors election to defer Directors Annual Fees: 3,400 for Ambassador Barshefsky; 3,542 for Mr. Daley; 7,499 for Mr. Duncan; 11,311 for Ms. Galbreath; 24,313 for Mr. Hippeau; and 19,267 for Mr. Ryder. (4) Includes 121,866 Shares held by The Bruce W. Duncan Revocable Trust of which Mr. Duncan is a trustee and beneficiary. (5) Includes 29,754 Shares held by a trust of which Mr. Quazzo is settlor and over which he shares investment control, and 397 Shares owned by Mr. Quazzos wife in a retirement account. (6) Includes 19,958 Shares owned jointly with spouse.

16

The following table provides information as of December 31, 2010 regarding Shares that may be issued under equity compensation plans maintained by the Company. Equity Compensation Plan Information-December 31, 2010
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)

Plan Category

Equity compensation plans approved by security holders. . . . . . . . . . . . . . . . . . Equity compensation plans not approved by security holders . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

17,182,466 17,182,466

$15.06 $15.06

52,807,415(1) 52,807,415

(1) Does not include deferred restricted stock units (that vest over three years and may be settled in Shares) that have been issued pursuant to the Executive Plan. The Executive Plan as it was approved by stockholders at the 2010 Annual Meeting did not limit the number of deferred restricted stock units that may be issued. In addition, 10,157,990 Shares remain available for issuance under our Employee Stock Purchase Plan, a stock purchase plan meeting the requirements of Section 423 of the Code.

17

EXECUTIVE AND DIRECTOR COMPENSATION I. EXECUTIVE OFFICERS Our executive officers and their positions as of March 10, 2011 are:
Name (listed alphabetically, after Chief Executive Officer) Position

Frits van Paasschen . . . . . . . . . . . . . . . . Chief Executive Officer and President and a Director Matthew E. Avril . . . . . . . . . . . . . . . . . . President, Hotel Group Jeffrey M. Cava. . . . . . . . . . . . . . . . . . . Executive Vice President and Chief Human Resources Officer Philip P. McAveety . . . . . . . . . . . . . . . . Executive Vice President and Chief Brand Officer Vasant M. Prabhu . . . . . . . . . . . . . . . . . Vice Chairman and Chief Financial Officer Kenneth S. Siegel . . . . . . . . . . . . . . . . . Chief Administrative Officer, General Counsel and Secretary Simon M. Turner . . . . . . . . . . . . . . . . . . President, Global Development The biography for Mr. van Paasschen, our Chief Executive Officer and President, follows the table listing our Directors under Election of Directors beginning on page 8 above. Biographies for our other executive officers are: Matthew E. Avril. Mr. Avril, 50, has been President, Hotel Group since September 2008. From May 2005 until August 2008, he was President and Managing Director of Operations for Starwood Vacation Ownership (SVO); and immediately prior, from September 2002 to May 2005, served as Senior Vice President for SVO. Mr. Avril was with Vistana, Inc. (SVOs predecessor entity) for the ten year period from January 1989 to December 1998, serving as its Executive Vice President and Chief Operating Officer and, prior to that, as the companys Chief Financial Officer. Prior to joining Vistana, Mr. Avril, a certified public accountant, spent five years with KPMG Peat Marwick. Mr. Avril is also a member of the board of directors of API Technologies Corp. Jeffrey M. Cava. Mr. Cava, 59, has been Executive Vice President and Chief Human Resources Officer since May 2008. Mr. Cava served as Executive Vice President and Chief Human Resources Officer for Wendys International, Inc. from June 2003 to May 2008. Prior to joining Wendys, Mr. Cava was Vice President and Chief Human Resources Officer for Nike, Inc.; Vice President Human Resources for The Walt Disney Company, Consumer Products Group; and Vice President of Global Staffing, Training and Development for ITT Sheraton Corporation. Mr. Cava is also a member of the board of directors of The Society for Human Resources Management, a non-profit global human resources professional organization. Philip P. McAveety. Mr. McAveety, 44, has been Executive Vice President and Chief Brand Officer since April 2008. Prior to joining the company, Mr. McAveety was Global Brand Director of Camper, SL, a fashion footwear company, from January 2007 until March 2008. From July 1997 until December 2006, he served as Vice President, Brand Marketing, Europe, Middle East and Africa at Nike, Inc. Vasant M. Prabhu. Mr. Prabhu, 51, has been Vice Chairman and Chief Financial Officer since February 2010. Prior to that, he was Executive Vice President and Chief Financial Officer since January 2004. Prior to joining the Company, Mr. Prabhu served as Executive Vice President and Chief Financial Officer for Safeway Inc., from September 2000 through December 2003. Mr. Prabhu was previously the President of the Information and Media Group at the McGraw-Hill Companies, Inc., from June 1998 to August 2000, and held several senior positions at divisions of PepsiCo, Inc. from June 1992 to May 1998. From August 1983 to May 1992 he was a partner at Booz Allen Hamilton Inc., an international management consulting firm. Mr. Prabhu is a member of the board of directors of Mattel, Inc. Kenneth S. Siegel. Mr. Siegel, 55, has been Chief Administrative Officer and General Counsel since May 2006. From November 2000 to May 2006, Mr. Siegel held the position of Executive Vice President and General Counsel. In February 2001, he was also appointed as the Secretary of the Company. Mr. Siegel was formerly the Senior Vice President and General Counsel of Gartner, Inc., a provider of research and analysis on information technology industries, from January 2000 to November 2000. Prior to that time, he served as Senior Vice President, 18

General Counsel and Corporate Secretary of IMS Health Incorporated, an information services company, and its predecessors from February 1997 to December 1999. Prior to that time, Mr. Siegel was a Partner in the law firm of Baker & Botts, LLP. Mr. Siegel is also a Trustee of Cancer Hope Network, a non-profit entity, a Trustee of Minority Corporate Counsel Association, and a Trustee of the American Hotel & Lodging Educational Foundation. Simon M. Turner. Mr. Turner, 49, has been President, Global Development since May 2008. From June 1996 to April 2008, he was a principal of Hotel Capital Advisers, Inc., a hotel investment advisory firm. During this period, Mr. Turner served on the board of directors of Four Season Hotels, Inc., serving as a member of the Human Resources Committee and the Audit Committee. He was also a member of the board of directors of Fairmont Raffles Hotels International and was chairman of the Audit Committee. From July 1987 to May 1996, Mr. Turner was a member of the Investment Banking Department of Salomon Brothers, based in both New York and London. II. COMPENSATION DISCUSSION AND ANALYSIS Introduction The Companys compensation programs are designed to align compensation with its business objectives and performance, enabling the Company to attract, retain, and reward executive officers and other key employees who contribute to the Companys long-term success and motivate executive officers and key employees to enhance longterm stockholder value. The Compensation Committee reviews and sets the Companys overall compensation strategy for all employees on an annual basis. In the course of this review, the Compensation Committee considers the Companys current compensation programs and whether to modify them or introduce new programs or elements of compensation in order to better meet the Companys overall compensation objectives. We provide information below with regard to the specific compensation of our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated executive officers, as determined for 2010 (our Named Executive Officers). A. Overview of Starwoods Executive Compensation Program 1. Program Objectives and Other Considerations Objectives. As a consumer lifestyle company with a branded hotel portfolio at its core, the Company operates in a competitive, dynamic and challenging business environment. In step with this mission and environment, the Companys compensation program for our principal executive officer, principal financial officer and other executive officers has the following key objectives: Attract and Retain: We seek to attract and retain talented executives from within and outside the hospitality industry who understand the importance of innovation, brand enhancement and consumer experience. We are working to reinvent the hospitality industry, and one element of this endeavor is to bring in key talent from other industries. Therefore, overall program competitiveness must take these other markets into account. Motivate: We seek to motivate our executives to sustain high performance and achieve Company financial and strategic/operational goals over the course of business cycles and in various market conditions. Align Interests: We endeavor to align the interests of stockholders and our executives by tying executive compensation to the Companys business results and stock performance. Moreover, we strive to keep the executive compensation program transparent, easily understood, in line with market practices and consistent with high standards of good corporate governance. In its review of the overall compensation strategy and program in 2008, the Compensation Committee made several key changes, most of which became effective for the 2009 performance year and have carried forward for 2010. The Compensation Committee changed its philosophy on tax gross-ups in change in control agreements and eliminated gross-ups for arrangements put in place in 2008 and thereafter. The Compensation Committee also revised the structure of determining annual incentive compensation under the Companys Executive Plan: with respect to the goal based upon the Companys financial performance, the Compensation Committee eliminated a floor below which compensation could not fall; and with respect to bonus pool funding, the Compensation Committee made structural changes to fund the pool entirely based upon the Companys financial performance 19

goals. Further, when translating dollar-denominated long-term equity incentive awards into a number of stock options to be granted under the Companys 2004 Long-Term Incentive Compensation Plan (LTIP), the Compensation Committee lowered the ratio from three times as many options as the number of Shares whose aggregate value on the grant date equals the dollar-denominated award (i.e., a 3-to-1 ratio) to two and one-half times (i.e., a 2.5-to-1 ratio). These changes were designed to better align compensation with the creation and preservation of stockholder value. What the Program Intends to Reward. Our executive compensation program is strongly weighted toward variable compensation tied to Company results. Specifically, our compensation program for our Named Executive Officers is designed to ensure the following: Alignment with Stockholders: A significant portion of Named Executive Officer compensation is delivered in the form of equity, ensuring that long-term compensation is strongly tied to stockholder returns. Achievement of Company Financial Objectives: A portion of Named Executive Officer compensation is tied directly to the Companys financial performance. Achievement of Strategic/Operational Objectives: A portion of Named Executive Officer compensation is tied to achievement of specific individual objectives that are directly aligned with the execution of our business strategy. These objectives may be related to, among others, operational excellence, brand enhancement, innovation, growth, cost containment/efficiency, customer experience and/or teamwork. Overall Leadership and Stewardship of the Company: Leadership, teambuilding, and development of future talent are key success factors for the Company and a portion of compensation for the Named Executive Officers is dependent on satisfaction of core leadership competencies. 2. Roles and Responsibilities The Compensation Committee is responsible for, among other things, the establishment and review of compensation policies and programs for our executive officers and ensuring that the executive officers are compensated in a manner consistent with the objectives and principles outlined above. It also monitors the Companys executive succession plan, and reviews and monitors the Companys performance as it affects the Companys employees and the overall compensation policies for the Companys employees. The Compensation Committee makes all compensation decisions with respect to our Named Executive Officers. Our Chief Executive Officer, together with the Chief Human Resources Officer, reviews the performance of each other Named Executive Officer and presents to the Compensation Committee his conclusions and recommendations, including salary adjustments and annual incentive compensation amounts (as described in more detail in the Annual Incentive Compensation section below). The Compensation Committee may exercise its discretion in modifying any recommended salary adjustments or awards to these executives. The role of the Companys management is to provide reviews and recommendations for the Compensation Committees consideration, and to manage operational aspects of the Companys compensation programs, policies and governance. Direct responsibilities include, but are not limited to, (i) providing an ongoing review of the effectiveness of the compensation programs, including competitiveness, and alignment with the Companys objectives, (ii) recommending changes, if necessary, to ensure achievement of all program objectives and (iii) recommending pay levels, payout and/or awards for executive officers other than the Chief Executive Officer. Management also prepares tally sheets which describe and quantify all components of total compensation for our Named Executive Officers, including salary, annual incentive compensation, long-term incentive compensation, deferred compensation, outstanding equity awards, benefits, perquisites and potential severance and change in control payments. The Compensation Committee reviews and considers these tally sheets in making compensation decisions for our Named Executive Officers. The Compensation Committee retained Pearl Meyer & Partners to assist in the review and determination of compensation awards to the Named Executive Officers (including the Chief Executive Officer) for the 2010 performance period, as well as the annual fees or other compensation paid to our Board. Pearl Meyer & Partners worked with management and the Compensation Committee in reviewing the compensation structure of the 20

Company and of the companies in the peer group. The fees paid to Pearl Meyer & Partners for services performed for the Compensation Committee during 2010 were $136,000. Pearl Meyer & Partners does not provide any other services to the Company and no other fees were paid to Pearl Meyer & Partners by the Company during 2010. 3. Risk Assessment In setting compensation, our Compensation Committee also considers the risks to our stockholders, and the Company as a whole, arising out of our compensation programs. In January 2011, management held a special meeting to discuss and assess the risk profile of our compensation programs. The Chief Human Resources Officer, our Chief Administrative Officer and General Counsel, our Vice Chairman and Chief Financial Officer, the Companys external legal counsel for compensation matters, and Pearl Meyer & Partners were among the participants in the special meeting. Their review considered risk-determining characteristics of the overall structure and individual components of our Company-wide compensation program, including our base salaries, incentive plans (both at the executive and property management levels) and equity plans. A report of the findings was provided to the Compensation Committee for its review and consideration. Following this assessment, we believe that the Company has instituted policies that align our executive officers interests with those of our stockholders without creating incentives for our executive officers to take risks that are reasonably likely to have a material adverse effect on the Company. For example, Balance of Compensation: Across the Company, individual elements of our compensation program include base salaries, incentive compensation, and for certain of our employees, equity-based awards. By providing a mix of different elements of compensation which reward both short-term and long-term performance, the Companys compensation programs as a whole provide a balanced approach to incentivizing and retaining employees, without placing an inappropriate emphasis on any particular form of compensation. Objective Formula and Pre-established Performance Measures Dictate Annual Incentives: Under the Executive Plan, payment of annual incentives to our Named Executive Officers is subject to the satisfaction of specific company-wide annual performance targets determined under an incentive formula established by our Compensation Committee within the first 90 days of each fiscal year. Similarly, the Companys employees other than the Named Executive Officers that are eligible to receive an annual incentive receive such incentive subject to the satisfaction of specific company-wide annual performance targets determined under an incentive formula established by our Compensation Committee. These performance targets are directly and specifically tied to one or more of the following company-wide business criteria: EBITDA, consolidated pre-tax earnings, net revenues, net earnings, operating income, earnings before interest and taxes, cash flow measures, return on equity, return on net assets employed or earnings per share for the applicable fiscal year. Minimum and Maximum Thresholds For Annual Incentives: Each year our Compensation Committee establishes within the first 90 days of any fiscal year a threshold level of EBITDA that the Company must achieve in order for any bonus to be paid to our Named Executive Officers or other Company employees eligible to receive an annual incentive for any given year. The Executive Plan also specifies a maximum incentive amount, in dollars, that may be paid to any executive officer for any 12-month performance period. As a result of this threshold performance requirement and the design of our Executive Plan, incentive compensation is payable under our incentive plans only upon the attainment of performance targets related to business criteria that are in the interests of our stockholders. Use of Long-Term Incentive Compensation: Equity-based long-term incentive compensation that vests over a period of years is a key component of total compensation of our executive employees. This vesting period encourages our executives to focus on sustaining the Companys long-term performance. These grants are also made annually, so executives always have unvested awards that could decrease significantly in value if our business is not managed for the long term. Share Ownership Guidelines: Our Share ownership guidelines require our executive officers, including the Named Executive Officers, to hold that number of Shares having a market value equal to or greater than a multiple of each executives base salary. For the Chief Executive Officer, the multiple is five times base 21

salary and for the other Named Executive Officers, the multiple is four times base salary. A retention requirement of 35% is applied to restricted Shares upon vesting (net Shares after tax withholding) and Shares obtained from option exercises until the executive meets the target, or if an executive falls out of compliance. See the section entitled Share Ownership Guidelines on page 32 for a description of the securities that count towards meeting the target and other considerations. Internal Processes Further Restrict Risk: The Company has in place additional processes to limit risk to the Company from our compensation programs. Specifically, the Company has financial policies that restrict the amount of capital that any individual may deploy absent obtaining internal approvals, which reduces the risk of inappropriate expenditures by an individual. Further, the processes and controls associated with respect to our compensation programs are audited each year to insure that all expenditures have been approved within the Companys guidelines and by required approval authorities. In addition, the Company engages an external compensation consulting firm for design and review of our compensation programs, as well as external legal counsel to assist with the periodic review of our compensation plans to ensure compliance with applicable laws and regulations. B. Elements of Compensation 1. Primary Elements The primary elements of the Companys compensation program for our Named Executive Officers are: Base Salary Incentive Compensation O Annual Incentive Compensation O Long-Term Incentive Compensation Benefits and Perquisites Mr. van Paasschens compensation structure was established in 2007 pursuant to his employment agreement. Mr. van Paasschen and the Company agreed to a compensation structure which was heavily weighted towards performance and long-term incentives, including equity awards in the form of restricted stock and stock options and restrictions on selling equity awards for two years (other than to satisfy tax withholding obligations). As a result, in the event of strong financial and individual performance, Mr. van Paasschen would benefit greatly in the form of long-term incentive compensation (stock options and restricted stock), but his compensation would be significantly lower if the Company did not perform well or if his employment with the Company was terminated after a short period of time (due to the vesting requirements of the equity awards under which there is generally no acceleration of equity awards for a termination with or without cause). For the other Named Executive Officers, pay is structured to award performance upon achievement of pre-established financial and strategic performance goals. Total compensation for this group is evaluated against the peer group identified in this proxy statement. Evaluated on this basis, the Compensation Committee believes the actual cash and equity compensation delivered for the 2010 performance year was appropriate in light of the Companys overall performance and the performance of the particular executives. We describe each of the compensation elements below and explain why we pay each element and how we determine the amount of each element. Base Salary. The Company believes it is essential to provide our Named Executive Officers with competitive base salaries that will enable the Company to continue to attract and retain critical senior executives from within and outside the hospitality industry. In the case of Named Executive Officers other than the Chief Executive Officer, base salary typically accounts for approximately 20% of total compensation at target (i.e., total compensation assuming performance goals are satisfied at targeted levels, but excluding benefits and perquisites). In the case of Mr. van Paasschen, base salary for 2010 was $1,250,000. As a result, base salary accounted for approximately 14% of total compensation at target for Mr. van Paasschen. Base salary serves as a minimum 22

level of compensation to Named Executive Officers in circumstances when achieving Company financial and strategic/operational objectives becomes challenging and the level of incentive compensation is impacted. Salaries for Named Executive Officers are generally based on the responsibilities of each position and are reviewed annually against similar positions among a group of peer companies developed by the Company and its advisors consisting of similarly-sized hotel and hospitality companies as well as other companies representative of markets in which the Company competes for key executive talent. See the Background Information on the Executive Compensation Program Use of Peer Data section beginning on page 31 below for a list of the peer companies used in this analysis. The Company generally seeks to position base salaries of our Named Executive Officers at or near the median base salary of the Companys peer group for similar positions. Incentive Compensation. Incentive compensation includes annual cash bonus awards under the Companys Executive Plan and long-term incentive compensation in the form of equity awards under the Companys LTIP. Incentive compensation typically accounts for approximately 80% of total compensation at target (86% for Mr. van Paasschen in 2010), with annual cash bonus compensation and long-term incentive compensation accounting for 23% and 57%, respectively (29% and 57% for Mr. van Paasschen, respectively, in 2010). The Company believes that this structure allows it to provide each Named Executive Officer with substantial incentive compensation opportunities if performance objectives are met. The Company believes that the allocation between base and incentive compensation is appropriate and beneficial because: it promotes the Companys competitive position by allowing it to provide Named Executive Officers with above-median total competitive compensation if targets are met; it targets and attracts highly motivated and talented executives within and outside the hospitality industry; it aligns senior managements interests with those of stockholders; it promotes achievement of business and individual performance objectives; and it provides long-term incentives for Named Executive Officers to remain in the Companys employ. Annual Incentive Compensation. Annual cash bonuses are a key part of the Companys executive compensation program. The bonuses directly link the achievement of Company financial and strategic/ operational performance objectives to executive pay. Annual bonuses also provide a complementary balance to equity incentives (discussed below). Each Named Executive Officer has an annual opportunity to receive an incentive award under the stockholder-approved Executive Plan. If and when earned, awards are typically paid to Named Executive Officers partly in cash and, unless the Compensation Committee otherwise elects, partly as deferred stock awards (under the Executive Plan). The deferred stock awards generally vest over a threeyear period. See additional detail regarding these deferred stock awards in the Long-Term Incentive Compensation section beginning on page 28 below. Viewed on a combined basis once minimum performance is attained, the annual bonus payments attributable to both Company financial and strategic/operational performance can range from 0% - 275% of target for the Named Executive Officers, other than the Chief Executive Officer. Minimum Threshold. For the Named Executive Officers, an annual bonus award for 2010 was paid under the Executive Plan. Under the Executive Plan, each year, the Compensation Committee establishes in advance a threshold level of EBITDA that the Company must achieve in order for any bonus to be paid under the Executive Plan for that year (the EP Threshold). The Executive Plan also specifies a maximum bonus amount, in dollars, that may be paid to any executive for any 12-month performance period. When the threshold is established at the beginning of a year, the achievement of the threshold is considered substantially uncertain for purposes of Section 162(m), which is one of the requirements for compensation paid under the Executive Plan to be deductible as performance-based compensation under Section 162(m). For 2010, the EP Threshold was $640,000,000. Generally, a Named Executive Officer will receive payment of a bonus award under the Executive Plan only if he remains employed by the Company on the award payment date. However, subject to attaining the EP 23

Threshold in the relevant year, pro rata awards may be paid at the discretion of the Compensation Committee in the event of death, disability, retirement or other termination of employment. Once the EP Threshold is achieved, the maximum annual bonus amount specified in the Executive Plan becomes available for each Named Executive Officer and the Compensation Committee may apply its discretion to reduce such amount to determine the actual bonus amount for each individual. To determine the actual bonus to be paid for a year under the Executive Plan, the Compensation Committee also establishes specific annual Company financial and strategic/operational performance goals and a related target bonus amount for each executive. These financial and strategic/operational goals are described below. Additional Performance Criteria. If the EP Threshold under the Executive Plan is met for a year, the Companys performance in comparison to the financial and strategic/operational goals for the year set by the Compensation Committee is then used to determine a Named Executive Officers actual bonus, as follows: Financial Goals. The Company financial goals for Named Executive Officers under the Executive Plan consist of EBITDA and earnings per share targets, with each criteria accounting for half of the financial goal portion of the annual bonus. As the Compensation Committee generally sets target bonus award opportunities above the median among the Companys peer group, the Company financial and strategic/operational goals to achieve such award levels are considered challenging but achievable, representing a superior level of performance. Consistent with maintaining these high standards and subject to achieving the EP Threshold, the Compensation Committee retains the ability to consider whether an adjustment of the financial goals for any year is necessitated by exceptional circumstances, e.g., an unanticipated and material downturn in the business cycle that triggers, in response, an increased focus by the Compensation Committee on the Companys performance relative to the industry. This ability is intended to be narrowly and infrequently used and, if applicable, the basis for its use would be detailed in the Companys proxy statement. Performance against the financial goals determined 60% of Mr. van Paasschens total target annual bonus opportunity and 50% of the total target opportunities for the other Named Executive Officers. Subject to achieving the EP Threshold, actual bonuses paid to Named Executive Officers for financial performance may range from 0% to 200% of the pre-determined target bonus for this category of performance, as determined by the Compensation Committee. For Named Executive Officers, the Company financial performance portion is based 50% on earnings per share and 50% on EBITDA of the Company. As noted above, once the EP Threshold is achieved, the minimum and maximum annual bonus amount specified in the Executive Plan becomes available for award. The maximum bonus payout for the applicable Company financial performance metric is limited to 200% of target (i.e., the Maximum) and the Compensation Committee may apply its discretion to reduce such amount to the actual bonus amount for each Named Executive Officer. The table below sets forth for each metric the performance levels for 2010 which would have resulted in 100% bonus pool payout (i.e., Target), the minimum performance level (i.e., the Minimum) that would have resulted in a 20% bonus pool payout and the Maximum that would have resulted in a 200% bonus pool payout. In addition, the table sets forth the approximate mid-points of payout between the Minimum to Target and Target to Maximum and indicates the related required performance level:
Minimum (20%) Mid-point (75%) Target (100%) Mid-point (150%) Maximum (200%)

Earnings per Share . . . . . . . $ 0.68 $ 0.80 $ 0.85 $ 0.96 $ 1.06 Company EBITDA . . . . . . . $640,000,000 $750,000,000 $800,000,000 $900,000,000 $1,000,000,000

For the 2010 performance period, EBITDA (which exceeded the EP Threshold) for purposes of determining annual bonuses was $884,000,000, which reflects an adjusted EBITDA amount that is normalized to exclude the potential impact of asset sales and/or foreign exchange swings. Actual results for earnings per Share for purposes of determining annual bonuses were $1.26, which reflects earnings before special items. The Compensation Committee, using the metrics described above, approved a maximum payout eligibility of 24

170% of target for the Company financial portion of the annual bonus for the 2010 fiscal year for the Named Executive Officers. Using negative discretion, the Compensation Committee determined that the Company financial portion of the annual bonus would pay out only at 120% of target, reflecting the Compensation Committees judgment that the economic recovery was stronger than anticipated at the time the 2010 targets were established. Strategic/Operational Goals. The strategic/operational performance goals for Named Executive Officers under the Executive Plan consists of Big 5 and leadership competency objectives that link individual contributions to execution of our business strategy and major financial and operating goals. Big 5 refers to each executives specific deliverables within the Companys critical performance categories win with talent, execute brilliantly, build great brands, deliver global growth, and drive outstanding results. As part of a structured process that cascades down throughout the Company, these objectives are developed at the beginning of the year, and they integrate and align an executive with the Companys strategic and operational plan. Achievement of Big 5 objectives typically accounts for 80% of the strategic/operational performance evaluation, and achievement of leadership competency objectives typically accounts for 20% of such evaluation. The portion of annual bonus awards attributable to strategic/operational management performance represents 40% of Mr. van Paasschens total target opportunity and 50% of the total target opportunities for the other Named Executive Officers. Actual bonuses paid to Named Executive Officers for strategic/operational performance may range from 0% to 175% of the pre-determined target amount for this category of performance, as determined by the Compensation Committee. Evaluation Process. In the case of Mr. van Paasschen, the Compensation Committee conducts a formal performance review process each year during which the Compensation Committee evaluates how Mr. van Paasschen performed against the strategic/operational/talent management performance goals established for the prior year. The Compensation Committee also determines the extent to which the Companys financial performance goals were achieved and whether the Company achieved the applicable minimum threshold(s) required to pay awards. With respect to the other Named Executive Officers, Mr. van Paasschen, together with the Chief Human Resources Officer and with oversight and input from the Compensation Committee, conducts a formal performance review process each year to evaluate performance against the officers strategic/operational performance goals for the prior year. The Chief Executive Officer conducts this evaluation through the Performance Management Process (PMP), which results in a PMP rating for each executive. This PMP rating corresponds to a payout range under the Executive Plan determined annually by the Compensation Committee for that rating. As noted, for 2010 the portion of the Executive Plan payouts based on PMP ratings could range from 0% to 175% of target once the target has been adjusted to reflect the Companys performance. Where necessary to preserve the competitive position of the Companys compensation scale, the Chief Executive Officer may recommend a market adjustment to the base amount that is subjected to this percentage. At the conclusion of his review, the Chief Executive Officer submits his recommendations to the Compensation Committee for final review and approval. In determining the actual award payable to a Named Executive Officer under the Executive Plan, the Compensation Committee reviews the Chief Executive Officers evaluation and makes a final determination as to how the executive performed against his strategic/ operational goals for the year. The Compensation Committee also determines, based on managements report, the extent to which the Companys financial performance goals were achieved and whether the Company achieved the applicable minimum threshold(s) required to pay awards. The Chief Executive Officer also meets in executive session with the Board of Directors to inform the Board of his performance assessments regarding the Named Executive Officers and the basis for the compensation recommendations he presented to the Compensation Committee. The evaluation of Mr. van Paasschen and the other Named Executive Officers with respect to each executives strategic/operational goals for 2010 is described below. 25

Mr. van Paasschens accomplishments for the 2010 performance year included the following: Delivered strong financial returns, as measured by key financial measures including EBITDA, EPS, and shareholder return, in excess of both the S&P 500 average and the S&P 500 average for hotel companies for 2010; Furthered strong growth in the Companys hotel portfolio by opening 72 new hotels and executing signed deals for 96 new hotels and 59 re-engagements of existing hotels; Maintained Starwoods position as a brand leader and innovator by improving market share across most Company brands and increasing membership in the Companys Preferred Guest Program; Achieved increased employee satisfaction scores and introduced new initiatives to develop management talent within the Company; and Announced water and energy reduction targets, with global initiatives rolled out to support these goals. In light of Mr. van Paasschens accomplishments and impact on the Company, the Compensation Committee awarded him a payout at 120% of target for the strategic/operational portion of the annual bonus, for a total annual bonus of $3,000,000 for 2010, representing 120% of his overall annual bonus target. Mr. Avrils accomplishments for the 2010 performance year included the following: Significantly gained market share across most Company brands, including an 1.5% increase over last year in our North America Division led by a 2.1% increase in market share for our Sheraton brand, and a 7.1% increase over last year for our W brand globally; Significantly increased from the prior year the hotel group EBITDA and owned hotels EBITDA, outpacing our budgeted revenue growth by 7%, and 32% in each case, respectively; Redesigned the Starwood Preferred Guest enrollment process, resulting in a significant increase in the Companys Preferred Guest Program; Opened 72 hotels worldwide and delivered strong guest satisfaction index (GSI) scores across all brands, despite inherent pressures from raising rates and occupancy levels; and Furthered key relationships with hotel owners, joint venture partners and our Companys personnel to drive revenue, strong owner relations, and retention of management talent throughout our hotels. In light of Mr. Avrils accomplishments in 2010, he received an accomplished objectives PMP performance rating and was awarded a payout at 120% of target for the strategic/operational portion of the annual bonus, for a total annual bonus of $902,100 for 2010, representing 120% of his overall annual bonus target. Mr. Prabhus accomplishments for the 2010 performance year included the following: Continued to strengthen the Companys liquidity position and reduce leverage by extending the Companys $1.6 billion credit facility to 2013 and significantly reducing debt; Exceeded the Companys cash flow budget by almost $800 million and lowered net debt to $2 billion with approximately $650 million in cash reserves at year-end; Received a total tax refund of $245 million for the successful settlement of a tax matter with the United States Internal Revenue Service; Led a strategic sourcing team that delivered savings of $37 million with the successful negotiation of contracts in 2010; and Managed the Companys financial operations efficiently, improving the accuracy of our forecasting and continuing a focus on strong internal controls. In light of Mr. Prabhus accomplishments, he received an accomplished objectives PMP performance rating and the Compensation Committee awarded him a payout at 120% of target for the strategic/operational portion of the annual bonus, for a total annual bonus of $902,100 for 2010, representing 120% of his overall annual bonus target. 26

Mr. Siegels individual accomplishments for the 2010 performance year included the following: Provided legal support for over 145 hotel management and franchise transactions, including new deals, changes in ownership and re-engagements worldwide; strategic hotel sales and sale-and-manage-back transactions; and the negotiation of the Companys new headquarters lease along with eight additional corporate lease transactions; Successfully resolved a litigation matter against certain former employees and their new employer regarding substantial theft of intellectual property from the Company, along with the management of over 600 matters in active litigation; Managed, in coordination with our finance and information security teams, the resolution of a hacker-instituted malware incident; and streamlined, in coordination with our development team, the Companys hotel operating agreements for more expedient negotiations with owners; In partnership with the hotel industry, led efforts to block Card Check legislation and tax windfall legislation favoring Online Travel Agencies (OTAs); and Made significant progress in long-term Global Citizenship goals, including instituting four Foundational Environmental Initiatives in our hotel brand standards and secured LEED Volume Certification for our Element brand hotels. In light of Mr. Siegels accomplishments, he received an accomplished objectives PMP performance rating and was awarded a payout at 120% of target for the strategic/operational portion of the annual bonus, for a total annual bonus of $766,188 for 2010, representing 120% of his overall annual bonus target. Mr. Turners accomplishments for the 2010 performance year included the following: Successfully managed the global development team to achieve agreements for 96 new hotels (approximately 22,200 new rooms) and 59 re-engagements or changes to ownership involving existing hotels (approximately 15,000 rooms), which exceeds 2009 growth levels by approximately 25% and 35% respectively; Completed strategic sale transactions generating pre-tax proceeds of $148 million; Continued focus on accelerating growth of the Aloft brand with 17 incremental Aloft hotel deals signed in 2010; Completed a series of Strategic Asset Reviews to set direction for future development, covering 80% of wholly owned properties; and Completed a comprehensive review of the Companys hotel operating agreements in partnership with the legal team, which will allow for more streamlined, efficient negotiations with owners. In light of Mr. Turners accomplishments in 2010, he received an accomplished objectives PMP performance rating and was awarded a payout at 120% of target for the strategic/operational portion of the annual bonus, for a total annual bonus of $778,500 for 2010, representing 120% of his overall annual bonus target. Overall, the Compensation Committee paid the Named Executive Officers individual bonuses under the Executive Plan at 120% of target, which reflected the target payout based upon the Companys financial performance goals, and the contribution made by each of the Named Executive Officers under his strategic/ operational goals. Annual awards made to our Named Executive Officers under the Executive Plan with respect to 2010 performance are reflected in the Summary Compensation Table on page 34 and described in the accompanying narrative. 27

Long-Term Incentive Compensation. Like the annual incentives described above, long-term incentives are a key part of the Companys executive compensation program. Long-term incentives are strongly tied to returns achieved by stockholders, providing a direct link between the interests of stockholders and the Named Executive Officers. Long-term incentive compensation for our Named Executive Officers consists primarily of equity compensation awards granted annually (in February of each year following the announcement of the Companys earnings for the previous year) under the Companys LTIP and secondarily of the portion of the Executive Plan awards that are deferred in the form of deferred stock awards. Taken together, approximately 60% of total compensation at target award levels is equity-based long-term incentive compensation. The Compensation Committee grants awards under the LTIP to Mr. van Paasschen that are a combination of stock options and restricted stock. Mr. van Paasschens employment agreement, which reflects an emphasis on performance and long-term incentives, provides that in the event of strong financial and individual performance Mr. van Paasschen benefits greatly in the form of long-term incentive compensation that, for the 2010 fiscal year, would not be less than $5,000,000. The Compensation Committee generally grants awards under the LTIP to all other Named Executive Officers that are a combination of stock options and restricted stock awards. For the other Named Executive Officers, compensation is also geared towards performance and long-term incentives, but to a lesser degree than Mr. van Paasschen. The Compensation Committee believes an emphasis on long-term equity compensation (i.e., stock options and restricted stock) is particularly appropriate for the leader of a management team committed to the creation of stockholder value. In 2010, for all Named Executive Officers, the Compensation Committee used a grant approach in which the award is articulated as a dollar value. Under this approach, an overall award value, in dollars, was determined for each executive based upon our compensation strategy and competitive market positioning taking into account the Company and individual performance factors for the Named Executive Officers described above in Annual Incentive Compensation. The Compensation Committee determines the appropriate mix of restricted stock and stock options to be given to our Named Executive Officers. For 2010, the Compensation Committee determined that a split of 75% of restricted stock awards and 25% of stock options was the appropriate balance to maximize cost effectiveness and encourage equity ownership among our management. The number of shares of restricted stock was calculated by dividing 75% of the award value by the fair market value of the Companys stock on the grant date. The number of stock options was determined by dividing the remaining 25% of the award value by the fair market value of the Companys stock on the grant date and multiplying the result by two and one-half. The Named Executive Officers are able to elect a greater portion of options (up to 100% options). Based on the factors set forth above, including the Companys performance and individual performance of each Named Executive Officer in 2010, the Compensation Committee believes that the equity award grants in 2010 were appropriate. The exercise price for each stock option is equal to fair market value of the Companys common stock on the option grant date. See the section entitled Equity Grant Practices on page 32 below for a description of the manner in which we determine fair market value for this purpose. Currently, most stock options vest in 25% increments annually starting with the first anniversary of the date of grant. For stock options granted in 2010, awards granted to associates who are retirement eligible, as defined in the LTIP, vest in 16 equal quarterly periods. Unexercised stock options expire eight years from the date of grant, or earlier in the event of termination of employment. Stock options provide compensation only when vested and only if the Companys stock price appreciates and exceeds the exercise price of the option. Therefore, during business downturns, option awards may not represent any economic value to an executive. Named Executive Officers have a mandatory deferral of 25% of their awards under the Executive Plan in the form of deferred restricted stock units, unless reduced in the discretion of the Compensation Committee. The deferred amount (as increased as described below) is deemed to represent a number of shares of the Company determined by dividing the amount by the fair market value of a Share on the date of grant, which will be delivered to the Named Executive Officer upon vesting of the Shares. As such, the awards combine performance-based compensation with a further link to stockholder interests. First, amounts must be earned based on annual Company financial and strategic/operational performance under the Executive Plan. Second, 28

these already earned amounts are put at risk through a vesting schedule. Vesting occurs in installments for employment over a three-year period. Third, these earned amounts become subject to Share price performance. Primarily in consideration of this vesting risk being applied to already earned compensation (but also taking into account the enhanced stockholder alignment that results from being subject to Share performance), the deferred amount is increased by 33% of value. For awards granted in 2009 or later, vesting will accelerate in the event of death, disability or retirement. Restricted stock and restricted stock unit awards provide some measure of mitigation of business cyclicality while maintaining a direct tie to Share price. The Company seeks to enhance the link to stockholder performance by building a strong retention incentive into the equity program. Consequently, for 2010 grants, 100% of restricted stock unit awards vest on the fiscal year end of the year immediately prior to the third anniversary of the date of grant and 100% of restricted stock awards vest on the third anniversary of the date of grant. For restricted stock granted in 2010, awards granted to associates who are retirement eligible, as defined in the LTIP, vest in twelve equal quarterly periods. This vesting places an executives long-term compensation at risk to Share price performance for a significant portion of the business cycle, while encouraging long-term retention of executives. Pursuant to his employment agreement, Mr. van Paasschen agreed not to sell any Company stock awards or Shares received on exercise of options (except as may be withheld for taxes) without prior consultation with the Board of Directors. Benefits and Perquisites. Base salary and incentive compensation are supplemented by benefits and perquisites. Current Benefits. The Company believes the employee benefits it provides are consistent with local practices and competitive markets, including group health benefits, life and disability insurance, dependent care flexible spending accounts, health savings account, and a pre-tax premium payment arrangement. Each of these benefits is provided to a broad group of employees within the Company and our Named Executive Officers participate in the arrangements on the same basis as other employees. Perquisites. As reflected in the Summary Compensation Table below, the Company provides certain limited perquisites to select Named Executive Officers when necessary to provide an appropriate compensation package, particularly in connection with enabling the executives and their families to smoothly transition from previous positions which may require relocation. For example, Mr. van Paasschen and his immediate family had access to a Company owned or leased airplane on an as available basis for personal travel, i.e., assuming such plane was not needed for business purposes, with an obligation to reimburse for personal use based upon the Companys operating cost. The Company also reimburses Named Executive Officers generally for travel expenses and other out-of-pocket costs incurred with respect to attendance by their spouses at one meeting of the Board each year. Retirement Benefits. The Company maintains a tax-qualified retirement savings plan pursuant to Code section 401(k) for a broadly-defined group of eligible employees that includes the Companys Named Executive Officers. Eligible employees may contribute a portion of their eligible compensation to the plan on a before-tax basis, subject to certain limitations prescribed by the Code. Prior to 2008, the Company matched 100% of the first 2% of eligible compensation and 50% of the next 2% of eligible compensation that an eligible employee contributes. Beginning in 2008, the Company matches 100% of the first 1% of eligible compensation and 50% of the next 6% of eligible compensation that an eligible employee contributes. These matching contributions, as adjusted for related investment returns, become fully vested upon the eligible employees completion of two years of service with the Company. Our Named Executive Officers, in addition to certain other eligible employees, were permitted to make additional deferrals of base pay and regular annual incentive awards under our nonqualified deferred compensation plan. This plan is discussed in further detail under the heading Nonqualified Deferred Compensation on page 40. 29

2. Change in Control Arrangements On March 25, 2005, the Company adopted a policy proscribing certain terms of severance agreements triggered upon a change in control of the Company. Pursuant to the policy, the Company is required to seek stockholder approval of severance agreements with executive officers that provide Benefits (as defined in the policy) in excess of 2.99 times base salary plus such officers most recent annual incentive award. In 2006, the Board reviewed the change in control arrangements then in place with the Named Executive Officers and decided to enter into new change in control agreements with the Named Executive Officers at that time, which included Messrs. Prabhu and Siegel. In connection with the hiring of Mr. Turner in May 2008 as President, Global Development, and the promotion of Mr. Avril in September 2008 to President, Hotel Group, the Company entered into change in control arrangements with them that were similar to the arrangements in place for the other Named Executive Officers (other than the Chief Executive Officer). Pursuant to the Companys 2008 policy decision to cease paying tax gross-ups in change in control agreements, the arrangements with Messrs. Turner and Avril, however, do not provide for a tax gross-up if the benefits payable thereunder are subject to the excise tax under Section 280G of the Code. Instead, the benefits provided are reduced to the point that it would be more advantageous to the executive to pay the excise tax rather than reduce benefits further. The Company also included change in control arrangements in Mr. van Paasschens employment agreement. These change in control arrangements are described in more detail beginning on page 41 under the heading entitled Potential Payments Upon Termination or Change in Control. The change in control severance agreements are intended to promote stability and continuity of senior management. The Company believes that the provision of severance pay to these Named Executive Officers upon a change in control aligns their interests with those of stockholders. By making severance pay available, the Company is able to mitigate executive concern over employment termination in the event of a change in control that benefits stockholders. In addition, the acceleration of equity compensation vesting in connection with a change in control provides these Named Executive Officers with protection against equity forfeiture due to termination and ample incentive to achieve Company goals, including facilitating a sale of the Company at the highest possible price per share, which would benefit both stockholders and executives. In addition, the Company acknowledges that seeking a new senior position is a long and time-consuming process. Lastly, each severance agreement permits the executive to maintain certain benefits for a period of two years following termination and to receive outplacement services. The aggregate effect of our change in control provisions is intended to focus executives on maximizing value to stockholders. In addition, should a change in control occur, benefits will be paid only after a double trigger event as described in Potential Payments Upon Termination or Change in Control. The Company believes benefit levels have been set to be competitive with peer group practices. In connection with Section 409A of the Code (Section 409A), in 2008 the Company amended the employment arrangements with each of the Named Executive Officers (including the Chief Executive Officer). These amendments made several technical changes designed to make the employment arrangements with such officers comply with Section 409A and the final regulations issued thereunder, and generally affect the timing, but not the amount, of the compensation of such officers under specified circumstances.

3. Additional Severance Arrangements In 2007, the Company entered into a letter agreement with Mr. Prabhu clarifying that his severance included the acceleration of 50% of unvested stock options in the event that his employment was terminated without cause or by him for good reason. Mr. Prabhus employment agreement dated November 13, 2003, provides for the acceleration of 50% of unvested restricted stock in the event that his employment was terminated without cause or by him for good reason. The clarification formally documented Mr. Prabhus existing severance arrangements as part of his employment with the Company. This additional severance arrangement is described in more detail beginning on page 41 under the heading entitled Potential Payments Upon Termination or Change in Control. 30

C. Background Information on the Executive Compensation Program 1. Use of Peer Data In determining competitive compensation levels, the Compensation Committee reviews data from several major compensation consulting firms that reflects compensation practices for executives in comparable positions in a peer group consisting of companies in the hotel and hospitality industries and companies with similar revenues in other industries relevant to key talent recruitment needs. The executive team and Compensation Committee review the peer group bi-annually to ensure it represents a relevant market perspective. The Compensation Committee utilizes the peer group for a broad set of comparative purposes, including levels of total compensation, pay mix, incentive plan and equity usage and other terms of employment. The Company believes that by conducting the competitive analysis using a broad peer group, which includes companies outside the hospitality industry, it is able to attract and retain talented executives from outside the hospitality industry. The Companys experience has proven that key executives with diversified experience prove to be major contributors to its continued growth and success. The peer group approved by the Compensation Committee for 2010 is set out below. We expect that it will be necessary to update the list periodically. Avon Products Carnival Corp. Colgate Palmolive Corporation Estee Lauder Cos. Inc. Federal Express Corp. Host Hotels & Resorts Kellogg Corporation Limited Brands Inc. Marriott International, Inc. McDonalds Corp. MGM Mirage Nike, Inc. Simon Property Group Inc. Staples Inc. Starbucks Corp. Williams Sonoma Inc. Walt Disney Co. Wyndham Worldwide Corporation Yum Brands Inc.

In performing its competitive analysis, the Compensation Committee typically reviews: base pay; target and actual total cash compensation, consisting of salary, target and actual annual incentive awards in prior years; and direct total compensation consisting of salary, target and actual annual incentive awards, and the value of option and restricted stock/restricted stock unit awards. When establishing target compensation levels for 2010, the Compensation Committee reviewed peer group data on payments to named executive officers as reported in proxy statements available as of February 2010 as provided by Pearl Meyer & Partners. 2. Tax Considerations Section 162(m) generally disallows a federal income tax deduction to public companies for incentive compensation in excess of $1,000,000 paid to the chief executive officer and the four other most highly compensated executive officers. Qualified performance-based compensation is not subject to the deduction limit if certain requirements are met. The Company believes that compensation paid under the Executive Plan for 2010 meets these requirements and is generally fully deductible for federal income tax purposes. In designing the Companys compensation programs, the Compensation Committee carefully considers the effect of this provision together with other factors relevant to its business needs. In certain circumstances the Company may approve compensation that does not meet these requirements in order to advance the long-term interests of its stockholders. In February 2010 the Compensation Committee approved an increase in Mr. van Paasschens base salary from $1,000,000 to $1,250,000. For the 2011 fiscal year, the Compensation Committee determined that Mr. van Paasschens base salary should remain $1,250,000. The Company has 31

historically taken, and intends to continue taking, reasonably practicable steps to minimize the impact of the loss of deductibility under Section 162(m). Accordingly, the Compensation Committee has determined that each of the Named Executive Officers will participate under the Executive Plan for 2011. On October 22, 2004, the American Jobs Creation Act of 2004 was signed into law, adding Section 409A to the Code and thereby changing the tax rules applicable to nonqualified deferred compensation arrangements effective January 1, 2005. While final Section 409A regulations were not effective until January 1, 2010, the Company believes it was operating in good faith compliance with Section 409A and the interpretive guidance thereunder. The Company entered into amendments to the employment arrangements with its senior officers, including the Chief Executive Officer and Named Executive Officers, and amended its bonus and compensation plans in December 2008 to meet the requirements of these regulations. A more detailed discussion of the Companys nonqualified deferred compensation plan is provided on page 40 under the heading Nonqualified Deferred Compensation.

3. Share Ownership Guidelines The Company has adopted share ownership guidelines for our executive officers, including the Named Executive Officers. Pursuant to the guidelines, the Named Executive Officers, including the Chief Executive Officer, are required to hold that number of Shares having a market value equal to or greater than a multiple of each executives base salary. For the Chief Executive Officer, the multiple is five times base salary and for the other Named Executive Officers, the multiple is four times base salary. A retention requirement of 35% is applied to restricted Shares upon vesting (net Shares after tax withholding) and Shares obtained from option exercises until the executive meets the target, or if an executive falls out of compliance. Shares owned, stock equivalents (vested/ unvested restricted stock units), and unvested restricted stock (pre-tax) count towards meeting ownership targets. However, stock options do not count towards meeting the target. Officers have five years from the date of hire or, if later, the date they first become subject to the policy, to meet the ownership requirements.

4. Equity Grant Practices Determination of Option Exercise Prices. The Compensation Committee grants stock options with an exercise price equal to the fair market value of a Share on the grant date. Under the LTIP, the fair market value of our common stock on a particular date is determined as the average of the high and low trading prices of a Share on the NYSE on that date. Timing of Equity Grants. The Compensation Committee generally makes annual equity compensation grants to Named Executive Officers following its first regularly scheduled meeting that occurs after the release of the Companys earnings for the prior year (typically the grant date is the last business day in February). The timing of this meeting is determined based on factors unrelated to the pricing of equity grants. The Compensation Committee approves equity compensation awards to a newly hired executive officer at the time that the Board meets to approve the executives employment package. Generally, the date on which the Board approves the employment package becomes the grant date of the newly-hired executive officers equity compensation awards. However, if the Company and the new executive officer enter into an employment agreement regarding the employment relationship, the Company requires the executive officer to sign his employment agreement shortly following the date of Board approval of the employment package; the later of the date on which the executive officer signs his employment agreement or the date that the executive officer begins employment becomes the grant date of these equity compensation awards. The Companys policy is that the grant date of equity compensation awards is always on or shortly after the date the Compensation Committee approves the grants, which is generally in February. However, the Compensation Committee has the discretion under unusual circumstances to award grants at other times in the year. 32

III. COMPENSATION COMMITTEE REPORT The Compensation and Option Committee of the Board of Directors of Starwood Hotels & Resorts Worldwide, Inc. (the Company) has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Companys Proxy Statement for the 2011 Annual Meeting of Stockholders. COMPENSATION AND OPTION COMMITTEE Adam M. Aron, Chairman Thomas E. Clarke Clayton C. Daley, Jr. Thomas O. Ryder Kneeland C. Youngblood

33

IV.

SUMMARY COMPENSATION TABLE

The table below sets forth a summary of the compensation received by the Named Executive Officers for the past three years:
Name and principal position (listed alphabetically following the Chief Executive Officer) Frits van Paasschen . . . . . . . . . . . Chief Executive Officer and President Matthew E. Avril . . . . . . . . . . . President, Hotel Group (since September 2008) Vasant M. Prabhu. . . . . . . . . . . Vice Chairman and Chief Financial Officer Kenneth S. Siegel . . . . . . . . . . . Chief Administrative Officer, General Counsel and Secretary Simon M. Turner . . . . . . . . . . . President, Global Development Group (since May 2008) .. Salary ($)(1) 1,208,333 1,000,000 1,000,000 747,292 725,000 601,896 733,235 640,658 638,054 634,582 615,039 612,539 644,792 625,000 407,197 Bonus ($) Stock awards ($)(2) Option awards ($)(3) Non-equity incentive plan All other compensation compensation ($)(4) ($)(5) 3,000,000 1,700,000 1,820,000 902,100 616,250 536,500 902,100 544,559 582,999 766,188 522,784 559,686 778,500 531,250 416,667 171,626 63,832 522,538 40,572 82,908 188,103 57,935 112,271 93,380 115,021 116,139 102,515 17,661 27,910 30,013 Total ($) 9,546,616 8,865,034 5,129,361 3,724,969 3,013,751 4,324,615 4,731,548 4,090,544 3,982,956 3,443,892 3,257,539 3,361,832 4,023,003 3,794,067 3,851,775

Year 2010 2009 2008 2010 2009 2008 2010 2009 2008 2010 2009 2008 2010 2009 2008

3,956,262 1,210,395 800,000(6) 150,125 5,151,077 44,421 1,742,402 207,191(6) 500,000 1,550,838 44,269 2,621,756 2,312,035 1,298,096 1,335,578 1,468,148 46,166 1,564,371 484,167 1,545,324 376,360 726,243 1,287,769 1,332,945 459,953 1,957,411 522,721

..

..

..

693,824 1,888,226 34,369 2,575,538 2,497,898

(1) Represents salary actually earned during the fiscal year listed. (2) Represents the grant date fair value for restricted stock and restricted stock unit awards granted during the year computed in accordance with ASC 718. For additional information, refer to Note 23 of the Companys financial statements filed with the SEC as part of the Form 10-K for the year ended December 31, 2010. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Named Executive Officers. See the Grants of Plan-Based Awards Table on page 36 for information on awards granted in 2010. (3) Represents the grant date fair value for stock option awards granted during the year computed in accordance with ASC 718. For additional information, refer to Note 23 of the Companys financial statements filed with the SEC as part of the Form 10-K for the year ended December 31, 2010. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Named Executive Officers. See the Grants of Plan-Based Awards Table on page 36 for information on awards granted in 2010. (4) Represents cash awards paid in March 2011, 2010 and 2009 with respect to performance in 2010, 2009 and 2008, respectively, determined under the Executive Plan, as discussed under the Annual Incentive Compensation section beginning on page 23. Cash incentive awards include the following amounts that were converted into restricted stock units and such number of restricted stock units was increased by 33% in accordance with the Executive Plan:
Name 2010 Amount Deferred 2009 Amount Deferred 2008 Amount Deferred

van Paasschen . . . . . . . . . . . . . Avril . . . . . . . . . . . . . . . . . . . . . Prabhu . . . . . . . . . . . . . . . . . . . Siegel . . . . . . . . . . . . . . . . . . . . Turner . . . . . . . . . . . . . . . . . . .

750,000 225,525 225,525 191,547 194,625

625,000(A) 154,063 187,938(B) 130,696 132,813

455,000 134,125 145,750 139,922 104,167

(A) This amount is an aggregate of cash incentive awards deferred in respect of the 2009 fiscal year, which includes $200,000 deferred from a special one-time cash bonus enhancement awarded by the Compensation Committee. (B) This amount is an aggregate of cash incentive awards deferred in respect of the 2009 fiscal year, which includes $51,798 deferred from a special one-time cash bonus enhancement awarded by the Compensation Committee. 34

(5) Pursuant to SEC rules, perquisites and personal benefits are not reported for any Named Executive Officer for whom such amounts were less than $10,000 in the aggregate for a year but must be identified by type for each Named Executive Officer for whom the aggregate amount was equal to or greater than $10,000 in the aggregate. In that regard, the All Other Compensation column of the Summary Compensation Table includes perquisites and other personal benefits consisting of the following: annual physical examinations, Company contributions to the Companys tax-qualified 401(k) plan, dividends on restricted stock, life insurance premiums, legal fees paid by the Company, spousal accompaniment while on business travel, and tax and financial planning services. SEC rules further require specification of the cost of any perquisite or personal benefit when this cost exceeds $25,000. This applies to Mr. van Paasschens personal travel (discussed below). These amounts are included in the All Other Compensation column. There was no net aggregate incremental cost to the Company of Mr. van Paasschens personal use of the Company-owned plane and chartered aircraft in 2010; in 2009 there was $3,746, all of which he reimbursed to the Company in January 2010; and in 2008, there was $329,480. With respect to expenses incurred in 2008, Mr. van Paasschens employment agreement provides that the Company would provide Mr. van Paasschen with up to a $500,000 credit for personal use of the Companys aircraft during the first 12 months of his employment with the Company. These amounts (other than the reimbursed expenses for use of the Company-owned plane and chartered aircraft in 2009) are included in the All Other Compensation column. The cost of the Company-owned plane includes the cost of fuel, ground services and landing fees, navigation and telecommunications, catering and aircraft supplies, crew expenses, aircraft cleaning and an allocable share of maintenance. Pursuant to SEC rules, the following table specifies the value for each element of All Other Compensation not specified above (other than perquisites and personal benefits) that is valued in excess of $10,000.
Dividend Equivalents on Restricted Stock ($) (2010) Dividend Equivalents on Restricted Stock ($) (2009) Relocation ($) (2009) Dividend Equivalents on Restricted Stock ($) (2008) Relocation ($) (2008)

Name

van Paasschen . . . . . . . Avril . . . . . . . . . . . . . . . Prabhu . . . . . . . . . . . . . Siegel . . . . . . . . . . . . . . Turner . . . . . . . . . . . . .

151,699 30,671 48,135 105,221

57,254 85,186 89,225

31,438

150,728 69,917 76,538

165,328

(6) Represents special one-time cash bonus enhancements awarded by the Compensation Committee in recognition of 2009 accomplishments.

35

V. GRANTS OF PLAN-BASED AWARDS The table below sets forth a summary of the grants of plan-based incentive awards to the Named Executive Officers made during 2010:
Grant date (or Compensation year with Committee respect to Approval non-equity date incentive plan (c)(1) award) (b)(1) All Other All Other Option Stock Exercise Grant Date Awards: Awards: Fair Value or Base Number of Number of of Stock Price of Shares of Securities and Option Option Stock or Underlying Awards Awards Options Units ($)(j)(5) (#)(h)(3) ($/Sh)(i)(4) (#)(g)

Name (listed alphabetically by name following the Chief Executive Officer) (a)

Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) Threshold Target Maximum ($)(d) ($)(e) ($)(f)

van Paasschen. . . . . .

2/26/2010 2/26/2010 3/01/2010 2010

2/11/2010 2/11/2010 (6) 2/11/2010 2/11/2010 (6) 150,350 2/11/2010 2/11/2010 (6) 150,350 2/11/2010 2/11/2010 (6) 127,698 2/11/2010 2/11/2010 (6) 129,750 648,750 1,784,062 17,000(7) 4,562(6) 638,490 1,755,848 37,270(7) 4,489(6) 751,750 2,067,312 58,847(7) 6,456(6) 751,750 2,067,312 39,231(7) 5,292(6) 2,500,000 3,750,000 98,078(7) 21,468(6)

81,731

38.24

1,210,395 3,750,012 831,241

Avril . . . . . . . . . . . .

2/26/2010 2/26/2010 3/01/2010 2010

32,693

38.24

484,167 1,499,997 204,906

Prabhu . . . . . . . . . .

2/26/2010 2/26/2010 3/01/2010 2010

49,039

38.24

726,243 2,250,015 249,976

Siegel . . . . . . . . . . .

2/26/2010 2/26/2010 3/01/2010 2010

31,058

38.24

459,953 1,425,018 173,814

Turner . . . . . . . . . .

2/26/2010 2/26/2010 3/01/2010 2010

127,501

38.24

1,888,226 649,995 176,641

(1) Grant date differs from Compensation Committee approval date in accordance with the procedure outlined in the discussion on page 32 under the heading Equity Grant Practices. (2) Represents the potential values of the awards granted to the Named Executive Officers under the Executive Plan if the threshold, target and maximum goals are satisfied for all applicable performance measures. See detailed discussion of these awards in section VI. below. (3) The options generally vest in equal installments on the first, second, third and fourth anniversary of their grant. As of September 4, 2010, Mr. Siegels awards vest quarterly in equal installments over four years due to his retirement eligible status, as defined in the LTIP. (4) The exercise price was determined by using the average of the high and low price of Shares on the grant date. (5) Represents the fair value of the awards disclosed in columns (g) and (h) on their respective grant dates. For restricted stock and restricted stock units, fair value is calculated in accordance with ASC 718 using the average of the high and low price of Shares on the grant date. For stock options, fair value is calculated in accordance with ASC 718 using a lattice valuation model. For additional information, refer to Note 23 of the Companys financial statements filed with the SEC as part of the Form 10-K for the year ended December 31, 2010. There can be no assurance that these amounts will correspond to the actual value that will be recognized by the Named Executive Officers. (6) On March 1, 2010, in accordance with the Executive Plan, 25% of Messrs. van Paasschen, Avril, Prabhu, Siegel and Turners annual bonus with respect to 2009 performance was converted into restricted stock units and the number of units was increased by 33%. The amount included in stock awards in the summary compensation table only includes the 33% increase, as the deferral of the bonus amount is disclosed separately. These restricted stock units vest in equal installments on the first, second and third fiscal year-ends following the date of grant, and vested units are distributed on the earlier of (i) the third fiscal year-end or (ii) a termination of employment. Dividends are paid to the Named Executive Officers in amounts equal to those paid to holders of 36

Shares. No separate Compensation Committee approval was required for award of these deferred stock units, which are provided by plan terms. (7) This award vests on the third anniversary of the grant date, except with respect to Mr. Siegel whose awards as of September 4, 2010, vest quarterly in equal installments over three years due to his retirement eligible status, as defined in the LTIP. VI. NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS SECTION We describe below the Executive Plan awards granted to our Named Executive Officers for 2010. These awards are reflected in both the Summary Compensation Table on page 34 and the Grants of Plan-Based Awards section on page 36. Each of the Named Executive Officers received an award in March 2011 relating to his 2010 performance. The table below sets forth for each Named Executive Officer his salary, target award as both a percentage of salary and a dollar amount, actual award, the portion of the award that is deferred into restricted stock units and the related 33% increase in his restricted stock units.
Award Target Relative to Salary (%) Award Deferred into Restricted Stock/Restricted Stock Units ($) Increased Award Deferred into Restricted Stock/Restricted Stock Units ($)

Name

Salary ($)

Award Target ($)

Actual Award ($)

van Paasschen . . . . . . . . 1,250,000 Avril . . . . . . . . . . . . . . . 751,750 Prabhu . . . . . . . . . . . . . 751,750 Siegel . . . . . . . . . . . . . . . 638,490 Turner . . . . . . . . . . . . . . 648,750

200% 100% 100% 100% 100%

2,500,000 751,750 751,750 638,490 648,750

3,000,000 902,100 902,100 766,188 778,500

750,000 225,525 225,525 191,547 194,625

997,500 299,948 299,948 254,758 258,851

The following factors contributed to the Compensation Committees determination of the 2010 Executive Plan awards for the Named Executive Officers: the Companys 2010 financial performance as measured by EBIDTA and earnings per share, the strategic and operational performance goals for each Named Executive Officer that link individual contributions to execution of our business strategy and major financial and operating goals, and the bonuses paid to executive officers performing comparable functions in peer companies, as further described in the Annual Incentive Compensation assessment commencing on page 23 above.

37

VII. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table provides information on the current holdings of stock options and stock awards by the Named Executive Officers as of December 31, 2010. This table includes unexercised and unvested stock options, unvested restricted stock and unvested restricted stock units. Each equity grant is shown separately for each Named Executive Officer. The market value of the stock awards is based on the closing price of a Share on December 31, 2010, which was $60.78.
Option awards Number of Securities Underlying Unexercised OptionsExercisable (#)(1)(2) Number of Securities Underlying Unexercised Options Unexercisable (#)(1)(2) Stock awards Market value of Shares or Units of Stock That Have Not Vested ($)

Name (listed alphabetically following the Chief Executive Officer)

Grant Date

Option Exercise Price ($)(1)

Option Expiration Date

Number of Shares or Units of Stock That Have Not Vested (#)

van Paasschen . . . . . . . . .

Avril . . . . . . . . . . . . . . . .

Prabhu . . . . . . . . . . . . . .

9/24/2007 2/28/2008 2/27/2009 2/26/2010 9/24/2007 3/02/2009 2/26/2010 3/01/2010 2/28/2007 2/28/2008 2/27/2009 2/26/2010 2/28/2007 2/28/2008 9/02/2008 3/02/2009 2/26/2010 3/01/2010 2/10/2005 2/07/2006 2/28/2007 2/28/2008 2/27/2009 2/26/2010 2/28/2007 2/28/2008 2/27/2009 3/02/2009 2/26/2010 3/01/2010

47,922 51,436 74,484

15,973 51,434 823,452 81,731

58.69 48.61 11.39 38.24

9/24/2015 2/28/2016 2/27/2017 2/26/2018 31,947(3) 18,905(4) 98,078(3) 14,312(4) 1,941,739 1,149,046 5,961,181 869,883

15,543

5,180 11,110 247,035 32,693

65.15 48.61 11.39 38.24

2/28/2015 2/28/2016 2/27/2017 2/26/2018 10,361(3) 22,220(3) 40,344(3) 5,572(4) 39,231(3) 3,528(4) 629,742 1,350,532 2,452,108 338,666 2,384,460 214,432

40,000 79,913 25,904 39,348

8,634 39,348 205,863 49,039

48.39 48.80 65.15 48.61 11.39 38.24

2/10/2013 2/07/2014 2/28/2015 2/28/2016 2/27/2017 2/26/2018 17,269(3) 26,232(3) 109,794(3) 6,056(4) 58,847(3) 4,304(4) 1,049,610 1,594,381 6,673,279 368,084 3,576,721 261,597

38

Option awards Number of Securities Underlying Unexercised OptionsExercisable (#)(1)(2) Number of Securities Underlying Unexercised Options Unexercisable (#)(1)(2)

Stock awards Market value of Shares or Units of Stock That Have Not Vested ($)

Name (listed alphabetically following the Chief Executive Officer)

Grant Date

Option Exercise Price ($)(1)

Option Expiration Date

Number of Shares or Units of Stock That Have Not Vested (#)

Siegel . . . . . . . . . . . . . . .

Turner . . . . . . . . . . . . . .

2/28/2007 2/28/2008 2/27/2009 2/26/2010 2/28/2008 3/02/2009 2/26/2010 3/01/2010 5/07/2008 2/27/2009 2/26/2010 3/02/2009 2/26/2010 3/01/2010

34,538 21,219 5,825

9,642 234,684 25,233

65.15 48.61 11.39 38.24

2/28/2015 2/28/2016 2/27/2017 2/26/2018 9,642(3) 5,813(4) 27,952(3) 2,992(4) 586,041 353,314 1,698,923 181,854

67,612 411,726 127,501

53.25 11.39 38.24

5/07/2016 2/27/2017 2/26/2018 4,328(4) 17,000(3) 3,041(4) 263,056 1,033,260 184,832

(1) In connection with the sale of 33 hotels to Host Hotels & Resorts, Inc. (or Host), Company stockholders received 0.6122 Host shares and $0.503 in cash for each of their Class B Shares. Holders of Company employee stock options and restricted stock did not receive this consideration while the market price of Shares was reduced to reflect the payment of this consideration directly to the holders of the Class B Shares. In order to preserve the value of the Companys options immediately before and after the Host transaction, the Company adjusted its stock options to reduce the strike price and increase the number of stock options using the intrinsic value method based on the Share price immediately before and after the transaction. The option information provided reflects the number of options granted and the option exercise prices after these adjustments were made. As of December 31, 2010, this impacts Mr. Prabhus holdings only. (2) These options generally vest in equal installments on the first, second, third and fourth anniversary of their grant. As of September 4, 2010, Mr. Siegels 2008, 2009 and 2010 awards vest quarterly in equal installments over four years due to his retirement eligible status, as defined in the LTIP. (3) For awards granted in 2007, the restricted stock or restricted stock units generally vest 50% on each of the third and fourth anniversaries of their grant date. For awards granted in 2008, the restricted stock or restricted stock units generally vest 75% on the third anniversary and 25% on the fourth anniversary of the date of grant, provided that Mr. Avrils September 2, 2008 award will vest on the third anniversary of the grant date. For awards granted in 2009 and 2010, the restricted stock or restricted stock units generally vest 100% on the third anniversary of their grant. As of September 4, 2010, Mr. Siegels 2008 and 2010 awards vest quarterly in equal installments over four and three years, respectively, due to his retirement eligible status as defined in the LTIP. (4) These restricted stock units vest in equal installments on the first, second and third fiscal year-ends following the date of grant, and vested units are distributed on the earlier of (i) the third fiscal year-end or (ii) a termination of employment.

VIII. OPTION EXERCISES AND STOCK VESTED The following table discloses, for each Named Executive Officer, (i) option awards representing Shares acquired pursuant to exercise of stock options during 2010; and (ii) stock awards representing (A) Shares of restricted Company stock that vested in 2010 and (B) Shares acquired in 2010 on account of vesting of restricted 39

stock units. The table also discloses the value realized by the Named Executive Officer for each such event, calculated prior to the deduction of any applicable withholding taxes and brokerage commissions.
Option Awards Number of Shares Acquired on Value Realized Exercise on Exercise (#) ($) Stock Awards Number of Shares Acquired on Value Realized Vesting on Vesting (#) ($)

Name

van Paasschen . . . . . . . . . . . Avril . . . . . . . . . . . . . . . . . . Prabhu . . . . . . . . . . . . . . . . Siegel . . . . . . . . . . . . . . . . . Turner . . . . . . . . . . . . . . . .

.. .. .. .. ..

200,000 159,420 257,846 322,302 204,854

9,795,140 2,864,025 4,632,750 9,218,465 5,434,039

61,284 12,137 22,422 70,549

3,237,050 465,123 974,072 3,444,463

IX. NONQUALIFIED DEFERRED COMPENSATION The Companys Deferred Compensation Plan (the Plan) permits eligible executives, including our Named Executive Officers, to defer up to 100% of their Executive Plan cash bonus award, as applicable, and up to 75% of their base salary for a calendar year. The Company does not contribute to the Plan. No Named Executive Officer made deferrals under the Plan in 2010.
Executive Contributions in Last FY ($) Registrant Contributions in Last FY ($) Aggregate Earnings in Last FY ($) Aggregate Withdrawals/ Distributions ($) Aggregate Balance at Last FYE ($)

Name

van Paasschen . . . . . . . . . . Avril . . . . . . . . . . . . . . . . . . Prabhu . . . . . . . . . . . . . . . . Siegel . . . . . . . . . . . . . . . . . Turner . . . . . . . . . . . . . . . .

83,644

585,376

Deferral elections are made in December for base salary paid in pay periods beginning in the following calendar year. Deferral elections are made in June for annual incentive awards that are earned for performance in that calendar year but paid in March of the following year. Deferral elections are irrevocable. Elections as to the time and form of payment are made at the same time as the corresponding deferral election. A participant may elect to receive payment on February 1 of a calendar year while still employed or either 6 or 12 months following employment termination. Payment will be made immediately in the event a participant terminates employment on account of death, disability or on account of certain changes in control. A participant may elect to receive payment of his account balance in either a lump sum or in annual installments, so long as the account balance exceeds $50,000; otherwise payment will be made in a lump sum. If a participant elects an in-service distribution, the participant may change the scheduled distribution date or form of payment so long as the change is made at least 12 months in advance of the scheduled distribution date. Any such change must provide that distribution will commence at least five years later than the scheduled distribution date. If a participant elects to receive a distribution upon employment termination, that election and the corresponding form of payment election are irrevocable. Withdrawals for hardship that result from an unforeseeable emergency are available, but no other unscheduled withdrawals are permitted. The Plan uses the investment funds listed below as potential indices for calculating investment returns on a participants Plan account balance. The deferrals the participant directs for investment into these funds are adjusted based on a deemed investment in the applicable funds. The participant does not actually own the investments that he 40

selects. The Company may, but is not required to, make identical investments pursuant to a variable universal life insurance product. When it does, participants have no direct interest in this life insurance.
Name of Investment Fund 1-Year Annualized Rate of Return (as of 2/28/11)

NVIT Money Market Class V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PIMCO VIT Total Return Admin Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fidelity VIP High Income Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NVIT Inv Dest Moderate Class 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T. Rowe Price Equity Income Class II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dreyfus Stock Index Initial Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fidelity VIP II Contrafund Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . NVIT Mid Cap Index Class I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dreyfus IP Small Cap Stock Index Service Shares . . . . . . . . . . . . . . . . . . . . . . NVIT International Index Class 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Invesco V.I. International Growth Series I Shares . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . .

0.25% 6.40% 16.19% 14.96% 21.60% 21.97% 25.51% 31.96% 30.00% 19.44% 20.59%

X. POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL The Company provides certain benefits to our Named Executive Officers in the event of employment termination, both in connection with a change in control and otherwise. These benefits are in addition to benefits available generally to salaried employees, such as distributions under the Companys tax-qualified retirement savings plan, disability insurance benefits and life insurance benefits. These benefits are described below. A. Termination Before Change in Control: Involuntary Other than for Cause, Voluntary for Good Reason, Death or Disability Pursuant to Mr. van Paasschens employment agreement, if Mr. van Paasschens employment is terminated by the Company other than for cause or by Mr. van Paasschen for good reason, the Company will pay Mr. van Paasschen as a severance benefit (i) two times the sum of his base salary and target annual bonus and (ii) a pro rated target bonus for the year of termination. None of the other equity awards granted to Mr. van Paasschen would be accelerated. If Mr. van Paasschens employment were terminated because of his death or permanent disability, Mr. van Paasschen (or his estate) would be entitled to receive a pro rated target bonus for the year of termination and all of his equity awards would accelerate and vest. Pursuant to Mr. Avrils employment agreement, if Mr. Avrils employment is terminated by the Company without cause, Mr. Avril will receive severance benefits of twelve months of base salary and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. In addition, Mr. Avril will also be entitled to acceleration of all of his restricted stock and options that were granted prior to August 19, 2008, but no acceleration for equity awards granted on or after August 19, 2008. Pursuant to his employment agreement, if Mr. Prabhus employment is terminated by the Company without cause or by Mr. Prabhu voluntarily with good reason, Mr. Prabhu will receive severance benefits of twelve months of base salary and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. In addition, the Company will accelerate the vesting of 50% of Mr. Prabhus unvested restricted stock and options. The Company entered into a letter agreement on August 14, 2007 confirming the terms of the agreement as it relates to the acceleration of 50% of Mr. Prabhus unvested restricted stock and options if his employment is terminated by the Company without cause or is terminated by him voluntarily with good reason. Pursuant to Mr. Siegels employment agreement, in the event Mr. Siegels employment is terminated by the Company without cause, Mr. Siegel will receive severance benefits of twelve months of base salary plus 100% of his target annual incentive and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. 41

Pursuant to Mr. Turners employment agreement, if Mr. Turners employment is terminated by the Company other than for cause or by Mr. Turner for good reason, Mr. Turner will receive severance benefits of twelve months base salary and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. B. Termination in the Event of Change in Control The Company has entered into severance agreements with each of Messrs. Prabhu and Siegel. Each severance agreement provides for a term of three years, with automatic one-year extensions until either the executive or the Company notifies the other that such party does not wish to extend the agreement. If a Change in Control (as described below) occurs, the agreement will continue for at least 24 months following the date of such Change in Control. Each agreement provides that if, following a Change in Control, the executives employment is terminated without Cause (as defined in the agreement) or with Good Reason (as defined in the agreement), the executive would receive the following in addition to the items described in A. above: two times the sum of his base salary plus the average of the annual bonuses earned by the executive in the three fiscal years ending immediately prior to the fiscal year in which the termination occurs or, if higher, the annual bonus earned in the immediately prior year; continued medical benefits for two years, reduced to the extent benefits of the same type are received by or made available to the executive from another employer; a lump sum amount, in cash, equal to the sum of (A) any unpaid incentive compensation which had been allocated or awarded to the executive for any measuring period preceding termination under any annual or long-term incentive plan and which, as of the date of termination, is contingent only upon the continued employment of the executive until a subsequent date, and (B) the aggregate value of all contingent incentive compensation awards allocated or awarded to the executive for all then uncompleted periods under any such plan that the executive would have earned on the last day of the performance award period, assuming the achievement, at the target level, of the individual and corporate performance goals established with respect to such award; immediate vesting of stock options and restricted stock held by the executive under any stock option or incentive plan maintained by the Company; outplacement services suitable to the executives position for a period of two years or, if earlier, until the first acceptance by the executive of an offer of employment, the cost of which will not exceed 20% of the executives base salary; a lump sum payment of the executives deferred compensation paid in accordance with Section 409A distribution rules; and immediate vesting of all unvested 401(k) contributions in the executives 401(k) account or payment by the Company of an amount equal to any such unvested amounts that are forfeited by reason of the executives termination of employment. In addition, to the extent that any executive becomes subject to the golden parachute excise tax imposed under Section 4999 of the Code, the executive would receive a gross-up payment in an amount sufficient to offset the effects of such excise tax. Under the severance agreements, a Change in Control is deemed to occur upon any of the following events: any person becomes the beneficial owner of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing 25% or more of the combined voting power of the Company; a majority of the Directors cease to serve on the Companys Board in connection with a successful hostile proxy contest; 42

 a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than: O a merger or consolidation in which securities of the Company would represent at least 70% of the voting power of the surviving entity; or O a merger or consolidation effected to implement a recapitalization of the Company in which no person becomes the beneficial owner of 25% or more of the voting power of the Company; or approval of a plan of liquidation or dissolution by the stockholders or the consummation of a sale of all or substantially all of the Companys assets, other than a sale to an entity in which the Companys stockholders would hold at least 70% of the voting power in substantially the same proportions as their ownership of the Company immediately prior to such sale. However, a Change in Control does not include a transaction in which Company stockholders continue to hold substantially the same proportionate ownership in the entity which would own all or substantially all of the Companys assets following such transaction. Each of Messrs. Avril and Turner entered into similar change in control agreements in connection with their employment with the Company, provided that no tax gross-up is provided if such payments become subject to the excise tax. If such payments are subject to the excise tax, the benefits under the agreement will be reduced until the point where the executive is better off paying the excise tax rather than reducing the benefits. Mr. van Paasschens employment agreement provides that he would be entitled to the following benefits if his employment were terminated without cause or he resigned with good reason following a Change in Control: two times the sum of his base salary and target annual bonus; a lump sum payment, in cash, equal to the unpaid incentive compensation then subject to performance conditions, payable at the maximum level of performance; immediate vesting of stock options and restricted stock held under any stock option or incentive plan maintained by the Company; a lump sum payment of his nonqualified deferred compensation paid in accordance with Section 409A distribution rules; and immediate vesting of all unvested 401(k) contributions in his 401(k) account or payment by the Company of an amount equal to any such unvested amounts that are forfeited by reason of his termination of employment. In addition, to the extent that Mr. van Paasschen becomes subject to the golden parachute excise tax imposed under Section 4999 of the Code, he would receive a gross-up payment in an amount sufficient to offset the effects of such excise tax. In December 2008, the Company amended the employment arrangements and change in control agreements with each of the Named Executive Officers. The amendments were technical in nature and were designed to meet the guidelines of 409A of the Code. The amendments did not change any of the amounts payable to the Named Executive Officers.

C. Estimated Payments Upon Termination The tables below reflect the estimated amounts payable to the Named Executive Officers in the event their employment with the Company had terminated on December 31, 2010 under various circumstances, and includes amounts earned through that date. The actual amounts that would become payable in the event of an actual employment termination can only be determined at the time of such termination. 43

1. Involuntary Termination without Cause or Voluntary Termination for Good Reason The following table discloses the amounts that would have become payable on account of an involuntary termination without cause or a voluntary termination for good reason outside of the change in control context.
Name Severance Pay ($) Medical Benefits ($) Vesting of Restricted Stock ($)(1) Vesting of Stock Options ($)(2) Total ($)

van Paasschen . Avril(3) . . . . . . Prabhu . . . . . . Siegel(3) . . . . . . Turner . . . . . . .

. . . . . . . . . . 10,000,000 .......... 751,750 .......... 751,750 . . . . . . . . . . 1,276,980 .......... 648,750

11,448 11,220 11,075 11,101

1,980,273 7,628,802

135,264 5,876,625

10,000,000 2,878,735 14,268,397 1,288,055 659,851

(1) Includes values for holdings of restricted stock and restricted stock units. With respect to Mr. Prabhu, includes vested but deferred restricted stock units in accordance with the Executive Plan. (2) Excludes vested stock options. (3) Messrs. Siegel and Avrils employment agreements provide for payments in the event of involuntary termination other than for cause but do not provide for payments in the event of voluntary termination for good reason. 2. Termination on Account of Death or Disability The following table discloses the amounts that would have become payable on account of a termination on account of death or disability.
Severance Pay ($) Medical Benefits ($) Vesting of Restricted Stock ($)(1) Vesting of Stock Options ($)(2) Total ($)

Name

van Paasschen(3). . . . . . . . . . . . . 2,500,000 Avril . . . . . . . . . . . . . . . . . . . . . . 751,750 Prabhu . . . . . . . . . . . . . . . . . . . . 751,750 Siegel . . . . . . . . . . . . . . . . . . . . . 1,276,980 Turner. . . . . . . . . . . . . . . . . . . . . 648,750

11,448 11,220 11,075 11,101

12,654,882 8,154,609 14,390,637 3,617,869 2,099,706

47,582,156 13,074,622 13,685,101 12,668,152 23,721,172

62,737,038 21,992,429 28,838,708 17,574,076 26,480,729

(1) Includes values for holdings of restricted stock and restricted stock units. Includes vested but deferred restricted stock units in accordance with the Executive Plan. (2) Includes vested stock options. Vested stock options could be subject to loss by the Named Executive Officers in the event of a termination for cause and certain other events but could not in the event of termination on account of death or disability. (3) Excludes $585,376 of Mr. van Paasschens nonqualified deferred compensation that is payable upon death, disability or certain changes in control as discussed in the Nonqualified Deferred Compensation section beginning on page 40.

44

3. Change in Control The following table discloses the amounts that would have become payable on account of an involuntary termination without cause following a change in control or a voluntary termination with good reason following a change in control.
Severance Pay ($) Medical Benefits ($) Vesting of Restricted Stock ($)(1) Vesting of Stock Options ($)(2) Outplacement ($) 401(k) Payment ($) Tax Gross-Up ($) Total ($)

Name

van Paasschen(3) . . . . . . . . 1,000,000 Avril . . . . . . . . . . . . . . . . 3,487,750 Prabhu . . . . . . . . . . . . . . . 3,758,750 Siegel . . . . . . . . . . . . . . . . 3,157,150 Turner . . . . . . . . . . . . . . . 3,008,750

5,424 31,139 30,519 30,125 30,195

12,654,882 8,154,609 14,390,637 3,617,869 2,099,706

47,582,156 13,074,622 13,685,101 12,668,152 23,721,172

150,350 150,350 127,698 129,750

7,220,816 n/a n/a

77,463,278 24,898,470 32,015,357 19,600,994 28,989,573

(1) Includes values for holdings of restricted stock and restricted stock units. Includes vested but deferred restricted stock units in accordance with the Executive Plan. (2) Includes vested stock options. Vested stock options could be subject to loss by the Named Executive Officers in the event of a termination for cause and certain other events but could not in the event of an involuntary termination without cause following a change in control or a voluntary termination with good reason following a change in control. (3) If the amount of severance pay and other benefits payable on change in control is greater than three times certain base period taxable compensation for Mr. van Paasschen, a 20% excise tax is imposed on the excess amount of such severance pay and other benefits. Excludes $585,376 of Mr. van Paasschens nonqualified deferred compensation that is payable upon death, disability or certain changes in control as discussed in the Nonqualified Deferred Compensation section beginning on page 40. Because of Mr. van Paasschens recent hire, his base period taxable compensation does not reflect the total value of restricted stock granted to him in earlier years, thus artificially increasing the excise tax that would apply on a change in control and, correspondingly, the tax gross-up payment due under the estimate. XI. DIRECTOR COMPENSATION The Company uses a combination of cash and stock-based awards to attract and retain qualified candidates to serve on the Board. In setting Director compensation, the Company considers the significant amount of time that members of the Board spend in fulfilling their duties to the Company as well as the skill level required by the Company of its Directors. The current compensation structure is described below. For 2010, under the Companys Director share ownership guidelines, each Director was required to own Shares (or deferred compensation stock equivalents) that have a market price equal to four times the annual Directors fees paid to such Director. If any Director fails to satisfy this requirement, sales of Shares by such Director shall be subject to a 35% retention requirement. Any new Director shall be given a period of three years to satisfy this requirement. Company employees who serve as members of the Board receive no fees for their services in this capacity. Non-employee members of the Board (Non-Employee Directors) receive compensation for their services as described below. A. Annual Fees Each Non-Employee Director receives an annual fee in the amount of $80,000, payable in four equal installments of Shares issued under our LTIP. The number of Shares to be issued is based on the fair market value of a Share using the average of the high and low price of the Companys stock on December 31 of the year prior to grant. A Non-Employee Director may elect to receive up to one-half of the annual fee in cash and to defer (at an annual interest rate of LIBOR plus 112% for deferred cash amounts) any or all of the annual fee payable in cash. 45

Deferred cash amounts are payable in accordance with the Non-Employee Directors advance election. A NonEmployee Director is also permitted to elect to defer to a deferred unit account any or all of the annual fee payable in Shares or cash. Deferred stock or cash amounts are payable in accordance with the Non-Employee Directors advance election. Non-Employee Directors serving as members of the Audit Committee receive an additional annual fee in cash of $10,000 ($25,000 for the Chairman of the Audit Committee). The chairperson of each other committee of the Board receive an additional annual fee in cash of $12,500. The Chairman of the Board receive an additional retainer of $150,000, payable quarterly in restricted stock units which vest in three years. B. Attendance Fees Non-Employee Directors do not receive fees for attendance at meetings. C. Equity grant In 2010, each Non-Employee Director received an annual equity grant (made at the same time as the annual grant is made to Company employees) under our LTIP with a value of $125,000. The equity grant was delivered 50% in restricted stock units and 50% in stock options. The number of restricted stock units is determined by dividing the value by the average of the high and low Share price on the date of grant. The number of options is determined by dividing the value by the average of the high and low Share price on the date of grant (also the exercise price) and multiplying by two and one half. The options are fully vested and exercisable upon grant and are scheduled to expire eight years after the grant date. The restricted stock units awarded pursuant to the annual grant generally vest upon the earlier of (i) the third anniversary of the grant date and (ii) the date such person ceases to be a Director of the Company. D. Starwood Preferred Guest Program Points and Rooms In 2010, each Director received an annual grant of 750,000 Starwood Preferred Guest (SPG) Points to encourage them to visit and personally evaluate our properties. E. Other Compensation The Company reimburses Non-Employee Directors for travel expenses, other out-of-pocket costs they incur when attending meetings and, for one meeting per year, expenses related to attendance by spouses. We have summarized the compensation paid by the Company to our Non-Employee Directors in 2010 in the table below.
Name of Director(1) Fees earned or Paid in Cash ($) Stock Awards (2) (3) ($) Option Awards (4) ($) All Other compensation (5) ($) Total ($)

Adam M. Aron . . . . . . . . . . . . Charlene Barshefsky. . . . . . . . Thomas E. Clarke. . . . . . . . . . Clayton C. Daley, Jr. . . . . . . . Bruce W. Duncan . . . . . . . . . . Lizanne Galbreath . . . . . . . . . Eric Hippeau . . . . . . . . . . . . . Stephen R. Quazzo . . . . . . . . . Thomas O. Ryder . . . . . . . . . . Kneeland C. Youngblood . . . .

22,500 47,898 50,000 59,478 4,602 12,500 9,203 50,000

142,571 102,469 102,469 102,469 292,623 142,571 142,571 142,571 142,571 102,469

55,853 55,853 55,853 55,853 55,853 55,853 55,853 55,853 55,853 55,853

11,250 14,582 11,250 12,335 21,960 14,908 20,672 11,250 18,302 11,250

232,174 220,802 219,572 230,135 370,436 217,934 219,096 222,174 225,929 219,572

(1) Mr. van Paasschen is not included in this table because he was an employee of the Company and thus received no compensation for his services as a Director. Mr. van Paasschens 2010 compensation from the Company is disclosed in the Summary Compensation Table on page 34. 46

(2) As of December 31, 2010, each Director beneficially owns the following aggregate number of Shares (deferred or otherwise) outstanding: Mr. Aron, 20,067; Ambassador Barshefsky, 14,059; Mr. Clarke, 4,787; Mr. Daley, 6,542; Mr. Duncan, 136,101; Ms. Galbreath, 11,311; Mr. Hippeau, 24,313; Mr. Quazzo, 30,151; Mr. Ryder, 30,265; Mr. Youngblood, 8,829. (3) Represents the grant date fair value for restricted stock and unit awards granted during the year computed in accordance with ASC 718. For additional information, refer to Note 23 of the Companys financial statements filed with the SEC as part of the Form 10-K for the year ended December 31, 2010. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Named Executive Officers. The grant date fair value of each stock award is set forth below:
Director Grant Date Number of Shares of Stock/Units Grant Date Fair Value ($)

Adam M. Aron . . . . . . . . . . . . . . . . . . .

Charlene Barshefsky . . . . . . . . . . . . . . .

Thomas E. Clarke . . . . . . . . . . . . . . . . .

Clayton C. Daley, Jr. . . . . . . . . . . . . . .

Bruce W. Duncan . . . . . . . . . . . . . . . . .

Lizanne Galbreath . . . . . . . . . . . . . . . . .

2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 3/31/2010 6/30/2010 6/30/2010 9/30/2010 9/30/2010 12/31/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010

1,635 541 541 541 541 1,635 270 270 270 270 1,635 270 270 270 270 1,635 270 270 270 270 1,635 1,014 541 1,014 541 1,014 541 1,014 541 1,635 541 541 541 541

62,514 20,014 20,014 20,014 20,014 62,514 9,989 9,989 9,989 9,989 62,514 9,989 9,989 9,989 9,989 62,514 9,989 9,989 9,989 9,989 62,514 37,513 20,014 37,513 20,014 37,513 20,014 37,513 20,014 62,514 20,014 20,014 20,014 20,014

47

Director

Grant Date

Number of Shares of Stock/Units

Grant Date Fair Value ($)

Eric Hippeau . . . . . . . . . . . . . . . . . . . . .

Stephen R. Quazzo . . . . . . . . . . . . . . . .

Thomas O. Ryder . . . . . . . . . . . . . . . . .

Kneeland C. Youngblood . . . . . . . . . . . .

2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010 2/26/2010 3/31/2010 6/30/2010 9/30/2010 12/31/2010

1,635 541 541 541 541 1,635 541 541 541 541 1,635 541 541 541 541 1,635 270 270 270 270

62,514 20,014 20,014 20,014 20,014 62,514 20,014 20,014 20,014 20,014 62,514 20,014 20,014 20,014 20,014 62,514 9,989 9,989 9,989 9,989

(4) Represents the grant date fair value for stock option awards granted during the year computed in accordance with ASC 718. For additional information, refer to Note 23 of the Companys financial statements filed with the SEC as part of the Form 10-K for the year ended December 31, 2010. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Directors. As of December 31, 2010, each Director has the following aggregate number of stock options outstanding: Mr. Aron, 26,028; Ambassador Barshefsky, 22,672; Mr. Clarke, 17,918; Mr. Daley, 13,631; Mr. Duncan, 66,897; Ms. Galbreath, 33,651; Mr. Hippeau, 44,649; Mr. Quazzo, 39,150; Mr. Ryder, 44,649; Mr. Youngblood, 28,171. All Directors received a grant of 4,087 options on February 26, 2010 with a grant date fair value of $55,853. (5) We reimburse Non-Employee Directors for travel expenses and other out-of-pocket costs they incur when attending meetings and, for one meeting per year, attendance by spouses. In addition, in 2010 Non-Employee Directors received 750,000 SPG Points valued at $11,250. Non-Employee Directors receive interest on deferred dividends. Pursuant to SEC rules, perquisites and personal benefits are not reported for any Director for whom such amounts were less than $10,000 in the aggregate for 2010 but must be identified by type for each Director for whom such amounts were equal to or greater than $10,000 in the aggregate. SEC rules do not require specification of the value of any type of perquisite or personal benefit provided to the Non-Employee Directors because no such value exceeded $25,000.

48

AUDIT COMMITTEE REPORT The information contained in this Audit Committee Report shall not be deemed to be soliciting material or filed or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act. The Audit Committee (the Audit Committee) of the Board of Directors (the Board) of Starwood Hotels & Resorts Worldwide, Inc. (the Company), which is comprised entirely of independent Directors, as determined by the Board in accordance with the New York Stock Exchange (the NYSE) listing requirements and applicable federal securities laws, serves as an independent and objective party to assist the Board in fulfilling its oversight responsibilities including, but not limited to, (i) monitoring the quality and integrity of the Companys financial statements, (ii) monitoring compliance with legal and regulatory requirements, (iii) assessing the qualifications and independence of the independent registered public accounting firm and (iv) establishing and monitoring the Companys systems of internal controls regarding finance, accounting and legal compliance. The Audit Committee operates under a written charter which meets the requirements of applicable federal securities laws and the NYSE requirements. In the first quarter of 2011, the Audit Committee reviewed and discussed the audited financial statements for the year ended December 31, 2010 with management, the Companys internal auditors and the independent registered public accounting firm, Ernst & Young LLP, including the matters required to be discussed with the independent accountant by Statement of Auditing Standards No. 61, as amended. The Audit Committee also discussed with the independent registered public accounting firm matters relating to its independence, including a review of audit and non-audit fees and the written disclosures and letter from Ernst & Young LLP to the Audit Committee required pursuant to Rule 3526 of the Public Company Accounting Oversight Board regarding the independent accountants communications with the Audit Committee concerning independence. Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the financial statements referred to above be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2010. Audit Committee of the Board of Directors Clayton C. Daley, Jr., Chairman Adam M. Aron Thomas E. Clarke Kneeland C. Youngblood Audit Fees The aggregate amounts paid by the Company for the fiscal years ended December 31, 2010 and 2009 to the Companys principal accounting firm, Ernst & Young, are as follows (in millions):
2010 2009

Audit Fees(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5.6 Audit-Related Fees(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.9 Tax Fees(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.6 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7.1

$5.4 $0.6 $0.4 $6.4

(1) Audit fees include the fees paid for the annual audit, the review of quarterly financial statements and assistance with financial reports required as part of regulatory and statutory filings and the audit of the Companys internal controls over financial reporting with the objective of obtaining reasonable assurance about whether effective internal controls over financial reporting were maintained in all material respects. (2) Audit-related fees include fees for audits of employee benefit plans, audit and accounting consultation and other attest services. (3) Tax fees include fees for the preparation and review of certain foreign tax returns. 49

The Company has adopted a policy which requires the Audit Committee of the Board of Directors to approve the hiring of any current or former employee (within the last five years) of the Companys independent registered public accounting firm into any position (i) as a manager or higher, (ii) in its accounting or tax departments, (iii) where the hire would have direct involvement in providing information for use in its financial reporting systems, or (iv) where the hire would be in a policy setting position. When undertaking its review, the Audit Committee considers applicable laws, regulations and related commentary regarding the definition of independence for independent registered public accounting firms. Pre-Approval of Services The Audit Committee pre-approves all services, including both audit and non-audit services, provided by the Companys independent registered public accounting firm. For audit services (including statutory audit engagements as required under local country laws), the independent registered public accounting firm provides the Audit Committee with an engagement letter outlining the scope of the audit services proposed to be performed during the year. The engagement letter must be formally accepted by the Audit Committee before any audit commences. The independent registered public accounting firm also submits an audit services fee proposal, which also must be approved by the Audit Committee before the audit commences. The Audit Committee may delegate authority to one of its members to pre-approve all audit/non-audit services by the independent registered public accounting firm, as long as these approvals are presented to the full Audit Committee at its next regularly scheduled meeting. Management submits to the Audit Committee all non-audit services that it recommends the independent registered public accounting firm be engaged to provide and an estimate of the fees to be paid for each. Management and the independent registered public accounting firm must each confirm to the Audit Committee that the performance of the non-audit services on the list would not compromise the independence of the registered public accounting firm and would be permissible under all applicable legal requirements. The Audit Committee must approve both the list of non-audit services and the budget for each such service before commencement of the work. Management and the independent registered public accounting firm report to the Audit Committee at each of its regular meetings as to the non-audit services actually provided by the independent registered public accounting firm and the approximate fees incurred by the Company for those services. All audit and permissible non-audit services provided by Ernst & Young to the Company for the fiscal years ended December 31, 2010 and 2009 were pre-approved by the Audit Committee or our Board of Directors. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION All members of the Compensation Committee during fiscal year 2010 were independent Directors, and no member was an employee or former employee. No Compensation Committee member had any relationship requiring disclosure under Certain Relationships and Related Transactions, below. During fiscal year 2010, none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose officer served on our Compensation Committee. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Policies of the Board of Directors of the Company The Board has adopted a Corporate Opportunity and Related Person Transaction Policy (the Related Person Transaction Policy), the purpose of which is to address the reporting, review and approval or ratification of transactions with Directors, director nominees, executive officers, stockholders known to own of record or beneficially more than five percent of our Shares (5% Holders) and each of the foregoings respective family members and/or corporate affiliates (collectively Covered Persons). As a general matter, we seek to avoid Related Person Transactions because they can involve potential or actual conflicts of interest and pose the risk that they may be, or be perceived to be, based on considerations other than the Companys best interests. For purposes of the policy, a Related Person Transaction means any transaction involving the Company in which a Covered Person has a direct or indirect material interest. A transaction involving entities controlled by the Company shall be deemed 50

a transaction in which the Company participates. However, we recognize that in some circumstances transactions between us and related persons may be incidental to the normal course of business or provide an opportunity that is in the best interests of the Company, or that is not inconsistent with the best interests of the Company, or is more efficient to pursue than an alternative transaction. The Board has charged the Corporate Governance and Nominating Committee (the Governance Committee) with establishing and reviewing (on a periodic basis) our Related Person Transaction Policy. A copy of the policy is posted on our website at www.starwoodhotels.com/ corporate/investor _ relations.html. The Related Person Transaction Policy also governs certain corporate opportunities to ensure that Corporate Opportunities are not pursued by Covered Persons unless and until the Company has determined that it is uninterested in pursuing said opportunity. For purposes of the policy, a Corporate Opportunity means any opportunity (1) that is within the Companys existing line of business or is one in which the Company either has an existing interest or a reasonable expectancy of an interest; and (2) the Company is reasonably capable of pursuing. Under the Related Person Transaction Policy, except as otherwise provided, each Director, executive officer, and 5% Holder is required to submit any such Related Person Transaction or Corporate Opportunity to the Governance Committee for review. In its review, the Governance Committee is to consider all relevant facts and circumstances to determine whether it should (i) reject the proposed transaction; (ii) conclude that the proposed transaction is appropriate and suggest that the Company pursue it on the terms presented or on different terms, and in the case of a Corporate Opportunity suggest that the Company pursue the Corporate Opportunity on its own, with the party who brought the proposed transaction to the Companys attention or with another third party; or (iii) ask the Board to consider the proposed transaction so that the Board may then take either of the actions described in (i) or (ii) above, and, at the Governance Committees option, in connection with (iii), make recommendations to the Board. Any person bringing a proposed transaction to the Governance Committee is obligated to provide any and all information requested by the Governance Committee and, if a Director, to recuse himself from any vote or other deliberation. The policy may be changed at any time by the Board.

OTHER MATTERS The Board is not aware of any matters not referred to in this proxy statement that may properly be presented for action at the Annual Meeting. The deadline for stockholders to submit matters for consideration at the Annual Meeting and have it included in these proxy materials expired on November 16, 2010 and the deadline for stockholders to submit matters for consideration at the Annual Meeting without having the proposal included in these proxy materials expired on February 27, 2011. However, if any other matter properly comes before the Annual Meeting, it is the intention of the persons named in the enclosed proxy to vote the Shares represented thereby in accordance with their discretion.

SOLICITATION COSTS The Company will pay the cost of soliciting proxies for the Annual Meeting, including the cost of mailing. The solicitation is being made by mail and over the Internet and may also be made by telephone or in person using the services of a number of regular employees of the Company at nominal cost. The Company will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for expenses incurred in sending proxy materials to beneficial owners of Shares. The Company has engaged D.F. King & Co., Inc. to solicit proxies and to assist with the distribution of proxy materials for a fee of $18,500 plus reasonable out-of-pocket expenses. 51

HOUSEHOLDING The SEC allows us to deliver a single proxy statement and annual report to an address shared by two or more of our stockholders. This delivery method, referred to as householding, can result in significant cost savings for us. In order to take advantage of this opportunity, the Company and banks and brokerage firms that hold your Shares have delivered only one proxy statement and annual report to multiple stockholders who share an address unless one or more of the stockholders has provided contrary instructions. The Company will deliver promptly, upon written or oral request, a separate copy of the proxy statement and annual report to any stockholder at a shared address to which a single copy of the documents was delivered. A stockholder who wishes to receive a separate copy of the proxy statement and annual report, now or in the future, may obtain one, without charge, by addressing a request to Investor Relations, Starwood Hotels & Resorts Worldwide, Inc., 1111 Westchester Avenue, White Plains, NY 10604 or by calling (914) 640-8100. You may also obtain a copy of the proxy statement and annual report from the investor relations page on the Companys website (www.starwoodhotels.com/corporate/investor _ relations.html). Stockholders of record sharing an address who are receiving multiple copies of proxy materials and annual reports and wish to receive a single copy of such materials in the future should submit their request by contacting us in the same manner. If you are the beneficial owner, but not the record holder, of the Shares and wish to receive only one copy of the proxy statement and annual report in the future, you will need to contact your broker, bank or other nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the future.

52

STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING If you want to make a proposal for consideration at next years Annual Meeting and have it included in the Companys proxy materials, the Company must receive your proposal by November 22, 2011, and the proposal must comply with the rules of the SEC. If you want to make a proposal or nominate a Director for consideration at next years Annual Meeting without having the proposal included in the Companys proxy materials, you must comply with the then current advance notice provisions and other requirements set forth in the Companys Bylaws, including that the Company must receive your proposal on or after January 26, 2012 and on or prior to February 20, 2012, with certain exceptions if the date of next years Annual Meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date of the 2011 Annual Meeting. If the Company does not receive your proposal or nomination by the appropriate deadline and in accordance with the terms of the Companys Bylaws, then it may not properly be brought before the 2012 Annual Meeting. The fact that the Company may not insist upon compliance with these requirements should not be construed as a waiver by the Company of its right to do so at any time in the future. You should address your proposals or nominations to the Corporate Secretary, Starwood Hotels & Resorts Worldwide, Inc., 1111 Westchester Avenue, White Plains, New York 10604.

By Order of the Board of Directors STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

Kenneth S. Siegel Corporate Secretary March 21, 2011

53

General Directions To The St. Regis Atlanta

From North Take Interstate 285 East (from Interstate 75) or Interstate 285 West (from Interstate 85) to Exit GA 400 South. Take Exit 2 Lenox Road. Turn left and follow the signs for Peachtree Road South. Turn right on Peachtree Road. Continue one mile and turn right on West Paces Ferry Road. The St. Regis Atlanta is two blocks on the left. From South Take Interstate 85 North to Exit GA 400 North. Take first exit Lenox Road. Turn right and follow signs for Peachtree Road South. Turn right on Peachtree Road. Continue one mile and turn right on West Paces Ferry Road. The St. Regis Atlanta is two blocks on the left. From East Travel on Interstate 20 West to Interstate 85 North. Take Interstate 85 North and follow to Exit GA 400 North. Take first exit Lenox Road. Turn right and follow signs for Peachtree Road South. Turn right on Peachtree Road. Continue one mile and turn right on West Paces Ferry Road. The St. Regis Atlanta is two blocks on the left. From West Take Interstate 285 East to Exit GA 400 South. Take Exit 2 Lenox Road. Turn left and follow the signs for Peachtree Road South. Turn right on Peachtree Road. Continue one mile and turn right on West Paces Ferry Road. The St. Regis Atlanta is two blocks on the left. From Hartsfield-Jackson International Airport (ATL)* Take Interstate 85 North to Exit GA 400 North. Take first exit Lenox Road. Turn right and follow signs for Peachtree Road South. Turn right on Peachtree Road. Continue one mile and turn right on West Paces Ferry Road. The St. Regis Atlanta is two blocks on the left. From Peachtree-Dekalb Airport (PDK) Proceed west on Chamblee Tucker Road toward West Hospital Avenue. Turn left onto Peachtree Industrial Boulevard GA-141. Continue to follow GA-141. Turn right onto West Paces Ferry Road. The St. Regis Atlanta is two blocks on the left.

*The Atlanta Link is the exclusive shuttle service running to and from Hartsfield-Jackson International Airport. Taxi service is available from the airports, the Atlanta Amtrak Station, and from the Greyhound Bus Station. 54

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2010

OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to Commission File Number: 1-7959

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

Maryland
(State or other jurisdiction of incorporation or organization)

52-1193298
(I.R.S. employer identification no.)

1111 Westchester Avenue White Plains, NY 10604

(Address of principal executive offices, including zip code)

(914) 640-8100
(Registrants telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No n Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes n No Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No n Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( 232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files). Yes No n Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ( 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer n Non-accelerated filer n Smaller reporting company n (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes n No As of June 30, 2010, the aggregate market value of the registrants voting and non-voting common equity held by non-affiliates (for purposes of this Annual Report only, includes all Shares other than those held by the registrants Directors and executive officers) computed by reference to the closing sales price as quoted on the New York Stock Exchange was $7,823,279,076. As of February 11, 2011, the Corporation had outstanding 192,165,807 shares of common stock. For information concerning ownership of Shares, see the Companys definitive Proxy Statement for the Companys Annual Meeting of Stockholders to be held on May 5, 2011, which is incorporated by reference under various Items of this Annual Report.

Document Incorporated by Reference:

Document Where Incorporated

Proxy Statement

Part III (Items 10, 11, 12, 13 and 14)

TABLE OF CONTENTS
Page

PART I Forward-Looking Statements . . . . . . . . . . . . . . . Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . Item 5.

................................. ................................. ................................. ................................. ................................. .................................

1 1 5 14 14 20

PART II Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations . . . Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure . . . Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 10. Item 11. Item 12. Item 13. Item 14. Item 15. PART III Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART IV Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21 23 23 38 40 40 40 42 42 42 42 42 42 42

This Annual Report is filed by Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the Corporation). Unless the context otherwise requires, all references to the Corporation include those entities owned or controlled by the Corporation, including SLC Operating Limited Partnership, a Delaware limited partnership (the Operating Partnership), which prior to April 10, 2006 included Starwood Hotels & Resorts, a Maryland real estate investment trust (the Trust), which was sold in the Host Transaction (defined below); all references to the Trust include the Trust and those entities owned or controlled by the Trust, including SLT Realty Limited Partnership, a Delaware limited partnership (the Realty Partnership); and all references to we, us, our, Starwood, or the Company refer to the Corporation, the Trust and its respective subsidiaries, collectively through April 7, 2006. Until April 7, 2006, the shares of common stock, par value $0.01 per share, of the Corporation (Corporation Shares) and the Class B shares of beneficial interest, par value $0.01 per share, of the Trust (Class B Shares) were attached and traded together and were held or transferred only in units consisting of one Corporation Share and one Class B Share (a Share). On April 7, 2006, in connection with a transaction (the Host Transaction) with Host Hotels & Resorts, Inc., its subsidiary Host Marriot L.P. and certain other subsidiaries of Host Hotels & Resorts, Inc. (collectively, Host), the Shares were depaired and the Corporation Shares became transferable separately from the Class B Shares. As a result of the depairing, the Corporation Shares trade alone under the symbol HOT on the New York Stock Exchange (NYSE). As of April 10, 2006, neither Shares nor Class B Shares are listed or traded on the NYSE. PART I Forward-Looking Statements This Annual Report contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in several places in this Annual Report, including, without limitation, the section of Item 1. Business, captioned Business Strategy and Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations. Such forward-looking statements may include statements regarding the intent, belief or current expectations of Starwood, its Directors or its officers with respect to the matters discussed in this Annual Report. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements including, without limitation, the risks and uncertainties set forth below. Starwood undertakes no obligation to publicly update or revise any forward-looking statements to reflect current or future events or circumstances. Item 1. Business General We are one of the worlds largest hotel and leisure companies. We conduct our hotel and leisure business both directly and through our subsidiaries. Our brand names include the following: St. Regis (luxury full-service hotels, resorts and residences) are for connoisseurs who desire the finest expressions of luxury. They provide flawless and bespoke service to high-end leisure and business travelers. St. Regis hotels are located in the ultimate locations within the worlds most desired destinations, important emerging markets and yet to be discovered paradises, and they typically have individual design characteristics to capture the distinctive personality of each location. The Luxury Collection (luxury full-service hotels and resorts) is a group of unique hotels and resorts offering exceptional service to an elite clientele. From legendary palaces and remote retreats to timeless modern classics, these remarkable hotels and resorts enable the most discerning traveler to collect a world of unique, authentic and enriching experiences indigenous to each destination that capture the sense of both luxury and place. They are distinguished by magnificent decor, spectacular settings and impeccable service. W (luxury and upscale full service hotels, retreats and residences) feature world class design, world class restaurants and on trend bars and lounges and its signature Whatever\Whenever service standard. Its a sensory multiplex that not only indulges the senses, it delivers an emotional experience. Whether its behind the scenes 1

access at W Happenings, or our cutting edge music, lighting and scent programs, W hotels delivers an experience unmatched in the hotel segment. Westin (luxury and upscale full-service hotels, resorts and residences) provides a thoughtfully designed experience making the healthiest choices irresistibly appealing. A welcoming oasis to the savvy traveler, every innovative service aims to help guests thrive so they feel better than when they arrived. Truly restorative sleep in the world-renowned Heavenly Bed. Spa-like invigoration with the Heavenly Bath. Healthful indulgence from SuperFoodsRxTM menus. Energizing exercise with WestinWORKOUT. Fresh air from BreatheWestinSM, the industrys first smoke-free policy. Whether an epic city center location or refreshing resort destination, Westin ensures guests are well rested, well nourished and well cared for. Le Mridien (luxury and upscale full-service hotels, resorts and residences) is a European-inspired brand with a French accent. Each of its hotels, whether city, airport or resort has a distinctive character driven by its individuality and the Le Mridien brand values. With its underlying passion for food, art and style and its classic yet stylish design, Le Mridien offers a unique experience at some of the worlds top travel destinations. Sheraton (luxury and upscale full-service hotels, resorts and residences) is our largest brand serving the needs of upscale business and leisure travelers worldwide. For over 70 years this full-service, iconic brand has welcomed guests, becoming a trusted friend to travelers and one of the worlds most recognized hotel brands. From being the first hotel brand to step into major international markets like China, to completely captivating entire destinations like Waikiki, Sheraton understands that travel is about bringing people together. In Sheraton lobbies youll find the Link@SheratonSM experienced with Microsoft, which fosters connections, whether face-to-face or webcam-to-webcam. The Sheraton Club is also a social space where guests indulge in the upside of everything with likeminded travelers. Sheraton transcends lifestyles, generations and geographies and will continue to welcome generation after generation of world traveler, because we believe, as strongly as ever, that life is better when shared. Four Points (select-service hotels) delights the self-sufficient traveler with what is needed for greater comfort and productivity. Great Hotels. Great Rates. All at the honest value our guests deserve. Our guests start their day feeling energized and finish up relaxed, maybe even with one of our Best Brews (local craft beer). Its the little indulgences that make their time away from home special. Aloft (select-service hotels) first opened in 2008. It will already be opening its 50th property in 2011. Aloft provides new heights: an oasis where you least expect it, a spirited neighborhood outpost, a haven at the side of the road. Bringing a cozy harmony of modern elements to the classic on-the-road tradition, Aloft offers a sassy, refreshing, ultra effortless alternative for both the business and leisure traveler. Fresh, fun, and fulfilling, Aloft is an experience to be discovered and rediscovered, destination after destination, as you ease on down the road. Style at a Steal. Element(SM) (extended stay hotels), a brand introduced in 2006 with the first hotel opened in 2008, provides a modern, upscale and intuitively designed hotel experience that allows guests to live well and feel in control. Inspired by Westin, Element hotels promote balance through a thoughtful, upscale environment. Decidedly modern with an emphasis on nature, Element is intuitively constructed with an efficient use of space that encourages guests to stay connected, feel alive, and thrive while they are away. Primarily all Element hotels are LEED certified, depicting the importance of the environment in todays world. Space to live your life. Through our brands, we are well represented in most major markets around the world. Our operations are reported in two business segments, hotels and vacation ownership and residential operations. Our revenue and earnings are derived primarily from hotel operations, which include management and other fees earned from hotels we manage pursuant to management contracts, the receipt of franchise and other fees and the operation of our owned hotels. Our hotel business emphasizes the global operation of hotels and resorts primarily in the luxury and upscale segment of the lodging industry. We seek to acquire interests in, or management or franchise rights with respect to properties in this segment. At December 31, 2010, our hotel portfolio included owned, leased, managed and franchised hotels totaling 1,027 hotels with approximately 302,000 rooms in approximately 100 countries, and is comprised of 62 hotels that we own or lease or in which we have a majority equity interest, 463 hotels managed by 2

us on behalf of third-party owners (including entities in which we have a minority equity interest) and 502 hotels for which we receive franchise fees. Our revenues and earnings are also derived from the development, ownership and operation of vacation ownership resorts, marketing and selling vacation ownership interests (VOIs) in the resorts and providing financing to customers who purchase such interests. Generally these resorts are marketed under the brand names described above. Additionally, our revenue and earnings are derived from the development, marketing and selling of residential units at mixed use hotel projects owned by us as well as fees earned from the marketing and selling of residential units at mixed use hotel projects developed by third-party owners of hotels operated under our brands. At December 31, 2010, we had 23 owned vacation ownership resorts and residential properties (including 14 stand-alone, eight mixed-use and one unconsolidated joint venture) in the United States, Mexico and the Bahamas. Due to the global economic crisis and its impact on the long-term growth outlook for the timeshare industry, in 2009 we evaluated all of our existing vacation ownership projects, as well as land held for future vacation ownership projects. We have thereby decided that no new vacation ownership projects are being initiated and we have decided not to develop certain vacation ownership sites and future phases of certain existing projects. Our operations are in geographically diverse locations around the world. The following tables reflect our hotel and vacation ownership and residential properties by type of revenue source and geographical presence by major geographic area as of December 31, 2010:
Number of Properties Rooms

Managed and unconsolidated joint venture hotels . . . . . . . . . . . . . . . . . . . . . . Franchised hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Owned hotels(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership resorts and stand-alone properties . . . . . . . . . . . . . . . . . . Total properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) Includes wholly owned, majority owned and leased hotels.

463 502 62 14 1,041

159,200 121,400 21,100 7,000 308,700

Number of Properties

Rooms

North America (and Caribbean) . . . . . . . . . . . . Europe, Africa and the Middle East . . . . . . . . . Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . Latin America . . . . . . . . . . . . . . . . . . . . . . . . .

....................... ....................... ....................... .......................

551 247 181 62 1,041

175,800 61,300 58,500 13,100 308,700

Total properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

We have implemented a strategy of reducing our investment in owned real estate and increasing our focus on the management and franchise business. In furtherance of this strategy, since 2006, we have sold 62 hotels for approximately $5.3 billion. As a result, our primary business objective is to maximize earnings and cash flow by increasing the number of our hotel management contracts and franchise agreements; selling VOIs; and investing in real estate assets where there is a strategic rationale for doing so, which may include selectively acquiring interests in additional assets and disposing of non-core hotels (including hotels where the return on invested capital is not adequate) and trophy assets that may be sold at significant premiums. We plan to meet these objectives by leveraging our global assets, broad customer base and other resources and by taking advantage of our scale to reduce costs. The implementation of our strategy and financial planning is impacted by the uncertainty relating to geopolitical and economic environments around the world and its consequent impact on travel. The Corporation was incorporated in 1980 under the laws of Maryland. Sheraton Hotels & Resorts and Westin Hotels & Resorts, Starwoods largest brands, have been serving guests for more than 60 years. Starwood Vacation Ownership (and its predecessor, Vistana, Inc.) has been selling VOIs for more than 20 years. 3

Our principal executive offices are located at 1111 Westchester Avenue, White Plains, New York 10604, and our telephone number is (914) 640-8100. For discussion of our revenues, profits, assets and geographical segments, see the notes to financial statements of this Annual Report. For additional information concerning our business, see Item 2 Properties, of this Annual Report. Competition The hotel and timeshare industry is highly competitive. Competition is generally based on quality and consistency of room, restaurant and meeting facilities and services, attractiveness of locations, availability of a global distribution system, price, the ability to earn and redeem loyalty program points and other factors. Management believes that we compete favorably in these areas. Our properties compete with other hotels and resorts in their geographic markets, including facilities owned by local interests and facilities owned by national and international chains. Our principal competitors include other hotel operating companies, national and international hotel brands, and ownership companies (including hotel REITs). We encounter strong competition as a hotel, residential, resort and vacation ownership operator. While some of our competitors are private management firms, several are large national and international chains that own and operate their own hotels, as well as manage hotels for third-party owners and sell VOIs, under a variety of brands that compete directly with our brands. Environmental Matters We are subject to certain requirements and potential liabilities under various foreign and U.S. federal, state and local environmental laws, ordinances and regulations (Environmental Laws). Under such laws, we could be held liable for the costs of removing or cleaning up hazardous or toxic substances at, on, under, or in our currently or formerly owned or operated properties. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of hazardous or toxic substances may adversely affect the owners ability to sell or rent such real property or to borrow using such real property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic wastes may be liable for the costs of removal or remediation of such wastes at the treatment, storage or disposal facility, regardless of whether such facility is owned or operated by such person. We use certain substances and generate certain wastes that may be deemed hazardous or toxic under applicable Environmental Laws, and we from time to time have incurred, and in the future may incur, costs related to cleaning up contamination resulting from historic uses of certain of our current or former properties or our treatment, storage or disposal of wastes at facilities owned by others. Other Environmental Laws govern occupational exposure to asbestos-containing materials (ACMs) and require abatement or removal of certain ACMs (limited quantities of which are present in various building materials such as spray-on insulation, floor coverings, ceiling coverings, tiles, decorative treatments and piping located at certain of our hotels) in the event of damage or demolition, or certain renovations or remodeling. Environmental Laws also regulate polychlorinated biphenyls (PCBs), which may be present in electrical equipment. A number of our hotels have underground storage tanks (USTs) and equipment containing chlorofluorocarbons (CFCs); the operation and subsequent removal or upgrading of certain USTs and the use of equipment containing CFCs also are regulated by Environmental Laws. In connection with our ownership, operation and management of our properties, we could be held liable for costs of remedial or other action with respect to PCBs, USTs or CFCs. Congress and some states are considering or have undertaken actions to regulate and reduce greenhouse gas emissions. New or revised laws and regulations or new interpretations of existing laws and regulations, such as those related to climate change, could affect the operation of our hotels and/or result in significant additional expense and operating restrictions on us. The cost impact of such legislation, regulation, or new interpretations would depend upon the specific requirements enacted and cannot be determined at this time. Environmental Laws are not the only source of environmental liability. Under common law, owners and operators of real property may face liability for personal injury or property damage because of various 4

environmental conditions such as alleged exposure to hazardous or toxic substances (including, but not limited to, ACMs, PCBs and CFCs), poor indoor air quality, radon or poor drinking water quality. Although we have incurred and expect to incur remediation and various environmental-related costs during the ordinary course of operations, management does not anticipate that such costs will have a material adverse effect on our operations or financial condition. Seasonality and Diversification The hotel industry is seasonal in nature; however, the periods during which our properties experience higher revenue activities vary from property to property and depend principally upon location. Generally, our revenues and operating income have been lower in the first quarter than in the second, third or fourth quarters. Comparability of Owned Hotel Results We continually update and renovate our owned, leased and consolidated joint venture hotels. While undergoing renovation, these hotels are generally not operating at full capacity and, as such, these renovations can negatively impact our owned hotel revenues and operating income. Other events, such as the occurrence of natural disasters may cause a full or partial closure or sale of a hotel, and such events can negatively impact our revenues and operating income. Finally, as we pursue our strategy of reducing our investment in owned real estate assets, the sale of such assets can significantly reduce our revenues and operating income. Employees At December 31, 2010, approximately 145,000 people were employed at our corporate offices, owned and managed hotels and vacation ownership resorts, of which approximately 26% were employed in the United States. At December 31, 2010, approximately 34% of the U.S.-based employees were covered by various collective bargaining agreements providing, generally, for basic pay rates, working hours, other conditions of employment and orderly settlement of labor disputes. Generally, labor relations have been maintained in a normal and satisfactory manner, and management believes that our employee relations are satisfactory. Where You Can Find More Information We file annual, quarterly and special reports, proxy statements and other information with the Securities & Exchange Commission (SEC). Our SEC filings are available to the public over the Internet at the SECs website at http://www.sec.gov. Our SEC filings are also available on our website at http://www.starwoodhotels.com/ corporate/investor relations.html as soon as reasonably practicable after they are filed with or furnished to the SEC. You may also read and copy any document we file with the SEC at its public reference room located at 100 F Street, NE, in Washington, D.C. 20549 on official business days during the hours of 10 a.m. to 3 p.m. Please call the SEC at (800) SEC-0330 for further information. Our filings with the SEC are also available at the New York Stock Exchange. For more information on obtaining copies of our public filings at the New York Stock Exchange, you should call (212) 656-5060. You may also obtain a copy of our filings free of charge by calling Investor Relations at (914) 640-8165. Item 1A. Risk Factors. Risks Relating to Hotel, Resort, Vacation Ownership and Residential Operations We Are Subject to All the Operating Risks Common to the Hotel and Vacation Ownership and Residential Industries. Operating risks common to the hotel and vacation ownership and residential industries include: changes in general economic conditions, including the severity and duration of downturns in the US and global economies; impact of war and terrorist activity (including threatened terrorist activity) and heightened travel security measures instituted in response thereto; domestic and international political and geopolitical conditions; 5

 travelers fears of exposures to contagious diseases; decreases in the demand for transient rooms and related lodging services, including a reduction in business travel as a result of general economic conditions; decreases in demand or increases in supply for vacation ownership interests; the impact of internet intermediaries on pricing and our increasing reliance on technology; cyclical over-building in the hotel and vacation ownership industries; restrictive changes in zoning and similar land use laws and regulations or in health, safety and environmental laws, rules and regulations and other governmental and regulatory action; changes in travel patterns; changes in operating costs including, but not limited to, energy, labor costs (including the impact of unionization), food costs, workers compensation and health-care related costs, insurance and unanticipated costs such as acts of nature and their consequences; the costs and administrative burdens associated with compliance with applicable laws and regulations, including, among others, franchising, timeshare, privacy, licensing, labor and employment, and regulations under the Office of Foreign Assets Control and the Foreign Corrupt Practices Act; disputes with owners of properties, including condominium hotels, franchisees and homeowner associations which may result in litigation; the availability and cost of capital to allow us and potential hotel owners and franchisees to fund construction, renovations and investments; foreign exchange fluctuations; the financial condition of third-party owners, project developers and franchisees, which may impact our ability to recover indemnity payments that may be owed to us and their ability to fund amounts required under development, management and franchise agreements and in most cases our recourse is limited to the equity value said party has in the property; the financial condition of the airline industry and the impact on air travel; and regulation or taxation of carbon dioxide emissions by airlines and other forms of transportation. We are also impacted by our relationships with owners and franchisees. Our hotel management contracts are typically long-term arrangements, but most allow the hotel owner to replace us in certain circumstances, such as the bankruptcy of the hotel owner or franchisee, the failure to meet certain financial or performance criteria and in certain cases, upon a sale of the property. Our ability to meet these financial and performance criteria is subject to, among other things, the risks described in this section. Additionally, our operating results would be adversely affected if we could not maintain existing management, franchise or representation agreements or obtain new agreements on as favorable terms as the existing agreements. We utilize our brands in connection with the residential portions of certain properties that we develop and license our brands to third parties to use in a similar manner for a fee. Residential properties using our brands could become less attractive due to changes in mortgage rates and the availability of mortgage financing generally, market absorption or oversupply in a particular market. As a result, we and our third party licensees may not be able to sell these residences for a profit or at the prices that we or they have anticipated. The Recent Recession in the Lodging Industry and the Global Economy Generally Will Continue to Impact Our Financial Results and Growth. The recent economic recession has had a negative impact on the hotel and vacation ownership and residential industries. Substantial increases in air and ground travel costs and decreases in airline capacity have reduced demand for our hotel rooms and interval and fractional timeshare products. Accordingly, our financial results have been impacted by the economic recession and both our future financial results and growth could be further harmed if recovery from the economic recession slows or the economic 6

recession becomes worse. In certain cases, we have entered into third party hotel management contracts which contain performance guarantees specifying that certain operating metrics will be achieved. As a result of the impact of the economic downturn on the lodging industry, we may not meet the requisite performance levels, and we may be forced to loan or contribute monies to fund the shortfall of performance levels or terminate the management contract. For a more detailed description of our performance guarantees, see Note 26 of the consolidated financial statements. Moreover, many businesses, particularly financial institutions, face restrictions on the ability to travel and hold conferences or events at resorts and luxury hotels. The negative publicity associated with such companies holding large events has also resulted in reduced bookings. New or revised regulations on businesses participating in government financial assistance programs, as well as the negative publicity associated with conferences and corporate events, could impact our financial results. Our Revenues, Profits, or Market Share Could Be Harmed If We Are Unable to Compete Effectively. The hotel, vacation ownership and residential industries are highly competitive. Our properties compete for customers with other hotel and resort properties, and, with respect to our vacation ownership resorts and residential projects, with owners reselling their VOIs, including fractional ownership, or apartments. Some of our competitors may have substantially greater marketing and financial resources than we do, and they may improve their facilities, reduce their prices or expand or improve their marketing programs in ways that adversely affect our operating results. Moreover, our present growth strategy for development of additional lodging facilities entails entering into and maintaining various arrangements with property owners. We compete with other hotel companies for management and franchise agreements. The terms of our management agreements, franchise agreements, and leases for each of our lodging facilities are influenced by contract terms offered by our competitors, among other things. We cannot assure you that any of our current arrangements will continue or that we will be able to enter into future collaborations, renew agreements, or enter into new agreements in the future on terms that are as favorable to us as those that exist today. In connection with entering into management or franchise agreements, we may be required to make investments in or guarantee the obligations of third parties or guarantee minimum income to third parties. Our Businesses Are Capital Intensive. For our owned, managed and franchised properties to remain attractive and competitive, the property owners and we have to spend money periodically to keep the properties well maintained, modernized and refurbished. This creates an ongoing need for cash. Third-party property owners may be unable to access capital or unwilling to spend available capital when necessary, even if required by the terms of our management or franchise agreements. To the extent that property owners and we cannot fund expenditures from cash generated by operations, funds must be borrowed or otherwise obtained. Failure to make the investments necessary to maintain or improve such properties could adversely affect the reputation of our brands. Recent events, including the failures and near failures of financial services companies and the decrease in liquidity and available capital, have negatively impacted the capital markets for hotel and real estate investments. Any Failure to Protect our Trademarks Could Have a Negative Impact on the Value of Our Brand Names and Adversely Affect Our Business. We believe our trademarks are an important component of our business. We rely on trademark laws to protect our proprietary rights. The success of our business depends in part upon our continued ability to use our trademarks to increase brand awareness and further develop our brand in both domestic and international markets. Monitoring the unauthorized use of our intellectual property is difficult. Litigation has been and may continue to be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of resources, may result in counterclaims or other claims against us and could significantly harm our results of operations. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States. From time to time, we apply to have certain trademarks registered. There is no guarantee that such trademark registrations will be granted. We cannot assure you that all of the steps we have taken to protect our trademarks in the United States and foreign countries will be adequate to prevent imitation of our trademarks by others. The unauthorized reproduction of our trademarks could diminish the value of our brand and its market acceptance, competitive advantages or goodwill, which could adversely affect our business. 7

Our Dependence on Hotel and Resort Development Exposes Us to Timing, Budgeting and Other Risks. We intend to develop hotel and resort properties and residential components of hotel properties, as suitable opportunities arise, taking into consideration the general economic climate. In addition, the owners and developers of new-build properties that we have entered into management or franchise agreements with are subject to these same risks which may impact the amount and timing of fees we had expected to collect from those properties. New project development has a number of risks, including risks associated with: construction delays or cost overruns that may increase project costs; receipt of zoning, occupancy and other required governmental permits and authorizations; development costs incurred for projects that are not pursued to completion; so-called acts of God such as earthquakes, hurricanes, floods or fires that could adversely impact a project; defects in design or construction that may result in additional costs to remedy or require all or a portion of a property to be closed during the period required to rectify the situation; ability to raise capital; and governmental restrictions on the nature or size of a project or timing of completion. We cannot assure you that any development project, including sites held for development of vacation ownership resorts, will in fact be developed, and, if developed, the time period or the budget of such development may be greater than initially contemplated and the actual number of units or rooms constructed may be less than initially contemplated. International Operations Are Subject to Unique Political and Monetary Risks. We have significant international operations which as of December 31, 2010 included 247 owned, managed or franchised properties in Europe, Africa and the Middle East (including 16 properties with majority ownership); 62 owned, managed or franchised properties in Latin America (including nine properties with majority ownership); and 181 owned, managed or franchised properties in the Asia Pacific region (including four properties with majority ownership). International operations generally are subject to various political, geopolitical, and other risks that are not present in U.S. operations. These risks include the risk of war, terrorism, civil unrest, expropriation and nationalization as well as the impact in cases in which there are inconsistencies between U.S. law and the laws of an international jurisdiction. In addition, some international jurisdictions restrict the repatriation of non-U.S. earnings. Various other international jurisdictions have laws limiting the ability of non-U.S. entities to pay dividends and remit earnings to affiliated companies unless specified conditions have been met. In addition, sales in international jurisdictions typically are made in local currencies, which subject us to risks associated with currency fluctuations. Currency devaluations and unfavorable changes in international monetary and tax policies could have a material adverse effect on our profitability and financing plans, as could other changes in the international regulatory climate and international economic conditions. Our Current Growth Strategy is Heavily Dependent on Growth in International Markets. As of December 31, 2010, 84% of our pipeline represented international growth. Further 60% of our pipeline represents new properties in Asia Pacific with 45% of our pipeline representing new growth in China alone. We must rely on third parties to build and complete these projects as planned and cannot ensure that all such hotels will be timely constructed. If our thirdparty property owners fail to invest in these projects, or fail to invest at estimated levels, the projects may not be realized or may not be as successful as anticipated. Many countries in the Asia Pacific region, including China, have construction and operational logistics different than the U.S., including but not limited to labor, transportation, real estate, and local reporting or legal requirements. Our dependence on international markets for growth is also limited by the availability of new markets, and we face established competitors that are similarly looking to grow in new markets. If our international expansion plans are unsuccessful, our financial results could be materially adversely affected. Third Party Internet Reservation Channels May Negatively Impact Our Bookings. Some of our hotel rooms are booked through third party internet travel intermediaries such as Travelocity.com, Expedia.com, Orbitz.com and Priceline.com. As the percentage of internet bookings increases, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from us. Moreover, some of these internet travel intermediaries are attempting to commoditize hotel rooms by increasing the 8

importance of price and general indicators of quality (such as three-star downtown hotel) at the expense of brand identification. These agencies hope that consumers will eventually develop brand loyalties to their reservations system rather than to our lodging brands. Although we expect to derive most of our business from traditional channels and our websites, if the amount of sales made through internet intermediaries increases significantly, our business and profitability may be significantly harmed. A Failure to Keep Pace with Developments in Technology Could Impair Our Operations or Competitive Position. The hospitality industry continues to demand the use of sophisticated technology and systems including technology utilized for property management, brand assurance and compliance, procurement, reservation systems, operation of our customer loyalty program, distribution and guest amenities. These technologies can be expected to require refinements, including to comply with the legal requirements such as privacy regulations and requirements established by third parties such as the payment card industry, and there is the risk that advanced new technologies will be introduced. Further, the development and maintenance of these technologies may require significant capital. There can be no assurance that as various systems and technologies become outdated or new technology is required, we will be able to replace or introduce them as quickly as our competition or within budgeted costs and timeframes. Further, there can be no assurance that we will achieve the benefits that may have been anticipated from any new technology or system. Significant Owners of Our Properties May Concentrate Risks. There is a concentration of ownership of hotels operated under our brands by any single owner. Following the acquisition of the Le Mridien brand business and a large disposition transaction to one ownership group in 2006, single ownership groups own significant numbers of hotels operated by us. While the risks associated with such ownership are no different than exist generally (i.e., the financial position of the owner, the overall state of the relationship with the owner and their participation in optional programs and the impact on cost efficiencies if they choose not to participate), they are more concentrated. Our Real Estate Investments Subject Us to Numerous Risks. We are subject to the risks that generally relate to investments in real property because we own and lease hotels and resorts. The investment returns available from equity investments in real estate depend in large part on the amount of income earned and capital appreciation generated by the related properties, and the expenses incurred. In addition, a variety of other factors affect income from properties and real estate values, including governmental regulations, insurance, zoning, tax and eminent domain laws, interest rate levels and the availability of financing. For example, new or existing real estate zoning or tax laws can make it more expensive and/or time-consuming to develop real property or expand, modify or renovate hotels. When interest rates increase, the cost of acquiring, developing, expanding or renovating real property increases and real property values may decrease as the number of potential buyers decreases. Similarly, as financing becomes less available, it becomes more difficult both to acquire and to sell real property. Finally, under eminent domain laws, governments can take real property. Sometimes this taking is for less compensation than the owner believes the property is worth. Any of these factors could have a material adverse impact on our results of operations or financial condition. In addition, equity real estate investments are difficult to sell quickly and we may not be able to adjust our portfolio of owned properties quickly in response to economic or other conditions. If our properties do not generate revenue sufficient to meet operating expenses, including debt service and capital expenditures, our income will be adversely affected. We May Be Subject to Environmental Liabilities. Our properties and operations are subject to a number of Environmental Laws. Under such laws, we could be held liable for the costs of removing or cleaning up hazardous or toxic substances at, on, under, or in our currently or formerly owned or operated properties. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of hazardous or toxic substances may adversely affect the owners ability to sell or rent such real property or to borrow using such real property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic wastes may be liable for the costs of removal or remediation of such wastes at the treatment, storage or disposal facility, regardless of whether such facility is owned or operated by such person. We use certain substances and generate certain wastes that may be deemed hazardous or toxic under applicable Environmental Laws, and we from time to time have incurred, and in the future may incur, costs related to cleaning up contamination resulting from historic uses at certain of our current or former properties or our treatment, storage or disposal of wastes at facilities owned by others. Other Environmental Laws govern 9

occupational exposure to ACMs and require abatement or removal of certain ACMs (limited quantities of which are present in various building materials such as spray-on insulation, floor coverings, ceiling coverings, tiles, decorative treatments and piping located at certain of our hotels) in the event of damage or demolition, or certain renovations or remodeling. Environmental Laws also regulate PCBs, which may be present in electrical equipment. A number of our hotels have USTs and equipment containing CFCs; the operation and subsequent removal or upgrading of certain USTs and the use of equipment containing CFCs also are regulated by Environmental Laws. In connection with our ownership, operation and management of our properties, we could be held liable for costs of remedial or other action with respect to PCBs, USTs or CFCs. Congress and some states are considering or have undertaken actions to regulate and reduce greenhouse gas emissions. New or revised laws and regulations or new interpretations of existing laws and regulations, such as those related to climate change, could affect the operation of our hotels and/or result in significant additional expense and operating restrictions on us. The cost impact of such legislation, regulation, or new interpretations would depend upon the specific requirements enacted and cannot be determined at this time. Risks Relating to Operations in Syria During fiscal 2010, Starwood subsidiaries generated approximately $2 million of revenue from management and other fees from hotels located in Syria, a country that the United States has identified as a state sponsor of terrorism. This amount constitutes significantly less than 1% of our worldwide annual revenues. The United States does not prohibit U.S. investments in, or the exportation of services to, Syria, and our activities in that country are in full compliance with U.S. and local law. However, the United States has imposed limited sanctions as a result of Syrias support for terrorist groups and its interference with Lebanons sovereignty, including a prohibition on the exportation of U.S.-origin goods to Syria and the operation of government-owned Syrian air carriers in the United States except in limited circumstances. The United States may impose further sanctions against Syria at any time for foreign policy reasons. If so, our activities in Syria may be adversely affected, depending on the nature of any further sanctions that might be imposed. In addition, our activities in Syria may reduce demand for our stock among certain investors. Risks Relating to Debt Financing Our Debt Service Obligations May Adversely Affect our Cash Flow. As a result of our debt obligations, we are subject to: (i) the risk that cash flow from operations will be insufficient to meet required payments of principal and interest, (ii) restrictive covenants, including covenants relating to certain financial ratios, and (iii) interest rate risk. Although we anticipate that we will be able to repay or refinance our existing indebtedness and any other indebtedness when it matures, there can be no assurance that we will be able to do so or that the terms of such refinancing will be favorable. Our leverage may have important consequences including the following: (i) our ability to obtain additional financing for acquisitions, working capital, capital expenditures or other purposes, if necessary, may be impaired or such financing may not be available on terms favorable to us and (ii) a substantial decrease in operating cash flow, EBITDA (as defined in our credit agreements) or a substantial increase in our expenses could make it difficult for us to meet our debt service requirements and restrictive covenants and force us to sell assets and/or modify our operations. We Have Little Control Over the Availability of Funds Needed to Fund New Investments and Maintain Existing Hotels. In order to fund new hotel investments, as well as refurbish and improve existing hotels, both we and current and potential hotel owners must have access to capital. The availability of funds for new investments and maintenance of existing hotels depends in large measure on capital markets and liquidity factors over which we have little control. Current and prospective hotel owners may find hotel financing expensive and difficult to obtain. Delays, increased costs and other impediments to restructuring such projects may affect our ability to realize fees, recover loans and guarantee advances, or realize equity investments from such projects. Our ability to recover loans and guarantee advances from hotel operations or from owners through the proceeds of hotel sales, refinancing of debt or otherwise may also affect our ability to raise new capital. In addition, downgrades of our public debt ratings by rating agencies could increase our cost of capital. A breach of a covenant could result in an event of default that, if not cured or waived, could result in an acceleration of all or a substantial portion of our debt. For a more detailed description of the covenants imposed by our debt obligations, see Item 7, Managements Discussion and Analysis of 10

Financial Condition and Results of Operations Liquidity and Capital Resources Cash Used for Financing Activities in this Annual Report. Volatility in the Credit Markets Will Continue to Adversely Impact Our Ability to Sell the Loans That Our Vacation Ownership Business Generates. Our vacation ownership business provides financing to purchasers of our vacation ownership units, and we attempt to sell interests in those loans in the securities markets. Volatility in the credit markets may impact the timing and volume of the timeshare loans that we are able to sell. Although we expect to realize the economic value of our vacation ownership note portfolio even if future note sales are temporarily or indefinitely delayed, such delays may result in either increased borrowings to provide capital to replace anticipated proceeds from such sales or reduced spending in order to maintain our leverage and return targets. Risks Relating to So-Called Acts of God, Terrorist Activity and War Our financial and operating performance may be adversely affected by so-called acts of God, such as natural disasters, in locations where we own and/or operate significant properties and areas of the world from which we draw a large number of customers. Similarly, wars (including the potential for war), terrorist activity (including threats of terrorist activity), political unrest and other forms of civil strife and geopolitical uncertainty have caused in the past, and may cause in the future, our results to differ materially from anticipated results. Risks Related to Pandemic Diseases Our business could be materially and adversely affected by the effect of a pandemic disease on the travel industry. For example, the past outbreaks of SARS and avian flu had a severe impact on the travel industry, and the recent outbreak of swine flu in Mexico had a similar impact. A prolonged recurrence of SARS, avian flu, swine flu or another pandemic disease also may result in health or other government authorities imposing restrictions on travel. Any of these events could result in a significant drop in demand for our hotel and vacation ownership businesses and adversely affect our financial condition and results of operations. Our Insurance Policies May Not Cover All Potential Losses We carry insurance coverage for general liability, property, business interruption and other risks with respect to our owned and leased properties and we make available insurance programs for owners of properties we manage. These policies offer coverage terms and conditions that we believe are usual and customary for our industry. Generally, our all-risk property policies provide that coverage is available on a per occurrence basis and that, for each occurrence, there is a limit as well as various sub-limits on the amount of insurance proceeds we will receive in excess of applicable deductibles. In addition, there may be overall limits under the policies. Sub-limits exist for certain types of claims such as service interruption, debris removal, expediting costs or landscaping replacement, and the dollar amounts of these sub-limits are significantly lower than the dollar amounts of the overall coverage limit. Our property policies also provide that for the coverage of critical earthquake (California and Mexico), hurricane and flood, all of the claims from each of our properties resulting from a particular insurable event must be combined together for purposes of evaluating whether the annual aggregate limits and sub-limits contained in our policies have been exceeded and any such claims will also be combined with the claims of owners of managed hotels that participate in our insurance program for the same purpose. Therefore, if insurable events occur that affect more than one of our owned hotels and/or managed hotels owned by third parties that participate in our insurance program, the claims from each affected hotel will be added together to determine whether the per occurrence limit, annual aggregate limit or sub-limits, depending on the type of claim, have been reached and if the limits or sub-limits are exceeded each affected hotel will only receive a proportional share of the amount of insurance proceeds provided for under the policy. In addition, under those circumstances, claims by third party owners will reduce the coverage available for our owned and leased properties. In addition, there are also other risks including but not limited to war, certain forms of terrorism such as nuclear, biological or chemical terrorism, political risks, some environmental hazards and/or acts of God that may be deemed to fall completely outside the general coverage limits of our policies or may be uninsurable or may be too expensive to justify insuring against. 11

We may also encounter challenges with an insurance provider regarding whether it will pay a particular claim that we believe to be covered under our policy. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a hotel or resort, as well as the anticipated future revenue from the hotel or resort. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Our Acquisitions/Dispositions and Investments in New Brands May Ultimately Not Prove Successful and We May Not Realize Anticipated Benefits We will consider corporate as well as property acquisitions and investments that complement our business. In many cases, we will be competing for these opportunities with third parties who may have substantially greater financial resources or different or lower acceptable financial metrics than we do. There can be no assurance that we will be able to identify acquisition or investment candidates or complete transactions on commercially reasonable terms or at all. If transactions are consummated, there can be no assurance that any anticipated benefits will actually be realized. Similarly, there can be no assurance that we will be able to obtain additional financing for acquisitions or investments, or that the ability to obtain such financing will not be restricted by the terms of our debt agreements. We periodically review our business to identify properties or other assets that we believe either are non-core, no longer complement our business, are in markets which may not benefit us as much as other markets during an economic recovery or could be sold at significant premiums. We are focused on restructuring and enhancing real estate returns and monetizing investments, and from time to time, may attempt to sell these identified properties and assets. There can be no assurance, however, that we will be able to complete dispositions on commercially reasonable terms or at all or that any anticipated benefits will actually be received. We may develop and launch additional brands in the future. There can be no assurance regarding the level of acceptance of these brands in the development and consumer marketplaces, that the cost incurred in developing the brands will be recovered or that the anticipated benefits from these new brands will be realized. Investing Through Partnerships or Joint Ventures Decreases Our Ability to Manage Risk In addition to acquiring or developing hotels and resorts or acquiring companies that complement our business directly, we have from time to time invested, and expect to continue to invest, as a co-venturer. Joint venturers often have shared control over the operation of the joint venture assets. Therefore, joint venture investments may involve risks such as the possibility that the co-venturer in an investment might become bankrupt or not have the financial resources to meet its obligations, or have economic or business interests or goals that are inconsistent with our business interests or goals, or be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. Consequently, actions by a co-venturer might subject hotels and resorts owned by the joint venture to additional risk. Further, we may be unable to take action without the approval of our joint venture partners. Alternatively, our joint venture partners could take actions binding on the joint venture without our consent. Additionally, should a joint venture partner become bankrupt, we could become liable for our partners share of joint venture liabilities. Our Vacation Ownership Business is Subject to Extensive Regulation and Risk of Default We market and sell VOIs, which typically entitle the buyer to ownership of a fully-furnished resort unit for a one-week period on either an annual or an alternate-year basis. We also acquire, develop and operate vacation ownership resorts, and provide financing to purchasers of VOIs. These activities are all subject to extensive regulation by the federal government and the states in which vacation ownership resorts are located and in which VOIs are marketed and sold including regulation of our telemarketing activities under state and federal Do Not Call laws. In addition, the laws of most states in which we sell VOIs grant the purchaser the right to rescind the purchase contract at any time within a statutory rescission period. Although we believe that we are in material compliance with all applicable federal, state, local and foreign laws and regulations to which vacation ownership marketing, sales and operations are currently subject, changes in these requirements, or a determination by a regulatory authority that we were not in compliance, could adversely affect us. In particular, increased regulations of telemarketing activities could adversely impact the marketing of our VOIs. 12

We bear the risk of defaults under purchaser mortgages on VOIs. If a VOI purchaser defaults on the mortgage during the early part of the loan amortization period, we will not have recovered the marketing, selling (other than commissions in certain events), and general and administrative costs associated with such VOI, and such costs will be incurred again in connection with the resale of the repossessed VOI. Accordingly, there is no assurance that the sales price will be fully or partially recovered from a defaulting purchaser or, in the event of such defaults, that our allowance for losses will be adequate. Risks Related to Privacy Initiatives We collect information relating to our guests for various business purposes, including marketing and promotional purposes. The collection and use of personal data are governed by privacy laws and regulations enacted in the United States and other jurisdictions around the world. Privacy regulations continue to evolve and on occasion may be inconsistent from one jurisdiction to another. Compliance with applicable privacy regulations may increase our operating costs and/or adversely impact our ability to market our products, properties and services to our guests. In addition, non-compliance with applicable privacy regulations by us (or in some circumstances noncompliance by third parties engaged by us) or a breach of security on systems storing our data may result in fines, payment of damages or restrictions on our use or transfer of data. Risks Related to Our Ability to Manage Growth Our future success and our ability to manage future growth depend in large part upon the efforts of our senior management and our ability to attract and retain key officers and other highly qualified personnel. Competition for such personnel is intense. In the past several years, we have experienced significant changes in our senior management, including executive officers (see Item 10. Directors, Executive Officers and Corporate Governance of this Annual Report). There can be no assurance that we will continue to be successful in attracting and retaining qualified personnel. Accordingly, there can be no assurance that our senior management will be able to successfully execute and implement our growth and operating strategies. Over the last few years we have been pursuing a strategy of reducing our investment in owned real estate and increasing our focus on the management and franchise business. As a result, we are planning on substantially increasing the number of hotels we open every year and increasing the overall number of hotels in our system. This increase will require us to recruit and train a substantial number of new associates to work at these hotels as well as increasing our capabilities to enable hotels to open on time and successfully. There can be no assurance that our strategy will be successful. Tax Risks Evolving Government Regulation Could Impose Taxes or Other Burdens on Our Business. We rely upon generally available interpretations of tax laws and other types of laws and regulations in the countries and locales in which we operate. We cannot be sure that these interpretations are accurate or that the responsible taxing or other governmental authority is in agreement with our views. The imposition of additional taxes or requirements to change the way we conduct our business could cause us to have to pay taxes that we currently do not collect or pay or increase the costs of our services or increase our costs of operations. Our current business practice with our internet reservation channels is that the intermediary collects hotel occupancy tax from its customer based on the price that the intermediary paid us for the hotel room. We then remit these taxes to the various tax authorities. Several jurisdictions have stated that they may take the position that the tax is also applicable to the intermediaries gross profit on these hotel transactions. If jurisdictions take this position, they should seek the additional tax payments from the intermediary; however, it is possible that they may seek to collect the additional tax payment from us and we would not be able to collect these taxes from the customers. To the extent that any tax authority succeeds in asserting that the hotel occupancy tax applies to the gross revenue on these transactions, we believe that any additional tax would be the responsibility of the intermediary. However, it is possible that we might have additional tax exposure. In such event, such actions could have a material adverse effect on our business, results of operations and financial condition. 13

Risks Relating to Ownership of Our Shares Our Board of Directors May Issue Preferred Stock and Establish the Preferences and Rights of Such Preferred Stock. Our charter provides that the total number of shares of stock of all classes which the Corporation has authority to issue is 1,200,000,000, consisting of one billion shares of common stock and 200 million shares of preferred stock. Our Board of Directors has the authority, without a vote of shareholders, to establish the preferences and rights of any preferred shares to be issued and to issue such shares. The issuance of preferred shares having special preferences or rights could delay or prevent a change in control even if a change in control would be in the interests of our shareholders. Since our Board of Directors has the power to establish the preferences and rights of preferred shares without a shareholder vote, our Board of Directors may give the holders preferences, powers and rights, including voting rights, senior to the rights of holders of our shares. Our Board of Directors May Implement Anti-Takeover Devices and Our Charter and Bylaws Contain Provisions which May Prevent Takeovers. Certain provisions of Maryland law permit our Board of Directors, without stockholder approval, to implement possible takeover defenses that are not currently in place, such as a classified board. In addition, our charter contains provisions relating to restrictions on transferability of the Corporation Shares, which provisions may be amended only by the affirmative vote of our shareholders holding two-thirds of the votes entitled to be cast on the matter. As permitted under the Maryland General Corporation Law, our Bylaws provide that directors have the exclusive right to amend our Bylaws. Item 1B. Unresolved Staff Comments. Not applicable. Item 2. Properties. We are one of the largest hotel and leisure companies in the world, with operations in approximately 100 countries. We consider our hotels and resorts, including vacation ownership resorts (together Resorts), generally to be premier establishments with respect to desirability of location, size, facilities, physical condition, quality and variety of services offered in the markets in which they are located. Although obsolescence arising from age, condition of facilities, and style can adversely affect our Resorts, Starwood and third-party owners of managed and franchised Resorts expend substantial funds to renovate and maintain their facilities in order to remain competitive. For further information see Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources in this Annual Report. Our hotel business included 1,027 owned, managed or franchised hotels with approximately 302,000 rooms and our owned vacation ownership and residential business included 14 stand-alone vacation ownership resorts and residential properties at December 31, 2010, predominantly under seven brands. All brands (other than the Four Points by Sheraton and the Aloft and Element brands) represent full-service properties that range in amenities from luxury hotels and resorts to more moderately priced hotels. Our Four Points by Sheraton, Aloft and Element brands are select service properties that cater to more value oriented consumers. The following table reflects our hotel and vacation ownership properties, by brand, as of December 31, 2010:
Hotels, VOI and Residential(a) Properties Rooms

St. Regis and Luxury Collection . . . . . . . . . . . . . . . . . . . W......................................... Westin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Le Mridien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sheraton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Four Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Aloft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Independent / Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .

................ ................ ................ ................ ................ ................ ................ ................

97 38 181 100 401 158 46 20 1,041

19,400 11,200 71,200 26,700 141,500 27,400 6,800 4,500 308,700

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

(a) Includes vacation ownership properties of which 14 are stand-alone, eight are mixed-use and one is an unconsolidated joint venture totaling rooms of 7,000. Hotel Business Managed and Franchised Hotels. Hotel and resort properties in the United States are often owned by entities that do not manage hotels or own a brand name. Hotel owners typically enter into management contracts with hotel management companies to operate their hotels. When a management company does not offer a brand affiliation, the hotel owner often chooses to pay separate franchise fees to secure the benefits of brand marketing, centralized reservations and other centralized administrative functions, particularly in the sales and marketing area. Management believes that companies, such as Starwood, that offer both hotel management services and wellestablished worldwide brand names appeal to hotel owners by providing the full range of management, marketing and reservation services. In 2010, we opened 70 managed and franchised hotels with approximately 15,000 rooms and 22 managed and franchised hotels with approximately 7,000 rooms left the system. Managed Hotels. We manage hotels worldwide, usually under a long-term agreement with the hotel owner (including entities in which we have a minority equity interest). Our responsibilities under hotel management contracts typically include hiring, training and supervising the managers and employees that operate these facilities. For additional fees, we provide centralized reservation services and coordinate national advertising and certain marketing and promotional services. We prepare and implement annual budgets for the hotels we manage and are responsible for allocating property-owner funds for periodic maintenance and repair of buildings and furnishings. In addition to our owned and leased hotels, at December 31, 2010, we managed 463 hotels with approximately 159,200 rooms worldwide. During the year ended December 31, 2010, we generated management fees by geographic area as follows: United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Americas (Latin America, Caribbean & Canada). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.1% 26.2% 17.4% 15.6% 7.7%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% Management contracts typically provide for base fees tied to gross revenue and incentive fees tied to profits as well as fees for other services, including centralized reservations, sales and marketing, public relations and national and international media advertising. In our experience, owners seek hotel managers that can provide attractively priced base, incentive and marketing fees combined with demonstrated sales and marketing expertise and operations-focused management designed to enhance profitability. Some of our management contracts permit the hotel owner to terminate the agreement when the hotel is sold or otherwise transferred to a third party, as well as if we fail to meet established performance criteria. In addition, many hotel owners seek equity, debt or other investments from us to help finance hotel renovations or conversions to a Starwood brand so as to align the interests of the owner and Starwood. Our ability or willingness to make such investments may determine, in part, whether we will be offered, will accept or will retain a particular management contract. During the year ended December 31, 2010, we opened 39 managed hotels with approximately 9,000 rooms, and 15 managed hotels with approximately 5,000 rooms left our system. In addition, during 2010, we signed management agreements for 61 hotels with approximately 15,000 rooms, a small portion of which opened in 2010 and the majority of which will open in the future. Brand Franchising and Licensing. We franchise our Sheraton, Westin, Four Points by Sheraton, Luxury Collection, Le Mridien, Aloft and Element brand names and generally derive licensing and other fees from franchisees based on a fixed percentage of the franchised hotels room revenue, as well as fees for other services, including centralized reservations, sales and marketing, public relations and national and international media advertising. In addition, a franchisee may also purchase hotel supplies, including brand-specific products, from certain Starwood-approved vendors. We approve certain plans for, and the location of, franchised hotels and review 15

their design. At December 31, 2010, there were 502 franchised properties with approximately 121,400 rooms. During the year ended December 31, 2010, we generated franchise fees by geographic area as follows: United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Americas (Latin America, Caribbean & Canada). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.9% . 12.2% . 13.4% . 9.6% . 0.9% . 100.0%

In addition to the franchise contracts we retained in connection with the sale of hotels during the year ended December 31, 2010, we opened 31 franchised hotels with approximately 6,000 rooms, and seven franchised hotels with approximately 2,000 rooms left our system. In addition, during 2010 we signed franchise agreements for 35 hotels with approximately 7,000 rooms, a portion of which opened in 2010 and a portion of which will open in the future. Owned, Leased and Consolidated Joint Venture Hotels. Historically, we have derived the majority of our revenues and operating income from our owned, leased and consolidated joint venture hotels and a significant portion of these results are driven by these hotels in North America. However, beginning in 2006, we embarked upon a strategy of selling a significant number of hotels. Since the beginning of 2006, we have sold 62 wholly owned hotels which has substantially reduced our revenues and operating income from owned, leased and consolidated joint venture hotels. The majority of these hotels were sold subject to long-term management or franchise contracts. To date, where we have sold hotels, we have not provided seller financing or other financial assistance to buyers. Total revenues generated from our owned, leased and consolidated joint venture hotels worldwide for the years ending December 31, 2010, 2009 and 2008 were $1.704 billion, $1.584 billion and $2.212 billion, respectively (total revenues from our owned, leased and consolidated joint venture hotels in North America were $1.067 billion, $1.024 billion and $1.380 billion for 2010, 2009 and 2008, respectively). The following represents our top five markets in the United States by metropolitan area as a percentage of our total owned, leased and consolidated joint venture revenues for the year ended December 31, 2010 (with comparable data for 2009): Top Five Domestic Markets in the United States as a % of Total Owned Revenues for the Year Ended December 31, 2010 with Comparable Data for 2009(1)
Metropolitan Area 2010 Revenues 2009 Revenues

New York, NY . . . . . . . . . . . . . . . . . . Hawaii . . . . . . . . . . . . . . . . . . . . . . . . Phoenix, AZ . . . . . . . . . . . . . . . . . . . . Boston, MA . . . . . . . . . . . . . . . . . . . . Chicago, IL . . . . . . . . . . . . . . . . . . . .

.............................. .............................. .............................. .............................. ..............................

12.7% 6.2% 5.0% 4.4% 4.3%

14.2% 6.3% 5.1% 4.4% 3.9%

16

The following represents our top five international markets by country as a percentage of our total owned, leased and consolidated joint venture revenues for the year ended December 31, 2010 (with comparable data for 2009): Top Five International Markets as a % of Total Owned Revenues for the Year Ended December 31, 2010 with Comparable Data for 2009(1)
Country 2010 Revenues 2009 Revenues

Canada . . . . . . . . . . . . . . . . . . . . . . . . Italy . . . . . . . . . . . . . . . . . . . . . . . . . . Spain . . . . . . . . . . . . . . . . . . . . . . . . . Mexico . . . . . . . . . . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . . . . . . . . . . (1)

.............................. .............................. .............................. .............................. ..............................

10.8% 7.0% 5.5% 4.1% 4.1%

9.3% 7.5% 2.8% 4.7% 5.3%

Includes the revenues of hotels sold for the period prior to their sale.

Following the sale of a significant number of our hotels in the past three years, we currently own or lease 62 hotels as follows:
Hotel Location Rooms

U.S. Hotels: The St. Regis Hotel, New York St. Regis Hotel, San Francisco The Phoenician W New York Times Square W Chicago Lakeshore W Los Angeles Westwood W Chicago City Center W New Orleans W New Orleans, French Quarter W Atlanta The Westin Maui Resort & Spa The Westin Peachtree Plaza, Atlanta The Westin Gaslamp San Diego The Westin San Francisco Airport The Westin St. John Resort & Villas Sheraton Kauai Resort Sheraton Steamboat Springs Resort Sheraton Suites Philadelphia Airport Aloft Lexington Aloft Philadelphia Airport Element Lexington Four Points by Sheraton Philadelphia Airport Four Points by Sheraton Tucson University Plaza The Boston Park Plaza Hotel & Towers The Manhattan at Times Square Tremont Hotel Clarion Hotel 17

New York, NY San Francisco, CA Scottsdale, AZ New York, NY Chicago, IL Los Angeles, CA Chicago, IL New Orleans, LA New Orleans, LA Atlanta, GA Maui, HI Atlanta, GA San Diego, CA San Francisco, CA St. John, Virgin Islands Kauai, HI Steamboat Springs, CO Philadelphia, PA Lexington, MA Philadelphia, PA Lexington, MA Philadelphia, PA Tucson, AZ Boston, MA New York, NY Chicago, IL San Francisco, CA

229 260 643 509 520 258 368 423 87 275 759 1,068 450 397 175 394 206 251 136 136 123 177 150 941 665 135 251

Hotel

Location

Rooms

Cove Haven Resort Pocono Palace Resort Paradise Stream Resort International Hotels: St. Regis Grand Hotel, Rome St. Regis Osaka Grand Hotel Hotel Gritti Palace Park Tower Hotel Alfonso XIII Hotel Imperial Hotel Bristol, Vienna Hotel Goldener Hirsch Hotel Maria Cristina W Barcelona The Westin Excelsior, Rome The Westin Resort & Spa, Los Cabos The Westin Resort & Spa, Puerto Vallarta The Westin Excelsior, Florence The Westin Resort & Spa Cancun The Westin Denarau Island Resort The Westin Dublin Hotel Sheraton Centre Toronto Hotel Sheraton On The Park Sheraton Rio Hotel & Resort Sheraton Diana Majestic Hotel Sheraton Ambassador Hotel Sheraton Lima Hotel & Convention Center Sheraton Santa Maria de El Paular Sheraton Fiji Resort Sheraton Buenos Aires Hotel & Convention Center Sheraton Maria Isabel Hotel & Towers Sheraton Gateway Hotel in Toronto International Airport Le Centre Sheraton Montreal Hotel Sheraton Paris Airport Hotel & Conference Centre The Park Lane Hotel, London

Scranton, PA Scranton, PA Scranton, PA Rome, Italy Tokyo, Japan Florence, Italy Venice, Italy Buenos Aires, Argentina Seville, Spain Vienna, Austria Vienna, Austria Salzburg, Austria San Sebastian, Spain Barcelona, Spain Rome, Italy Los Cabos, Mexico Puerto Vallarta, Mexico Florence, Italy Cancun, Mexico Nadi, Fiji Dublin, Ireland Toronto, Canada Sydney, Australia Rio de Janeiro, Brazil Milan, Italy Monterrey, Mexico Lima, Peru Rascafria, Spain Nadi, Fiji Buenos Aires, Argentina Mexico City, Mexico Toronto, Canada Montreal, Canada Paris, France London, England

276 189 143 161 160 107 91 180 147 138 140 69 136 473 316 243 280 171 379 273 163 1,377 557 559 106 229 431 44 264 739 755 474 825 252 303

18

An indicator of the performance of our owned, leased and consolidated joint venture hotels is revenue per available room (REVPAR)(1), as it measures the period-over-period growth in rooms revenue for comparable properties. This is particularly the case in the United States where there is no impact on this measure from foreign exchange rates. The following table summarizes REVPAR, average daily rates (ADR) and average occupancy rates on a year-to-year basis for our 54 owned, leased and consolidated joint venture hotels (excluding nine hotels sold or closed and eight hotels undergoing significant repositionings or without comparable results in 2010 and 2009) (Same-Store Owned Hotels) for the years ended December 31, 2010 and 2009:
Year Ended December 31, 2010 2009

Variance

Worldwide (54 hotels with approximately 19,000 rooms) REVPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North America (28 hotels with approximately 12,000 rooms) REVPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International (26 hotels with approximately 7,000 rooms) REVPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . $136.27 $122.57 . . . . $196.62 $191.60 .... 69.3% 64.0% . . . . $141.02 $126.41 . . . . $192.97 $184.26 .... 73.1% 68.6% . . . . $129.05 $116.74 . . . . $202.99 $205.04 .... 63.6% 56.9%

11.2% 2.6% 5.3 11.6% 4.7% 4.5 10.5% (1.0)% 6.7

(1) REVPAR is calculated by dividing room revenue, which is derived from rooms and suites rented or leased, by total room nights available for a given period. REVPAR may not be comparable to similarly titled measures such as revenues. During the years ended December 31, 2010 and 2009, we invested approximately $184 million and $171 million, respectively, for capital expenditures at owned hotels. These capital expenditures include construction costs at W City Center in Chicago, IL, Westin Peachtree Plaza in Atlanta, GA, Westin Gaslamp in San Diego, CA, The Phoenician in Scottsdale, AZ, and the Manhattan Hotel at Times Square in New York, NY. The following table summarizes REVPAR, ADR and occupancy for our Same-Store Systemwide Hotels on a year-to-year basis for the years ended December 31, 2010 and 2009. Same-Store Systemwide Hotels represent results for the same store owned, leased, managed and franchised hotels.
Year Ended December 31, 2010 2009

Variance

Worldwide REVPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North America REVPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International REVPAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

. . . . $106.57 $ 97.45 . . . . $160.00 $158.51 .... 66.6% 61.5% . . . . $ 99.81 $ 92.17 . . . . $147.99 $147.29 .... 67.4% 62.6% . . . . $115.90 $104.75 . . . . $177.08 $174.68 .... 65.5% 60.0%

9.4% 0.9% 5.1 8.3% 0.5% 4.8 10.6% 1.4% 5.5

Vacation Ownership and Residential Business We develop, own and operate vacation ownership resorts, market and sell the VOIs in the resorts and, in many cases, provide financing to customers who purchase such ownership interests. Owners of VOIs can trade their interval for intervals at other Starwood vacation ownership resorts, for intervals at certain vacation ownership resorts not otherwise sponsored by Starwood through an exchange company, or for hotel stays at Starwood properties. From time to time, we securitize or sell the receivables generated from our sale of VOIs. We have also entered into arrangements with several owners for mixed use hotel projects that will include a residential component. We have entered into licensing agreements for the use of certain of our brands to allow the owners to offer branded condominiums to prospective purchasers. In consideration, we typically receive a licensing fee equal to a percentage of the gross sales revenue of the units sold. The licensing arrangement generally terminates upon the earlier of sell-out of the units or a specified length of time. At December 31, 2010, we had 23 residential and vacation ownership resorts and sites in our portfolio with 17 actively selling VOIs and residences including one unconsolidated joint venture. During 2010 and 2009 we invested approximately $151 million and $145 million, respectively, for vacation ownership capital expenditures, including VOI construction at the Westin Desert Willow Villas in Palm Desert, CA, the Westin Lagunamar Ocean Resort in Cancun, as well as construction costs at the St. Regis Bal Harbour Resort in Miami Beach, FL. Due to the global economic crisis and its impact on the long-term outlook for the timeshare industry, during the fourth quarter of 2009, we completed a comprehensive review of our vacation ownership projects. No new projects are being initiated and we have decided not to develop three vacation ownership sites and future phases of certain existing projects. As a result, inventories, fixed assets and land values at certain projects were determined to be impaired and were written down to their fair value, resulting in a primarily non-cash pre-tax impairment charge in 2009 of $255 million. Additionally, in connection with this review of the business, we made a decision to reduce the pricing of certain inventory at existing projects, resulting in a pre-tax charge of $17 million. As a result of these decisions and future plans for the vacation ownership business, we also recorded a $90 million non-cash charge for the impairment of goodwill associated with the vacation ownership reporting unit. Item 3. Legal Proceedings. Incorporated by reference to the description of legal proceedings in Note 26. Commitments and Contingencies, in the consolidated financial statements set forth in Item 8. Financial Statements and Supplementary Data.

20

PART II Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Corporation Shares are traded on the New York Stock Exchange (the NYSE) under the symbol HOT. The following table sets forth the quarterly range of the high and low sale prices of the Corporation Shares for the fiscal periods indicated as reported on the NYSE Composite Tape:
High Low

2010 Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009 Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Approximate Number of Equity Security Holders

..... ..... ..... ..... ..... ..... ..... .....

$62.72 $54.25 $56.65 $47.52 $37.55 $34.78 $26.68 $23.78

$52.16 $39.60 $41.28 $33.15 $27.66 $18.49 $12.12 $ 8.99

As of February 11, 2011, there were approximately 14,000 holders of record of Corporation Shares. Dividends The following table sets forth the frequency and amount of dividends made by the Corporation to holders of Corporation Shares for the years ended December 31, 2010 and 2009:
Dividends Declared

2010 Annual dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009 Annual dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$0.30(a) $0.20(b)

(a) The Corporation declared a dividend in the fourth quarter of 2010 to shareholders of record on December 16, 2010, which was paid in December 2010. (b) The Corporation declared a dividend in the fourth quarter of 2009 to shareholders of record on December 31, 2009, which was paid in January 2010. Conversion of Securities; Sale of Unregistered Securities In 2006, we completed the redemption of the remaining 25,000 outstanding shares of Class B Exchangeable Preferred Shares of the Trust (Class B EPS) for approximately $1 million in cash. Also in 2006, in connection with the Host Transaction, we redeemed all of the Class A Exchangeable Preferred Shares of the Trust (Class A EPS) (approximately 562,000 shares) and Realty Partnership units (approximately 40,000 units) for approximately $34 million in cash. SLC Operating Limited Partnership units are convertible into Corporation Shares at the unit holders option, provided that we have the option to settle conversion requests in cash or Corporation Shares. In 2006, we redeemed approximately 926,000 SLC Operating Limited Partnership units for approximately $56 million in cash, and there were approximately 166,000 and 169,000 of these units outstanding at December 31, 2010 and 2009, respectively. Issuer Purchases of Equity Securities We did not repurchase any Corporation Shares during 2010. 21

STOCK RETURN PERFORMANCE AND CUMULATIVE TOTAL RETURN Set forth below is a line graph comparing the cumulative total stockholder return on the Corporation Shares (and Shares until April 7, 2006) against the cumulative total return on the S&P 500 and the S&P 500 Hotel Index (the S&P 500 Hotel) for the five fiscal years beginning December 31, 2005 and ending December 31, 2010. The graph assumes that the value of the investments was 100 on December 31, 2005 and that all dividends and other distributions were reinvested. In addition, the Share prices for the periods prior to the Host Transaction on April 10, 2006 have been adjusted based on the value shareholders received for their Class B shares. The comparisons are provided in response to SEC disclosure requirements and are not intended to forecast or be indicative of future performance.
250 Starwood 200 S&P 500 S&P 500 Hotel 150

DOLLARS

100

50

0 2005 2006
12/31/05

2007
12/31/06 12/31/07

2008
12/31/08

2009
12/31/09

2010
12/31/10

Starwood S&P 500 S&P 500 Hotel

100.00 100.00 100.00

122.72 115.78 114.60

88.22 122.14 100.35

37.67 76.96 51.89

77.38 97.33 80.87

129.24 112.01 123.94

22

Item 6. Selected Financial Data. The following financial and operating data should be read in conjunction with the information set forth under Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes thereto appearing elsewhere in this Annual Report and incorporated herein by reference.
2010 Year Ended December 31, 2009 2008 2007 (In millions, except per share data) 2006

Income Statement Data Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations(b) . . . . . . Diluted earnings per share from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating Data Cash from operating activities . . . . . . . . . . . . . . . . Cash from (used for) investing activities . . . . . . . . . Cash used for financing activities . . . . . . . . . . . . . . Aggregate cash distributions paid . . . . . . . . . . . . . . Cash distributions and dividends declared per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,071 $4,696 $ 600 $ 26 $ 310 $ (1) $ 1.63 $ 0.00 $ 764 $ 571 $ (71) $ 116 $ (26) $ (993) $ 93 $ 165 $ 0.30 $ 0.20

$5,754 $ 610 $ 249 $ 1.34 $ $ $ $ 646 (172) (243) 172

$5,999 $ 5,840 $ 841 $ 824 $ 532 $ 1,105 $ 2.52 $ 4.96 $ 884 $ 500 $ (215) $ 1,402 $ (712) $(2,635) $ 90 $ 276 $ 0.90 $ 0.84(a)

$ 0.90

(a) In connection with the Host Transaction, in February and March 2006, the Trust declared distributions totaling $0.42 per Corporation Share. In December 2006, the Corporation declared a dividend of $0.42 per Corporation Share. (b) Amounts represent income from continuing operations attributable to Starwood Shares (i.e. excluding noncontrolling interests).
2010 2009 At December 31, 2008 2007 (In millions) 2006

Balance Sheet Data Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt, net of current maturities and including exchangeable units and Class B preferred shares . . . . . . . . . . . . . . . . . . . . . . . .

$9,776

$8,761

$9,703

$9,622

$9,280

$3,215

$2,955

$3,502

$3,590

$1,827

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations. Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and costs and expenses during the reporting periods. On an ongoing basis, management evaluates its estimates and judgments, including those relating to revenue recognition, bad debts, inventories, investments, plant, property and equipment, goodwill and intangible assets, income taxes, financing operations, frequent guest program liability, self-insurance claims payable, restructuring costs, retirement benefits and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions and conditions. 23

CRITICAL ACCOUNTING POLICIES We believe the following to be our critical accounting policies: Revenue Recognition. Our revenues are primarily derived from the following sources: (1) hotel and resort revenues at our owned, leased and consolidated joint venture properties; (2) vacation ownership and residential revenues; (3) management and franchise revenues; (4) revenues from managed and franchised properties; and (5) other revenues which are ancillary to our operations. Generally, revenues are recognized when the services have been rendered. The following is a description of the composition of our revenues: Owned, Leased and Consolidated Joint Ventures Represents revenue primarily derived from hotel operations, including the rental of rooms and food and beverage sales from owned, leased or consolidated joint venture hotels and resorts. Revenue is recognized when rooms are occupied and services have been rendered. These revenues are impacted by global economic conditions affecting the travel and hospitality industry as well as relative market share of the local competitive set of hotels. REVPAR is a leading indicator of revenue trends at owned, leased and consolidated joint venture hotels as it measures the period-over-period growth in rooms revenue for comparable properties. Vacation Ownership and Residential We recognize revenue from VOI sales and financings and the sales of residential units which are typically a component of mixed use projects that include a hotel. Such revenues are impacted by the state of the global economies and, in particular, the U.S. economy, as well as interest rate and other economic conditions affecting the lending market. Revenue is generally recognized upon the buyer demonstrating a sufficient level of initial and continuing investment, the period of cancellation with refund has expired and receivables are deemed collectible. We determine the portion of revenues to recognize for sales accounted for under the percentage of completion method based on judgments and estimates including total project costs to complete. Additionally, we record reserves against these revenues based on expected default levels. Changes in costs could lead to adjustments to the percentage of completion status of a project, which may result in differences in the timing and amount of revenues recognized from the projects. We have also entered into licensing agreements with third-party developers to offer consumers branded condominiums or residences. Our fees from these agreements are generally based on the gross sales revenue of units sold. Residential fee revenue is recorded in the period that a purchase and sales agreement exists, delivery of services and obligations has occurred, the fee to the owner is deemed fixed and determinable and collectability of the fees is reasonably assured. Management and Franchise Revenues Represents fees earned on hotels managed worldwide, usually under long-term contracts, franchise fees received in connection with the franchise of our Sheraton, Westin, Four Points by Sheraton, Le Mridien and Luxury Collection brand names, termination fees and the amortization of deferred gains related to sold properties for which we have significant continuing involvement. Management fees are comprised of a base fee, which is generally based on a percentage of gross revenues, and an incentive fee, which is generally based on the propertys profitability. For any time during the year, when the provisions of our management contracts allow receipt of incentive fees upon termination, incentive fees are recognized for the fees due and earned as if the contract was terminated at that date, exclusive of any termination fees due or payable. Therefore, during periods prior to year-end, the incentive fees recorded may not be indicative of the eventual incentive fees that will be recognized at yearend as conditions and incentive hurdle calculations may not be final. Franchise fees are generally based on a percentage of hotel room revenues. As with hotel revenues discussed above, these revenue sources are affected by conditions impacting the travel and hospitality industry as well as competition from other hotel management and franchise companies. Revenues from Managed and Franchised Properties These revenues represent reimbursements of costs incurred on behalf of managed hotel properties and franchisees. These costs relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our operating income and our net income. 24

Goodwill and Intangible Assets. Goodwill and intangible assets arise in connection with acquisitions, including the acquisition of management contracts. We do not amortize goodwill and intangible assets with indefinite lives. Intangible assets with finite lives are amortized on a straight-line basis over their respective useful lives. We review all goodwill and intangible assets for impairment by comparing their fair values to book values annually, or upon the occurrence of a trigger event. Impairment charges, if any, are recognized in operating results. Frequent Guest Program. SPG is our frequent guest incentive marketing program. SPG members earn points based on spending at our owned, managed and franchised hotels, as incentives to first-time buyers of VOIs and residences, and through participation in affiliated partners programs such as co-branded credit cards. Points can be redeemed at substantially all of our owned, managed and franchised hotels as well as through other redemption opportunities with third parties, such as conversion to airline miles. We charge our owned, managed and franchised hotels the cost of operating the SPG program, including the estimated cost of our future redemption obligation, based on a percentage of our SPG members qualified expenditures. The Companys management and franchise agreements require that we be reimbursed for the costs of operating the SPG program, including marketing, promotions and communications and performing member services for the SPG members. As points are earned, the Company increases the SPG point liability for the amount of cash it receives from its managed and franchised hotels related to the future redemption obligation. For its owned hotels we record an expense for the amount of our future redemption obligation with the offset to the SPG point liability. When points are redeemed by the SPG members, the hotels recognize revenue and the SPG point liability is reduced. We, through the services of third-party actuarial analysts, determine the value of the future redemption obligation based on statistical formulas which project the timing of future point redemptions based on historical experience, including an estimate of the breakage for points that will never be redeemed, and an estimate of the points that will eventually be redeemed as well as the cost of reimbursing hotels and other third parties in respect of other redemption opportunities for point redemptions. We consolidate the assets and liabilities of the SPG program including the liability associated with the future redemption obligation which is included in other long-term liabilities and accrued expenses in the accompanying consolidated balance sheets. The total actuarially determined liability (see Note 18), as of December 31, 2010 and 2009 is $753 million and $689 million, respectively, of which $225 million and $244 million, respectively, is included in accrued expenses. Long-Lived Assets. We evaluate the carrying value of our long-lived assets for impairment by comparing the expected undiscounted future cash flows of the assets to the net book value of the assets if certain trigger events occur. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value is charged to current earnings. Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, sales of similar assets, appraisals and, if appropriate, current estimated net sales proceeds from pending offers. We evaluate the carrying value of our long-lived assets based on our plans, at the time, for such assets and such qualitative factors as future development in the surrounding area, status of expected local competition and projected incremental income from renovations. Changes to our plans, including a decision to dispose of or change the intended use of an asset, can have a material impact on the carrying value of the asset. Loan Loss Reserves. For the vacation ownership and residential segment, we record an estimate of expected uncollectibility on our VOI notes receivable as a reduction of revenue at the time we recognize a timeshare sale. We hold large amounts of homogeneous VOI notes receivable and therefore assess uncollectibility based on pools of receivables. In estimating loan loss reserves, we use a technique referred to as static pool analysis, which tracks defaults for each years mortgage originations over the life of the respective notes and projects an estimated default rate. As of December 31, 2010, the average estimated default rate for our pools of receivables was 10%. The primary credit quality indicator used by us to calculate the loan loss reserve for the vacation ownership notes is the origination of the notes by brand (Sheraton, Westin, and Other) as we believe there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired. In addition to quantitatively calculating the loan loss reserve based on its static pool analysis, we 25

supplement the process by evaluating certain qualitative data, including the aging of the respective receivables, current default trends by brand and origination year, and the Fair Isaac Corporation (FICO) scores of the buyers. Given the significance of our respective pools of VOI notes receivable, a change in the projected default rate can have a significant impact to its loan loss reserve requirements, with a 0.1% change estimated to have an impact of approximately $3 million. We consider a VOI note receivable delinquent when it is more than 30 days outstanding. All delinquent loans are placed on nonaccrual status and we do not resume interest accrual until payment is made. Upon reaching 120 days outstanding, the loan is considered to be in default and we commence the repossession process. Uncollectible VOI notes receivable are charged off when title to the unit is returned to us. We generally do not modify vacation ownership notes that become delinquent or upon default. For the hotel segment, we measure the impairment of a loan based on the present value of expected future cash flows, discounted at the loans original effective interest rate, or the estimated fair value of the collateral. For impaired loans, we establish a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows or the estimated fair value of the collateral. We apply the loan impairment policy individually to all loans in the portfolio and do not aggregate loans for the purpose of applying such policy. For loans that we have determined to be impaired, we recognize interest income on a cash basis. Assets Held for Sale. We consider properties to be assets held for sale when management approves and commits to a formal plan to actively market a property or group of properties for sale and a signed sales contract and significant non-refundable deposit or contract break-up fee exist. Upon designation as an asset held for sale, we record the carrying value of each property or group of properties at the lower of its carrying value which includes allocable segment goodwill or its estimated fair value, less estimated costs to sell, and we stop recording depreciation expense. Any gain realized in connection with the sale of a property for which we have significant continuing involvement (such as through a long-term management agreement) is deferred and recognized over the initial term of the related agreement. The operations of the properties held for sale prior to the sale date are recorded in discontinued operations unless we will have continuing involvement (such as through a management or franchise agreement) after the sale. Legal Contingencies. We are subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. An estimated loss from a loss contingency should be accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. We evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our financial position or our results of operations. Income Taxes. We provide for income taxes in accordance with principles contained in ASC 740, Income Taxes. Under these principles, we recognize the amount of income tax payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. We also measure and recognize the amount of tax benefit that should be recorded for financial statement purposes for uncertain tax positions taken or expected to be taken in a tax return. With respect to uncertain tax positions, we evaluate the recognized tax benefits for derecognition, classification, interest and penalties, interim period accounting and disclosure requirements. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns.

26

RESULTS OF OPERATIONS The following discussion presents an analysis of results of our operations for the years ended December 31, 2010, 2009 and 2008. Business conditions in the global lodging industry were extremely difficult beginning in the middle of 2008 through late 2009, but have improved during 2010. These improvements have resulted from better than expected occupancy primarily related to our three main classes of customers: business, leisure and group travelers, and the stabilization of room rates. As corporate profits have continued to rise, our business from the business travelers, which accounts for the majority of our revenues, is leading the recovery. In addition, the supply side growth has been lower than recent years which has led us to achieve upper single digit to low double digit REVPAR growth in many of our leading markets. We are the largest operator of upper upscale and luxury hotels in the world and we are seeing luxury travel leading the increases in occupancy. Despite the improvement in revenues, we continue to enforce previously instituted rigorous policies to control costs. As discussed in Note 2 of the financial statements, following the adoption of ASU Nos. 2009-16 and 2009-17 on January 1, 2010, our statement of income beginning with the year ended December 31, 2010 no longer reflects securitization income, but instead reports interest income, net charge-offs and certain other income associated with all securitized loan receivables, and interest expense associated with debt issued from the trusts to third-party investors in the same line items in our statement of income as debt. Additionally, we will no longer record initial gains or losses on new securitization activity since securitized vacation ownership notes receivable no longer receive sale accounting treatment. Finally, we no longer recognize gains or losses on the revaluation of the interestonly strip receivable as that asset is not recognized in a transaction accounted for as a secured borrowing. Our statement of income for the year ended December 31, 2009 and our balance sheet as of December 31, 2009 have not been retrospectively adjusted to reflect the adoption of ASU Nos. 2009-16 and 2009-17. Therefore, current period results will not be comparable to prior period amounts, particularly with regards to: Vacation ownership and residential sales and services Interest expense Year Ended December 31, 2010 Compared with Year Ended December 31, 2009 Continuing Operations
Increase / Percentage Year Ended (Decrease) Change Year Ended December 31, December 31, from Prior from Prior 2009 Year Year 2010

Owned, Leased and Consolidated Joint Venture Hotels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management Fees, Franchise Fees and Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation Ownership and Residential . . . . . . . . . . . Other Revenues from Managed and Franchise Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,704 712 538 2,117 $5,071

$1,584 658 523 1,931 $4,696

$120 54 15 186 $375

7.6% 8.2% 2.9% 9.6% 8.0%

The increase in revenues from owned, leased and consolidated joint venture hotels was primarily due to improved REVPAR (as discussed below) at our existing owned, leased and consolidated joint venture hotels, offset in part by lost revenues from eight wholly owned hotels sold or closed in 2010 and 2009. These sold or closed hotels had revenues of $18 million in the year ended December 31, 2010 compared to $98 million in the corresponding period of 2009. Revenues at our Same-Store Owned Hotels (54 hotels for the year ended December 31, 2010 and 2009, excluding the eight hotels sold or closed and eight additional hotels undergoing significant repositionings or without comparable results in 2010 and 2009) increased 8.2%, or $107 million, to $1.421 billion for the year ended December 31, 2010 when compared to $1.314 billion in the same period of 2009 due primarily to an increase in REVPAR. 27

REVPAR at our Same-Store Owned Hotels increased 11.2% to $136.27 for the year ended December 31, 2010 when compared to the corresponding 2009 period. The increase in REVPAR at these Same-Store Owned Hotels resulted from a 2.6% increase in ADR to $196.62 for the year ended December 31, 2010 compared to $191.60 for the corresponding 2009 period and an increase in occupancy rates to 69.3% in the year ended December 31, 2010 when compared to 64.0% in the same period in 2009. REVPAR at Same-Store Owned Hotels in North America increased 11.6% for the year ended December 31, 2010 when compared to the same period of 2009. REVPAR growth was particularly strong at our owned hotels in New York, New York, Chicago, Illinois, Toronto, Canada and New Orleans, Louisiana. REVPAR at our international Same-Store Owned Hotels increased by 10.5% for the year ended December 31, 2010 when compared to the same period of 2009. REVPAR for Same-Store Owned Hotels internationally increased 11.6% excluding the unfavorable effects of foreign currency translation. The increase in management fees, franchise fees and other income was primarily a result of a $59 million or 9.4% increase in management and franchise revenue to $689 million for the year ended December 31, 2010 compared to $630 million in the corresponding period in 2009. Management fees increased $53 million or 14.9% and franchise fees increased $23 million or 16.7% compared to the year ended December 31, 2009. These increases were due to growth in REVPAR at existing hotels as well as the net addition of 27 managed and 65 franchised hotels to our system since the beginning of 2009. Total vacation ownership and residential sales and services revenue increased 2.9% to $538 million compared to $523 million in 2009 primarily driven by the impact of ASU 2009-17. Originated contract sales of VOI inventory decreased 3.1% for the year ended December 31, 2010 when compared to the same period in 2009. This decline was primarily driven by lower tour flow which was down 6.8% for the year ended December 31, 2010 when compared to the same period in 2009. The decline in tour flow was a result of the economic climate and resulting closure of fractional sales centers in the latter part of 2009. Additionally, the average contract amount per vacation ownership unit sold decreased 6.0% to approximately $15,000, driven by price reductions and inventory mix. Residential revenue increased approximately $6 million in the year ended December 31, 2010 primarily due to the recognition of $4 million of marketing and license fees associated with a new hotel and residential project in Guangzhou, China which opened in 2010. Other revenues from managed and franchised properties increased primarily due to an increase in payroll costs commensurate with increased occupancy at our existing managed hotels and payroll costs for the new hotels entering the system. These revenues represent reimbursements of costs incurred on behalf of managed hotel and vacation ownership properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our operating income and our net income.
Year Ended December 31, 2010 Year Ended December 31, 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Selling, General, Administrative and Other . . . . .

$344

$314

$30

9.6%

The increase in selling, general, administrative and other expenses for the year ended December 31, 2010 was primarily a result of higher incentive based compensation in the current year when compared to the prior year. This increase was partially offset by the reimbursement of previously expensed legal costs in connection with the favorable settlement of a lawsuit and an $8 million reversal of a guarantee liability which was favorably settled during the period (see Note 26).
Year Ended December 31, 2010 Year Ended December 31, 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Restructuring, Goodwill Impairment and Other Special Charges (Credits), Net . . . . . . . . . . . .

$(75)

$379

$454

n/m

During the year ended December 31, 2010, we received cash proceeds of $75 million in connection with the favorable settlement of a lawsuit. We recorded this settlement, net of the reimbursement of legal costs incurred in connection with the litigation, as a credit to restructuring, goodwill impairment, and other special (credits) charges. 28

Additionally, we recorded an $8 million credit related to the reversal of a reserve associated with an acquisition in 1998 as the liability is no longer deemed necessary. During the year ended December 31, 2009, we completed a comprehensive review of our vacation ownership business. We decided not to develop certain vacation ownership sites and future phases of certain existing projects. As a result of these decisions, we recorded a primarily non-cash impairment charge of $255 million in the restructuring, goodwill impairment and other special charges (credits) line item. Additionally, we recorded a $90 million non-cash charge for the impairment of goodwill in the vacation ownership reporting unit. Additionally, throughout 2009, we recorded restructuring and other special charges of $34 million related to our ongoing initiative of rationalizing our cost structure. These charges related to severance charges and costs to close vacation ownership sales galleries.
Year Ended December 31, 2010 Year Ended December 31, 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Depreciation and Amortization . . . . . . . . . . .

$285

$309

$(24)

7.8%

The decrease in depreciation expense for the year ended December 31, 2010, when compared to the same period of 2009, was due to reduced depreciation expense from sold hotels offset by additional capital expenditures made in the last twelve months.
Year Ended December 31, 2010 Year Ended December 31, 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Operating Income . . . . . . . . . . . . . . . . . . . . .

$600

$26

$574

n/m

The increase in operating income for the year ended December 31, 2010, when compared to the same period of 2009, is primarily related to the restructuring, goodwill impairments and other special charges (credits) favorable benefit of $75 million in 2010 compared to a charge of $379 million in 2009 (see earlier discussion). Additionally, the increase in operating income was favorably impacted by improved operating results in primarily all of our revenue streams, as discussed earlier.
Year Ended December 31, 2010 Year Ended December 31, 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Equity Earnings (Losses) and Gains and Losses from Unconsolidated Ventures, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10

$(4)

$14

n/m

The increase in equity earnings and gains and losses from unconsolidated joint ventures for the year ended December 31, 2010, when compared to the same period of 2009, was primarily due to improved operating results at several properties owned by joint ventures in which we hold non-controlling interests. The increase also relates to a charge of approximately $4 million, in 2009, related to an unfavorable mark-to-market adjustment on a US dollar denominated loan in an unconsolidated venture in Mexico.
Year Ended December 31, 2010 Year Ended December 31, 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Net Interest Expense . . . . . . . . . . . . . . . . . . .

$236

$227

$9

4.0%

The increase in net interest expense was primarily due to interest of $27 million on securitized debt related to the adoption of ASU No. 2009-17, partially offset by certain early debt extinguishment costs of $21 million that were incurred in 2009. Our weighted average interest rate was 6.86% at December 31, 2010 as compared to 6.73% at December 31, 2009. 29

Year Ended December 31, 2010

Year Ended December 31, 2009

Increase/ (Decrease) from Prior Year

Percentage Change from Prior Year

Loss on Asset Dispositions and Impairments, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(39)

$(91)

$52

n/m

During the year ended December 31, 2010, we recorded a net loss on dispositions of approximately $39 million, primarily related to a $53 million loss on the sale of one wholly-owned hotel (see Note 5) as well as a $4 million impairment of fixed assets that are being retired in connection with a significant renovation of a wholly-owned hotel, and a $2 million impairment on one hotel whose carrying value exceeded its fair value. These charges were partially offset by a gain of $14 million from insurance proceeds received for a claim at a whollyowned hotel that suffered damage from a storm in 2008, a $5 million gain as a result of an acquisition of a controlling interest in a joint venture in which we previously held a non-controlling interest (see Note 4) and a $4 million gain from the sale of non-hotel assets. During the year ended December 31, 2009, we recorded a net loss on dispositions of approximately $91 million, primarily related to $41 million of impairment charges on six hotels whose carrying values exceeded their fair values, a $22 million impairment of our retained interests in vacation ownership mortgage receivables, a $13 million impairment of an investment in a hotel management contract that has been cancelled, a $5 million impairment of certain technology-related fixed assets and a $4 million loss on the sale of a wholly-owned hotel.
Year Ended December 31, 2010 Year Ended December 31, 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Income Tax (Benefit) Expense . . . . . . . . . . .

$27

$(293)

$320

n/m

The $320 million increase in income tax expense primarily relates to 2009 items that did not recur in 2010, including a $120 million deferred tax benefit for an Italian tax incentive program in which the tax basis of land and building for the hotels we own in Italy was stepped up to fair value in exchange for paying a current tax of $9 million, a $51 million tax benefit related to previously unrecognized foreign tax credits for prior tax years and a $10 million benefit to reverse the deferred interest accrual associated with the deferral of taxable income. The remaining increase is primarily due to higher pretax income in 2010, partially offset by a benefit of $42 million related to an IRS audit. Discontinued Operations, Net of Tax During the year ended December 31, 2010, we recorded a gain of $134 million related to the final settlement with the IRS regarding the World Directories disposition and a gain of approximately $36 million related to the sale of one wholly-owned hotel. The tax benefit was related to the realization of a high tax basis in this hotel that was generated through a previous transaction. During the year ended December 31, 2009, we sold our Bliss spa business and other non-core assets for cash proceeds of $227 million. Revenues and expenses from the Bliss spa business, together with revenues and expenses from one hotel that was sold in 2010, were reported in discontinued operations resulting in a loss of $2 million, net of tax. In addition, the net gain on the assets sold in 2009 and the one hotel held for sale at December 31, 2009 has been recorded in discontinued operations resulting in income of $76 million, net of tax.

30

Year Ended December 31, 2009 Compared with Year Ended December 31, 2008 Continuing Operations
Year Ended December 31, 2009 Year Ended December 31, 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Owned, Leased and Consolidated Joint Venture Hotels. . . . . . . . . . . . . . . . . . . . . . Management Fees, Franchise Fees and Other Income . . . . . . . . . . . . . . . . . . . . . . Vacation Ownership and Residential . . . . . . . Other Revenues from Managed and Franchise Properties . . . . . . . . . . . . . . . . . Total Revenues . . . . . . . . . . . . . . . . . . . . . . .

$1,584 658 523 1,931 $4,696

$2,212 751 749 2,042 $5,754

$ (628) (93) (226) (111) $(1,058)

(28.4)% (12.4)% (30.2)% (5.4)% (18.4)%

The decrease in revenues from owned, leased and consolidated joint venture hotels was primarily due to the economic crisis in the United States and internationally. The decrease was also due to lost revenues from 15 wholly owned hotels sold or closed in 2009 and 2008. These sold or closed hotels had revenues of $68 million in the year ended December 31, 2009 compared to $248 million in the corresponding period of 2008. Revenues at our SameStore Owned Hotels (53 hotels for the year ended December 31, 2009 and 2008, excluding the 15 hotels sold or closed and 10 additional hotels undergoing significant repositionings or without comparable results in 2009 and 2008) decreased 24.0%, or $437 million, to $1.386 billion for the year ended December 31, 2009 when compared to $1.823 billion in the same period of 2008 due primarily to a decrease in REVPAR. REVPAR at our Same-Store Owned Hotels decreased 24.6% to $128.95 for the year ended December 31, 2009 when compared to the corresponding 2008 period. The decrease in REVPAR at these Same-Store Owned Hotels resulted from a 17.1% decrease in ADR to $199.22 for the year ended December 31, 2009 compared to $240.23 for the corresponding 2008 period and a decrease in occupancy rates to 64.7% in the year ended December 31, 2009 when compared to 71.2% in the same period in 2008. REVPAR at Same-Store Owned Hotels in North America decreased 24.4% for the year ended December 31, 2009 when compared to the same period of 2008. REVPAR declined in substantially all of our major domestic markets. REVPAR at our international Same-Store Owned Hotels decreased by 25.0% for the year ended December 31, 2009 when compared to the same period of 2008. REVPAR declined in most of our major international markets. REVPAR for Same-Store Owned Hotels internationally decreased 20.3% excluding the unfavorable effects of foreign currency translation. The decrease in management fees, franchise fees and other income was primarily a result of an $87 million decrease in management and franchise revenue to $630 million for the year ended December 31, 2009 compared to $717 million in the corresponding period in 2008. The decrease was due to the significant decline in base and incentive management fees as a result of the global economic crisis, partially offset by fees from the net addition of 40 managed and franchised hotels to our system and approximately $15 million in termination fees recognized in 2009 when compared to $4 million in 2008. The decrease in vacation ownership and residential sales and services was primarily due to lower originated contract sales of VOI inventory, which represents vacation ownership revenues before adjustments for percentage of completion accounting and other deferrals, partially offset by gains of $23 million relating to securitizations. Originated contract sales of VOI inventory decreased 39% for the year ended December 31, 2009 when compared to the same period in 2008. This decline was primarily driven by lower tour flow which was down 19.2% for the year ended December 31, 2009 when compared to the same period in 2008. The decline in tour flow was a result of the economic climate and resulting closure of underperforming sales centers. Additionally, the average contract amount per vacation ownership unit sold decreased 21.4% to approximately $16,000, driven by a higher sales mix of lowerpriced inventory, including a higher percentage of lower-priced biennial inventory. The decrease is also due to a $43 million decrease in residential revenue, as the 2008 period included license fees in connection with two St. Regis projects. 31

Other revenues from managed and franchised properties decreased primarily due to a decrease in costs, commensurate with the decline in revenues, at our managed and franchised hotels. These revenues represent reimbursements of costs incurred on behalf of managed hotel and vacation ownership properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our operating income and our net income.
Year Ended December 31, 2009 Year Ended December 31, 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Selling, General, Administrative and Other . .

$314

$377

$(63)

(16.7)%

The decrease in selling, general, administrative and other expenses was primarily a result of our focus on reducing our cost structure in the current economic climate. Beginning in the middle of 2008, we began an activity value analysis project to review our cost structure across a majority of our corporate departments and divisional headquarters. (See Note 14 for a summary of charges associated with this initiative.) A majority of the cost containment initiatives were completed and implemented in late 2008 and early 2009 and are now being realized. Costs and expenses related to our former Bliss spa business were reclassified to discontinued operations for both periods presented as a result of its sale at the end of 2009.
Year Ended December 31, 2009 Year Ended December 31, 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Restructuring, Goodwill Impairment and Other Special Charges, Net . . . . . . . . .

$379

$141

$238

n/m

During the fourth quarter of 2009, we completed a comprehensive review of our vacation ownership business. We decided not to develop certain vacation ownership sites and future phases of certain existing projects. As a result of these decisions, we recorded a primarily non-cash impairment charge of $255 million in the restructuring, goodwill impairment and other special charges line item. Additionally, we recorded a $90 million non-cash charge for the impairment of goodwill in the vacation ownership reporting unit. Additionally, throughout 2009, we recorded restructuring and other special charges of $34 million related to our ongoing initiative of rationalizing our cost structure. These charges related to severance charges and costs to close vacation ownership sales galleries. During the year ended December 31, 2008, we recorded restructuring and other special charges of $141 million, including $62 million of severance and related charges associated with our ongoing initiative of rationalizing our cost structure in light of the current economic climate. We also recorded impairment charges of approximately $79 million primarily related to the decision not to develop two vacation ownership projects as a result of the economic climate and its impact on business conditions.
Year Ended December 31, 2009 Year Ended December 31, 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Depreciation and Amortization . . . . . . . . . . .

$309

$313

$(4)

(1.3)%

The decrease in depreciation expense was due to reduced depreciation expense from sold hotels offset by additional capital expenditures made in the last twelve months.
Year Ended December 31, 2009 Year Ended December 31, 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Operating Income . . . . . . . . . . . . . . . . . . . . .

$26

$610

$(584)

n/m

The decrease in operating income was primarily due to the decline in our core business units, hotels and vacation ownership, due to the severe impact from the global economic crisis as discussed above and the related impairments and restructuring charges previously discussed. Additionally, operating income was impacted by a 32

$17 million charge, recorded in the vacation ownership costs and expenses line, related to a price reduction in vacation ownership intervals, following an in-depth review of the business. These decreases were partially offset by the reduction in selling, general, administrative and other costs as a result of our activity value analysis costs savings project and other cost savings initiatives and a favorable $14 million income item related to the expiration of the statute of limitations on an indirect tax exposure and a Brazilian water claim.
Year Ended December 31, 2009 Year Ended December 31, 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Equity (Losses) Earnings and Gains and Losses from Unconsolidated Ventures, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(4)

$16

$(20)

n/m

The decrease in equity earnings and gains and losses from unconsolidated joint ventures was primarily due to decreased operating results at several properties owned by joint ventures in which we hold non-controlling interests. The decrease also relates to a charge of approximately $4 million, in 2009, related to an unfavorable mark-to-market adjustment on a US dollar denominated loan in an unconsolidated venture in Mexico.
Year Ended December 31, 2009 Year Ended December 31, 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Net Interest Expense . . . . . . . . . . . . . . . . . . .

$227

$207

$20

9.7%

The increase in net interest expense was primarily due to higher interest rates in the year ended December 31, 2009 when compared to the same period of 2008 and early debt extinguishment costs of $21 million that were incurred in 2009. This was partially offset by a lower average debt balance in 2009 as compared to 2008. Our weighted average interest rate was 6.73% at December 31, 2009 as compared to 5.24% at December 31, 2008.
Year Ended December 31, 2009 Year Ended December 31, 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Loss on Asset Dispositions and Impairments, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(91)

$(98)

$(7)

(7.1)%

During 2009, we recorded a net loss on dispositions of approximately $91 million, primarily related to $41 million of impairment charges on six hotels whose carrying values exceeded their fair values, a $22 million impairment of our retained interests in vacation ownership mortgage receivables, a $13 million impairment of an investment in a hotel management contract that has been cancelled, a $5 million impairment of certain technologyrelated fixed assets and a $4 million loss on the sale of a wholly-owned hotel. During 2008, we recorded a net loss of $98 million primarily related to $64 million of impairment charges on five hotels, a $22 million impairment of our investment in vacation ownership notes receivable that we have previously securitized, and an $11 million write-off of our investment in a joint venture in which we hold minority interest (see Note 5).
Year Ended December 31, 2009 Year Ended December 31, 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year

Income Tax (Benefit) Expense . . . . . . . . . . .

$(293)

$72

$(365)

n/m

The $365 million decrease in income tax expense primarily relates to a deferred tax benefit of $120 million (net) in 2009 for an Italian tax incentive program in which the tax basis of land and buildings for the hotels we own in Italy was stepped-up to fair value in exchange for paying a current tax of $9 million. The remaining decrease primarily relates to tax benefits of $67 million associated with impairments, restructuring and asset sales and $37 million related to a foreign tax credit election change. Additionally, a benefit of $10 million was recognized to reverse the deferred interest accrual associated with the deferral of taxable income. The remaining decrease is primarily due to lower pretax income. 33

Discontinued Operations, Net of Tax During 2009, we sold our Bliss spa business and other non-core assets for cash proceeds of $227 million. Revenues and expenses from the Bliss spa business, together with revenues and expenses from two hotels which were sold in 2010, were reported in discontinued operations resulting in a loss of $2 million, net of tax. In addition, the net gain on the assets sold in 2009 and the one hotel held for sale at December 31, 2009 has been recorded in discontinued operations resulting in income of $76 million, net of tax. For the year ended December 31, 2008, the gain on dispositions includes a $124 million gain ($129 million pretax) on the sale of three properties which were sold unencumbered by management or franchise contracts. The tax impact on this transaction was minimized due to the utilization of capital loss carryforwards. Additionally, in 2009, $5 million was reclassified to discontinued operations (in the 2008 results) relating to one hotel that was in the process of being sold at the end of 2009. Discontinued operations for the year ended December 31, 2008 also includes a $49 million tax charge as a result of a 2008 administrative tax ruling for an unrelated taxpayer, that impacts the tax liability associated with the disposition of one of our businesses several years ago.

LIQUIDITY AND CAPITAL RESOURCES Cash From Operating Activities Cash flow from operating activities is generated primarily from management and franchise revenues, operating income from our owned hotels and sales of VOIs and residential units. Other sources of cash are distributions from joint ventures, servicing financial assets and interest income. These are the principal sources of cash used to fund our operating expenses, interest payments on debt, capital expenditures, dividend payments and property and income taxes. We believe that our existing borrowing availability together with capacity for additional borrowings and cash from operations will be adequate to meet all funding requirements for our operating expenses, principal and interest payments on debt, capital expenditures, dividends and any share repurchase program we may initiate in the foreseeable future. The majority of our cash flow is derived from corporate and leisure travelers and is dependent on the supply and demand in the lodging industry. In a recessionary economy, we experience significant declines in business and leisure travel. The impact of declining demand in the industry and higher hotel supply in key markets could have a material impact on our sources of cash. Our day-to-day operations are financed through net working capital, a practice that is common in our industry. The ratio of our current assets to current liabilities was 1.07 and 0.74 as of December 31, 2010 and 2009, respectively. Consistent with industry practice, we sweep the majority of the cash at our owned hotels on a daily basis and fund payables as needed by drawing down on our existing revolving credit facility. State and local regulations governing sales of VOIs and residential properties allow the purchaser of such a VOI or property to rescind the sale subsequent to its completion for a pre-specified number of days. In addition, cash payments received from buyers of units under construction are held in escrow during the period prior to obtaining a certificate of occupancy. These payments and the deposits collected from sales during the rescission period are the primary components of our restricted cash balances in our consolidated balance sheets. At December 31, 2010 and 2009, we had short-term restricted cash balances of $53 million and $47 million, respectively. During 2010, we completed a series of disposition, financing and other transactions that resulted in proceeds of approximately $650 million as outlined below: We securitized vacation ownership receivables resulting in proceeds of approximately $180 million. We sold assets that resulted in cash proceeds of approximately $150 million. We received a tax refund from the IRS of $245 million (see Note 15). We received proceeds of $75 million as a result of the favorable settlement of a lawsuit. 34

Cash From Investing Activities Gross capital spending during the full year ended December 31, 2010 was as follows (in millions): Maintenance Capital Expenditures(1): Owned, Leased and Consolidated Joint Venture Hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . $106 Corporate and information technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation Ownership and Residential Capital Expenditures : Net capital expenditures for inventory (excluding St. Regis Bal Harbour) . . . . . . . . . . . . . . Capital expenditures for inventory St. Regis Bal Harbour . . . . . . . . . . . . . . . . . . . . . . . . Subtotal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Development Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)

148 (34) 146 112 117

Total Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $377 (1) Maintenance capital expenditures include improvements, renewals and extraordinary repairs that extend the useful life of the asset. (2) Represents gross inventory capital expenditures of $168 less cost of sales of $56. Gross capital spending during the year ended December 31, 2010 included approximately $148 million of maintenance capital, and $117 million of development capital. Investment spending on gross vacation ownership interest and residential inventory was $168 million, primarily in Bal Harbour, Florida. Our capital expenditure program includes both offensive and defensive capital. Defensive spending is related to maintenance and renovations that we believe are necessary to stay competitive in the markets we are in. Other than capital to address fire and life safety issues, we consider defensive capital to be discretionary, although reductions to this capital program could result in decreases to our cash flow from operations, as hotels in certain markets could become less desirable. The offensive capital expenditures, which are primarily related to new projects that we expect will generate a return, are also considered discretionary. We currently anticipate that our defensive capital expenditures for the full year 2011 (excluding vacation ownership and residential inventory) will be approximately $300 million for maintenance, renovations, and technology capital. In addition, for the full year 2011, we currently expect to spend approximately $150 million for investment projects. During the year ended December 31, 2010, we made a $23 million investment into an unconsolidated joint venture. Our partner in the joint venture contributed an equal amount and the funds were used to pay off a third-party mortgage. Our interest in this unconsolidated joint venture was subsequently sold, and we received cash proceeds of approximately $42 million. Additionally, we will continue to manage the hotel, formerly owned by the joint venture, under a long-term management contract. During the year ended December 31, 2010, we paid approximately $23 million to acquire a controlling interest in a joint venture in which we had previously held a non-controlling interest (see Note 4). In order to secure management or franchise agreements, we have made loans to third-party owners, made minority investments in joint ventures and provided certain guarantees and indemnifications. See Note 26 of the consolidated financial statements for discussion regarding the amount of loans we have outstanding with owners, unfunded loan commitments, equity and other potential contributions, surety bonds outstanding, performance guarantees and indemnifications we are obligated under, and investments in hotels and joint ventures. We intend to finance the acquisition of additional hotel properties (including equity investments), construction of the St. Regis Bal Harbour, hotel renovations, VOI and residential construction, capital improvements, technology spend and other core and ancillary business acquisitions and investments and provide for general corporate purposes (including dividend payments and share repurchases) through our credit facilities described below, through the net proceeds from dispositions, through the assumption of debt, and from cash generated from operations. 35

We periodically review our business to identify properties or other assets that we believe either are non-core (including hotels where the return on invested capital is not adequate), no longer complement our business, are in markets which may not benefit us as much as other markets during an economic recovery or could be sold at significant premiums. We are focused on enhancing real estate returns and monetizing investments. Since 2006, we have sold 62 hotels realizing proceeds of approximately $5.3 billion in numerous transactions (see Note 5 of the consolidated financial statements). There can be no assurance, however, that we will be able to complete future dispositions on commercially reasonable terms or at all. The 2010 asset sales resulted in gross cash proceeds from investing activities of approximately $150 million and are discussed in our general liquidity discussion under cash used for financing activities. Cash Used for Financing Activities The following is a summary of our debt portfolio (including capital leases) as of December 31, 2010:
Amount Outstanding at December 31, 2010(a) (Dollars in millions) Interest Rate at December 31, 2010 Average Maturity (In years)

Floating Rate Debt Revolving Credit Facilities . . . . . . . . . . . . . . . . . . . . Mortgages and Other . . . . . . . . . . . . . . . . . . . . . . . . Interest Rate Swaps . . . . . . . . . . . . . . . . . . . . . . . . . Total/Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed Rate Debt Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgages and Other . . . . . . . . . . . . . . . . . . . . . . . . Interest Rate Swaps . . . . . . . . . . . . . . . . . . . . . . . . . Total/Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Debt Total Debt and Average Terms . . . . . . . . . . . . . . . . .

41 500

5.99% 4.83% 4.92% 7.26% 7.56% 7.06% 7.31% 6.86%

2.8 2.3 2.3 4.1 7.2 4.2 4.2

$ 541 $2,698 118 (500) $2,316 $2,857

(a) Excludes approximately $434 million of our share of unconsolidated joint venture debt and securitized vacation ownership debt of $494 million, all of which is non-recourse. For specifics related to our financing transactions, issuances, and terms entered into for the years ended December 31, 2010 and 2009, see Note 16 of the consolidated financial statements. We have evaluated the commitments of each of the lenders in our Revolving Credit Facilities (the Facilities). In addition, we have reviewed our debt covenants and do not anticipate any issues regarding the availability of funds under the Facilities. On April 20, 2010, we executed a new $1.5 billion Senior Credit Facility (New Facility). The New Facility matures on November 15, 2013 and replaces the former $1.875 billion Revolving Credit Agreement, which would have matured on February 11, 2011. Due to the adoption of ASU Nos. 2009-16 and 2009-17, as discussed in Notes 2, 10, and 11, our 2010 cash flows from financing activities include the borrowings and repayments of securitized vacation ownership debt. During 2010, as previously described in Cash from Operating Activities, we completed a series of disposition, financing and other transactions that resulted in proceeds of approximately $650 million. As a result of these transactions and cash flow from operations, net debt was reduced to $2.060 billion compared to net debt of $2.819 billion as of December 31, 2009. Our gross debt at December 31, 2010 was $2.857 billion, excluding debt associated with securitized vacation ownership notes receivable. Additionally, we had cash and cash equivalents of $797 million (including $44 million of restricted cash) at December 31, 2010. As discussed earlier, we adopted 36

ASU Nos. 2009-16 and 2009-17 on January 1, 2010 and, as a result, at December 31, 2010 we had $494 million of non-recourse debt and $19 million of restricted cash associated with securitized vacation ownership receivables. Including this debt and restricted cash associated with securitized vacation ownership receivables, our net debt was $2.535 billion at December 31, 2010. Our Facilities are used to fund general corporate cash needs. As of December 31, 2010, we have availability of over $1.4 billion under the Facilities. We have reviewed the financial covenants associated with our Facilities, the most restrictive being the leverage ratio. As of December 31, 2010, we were in compliance with this covenant and expect to remain in compliance through the end of 2011. We have the ability to manage the business in order to reduce our leverage ratio by reducing operating costs, selling, general and administrative costs and postponing discretionary capital expenditures. However, there can be no assurance that we will stay below the required leverage ratio if the current economic climate deteriorates. Based upon the current level of operations, management believes that our cash flow from operations and asset sales, together with our significant cash balances (approximately $816 million at December 31, 2010, including $63 million of short-term and long-term restricted cash), available borrowings under the Facilities and other bank credit facilities (approximately $1.4 billion at December 31, 2010), and capacity for additional borrowings will be adequate to meet anticipated requirements for scheduled maturities, dividends, working capital, capital expenditures, marketing and advertising program expenditures, other discretionary investments, interest and scheduled principal payments and share repurchases for the foreseeable future. However, there can be no assurance that we will be able to refinance our indebtedness as it becomes due and, if refinanced, on favorable terms. In addition, there can be no assurance that in our continuing business we will generate cash flow at or above historical levels, that currently anticipated results will be achieved or that we will be able to complete dispositions on commercially reasonable terms or at all. If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to sell additional assets at lower than preferred amounts, reduce capital expenditures, refinance all or a portion of our existing debt or obtain additional financing at unfavorable rates. Our ability to make scheduled principal payments, to pay interest on or to refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the hotel and vacation ownership industries and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control. We had the following contractual obligations (1) outstanding as of December 31, 2010 (in millions):
Total Due in Less Than 1 Year Due in 1-3 Years Due in 3-5 Years Due After 5 Years

Debt(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest payable . . . . . . . . . . . . . . . . . . . . Capital lease obligations(3) . . . . . . . . . . . . Operating lease obligations(4) . . . . . . . . . . Unconditional purchase obligations(5) . . . . Other long-term obligations . . . . . . . . . . . Total contractual obligations . . . . . . . . . . .

$2,855 890 2 1,345 225 3 $5,320

$ 9 208 96 69 2 $384

$1,210 322 161 124 1 $1,818

$ 951 204 149 28 $1,332

$ 685 156 2 939 4 $1,786

(1) The table below excludes unrecognized tax benefits that would require cash outlays for $341 million, the timing of which is uncertain. Refer to Note 15 of the consolidated financial statements for additional discussion on this matter. In addition, the table excludes amounts related to the construction of our St. Regis Bal Harbour project that has a total project cost of $750 million, of which $532 million has been paid through December 31, 2010. (2) Excludes securitized debt of $494 million, all of which is non-recourse. (3) Excludes sublease income of $2 million. (4) Excludes sublease income of $13 million. (5) Included in these balances are commitments that may be reimbursed or satisfied by our managed and franchised properties. 37

We had the following commercial commitments outstanding as of December 31, 2010 (in millions):
Total Less Than 1 Year 1-3 Years 3-5 Years After 5 Years

Standby letters of credit . . . . . . . . . . . . . . . . . . $159

$144

$12

$3

A dividend of $0.30 per share was paid in December 2010 to shareholders of record as of December 16, 2010. A dividend of $0.20 per share was paid in January 2010 to shareholders of record as of December 31, 2009. Off-Balance Sheet Arrangements Our off-balance sheet arrangements include letters of credit of $159 million, unconditional purchase obligations of $225 million and surety bonds of $23 million. These items are more fully discussed earlier in this section and in the Notes to Financial Statements and Item 8 of Part II of this report. Item 7A. Quantitative and Qualitative Disclosures about Market Risk. In limited instances, we seek to reduce earnings and cash flow volatility associated with changes in interest rates and foreign currency exchange rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent they are not hedged. We enter into a derivative financial arrangement to the extent it meets the objectives described above, and we do not engage in such transactions for trading or speculative purposes. At December 31, 2010, we were party to the following derivative instruments: Forward contracts to hedge forecasted transactions for management and franchise fee revenues earned in foreign currencies. The aggregate dollar equivalent of the notional amounts was approximately $37 million, and they expire in 2011. Forward foreign exchange contracts to manage the foreign currency exposure related to certain intercompany loans not deemed to be permanently invested. The aggregate dollar equivalent of the notional amounts of the forward contracts was approximately $759 million and they expire in 2011.

38

The following table sets forth the scheduled maturities and the total fair value of our debt portfolio and other financial instruments as of December 31, 2010 (in millions, excluding average exchange rates):
Expected Maturity or Transaction Date At December 31, 2011 2012 2013 2014 2015 Total at December 31, 2010 Total Fair Value at December 31, 2010

Thereafter

Liabilities Fixed rate . . . . . . . . . . . . . . . Average interest rate . . . . . . . Floating rate . . . . . . . . . . . . . Average interest rate . . . . . . . Forward Foreign Exchange Hedge Contracts: Fixed (EUR) to Fixed (USD) . . . . . . . . . . . . . . . . Average Exchange rate . . . . . . Fixed (JPY) to Fixed (USD) . . Average Exchange rate . . . . . . Forward Foreign Exchange Contracts: Fixed (EUR) to Fixed (USD) . . . . . . . . . . . . . . . . Average Exchange rate . . . . . . Fixed (CLP) to Fixed (USD). . Average Exchange rate . . . . . . Fixed (THB) to Fixed (USD) . . . . . . . . . . . . . . . . Average Exchange rate . . . . . . Fixed (JPY) to Fixed (USD) . . Average Exchange rate . . . . . . Fixed (CAD) to Fixed (USD) . . . . . . . . . . . . . . . . Average Exchange rate . . . . . . Fixed (AUD) to Fixed (USD) . . . . . . . . . . . . . . . . Average Exchange rate . . . . . . Fixed (AUD) to Fixed (EUR) . . . . . . . . . . . . . . . . Fixed (GBP) to Fixed (EUR) . . . . . . . . . . . . . . . . Fixed (JPY) to Fixed (THB) . .

$ 8 $ 1

$415 $238

$306 $251

$444 $ 50

$456 $ 1

$687 $

$2,316 7.31% $ 541 4.92%

$2,588 $ 541

$ 31 $ 6

$ $

$ $

$ $

$ $

$ $

1.33 $ .01

$ $

$110 $ 52

$ $

$ $

$ $

$ $

$ $

1 1.33 $ (1) .00 $ .03 $ (1) .01 $ (5) 1.00 (1) .99 (1) (1)

$ $

1 (1)

$ 13 $ 60

$ $

$ $

$ $

$ $

$ $

$ $

(1)

$358

(5)

$ 29

(1)

$ 63 $ 56 $ 18

$ $ $

$ $ $

$ $ $

$ $ $

$ $ $

$ $ $

$ $ $

(1) (1)

39

Item 8. Financial Statements and Supplementary Data. The financial statements and supplementary data required by this Item are included in Item 15 of this Annual Report and are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934 (the Exchange Act)). Based upon the foregoing evaluation, our principal executive and principal financial officers concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. There has been no change in our internal control over financial reporting (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Managements Report on Internal Control over Financial Reporting Management of Starwood Hotels & Resorts Worldwide, Inc. and its subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) or 15(d)-15(f). Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (GAAP) and includes those policies and procedures that: Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; Provide reasonable assurance that the transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP, and the receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. The Companys management assessed the effectiveness of the Companys internal controls over financial reporting as of December 31, 2010. In making this assessment, the Companys management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment and those criteria, management believes that, as of December 31, 2010, the Companys internal control over financial reporting is effective. Management has engaged Ernst & Young LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, to attest to the Companys internal control over financial reporting. Its report is included herein. 40

Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of Starwood Hotels & Resorts Worldwide, Inc. We have audited Starwood Hotels & Resorts Worldwide, Inc.s (the Company) internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Companys management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2010 and 2009; and the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2010 of the Company and our report dated February 17, 2011, expressed an unqualified opinion thereon.

/s/ New York, New York February 17, 2011

Ernst & Young LLP

41

Changes in Internal Controls There has not been any change in our internal control over financial reporting identified in connection with the evaluation that occurred during the year ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, those controls. Item 9B. Other Information. Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance.

Information regarding directors, executive officers and corporate governance is incorporated by reference to our Proxy Statement for the Annual Meeting of Stockholders to be held May 5, 2011 (the Proxy Statement), which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. Item 11. Executive Compensation.

Information regarding executive compensation is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. Item 13. Certain Relationships and Related Transactions and Director Independence.

Information regarding certain relationships and related transactions and director independence is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. Item 14. Principal Accounting Fees and Services.

Information regarding principal accounting fees and services is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. Item 15. Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this Annual Report: 1-2. The financial statements and financial statement schedule listed in the Index to Financial Statements and Schedule following the signature pages hereof. 3. Exhibits:* * This list of exhibits has been revised to reflect amendments to the Companys Form 10-K Annual Report for the year ended December 31, 2010 filed with the Securities and Exchange Commission on February 18, 2011 made by the Form 10-K/A report filed by the Company on March 11, 2011. 42

Exhibit Number

Description of Exhibit

2.1

2.2

2.3

2.4 3.1 3.2

3.3

4.1 4.2

4.3

4.4

4.5

4.6

4.7

4.8

Formation Agreement, dated as of November 11, 1994, among the Company, Starwood Capital and the Starwood Partners (incorporated by reference to Exhibit 2 to the Companys Current Report on Form 8-K filed with the SEC on November 16, 1994). (The SEC file number of all filings made by the Company pursuant to the Securities Exchange Act of 1934, as amended, and referenced herein is 1-7959). Form of Amendment No. 1 to Formation Agreement, dated as of July 1995, among the Company and the Starwood Partners (incorporated by reference to Exhibit 10.23 to the Companys Registration Statement on Form S-2 filed with the SEC on June 29, 1995 (Registration Nos. 33-59155 and 33-59155-01)). Master Agreement and Plan of Merger, dated as of November 14, 2005, among Host Marriott Corporation, Host Marriott, L.P., Horizon Supernova Merger Sub, L.L.C., Horizon SLT Merger Sub, L.P., Starwood Hotels & Resorts Worldwide, Inc., Starwood Hotels & Resorts, Sheraton Holding Corporation and SLT Realty Limited Partnership (the Merger Agreement) (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC on November 14, 2005). Amendment Agreement, dated as of March 24, 2006, to the Merger Agreement (incorporated by reference to Exhibit 2.1 of the Joint Current Report on Form 8-K filed with the SEC on March 29, 2006). Articles of Amendment and Restatement of the Company, as of May 30, 2007 (incorporated by reference to Appendix A to the Companys 2007 Notice of Annual Meeting and Proxy Statement). Amended and Restated Bylaws of the Company, as amended and restated through April 10, 2006 (incorporated by reference to Exhibit 3.2 to the Companys Current Report on Form 8-K filed with the SEC on April 13, 2006 (the April 13 Form 8-K). Amendment to Amended and Restated Bylaws of the Company, dated as of March 13, 2008 (incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed with the SEC on March 18, 2008). Termination Agreement dated as of April 7, 2006 between the Company and the Trust (incorporated by reference to Exhibit 4.1 of the April 13 Form 8-K). Amended and Restated Rights Agreement, dated as of April 7, 2006, between the Company and American Stock Transfer and Trust Company, as Rights Agent (which includes the form of Amended and Restated Articles Supplementary of the Series A Junior Participating Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Stock as Exhibit C) (incorporated by reference to Exhibit 4.2 of the April 13 Form 8-K). Amended and Restated Indenture, dated as of November 15, 1995, as Amended and Restated as of December 15, 1995 between ITT Corporation (formerly known as ITT Destinations, Inc.) and the First National Bank of Chicago, as trustee (incorporated by reference to Exhibit 4.A.IV to the First Amendment to ITT Corporations Registration Statement on Form S-3 filed with the SEC on November 13, 1996). First Indenture Supplement, dated as of December 31, 1998, among ITT Corporation, the Company and The Bank of New York (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the SEC on January 8, 1999). Second Indenture Supplement, dated as of April 9, 2006, among the Company, Sheraton Holding Corporation and Bank of New York Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.3 to the April 13 Form 8-K). Indenture, dated as of April 19, 2002, among the Company, the guarantor parties named therein and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys and Sheraton Holding Corporations Joint Registration Statement on Form S-4 filed with the SEC on November 19, 2002). Indenture, dated as of September 13, 2007, between the Company and the U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the SEC on September 17, 2007 (the September 17 Form 8-K)). Supplemental Indenture, dated as of September 13, 2007, between the Company and the U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the September 17 Form 8-K).

43

Exhibit Number

Description of Exhibit

4.9

4.10

4.11

10.1

10.2

10.3

10.4

10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13

10.14 10.15

Supplemental Indenture No. 2, dated as of May 23, 2008, between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the SEC on May 28, 2008). Supplemental Indenture No. 3, dated as of May 7, 2009, between the Company and the U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the SEC on May 12, 2009). Supplemental Indenture No. 4, dated as of November 20, 2009, between the Company and the U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the SEC on November 23, 2009). The registrant hereby agrees to file with the Commission a copy of any instrument, including indentures, defining the rights of long-term debt holders of the registrant and its consolidated subsidiaries upon the request of the Commission. Third Amended and Restated Limited Partnership Agreement for Operating Partnership, dated January 6, 1999, among the Company and the limited partners of Operating Partnership (incorporated by reference to Exhibit 10.2 to the Companys Annual Report on Form 10-K405 for the fiscal year ended December 31, 1998). Form of Trademark License Agreement, dated as of December 10, 1997, between Starwood Capital and the Company (incorporated by reference to Exhibit 10.22 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 1997). Credit Agreement, dated as of April 20, 2010, among the Company, certain additional Dollar Revolving Loan Borrowers, certain additional Alternate Currency Revolving Loan Borrowers, various Lenders, Deutsche Bank AG New York Branch, as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Banc of America Securities LLC, as Lead Arrangers and Book Running Managers, (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC on April 22, 2010). Starwood Hotels & Resorts Worldwide, Inc. 1999 Long-Term Incentive Compensation Plan (the 1999 LTIP) (incorporated by reference to Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999).* First Amendment to the 1999 LTIP, dated as of August 1, 2001 (incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001).* Second Amendment to the 1999 LTIP (incorporated by reference to Exhibit 10.2 to the 2003 10-Q1). * Form of Non-Qualified Stock Option Agreement pursuant to the 1999 LTIP (incorporated by reference to Exhibit 10.30 to the 2004 Form 10-K).* Form of Restricted Stock Agreement pursuant to the 1999 LTIP (incorporated by reference to Exhibit 10.31 to the 2004 Form 10-K).* Starwood Hotels & Resorts Worldwide, Inc. 2002 Long-Term Incentive Compensation Plan (the 2002 LTIP) (incorporated by reference to Annex B of the Companys 2002 Proxy Statement).* First Amendment to the 2002 LTIP (incorporated by reference to Exhibit 10.1 to the 2003 10-Q1).* Form of Non-Qualified Stock Option Agreement pursuant to the 2002 LTIP (incorporated by reference to Exhibit 10.49 to the 2002 Form 10-K filed on February 28, 2003 (the 2002 10-K)).* Form of Restricted Stock Agreement pursuant to the 2002 LTIP (incorporated by reference to Exhibit 10.35 to the 2004 Form 10-K).* 2004 Long-Term Incentive Compensation Plan, amended and restated as of December 31, 2008 (2004 LTIP) (incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed with the SEC on January 6, 2009 (the January 2009 8-K)).* Form of Non-Qualified Stock Option Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.4 to the 2004 Form 10-Q2).* Form of Restricted Stock Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.38 to the 2004 Form 10-K).*

44

Exhibit Number

Description of Exhibit

10.16

10.17 10.18

10.19 10.20 10.21

10.22

10.23 10.24

10.25

10.26

10.27 10.28 10.29 10.30

10.31

10.32 10.33

10.34 10.35

Form of Non-Qualified Stock Option Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed February 13, 2006 (the February 2006 Form 8-K)).* Form of Restricted Stock Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.1 to the February 2006 Form 8-K).* Form of Amended and Restated Non-Qualified Stock Option Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2006 (the 2006 Form 10-Q2)).* Form of Amended and Restated Restricted Stock Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.2 to the 2006 Form 10-Q2).* Annual Incentive Plan for Certain Executives, amended and restated as of December 2008 (incorporated by reference to Exhibit 10.2 to the January 2009 8-K).* Starwood Hotels & Resorts Worldwide, Inc. Amended and Restated Deferred Compensation Plan, effective as of January 22, 2008 (incorporate by reference to Exhibit 10.35 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007).* Form of Indemnification Agreement between the Company and each of its Directors and executive officers (incorporated by reference to Exhibit 10.10 to the Companys Current Report on Form 8-K filed with the SEC on November 25, 2009).* Employment Agreement, dated as of November 13, 2003, between the Company and Vasant Prabhu (incorporated by reference to Exhibit 10.68 to the 2003 10-K).* Letter Agreement, dated August 14, 2007, between the Company and Vasant Prabhu (incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed with the SEC on August 17, 2007 (the August 17 Form 8-K)).* Amendment, dated as of December 30, 2008, to employment agreement between the Company and Vasant Prabhu (incorporated by reference to Exhibit 10.34 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the 2008 Form 10-K).* Employment Agreement, dated as of September 25, 2000, between the Company and Kenneth Siegel (incorporated by reference to Exhibit 10.57 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (the 2000 Form 10-K)).* Letter Agreement, dated July 22, 2004 between the Company and Kenneth Siegel (incorporated by reference to Exhibit 10.73 to the 2004 Form 10-K).* Letter Agreement, dated August 14, 2007, between the Company and Kenneth S. Siegel (incorporated by reference to Exhibit 10.1 to the August 17 Form 8-K).* Amendment, dated as of December 30, 2008, to employment agreement between the Company and Kenneth S. Siegel (incorporated by reference to Exhibit 10.43 to the 2008 Form 10-K).* Employment Agreement, dated as of August 2, 2007, between the Company and Bruce W. Duncan (incorporated by reference to Exhibit 10.5 to the Companys quarterly report on Form 10-Q for the quarterly period ended June 30, 2007).* Form of Restricted Stock Unit Agreement between the Company and Bruce W. Duncan pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007).* Amended and Restated Employment Agreement, dated as of December 30, 2008, between the Company and Frits van Paasschen (incorporated by reference to Exhibit 10.52 to the 2008 Form 10-K).* Form of Non-Qualified Stock Option Agreement between the Company and Frits van Paasschen pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.5 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007 (the 2007 Form 10-Q3)).* Form of Restricted Stock Unit Agreement between the Company and Frits van Paasschen pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.6 to the 2007 Form 10-Q3).* Form of Restricted Stock Grant between the Company and Frits van Paasschen pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.7 to the 2007 Form 10-Q3). * 45

Exhibit Number

Description of Exhibit

10.57 10.58

10.59 10.60 10.61 10.62 10.63 12.1 21.1 23.1 31.1 31.2 32.1 32.2 101

Form of Severance Agreement between the Company and each of Messrs. Siegel and Prabhu (incorporated by reference to Exhibit 10.57 to the 2008 Form 10-K).* Letter Agreement, dated August 22, 2008, between the Company and Matthew Avril (incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009 (the 2009 Form 10-Q1).* Amendment, dated as of December 30, 2008, to employment agreement between the Company and Matthew Avril (incorporated by reference to Exhibit 10.2 to the 2009 Form 10-Q1).* Amended and Restated Severance Agreement, dated as of December 30, 2008, between the Company and Matthew Avril (incorporated by reference to Exhibit 10.3 to the 2009 Form 10-Q1).* Letter Agreement, dated April 15, 2008, between the Company and Simon Turner (incorporated by reference to Exhibit 10.7 to the 2009 Form 10-Q1).* Amendment, dated as of December 30, 2008, to employment agreement between the Company and Simon Turner (incorporated by reference to Exhibit 10.8 to the 2009 Form 10-Q1).* Amended and Restated Severance Agreement, dated as of December 30, 2008, between the Company and Simon Turner (incorporated by reference to Exhibit 10.9 to the 2009 Form 10-Q1).* Calculation of Ratio of Earnings to Total Fixed Charges. List of our Subsidiaries. Consent of Ernst & Young LLP. Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 Chief Executive Officer.+ Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 Chief Financial Officer.+ Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code Chief Executive Officer.+ Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code Chief Financial Officer.+ The following materials from the Companys Annual Report on Form 10-K for the period ended December 31, 2010, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.**

+ Filed herewith. Copies of these exhibits are included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 18, 2011. * Indicates management contract or compensatory plan or arrangement ** This exhibit is being furnished rather than filed, and shall not be deemed incorporated by reference to any filing, in accordance with Item 601 of Regulation S-K.

46

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

By: /s/ FRITS VAN PAASSCHEN Frits van Paasschen Chief Executive Officer and Director Date: February 17, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature Title Date

/s/ FRITS VAN PAASSCHEN Frits van Paasschen /s/ BRUCE W. DUNCAN Bruce W. Duncan /s/ VASANT M. PRABHU Vasant M. Prabhu /s/ ALAN M. SCHNAID Alan M. Schnaid /s/ ADAM M. ARON Adam M. Aron /s/ CHARLENE BARSHEFSKY Charlene Barshefsky /s/ THOMAS E. CLARKE Thomas E. Clarke /s/ CLAYTON C. DALEY, JR. Clayton C. Daley, Jr. /s/ LIZANNE GALBREATH Lizanne Galbreath /s/ ERIC HIPPEAU Eric Hippeau

Chief Executive Officer and Director

February 17, 2011

Chairman and Director

February 17, 2011

Executive Vice President and Chief Financial Officer (Principal Financial Officer) Senior Vice President, Corporate Controller and Principal Accounting Officer Director

February 17, 2011

February 17, 2011

February 17, 2011

Director

February 17, 2011

Director

February 17, 2011

Director

February 17, 2011

Director

February 17, 2011

Director

February 17, 2011

47

Signature

Title

Date

/s/ STEPHEN R. QUAZZO Stephen R. Quazzo /s/ THOMAS O. RYDER Thomas O. Ryder /s/ KNEELAND C. YOUNGBLOOD Kneeland C. Youngblood

Director

February 17, 2011

Director

February 17, 2011

Director

February 17, 2011

48

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Page

Report of Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets as of December 31, 2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Income for the Years Ended December 31, 2010, 2009 and 2008 . . . . . . . . . Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2010, 2009 and 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Equity for the Years Ended December 31, 2010, 2009 and 2008 . . . . . . . . . . Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008 . . . . . . Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule: Schedule II Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-2 F-3 F-4 F-5 F-6 F-7 F-8 S-1

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Starwood Hotels & Resorts Worldwide, Inc. We have audited the accompanying consolidated balance sheets of Starwood Hotels & Resorts Worldwide, Inc. (the Company) as of December 31, 2010 and 2009, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2010 and 2009, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 2 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets (formerly Statement of Financial Accounting Standards (SFAS) No. 166), and ASU No. 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (formerly SFAS No. 167) on January 1, 2010. The Company adopted SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51 (codified in FASB Accounting Standards Codification Topic 810, Consolidations) on January 1, 2009. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2011 expressed an unqualified opinion thereon.

/s/ New York, New York February 17, 2011

Ernst & Young LLP

F-2

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED BALANCE SHEETS

December 31, 2010 2009 (In millions, except share data)

ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, net of allowance for doubtful accounts of $45 and $54 . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securitized vacation ownership notes receivable, net of allowance for doubtful accounts of $10 and $0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plant, property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill and intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securitized vacation ownership notes receivable, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 753 53 513 802 59 126 2,306 312 3,323 2,067 979 381 408 $9,776

87 47 445 783

127 1,489 368 3,350 71 2,063 982 438 $8,761

LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Short-term borrowings and current maturities of long-term debt . . . . . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current maturities of long-term securitized vacation ownership debt . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued taxes and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term securitized vacation ownership debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commitments and contingencies Stockholders equity: Common stock; $0.01 par value; authorized 1,000,000,000 shares; outstanding 192,970,437 and 186,785,068 shares at December 31, 2010 and 2009, respectively . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Starwood stockholders equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9 138 127 1,104 410 373 2,161 2,848 367 28 1,886 7,290

5 139 1,212 303 368 2,027 2,955 31 1,903 6,916

2 805 (283) 1,947 2,471 15 2,486 $9,776

2 552 (283) 1,553 1,824 21 1,845 $8,761

The accompanying notes to financial statements are an integral part of the above statements. F-3

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31, 2010 2009 2008 (In millions, except per share data)

Revenues Owned, leased and consolidated joint venture hotels . . . . . . . . . . . . . Vacation ownership and residential sales and services . . . . . . . . . . . . Management fees, franchise fees and other income . . . . . . . . . . . . . . Other revenues from managed and franchised properties . . . . . . . . . .

. . . . . . . . . $1,704 ......... 538 ......... 712 . . . . . . . . . 2,117 5,071 1,395 405 344 (75) 252 33 2,117 4,471 600 10 (236) (39) 335 (27) 308 (1) 168 475 2 477

$1,584 523 658 1,931 4,696 1,315 422 314 379 274 35 1,931 4,670 26 (4) (227) (91) (296) 293 (3) (2) 76 71 2 73

$2,212 749 751 2,042 5,754 1,688 583 377 141 281 32 2,042 5,144 610 16 (207) (98) 321 (72) 249 5 75 329 $ 329 $ 1.37 0.44 $ 1.81 $ 1.34 0.43 $ 1.77 $ 249 80 $ 329 181 185 $ 0.90

Costs and Expenses Owned, leased and consolidated joint venture hotels . . . . . . . . . . . . . . . . . . . . . . Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general, administrative and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restructuring, goodwill impairment and other special charges (credits), net . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other expenses from managed and franchised properties . . . . . . . . . . . . . . . . . . .

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity earnings (losses) and gains and losses from unconsolidated ventures, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense, net of interest income of $2, $3 and $3 . . . . . . . . . . . . . . . . . . Gain (loss) on asset dispositions and impairments, net . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations before taxes and noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations: Income (loss) from operations, net of tax (benefit) expense of $0, $(2) and $4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on dispositions, net of tax (benefit) expense of $(166), $(35) and $54 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net (income) loss attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . Net income attributable to Starwood. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Earnings (Losses) Per Share Basic Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.70 Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.91 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.61 Earnings (Losses) Per Share Diluted Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.63 Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.88 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.51 Amounts attributable to Starwoods Common Shareholders Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 310 Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 477 Weighted average number of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average number of shares assuming dilution . . . . . . . . . . . . . . . . . . . . 183 190

$ 0.00 0.41 $ 0.41 $ 0.00 0.41 $ 0.41 $ $ (1) 74 73 180 180 $ 0.20

Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.30

The accompanying notes to financial statements are an integral part of the above statements. F-4

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31, 2010 2009 2008 (In millions)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $475 Other comprehensive income (loss), net of taxes: Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Less: Recognition of accumulated foreign currency translation adjustments on sold hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Defined benefit pension and postretirement benefit plans net gains (losses) arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) Net curtailment and settlement gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of actuarial gains and losses included in net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Change in fair value of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Reclassification adjustments for losses (gains) included in net income . . . . . . . . . . 1 Change in fair value of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Reclassification for gains and amortization included in net income . . . . . . . . . . . . . Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive (income) loss attributable to noncontrolling interests . . . . . . . . . . . Foreign currency translation adjustments attributable to noncontrolling interests . . . 475 2 (1)

$ 71 86 (13) 10 23 5 (6) 3 108 179 2 1 $182

$ 329 (190) (61) 1 2 4 2 (1) (1) (244) 85 $ 85

Comprehensive income (loss) attributable to Starwood . . . . . . . . . . . . . . . . . . . . . . . . $476

The accompanying notes to financial statements are an integral part of the above statements. F-5

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF EQUITY

Equity Attributable to Starwood Stockholders Accumulated Other Comprehensive (Loss) Income(2) (In millions) Equity Attributable to Noncontrolling Interests

Shares Shares Amount

Additional Paid-in Capital(1)

Retained Earnings

Total

Balance at December 31, 2007. . . . . . . Net income (loss) . . . . . . . . . . . . . . . . Stock option and restricted stock award transactions, net . . . . . . . . . . . . . . . . ESPP stock issuances. . . . . . . . . . . . . . Share repurchases . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . Dividends declared . . . . . . . . . . . . . . . Balance at December 31, 2008. . . . . . . Net income (loss) . . . . . . . . . . . . . . . . Stock option and restricted stock award transactions, net . . . . . . . . . . . . . . . . ESPP stock issuances. . . . . . . . . . . . . . Other comprehensive income (loss) . . . Dividends declared . . . . . . . . . . . . . . . Balance at December 31, 2009. . . . . . . Net income (loss) . . . . . . . . . . . . . . . . Stock option and restricted stock award transactions, net . . . . . . . . . . . . . . . . ESPP stock issuances. . . . . . . . . . . . . . Impact of adoption of ASU No. 2009-17 . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . Dividends declared . . . . . . . . . . . . . . . Balance at December 31, 2010. . . . . . .

191 6 (14) 183 4 187 6 193

$ 2 2 2 $ 2

$ 868 212 6 (593) 493 54 5 552 248 5 $ 805

$(147) (244) (391) 108 (283) $(283)

$1,353 329 (165) 1,517 73 (37) 1,553 477 (26) (57) $1,947

$26 (2) (1) 23 (2) 1 (1) 21 (2) (1) (3) $15

$2,102 329 212 6 (593) (2) (244) (166) 1,644 71 54 5 109 (38) 1,845 475 248 5 (26) (1) (60) $2,486

(1) Stock option and restricted stock award transactions are net of a tax (expense) benefit of $28 million, ($18) million and $33 million in 2010, 2009, and 2008 respectively. (2) As of December 31, 2010, this balance is comprised of $227 million of cumulative translation adjustments and $56 million of cumulative pension adjustments.

The accompanying notes to financial statements are an integral part of the above statements. F-6

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 2010 2009 2008 (In millions)
Operating Activities Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to net income: Discontinued operations: (Gain) loss on dispositions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other adjustments relating to discontinued operations . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess stock-based compensation tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of deferred loan costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash portion of restructuring, goodwill impairment and other special charges (credits), Non-cash foreign currency (gains) losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of deferred gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributions in excess (deficit) of equity earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of VOI notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on asset dispositions and impairments, net . . . . . . . . . . . . . . . . . . . . . . . . Non-cash portion of income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in working capital: Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securitized VOI notes receivable activity, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VOI notes receivable activity, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investing Activities Purchases of plant, property and equipment . Proceeds from asset sales, net . . . . . . . . . . Issuance of notes receivable . . . . . . . . . . . Collection of notes receivable, net . . . . . . . Acquisitions, net of acquired cash . . . . . . . Purchases of investments . . . . . . . . . . . . . Proceeds from investments . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 475 $ 71 $ 329

. . . . . . . . . . . . . . . . . . . . . net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . .

(168) 72 (20) 285 13 (7) (39) (81) 55 3 39 16 9 (22) (110) 1 13 200 (29) 1 58 764 (227) 148 (1) 2 (18) (32) 49 8 (71) (114) 3 (9) 280 (224) (93) 141 20 (30) (26) (1) 666 87 $ 753 $

(76) 8 53 309 10 332 (6) (82) 72 30 (24) 91 (260) 46 63 (98) 10 (44) (50) 167 (51) 571 (196) 310 (4) 2 (5) 35 (26) 116 (102) 726 (1,681) (165) 2 227 (993) 4 (302) 389 87

(75) 10 68 (16) 313 5 74 (5) (83) 64 21 (4) 98 24 102 34 (280) 2 85 (22) (150) 52 646 (476) 320 (1) 5 (38) 39 (21) (172) (570) 986 (4) (172) 120 16 (593) (26) (243) 7 238 151 $ 389

Cash (used for) from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash (used for) from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financing Activities Revolving credit facility and short-term borrowings (repayments), net . Long-term debt issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt repaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term securitized debt issued . . . . . . . . . . . . . . . . . . . . . . . . Long-term securitized debt repaid . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from stock option exercises . . . . . . . . . . . . . . . . . . . . . . Excess stock-based compensation tax benefit (expense) . . . . . . . . . . Share repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash (used for) from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exchange rate effect on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplemental Disclosures of Cash Flow Information Cash paid (received) during the period for: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 244 $(171)

$ $

214 12

$ 170 $ 58

The accompanying notes to financial statements are an integral part of the above statements. F-7

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Note 1. Basis of Presentation The accompanying consolidated financial statements represent the consolidated financial position and consolidated results of operations of Starwood Hotels & Resorts Worldwide, Inc. and its subsidiaries (the Company). Starwood is one of the worlds largest hotel and leisure companies. The Companys principal business is hotels and leisure, which is comprised of a worldwide hospitality network of almost 1,000 full-service hotels, vacation ownership resorts and residential developments primarily serving two markets: luxury and upscale. The principal operations of Starwood Vacation Ownership, Inc. (SVO) include the acquisition, development and operation of vacation ownership resorts; marketing and selling vacation ownership interests (VOIs) in the resorts; and providing financing to customers who purchase such interests. The consolidated financial statements include the accounts of the Company and all of its controlled subsidiaries and partnerships. In consolidating, all material intercompany transactions are eliminated. We have evaluated all subsequent events through the date the consolidated financial statements were filed. Note 2. Significant Accounting Policies Principles of Consolidation. The accompanying consolidated financial statements of the Company and its subsidiaries include the assets, liabilities, revenues and expenses of majority-owned subsidiaries over which the Company exercises control. Intercompany transactions and balances have been eliminated in consolidation. Cash and Cash Equivalents. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Restricted Cash. Restricted cash primarily consists of deposits received on sales of VOIs and residential properties that are held in escrow until a certificate of occupancy is obtained, the legal rescission period has expired and the deed of trust has been recorded in governmental property ownership records. At December 31, 2010 and 2009, the Company had short-term restricted cash balances of $53 million and $47 million, respectively. Inventories. Inventories are comprised principally of VOIs of $307 million and $434 million as of December 31, 2010 and 2009, respectively, residential inventory of $462 million and $315 million at December 31, 2010 and 2009, respectively, and hotel inventory. VOI and residential inventory is carried at the lower of cost or net realizable value and includes $29 million, $31 million and $25 million of capitalized interest incurred in 2010, 2009 and 2008, respectively. Hotel inventory includes operating supplies and food and beverage inventory items which are generally valued at the lower of FIFO cost (first-in, first-out) or market. Hotel inventory also includes linens, china, glass, silver, uniforms, utensils and guest room items. Significant purchases of these items with a useful life of greater than one year are recorded at purchased cost and amortized over their useful life. Normal replacement purchases are expensed as incurred. Loan Loss Reserves. For the vacation ownership and residential segment, the Company records an estimate of expected uncollectibility on its VOI notes receivable as a reduction of revenue at the time it recognizes a timeshare sale. The Company holds large amounts of homogeneous VOI notes receivable and therefore assesses uncollectibility based on pools of receivables. In estimating loan loss reserves, the Company uses a technique referred to as static pool analysis, which tracks defaults for each years mortgage originations over the life of the respective notes and projects an estimated default rate. As of December 31, 2010, the average estimated default rate for the Companys pools of receivables was 10%. The primary credit quality indicator used by the Company to calculate the loan loss reserve for the vacation ownership notes is the origination of the notes by brand (Sheraton, Westin, and Other) as the Company believes there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired. In addition to quantitatively calculating the loan loss reserve based on its static pool analysis, the Company supplements the process by evaluating certain qualitative data, including the F-8

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) aging of the respective receivables, current default trends by brand and origination year, and the Fair Isaac Corporation (FICO) scores of the buyers. Given the significance of the Companys respective pools of VOI notes receivable, a change in the projected default rate can have a significant impact to its loan loss reserve requirements, with a 0.1% change estimated to have an impact of approximately $3 million. The Company considers a VOI note receivable delinquent when it is more than 30 days outstanding. All delinquent loans are placed on nonaccrual status and the Company does not resume interest accrual until payment is made. Upon reaching 120 days outstanding, the loan is considered to be in default and the Company commences the repossession process. Uncollectible VOI notes receivable are charged off when title to the unit is returned to the Company. The Company generally does not modify vacation ownership notes that become delinquent or upon default. For the hotel segment, the Company measures the impairment of a loan based on the present value of expected future cash flows, discounted at the loans original effective interest rate, or the estimated fair value of the collateral. For impaired loans, the Company establishes a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows or the estimated fair value of the collateral. The Company applies the loan impairment policy individually to all loans in the portfolio and does not aggregate loans for the purpose of applying such policy. For loans that the Company has determined to be impaired, the Company recognizes interest income on a cash basis. Assets Held for Sale. The Company considers properties to be assets held for sale when management approves and commits to a formal plan to actively market a property or group of properties for sale and a signed sales contract and significant non-refundable deposit or contract break-up fee exist. Upon designation as an asset held for sale, the Company records the carrying value of each property or group of properties at the lower of its carrying value which includes allocable segment goodwill or its estimated fair value, less estimated costs to sell, and the Company stops recording depreciation expense. Any gain realized in connection with the sale of a property for which the Company has significant continuing involvement (such as through a long-term management agreement) is deferred and recognized over the initial term of the related agreement (See Note 13). The operations of the properties held for sale prior to the sale date, if material, are recorded in discontinued operations unless the Company will have continuing involvement (such as through a management or franchise agreement) after the sale. Investments. Investments in joint ventures are generally accounted for under the equity method of accounting when the Company has a 20% to 50% ownership interest or exercises significant influence over the venture. If the Companys interest exceeds 50% or, if the Company has the power to direct the economic activities of the entity and the obligation to absorb losses, the results of the joint venture are consolidated herein. All other investments are generally accounted for under the cost method. The fair market value of investments is based on the market prices for the last day of the period if the investment trades on quoted exchanges. For non-traded investments, fair value is estimated based on the underlying value of the investment, which is dependent on the performance of the investment as well as the volatility inherent in external markets for these types of investments. In assessing potential impairment for these investments, the Company will consider these factors as well as forecasted financial performance of its investment. If these forecasts are not met, the Company may have to record impairment charges. Plant, Property and Equipment. Plant, property and equipment, including capitalized interest of $2 million, $2 million and $6 million incurred in 2010, 2009 and 2008, respectively, applicable to major project expenditures are recorded at cost. The cost of improvements that extend the life of plant, property and equipment are capitalized. These capitalized costs may include structural improvements, equipment and fixtures. Costs for normal repairs and maintenance are expensed as incurred. Depreciation is recorded on a straight-line basis over the estimated useful economic lives of 15 to 40 years for buildings and improvements; 3 to 10 years for furniture, fixtures and equipment; 3 to 20 years for information technology software and equipment; and the lesser of the lease term or the F-9

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) economic useful life for leasehold improvements. Gains or losses on the sale or retirement of assets are included in income when the assets are sold provided there is reasonable assurance of the collectability of the sales price and any future activities to be performed by the Company relating to the assets sold are insignificant. The Company evaluates the carrying value of its assets for impairment. For assets in use when the trigger events specified in Accounting Standards Codification (ASC) 360, Property Plant, and Equipment occur, the expected undiscounted future cash flows of the assets are compared to the net book value of the assets. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value is charged to current earnings. Fair value is based upon discounted cash flows of the assets at rates deemed reasonable for the type of asset and prevailing market conditions, comparative sales for similar assets, appraisals and, if appropriate, current estimated net sales proceeds from pending offers. Goodwill and Intangible Assets. Goodwill and intangible assets arise in connection with acquisitions, including the acquisition of management contracts. The Company does not amortize goodwill and intangible assets with indefinite lives. Intangible assets with finite lives are amortized on a straight-line basis over their respective useful lives. The Company reviews all goodwill and intangible assets for impairment by comparisons of fair value to book value annually, or upon the occurrence of a trigger event. Impairment charges, if any, are recognized in operating results. Frequent Guest Program. Starwood Preferred Guest (SPG) is the Companys frequent guest incentive marketing program. SPG members earn points based on spending at the Companys owned, managed and franchised hotels, as incentives to first-time buyers of VOIs and residences, and through participation in affiliated partners programs such as co-branded credit cards. Points can be redeemed at substantially all of the Companys owned, leased, managed and franchised hotels as well as through other redemption opportunities with third parties, such as conversion to airline miles. The Company charges its owned, managed and franchised hotels the cost of operating the SPG program, including the estimated cost of its future redemption obligation, based on a percentage of its SPG members qualified expenditures. The Companys management and franchise agreements require that the Company be reimbursed for the costs of operating the SPG program, including marketing, promotions and communications, and performing member services for the SPG members. As points are earned, the Company increases the SPG point liability for the amount of cash it receives from its managed and franchised hotels related to the future redemption obligation. For its owned hotels the Company records an expense for the amount of its future redemption obligation with the offset to the SPG point liability. When points are redeemed by the SPG members, the hotels recognize revenue and the SPG point liability is reduced. The Company, through the services of third-party actuarial analysts, determines the value of the future redemption obligation based on statistical formulas which project the timing of future point redemptions based on historical experience, including an estimate of the breakage for points that will never be redeemed, and an estimate of the points that will eventually be redeemed as well as the cost of reimbursing hotels and other thirdparties in respect of other redemption opportunities for point redemptions. The Company consolidates the assets and liabilities of the SPG program including the liability associated with the future redemption obligation which is included in other long-term liabilities and accrued expenses in the accompanying consolidated balance sheets. The total actuarially determined liability (see Note 18), as of December 31, 2010 and 2009, is $753 million and $689 million, respectively, of which $225 million and $244 million, respectively, is included in accrued expenses. Legal Contingencies. The Company is subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. ASC 450, Contingencies requires that an estimated loss from a loss contingency be accrued with a corresponding charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a contingency is required if there is at least a reasonable possibility that a loss has been incurred. The Company evaluates, among F-10

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact the Companys financial position or its results of operations. Derivative Financial Instruments. The Company periodically enters into interest rate swap agreements, based on market conditions, to manage interest rate exposure. The net settlements paid or received under these agreements are accrued consistent with the terms of the agreements and are recognized in interest expense over the term of the related debt. The Company enters into foreign currency hedging contracts to manage exposure to foreign currency fluctuations. All foreign currency hedging instruments have an inverse correlation to the hedged assets or liabilities. Changes in the fair value of the derivative instruments are classified in the same manner as the classification of the changes in the underlying assets or liabilities due to fluctuations in foreign currency exchange rates. These forward contracts do not qualify as hedges. The Company periodically enters into forward contracts to manage foreign exchange risk based on market conditions. The Company enters into forward contracts to hedge fluctuations in forecasted transactions based on foreign currencies that are billed in United States dollars. These forward contracts have been designated as cash flow hedges, and their change in fair value is recorded as a component of other comprehensive income. As a forecasted transaction occurs, the gain or loss is reclassified from other comprehensive income to management fees, franchise fees and other income. The Company does not enter into derivative financial instruments for trading or speculative purposes and monitors the financial stability and credit standing of its counterparties. Foreign Currency Translation. Balance sheet accounts are translated at the exchange rates in effect at each period end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The national currencies of foreign operations are generally the functional currencies. Gains and losses from foreign exchange and the effect of exchange rate changes on intercompany transactions of a long-term investment nature are generally included in other comprehensive income. Gains and losses from foreign exchange rate changes related to intercompany receivables and payables that are not of a long-term investment nature are reported currently in costs and expenses and amounted to a net gain of $39 million in 2010, a net gain of $6 million in 2009 and a net gain of $5 million in 2008. Income Taxes. The Company provides for income taxes in accordance with ASC 740, Income Taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entitys financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the new rate is enacted. Stock-Based Compensation. The Company calculates the fair value of share-based awards on the date of grant. Restricted stock awards are valued based on the share price. The Company has determined that a lattice valuation model would provide a better estimate of the fair value of options granted under its long-term incentive plans than a Black-Scholes model. The lattice valuation option pricing model requires the Company to estimate key assumptions such as expected life, volatility, risk-free interest rates and dividend yield to determine the fair value of share-based awards, based on both historical information and management judgment regarding market factors and trends. The Company amortizes the share-based compensation expense over the period that the awards are expected to vest, net of estimated forfeitures. If the actual forfeitures differ from management estimates, additional adjustments to compensation expense are recorded. Please refer to Note 23, Stock-Based Compensation. F-11

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Revenue Recognition. The Companys revenues are primarily derived from the following sources: (1) hotel and resort revenues at the Companys owned, leased and consolidated joint venture properties; (2) vacation ownership and residential revenues; (3) management and franchise revenues; (4) revenues from managed and franchised properties; and (5) other revenues which are ancillary to the Companys operations. Generally, revenues are recognized when the services have been rendered. Taxes collected from customers and submitted to taxing authorities are not recorded in revenue. The following is a description of the composition of revenues for the Company: Owned, Leased and Consolidated Joint Ventures Represents revenue primarily derived from hotel operations, including the rental of rooms and food and beverage sales, from owned, leased or consolidated joint venture hotels and resorts. Revenue is recognized when rooms are occupied and services have been rendered. Vacation Ownership and Residential The Company recognizes sales when the buyer has demonstrated a sufficient level of initial and continuing investment, the period of cancellation with refund has expired and receivables are deemed collectible. For sales that do not qualify for full revenue recognition as the project has progressed beyond the preliminary stages but has not yet reached completion, all revenue and profit are initially deferred and recognized in earnings through the percentage-of-completion method. The Company has also entered into licensing agreements with third-party developers to offer consumers branded condominiums or residences. The fees from these arrangements are generally based on the gross sales revenue of the units sold. Residential fee revenue is recorded in the period that a purchase and sales agreement exists, delivery of services and obligations has occurred, the fee to the owner is deemed fixed and determinable and collectability of the fees is reasonably assured. Management and Franchise Revenues Represents fees earned on hotels managed worldwide, usually under long-term contracts, franchise fees received in connection with the franchise of the Companys Sheraton, Westin, Four Points by Sheraton, Le Mridien, St. Regis, W, Luxury Collection, Aloft and Element brand names, termination fees and the amortization of deferred gains related to sold properties for which the Company has significant continuing involvement. Management fees are comprised of a base fee, which is generally based on a percentage of gross revenues, and an incentive fee, which is generally based on the propertys profitability. Base fee revenues are recognized when earned in accordance with the terms of the contract. For any time during the year, when the provisions of the management contracts allow receipt of incentive fees upon termination, incentive fees are recognized for the fees due and earned as if the contract was terminated at that date, exclusive of any termination fees due or payable. Franchise fees are generally based on a percentage of hotel room revenues and are recognized as the fees are earned and become due from the franchisee. Revenues from Managed and Franchised Properties These revenues represent reimbursements of costs incurred on behalf of managed hotel properties and franchisees. These costs relate primarily to payroll costs at managed properties where the Company is the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on the Companys operating income or net income. Insurance Retention. Through its captive insurance company, the Company provides insurance coverage for workers compensation, property and general liability claims arising at hotel properties owned or managed by the Company through policies written directly and through reinsurance arrangements. Estimated insurance claims payable represent expected settlement of outstanding claims and a provision for claims that have been incurred but not reported. These estimates are based on the Companys assessment of potential liability using an analysis of available information including pending claims, historical experience and current cost trends. The amount of the ultimate liability may vary from these estimates. Estimated costs of these self-insurance programs are accrued, based on the analysis of third-party actuaries. F-12

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Costs Incurred to Sell VOIs. The Company capitalizes direct costs attributable to the sale of VOIs until the sales are recognized. Selling and marketing costs capitalized under this methodology were approximately $3 million as of December 31, 2010 and 2009, respectively, and all such capitalized costs are included in prepaid expenses and other assets in the accompanying consolidated balance sheets. Costs eligible for capitalization follow the guidelines of ASC 978, Real Estate Time Sharing Activities. If a contract is cancelled, the Company charges the unrecoverable direct selling and marketing costs to expense and records forfeited deposits as income. VOI and Residential Inventory Costs. Real estate and development costs are valued at the lower of cost or net realizable value. Development costs include both hard and soft construction costs and together with real estate costs are allocated to VOIs and residential units on the relative sales value method. Interest, property taxes and certain other carrying costs incurred during the construction process are capitalized as incurred. Such costs associated with completed VOI and residential units are expensed as incurred. Advertising Costs. The Company enters into multi-media ad campaigns, including television, radio, internet and print advertisements. Costs associated with these campaigns, including communication and production costs, are aggregated and expensed the first time that the advertising takes place. If it becomes apparent that the media campaign will not take place, all costs are expensed at that time. During the years ended December 31, 2010, 2009 and 2008, the Company incurred approximately $132 million, $118 million and $146 million of advertising expense, respectively, a significant portion of which was reimbursed by managed and franchised hotels. Retained Interests. The Company periodically sells notes receivable originated by its vacation ownership business in connection with the sale of VOIs. The Company, prior to the adoption of ASU 2009-17, would retain interests in the assets transferred to qualified and non-qualified special purpose entities (Retained Interests), which were accounted for as over-collateralizations and interest only strips. These retained interests were treated as available-for-sale transactions under the provisions of ASC 320 Investments Debt and Equity Securities. The Company reported changes in the fair values of these Retained Interests considered temporary through the accompanying consolidated statement of comprehensive income. A change in fair value determined to be other-than-temporary was recorded as a loss in the Companys consolidated statement of income. The Company had Retained Interests of $25 million at December 31, 2009. Additionally, as of December 31, 2009, the Company had $56 million of notes retained after the 2009 note sales. Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications. Certain reclassifications have been made to the prior years financial statements to conform to the current year presentation Impact of Recently Issued Accounting Standards. Adopted Accounting Standards In July 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. This topic requires disclosures of financing receivables and allowance for credit losses on a disaggregated basis. The balance sheet related disclosures are required beginning at December 31, 2010 and the statements of income disclosures are required, beginning for the three months ended March 31, 2011 (see Note 11). In June 2009, the FASB issued ASU No. 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets (formerly Statement of Financial Accounting Standards (SFAS) No. 166), and F-13

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) ASU No. 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (formerly SFAS No. 167). ASU No. 2009-16 amended the accounting for transfers of financial assets. Under ASU No. 2009-16, the qualifying special purpose entities (QSPEs) used in the Companys securitization transactions are no longer exempt from consolidation. ASU No. 2009-17 prescribes an ongoing assessment of the Companys involvement in the activities of the QSPEs and the Companys rights or obligations to receive benefits or absorb losses of the trusts that could be potentially significant in order to determine whether those variable interest entities (VIEs) will be required to be consolidated in the Companys financial statements. In accordance with ASU No. 2009-17, the Company concluded it is the primary beneficiary of the QSPEs and accordingly, the Company began consolidating the QSPEs on January 1, 2010 (see Note 10). Using the carrying amounts of the assets and liabilities of the QSPEs as prescribed by ASU No. 2009-17 and any corresponding elimination of activity between the QSPEs and the Company resulting from the consolidation on January 1, 2010, the Company recorded a $417 million increase in total assets, a $444 million increase in total liabilities, a $26 million (net of tax) decrease in beginning retained earnings and a $1 million decrease to stockholders equity. The Company has additional VIEs whereby the Company was determined not to be the primary beneficiary (see Note 26). Beginning January 1, 2010, the Companys balance sheet and statement of income no longer reflect activity related to its Retained Interests, but instead reflects activity related to its securitized vacation ownership notes receivable and the corresponding securitized debt, including interest income, loan loss provisions, and interest expense. Interest income and loan loss provisions associated with the securitized vacation ownership notes receivable are included in the vacation ownership and residential sales and services line item resulting in an increase of $52 million for the year ended December 31, 2010 as compared to the same period in 2009. Interest expense of $27 million was recorded for the year ended December 31, 2010. The cash flows from borrowings and repayments associated with the securitized vacation ownership debt are now presented as cash flows from financing activities. The Company does not expect to recognize gains or losses from future securitizations as a result of the adoption of this new guidance. The Companys statement of income for the year ended December 31, 2009 and its balance sheet as of December 31, 2009 have not been retrospectively adjusted to reflect the adoption of ASU Nos. 2009-16 and 2009-17. Therefore, current period results and balances will not be comparable to prior period amounts, particularly with regards to: Restricted cash Other assets Investments Vacation ownership and residential sales and services Interest expense In April 2009, the FASB issued FASB Staff Position (FSP) Financial Accounting Standard (FAS) No. 107-1 and Accounting Principles Board (APB) No. 28-1 Interim Disclosures about Fair Value of Financial Instruments (FSP FAS No. 107-1 and APB No 28-1), included in the Codification as ASC 825-10-65-1. This topic requires disclosures about the fair value of financial instruments for annual and interim reporting periods of publicly traded companies and is effective in reporting periods ending after June 15, 2009. On June 30, 2009, the Company adopted this topic, which did not have a material impact on its consolidated financial statements. In January 2009, the FASB issued FSP Issue No. FAS No. 132(R)-1 Employers Disclosures about Pensions and Other Postretirement Benefit Plan Assets (FSP FAS No. 132(R)-1), included in the Codification as ASC 715-20-65-2. This topic provides guidance on an employers disclosures about plan assets of a defined benefit pension or other postretirement plan. This topic is effective for fiscal years ending after December 15, 2009. The F-14

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Company adopted this topic on December 31, 2009 and incorporated it into its Employee Benefit Plan disclosure (see Note 20). In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133 (SFAS No. 161), included in the Codification as ASC 815-10-65-1. This topic requires enhanced disclosure related to derivatives and hedging activities. This topic must be applied prospectively to all derivative instruments and non-derivative instruments that are designated and qualify as hedging instruments and related hedged items for all financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company adopted this topic on January 1, 2009. See Note 24 for enhanced disclosures associated with the adoption. Effective January 1, 2008, the Company adopted SFAS No. 157 related to its financial assets and liabilities and elected to defer the option of SFAS No. 157 for non-financial assets and non-financial liabilities as allowed by FSP No. SFAS 157-2 Effective Date of FASB Statement No. 157, which was issued in February 2008, included in the Codification as ASC 820, Fair Value Measurements and Disclosures. This topic defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows: Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. On January 1, 2009, the Company adopted the provisions of this topic relating to non-financial assets and nonfinancial liabilities. The adoption of this statement did not have a material impact on the Companys consolidated financial statements.

Future Adoption of Accounting Standards In October 2009, the FASB issued ASU 2009-13 which supersedes certain guidance in ASC 605-25, Revenue Recognition Multiple Element Arrangements. This topic requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. This topic is effective for annual reporting periods beginning after June 15, 2010. The Company has evaluated this topic and determined that it will not have a material impact on its consolidated financial statements.

Note 3. Earnings (Losses) per Share Basic and diluted earnings (losses) per share are calculated using income (losses) from continuing operations attributable to Starwoods common shareholders (i.e. excluding amounts attributable to noncontrolling interests). F-15

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) The following is a reconciliation of basic earnings (losses) per share to diluted earnings (losses) per share for income (losses) from continuing operations (in millions, except per share data):
Year Ended December 31, 2009 2008 Per Earnings Per Per Earnings Shares Share (Losses) Shares Share Earnings Shares Share 2010

Basic earnings (losses) from continuing operations . . . . . Effect of dilutive securities: Employee options and restricted stock awards . . . . . . Diluted earnings (losses) from continuing operations . . . .

$310 $310

183 7 190

$1.70

$ (1)

180 180

$0.00

$249

181 4 185

$1.37

$1.63

$ (1)

$0.00

$249

$1.34

Approximately 5 million shares, 12 million shares and 7 million shares were excluded from the computation of diluted shares in 2010, 2009 and 2008, respectively, as their impact would have been anti-dilutive. Note 4. Significant Acquisitions During the year ended December 31, 2010, the Company paid approximately $23 million to acquire a controlling interest in a joint venture in which it had previously held a non-controlling interest. The primary business of the joint venture is to develop, license and manage restaurant concepts. The acquisition took place after one of the Companys former partners exercised its right to put its interest to the Company in accordance with the terms of the joint venture agreement. In accordance with ASC 805, Business Combinations, when an acquirer obtains a controlling position as a result of a step acquisition, the acquirer is required to remeasure its previously held investment to fair value and record the difference between fair value and its carrying value in the statement of income. This acquisition resulted in a gain of approximately $5 million which was recorded in the gain (loss) on asset dispositions and impairments, net line item. The fair values of the assets and liabilities acquired were recorded in Starwoods consolidated balance sheet, including the resulting goodwill of approximately $26 million. The results of operations going forward from the acquisition date have been included in Starwoods consolidated statements of income. Note 5. Asset Dispositions and Impairments During the years ended December 31, 2010 and 2009, the Company sold one wholly-owned hotel each year for cash proceeds of $70 million and $0 million, respectively, and recognized losses of $53 million and $4 million, respectively. These hotels were sold subject to long-term management contracts. During the year ended December 31, 2010, the Company sold certain non-hotel assets and recorded a gain of $4 million. Additionally, during the year ended December 31, 2010, the Company received insurance proceeds related to an owned hotel that was damaged by a tornado, resulting in a gain of approximately $14 million. These gains were partially offset by impairment charges of $7 million related to a vacation ownership property, an investment in a hotel management contract, and the retirement of fixed assets as a result of a significant renovation of a wholly-owned hotel. During the years ended December 31, 2009 and 2008, the Company sold one wholly-owned hotel each year for $90 million, and $99 million, respectively. These hotels were sold subject to long-term management contracts and the Company recorded deferred gains of $8 million and $27 million for the years ended December 31, 2009 and 2008, respectively (see Note 13). During the years ended December 31, 2010, 2009 and 2008, the Company reviewed the recoverability of its carrying values of its owned hotels and determined that certain hotels were impaired. The fair values of the hotels were estimated by using discounted cash flows, comparative sales for similar assets and recent letters of intent to sell certain assets. Impairment charges of $2 million, $41 million and $64 million, relating to one, six, and three F-16

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) hotels, were recorded in the years ended December 31, 2010, 2009 and 2008, respectively. These assets are reported in the hotels operating segment. During 2009 and 2008, as a result of market conditions at the time and the impact on the timeshare industry, the Company reviewed the fair value of its economic interests in securitized VOI notes receivable and concluded these interests were impaired. The fair value of the Companys investment in these retained interests was determined by estimating the net present value of the expected future cash flows, based on expected default and prepayment rates (See Note 10.) The Company recorded impairment charges of $22 million and $23 million in the years ended December 31, 2009 and 2008, related to these retained interests. These assets, prior to the adoption of ASU No. 2009-17, were reported in the vacation ownership and residential operating segment. During the years ended December 31, 2009 and 2008 the Company recorded losses of $18 million and $11 million, respectively, primarily related to impairments of hotel management contracts, certain technologyrelated fixed assets and an investment in which the Company holds a minority interest. Note 6. Assets Held for Sale During the year ended December 31, 2009, the Company entered into purchase and sale agreements for the sale of one wholly owned hotel for total expected cash consideration of approximately $78 million. The Company classified this asset and the estimated goodwill to be allocated as assets held for sale, ceased depreciating it and reclassified the operating results to discontinued operations. The hotel was sold during the second quarter of 2010 (see Note 19). Note 7. Plant, Property and Equipment Plant, property and equipment, excluding assets held for sale, consisted of the following (in millions):
December 31, 2010 2009

Land and improvements . . . . . . . . . . . . . . . . . Buildings and improvements. . . . . . . . . . . . . . Furniture, fixtures and equipment . . . . . . . . . . Construction work in process . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . $ 600 ......................... 3,300 ......................... 1,901 ......................... 170 5,971 (2,648) $ 3,323

597 3,222 1,824 180

Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . .

5,823 (2,473) $ 3,350

The above balances include unamortized capitalized computer software costs of $132 million and $136 million at December 31, 2010 and 2009 respectively. Amortization of capitalized computer software costs was $36 million, $36 million and $24 million for the years ended December 31, 2010, 2009 and 2008, respectively.

F-17

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Note 8. Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the year ended December 31, 2010 are as follows (in millions):
Hotel Segment Vacation Ownership Segment Total

Balance at January 1, 2009 . . . . . . . . . . . . . . . . . . Cumulative translation adjustment . . . . . . . . . . . . . Impairment charge . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

............. ............. ............. .............

$1,324 7 1 $1,332 $1,332 26 (8) (10) 8 $1,348

$241 (90) $151 $151 $151

$1,565 7 (90) 1 $1,483 $1,483 26 (8) (10) 8 $1,499

Balance at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at January 1, 2010 . . . . . . . . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative translation adjustment . . . . . . . . . . . . . Asset dispositions . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............. ............. ............. ............. .............

Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Company performed its annual goodwill impairment test as of October 31, 2010 for its hotel and vacation ownership reporting units and determined that there was no impairment of its goodwill. The vacation ownership reporting units fair value at October 31, 2010 exceeded its carrying value by approximately $237 million, or 30%. The fair value was calculated using a discounted cash flow model, in which the underlying cash flows were derived from managements current financial projections. The two key assumptions used in the fair value calculation are the discount rate and the capitalization rate in the terminal period, which were 10% and 2%, respectively. The Company completed a sensitivity analysis on the fair value of the vacation ownership reporting unit to measure the change in value associated with independent changes in the two key assumptions. The decreases in the fair value that would result from various changes in the key assumptions are shown in the chart below (in millions). The factors may not move independently of each either.
Discount Rate Terminal Period Capitalization Rate

50 basis points-dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 basis points-percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 basis points-dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 basis points-percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 51 4.9% $ 98 9.5%

$ 29 2.8% $ 55 5.3%

The Company performed its annual goodwill impairment test as of October 31, 2009 for its hotel and vacation ownership reporting units and determined that the vacation ownership goodwill was impaired, resulting in a charge of $90 million ($90 million after-tax) to the restructuring, goodwill, impairment and other charges (credits) line item in the consolidated statements of income. During the year ended December 31, 2009, the Company completed a comprehensive review of its vacation ownership business (see Note 14). As a result of this review, the Company decided not to develop certain vacation ownership sites and future phases of certain existing projects. These actions reduced the future expected cash flows of the vacation ownership reporting unit which contributed to impairment of its goodwill. In 2009, the Companys hotel reporting units fair value exceeded its carrying value. However, as discussed above, the fair value of the vacation ownership reporting unit was less than its carrying value, as such goodwill was F-18

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) deemed to be impaired, and step two of goodwill impairment test was performed. This step resulted in an implied goodwill fair value of $151 million compared to an actual goodwill balance of $241 million, with the difference of $90 million representing the impairment charge. In determining fair values associated with the goodwill impairment steps, the Company primarily used the income and the market approaches. Under the income approach, fair value was determined based on the estimated future cash flows of the reporting units taking into account assumptions such as REVPAR, operating margins and sales pace of vacation ownership units and discounting these cash flows using a discount rate commensurate with the risk inherent in the calculations. Under the market approach, the fair value of the reporting units were determined based on market valuation techniques such as comparable revenue and EBITDA multiples of similar companies in the hospitality industry. The vacation ownership goodwill had not been previously impaired. Intangible assets consisted of the following (in millions):
December 31, 2010 2009

Trademarks and trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 309 Management and franchise agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 764 (196) $ 568

$ 309 376 76 761 (181) $ 580

The intangible assets related to management and franchise agreements have finite lives, and accordingly, the Company recorded amortization expense of $33 million, $35 million, and $32 million, respectively, during the years ended December 31, 2010, 2009 and 2008. The other intangible assets noted above have indefinite lives. Amortization expense relating to intangible assets with finite lives for each of the years ended December 31, is expected to be as follows (in millions): 2011 2012 2013 2014 2015 . . . . . .................................................. .................................................. .................................................. .................................................. .................................................. ................ ................ ................ ................ ................ $32 $30 $30 $30 $29

Note 9. Other Assets Other assets include the following (in millions):
December 31, 2010 2009

VOI notes receivable, net of allowance of $69 and $84 . . . . . . . . . . . . . . . . . . . . . . . Prepaid taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . See Note 11 for discussion relating to VOI notes receivable. F-19

$132 88 161 $381

$222 103 113 $438

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Note 10. Transfers of Financial Assets

As discussed in Note 2, the Company adopted ASU 2009-16 and ASU 2009 -17 on January 1, 2010. As a result, the Company concluded it has variable interests in the entities associated with its five outstanding securitization transactions. As these securitizations consist of similar, homogenous loans they have been aggregated for disclosure purposes. The Company applied the variable interest model and determined it is the primary beneficiary of these VIEs. In making this determination, the Company evaluated the activities that significantly impact the economics of the VIEs, including the management of the securitized notes receivable and any related non-performing loans. The Company also evaluated its retention of the residual economic interests in the related VIEs. The Company is the servicer of the securitized mortgage receivables. The Company also has the option, subject to certain limitations, to repurchase or replace VOI notes receivable, that are in default, at their outstanding principal amounts. Such activity totaled $38 million during the year end December 31, 2010. The Company has been able to resell the VOIs underlying the VOI notes repurchased or replaced under these provisions without incurring significant losses. The securitization agreements are without recourse to the Company, except for breaches of representations and warranties. Based on the right of the Company to fund defaults at its option, subject to certain limitations, it intends to do so until the debt is extinguished to maintain the credit rating of the underlying notes. Upon transfer of vacation ownership notes receivable to the VIEs, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the VIE creditors. The VIEs utilize trusts which have ownership of cash balances that also have restrictions, the amounts of which are reported in restricted cash. The Companys interests in trust assets are subordinate to the interests of third-party investors and, as such, may not be realized by the Company if needed to absorb deficiencies in cash flows that are allocated to the investors in the trusts debt (see Note 17). The Company is contractually obligated to receive the excess cash flows (spread between the collections on the notes and third party obligations defined in the securitization agreements) from the VIEs. Such activity totaled $43 million during the year ended December 31, 2010 and is classified in cash and cash equivalents when received. During the year ended December 31, 2010, the Company completed the securitization of approximately $300 million of vacation ownership notes receivable. The securitization transaction did not qualify as a sale for accounting purposes and, accordingly, no gain or loss was recognized. Approximately $93 million of proceeds from this transaction were used to terminate the securitization completed in June 2009 by repaying the outstanding principal and interest on the securitized debt. In connection with the termination, a charge of $5 million was recorded to interest expense, relating to the settlement of a balance guarantee interest rate swap and the write-off of deferred financing costs. The net cash proceeds from the securitization after termination of the 2009 securitization and associated deal costs were approximately $180 million. See Note 11 for disclosures and amounts related to the securitized vacation ownership notes receivable consolidated on the Companys balance sheets as of December 31, 2010. Prior to the adoption of ASU 2009-16 and 2009-17, the Company completed securitizations of its VOI notes receivables, which qualified for sales treatment. Retained Interests cash flows are limited to the cash available from the related VOI notes receivable, after servicing and other related fees, absorbing 100% of any credit losses on the related VOI notes receivable and QSPE fixed rate interest expense. With respect to those transactions still outstanding at December 31, 2009, the Retained Interests are classified and accounted for as available-for-sale securities, reported at fair value with credit losses recorded in the statement of income and other unrealized gains and losses reported in stockholders equity. The Companys replacement of the defaulted VOI notes receivable under the securitization agreements with new VOI notes receivable resulted in net gains of approximately $3 million and $4 million during 2009 and 2008, respectively, which are included in vacation ownership and residential sales and services in the Companys consolidated statements of income. F-20

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) In June 2009, the Company securitized approximately $181 million of VOI notes receivable (the 2009-A Securitization) resulting in cash proceeds of approximately $125 million. The Company retained $44 million of interests in the QSPE, which included $43 million of notes the Company effectively owned after the transfer and $1 million related to the interest only strip. The related loss on the 2009-A Securitization of $2 million is included in vacation ownership and residential sales and services in the Companys consolidated statements of income. Key assumptions used in measuring the fair value of the Retained Interests at the time of the 2009-A Securitization were as follows: an average discount rate of 12.8%, an average expected annual prepayment rate including defaults of 17.9%, and an expected weighted average remaining life of prepayable notes receivable of 52 months. These key assumptions are based on the Companys historical experience. In December 2009, the Company securitized approximately $200 million of VOI notes receivable (the 2009-B Securitization) resulting in cash proceeds of approximately $166 million. The Company retained $31 million of interests in the QSPE, which included $22 million of notes the Company effectively owned after the transfer and $9 million related to the interest only strip. The related gain on the 2009-B Securitization of $19 million is included in vacation ownership and residential sales and services in the Companys consolidated statements of income. Key assumptions used in measuring the fair value of the Retained Interests at the time of the 2009-B Securitization were as follows: an average discount rate of 7.5%, an average expected annual prepayment rate including defaults of 24.4%, and an expected weighted average remaining life of prepayable notes receivable of 69 months. These key assumptions are based on the Companys historical experience. In December 2009, the Company entered into an amendment with the third-party beneficial interest owner regarding the notes issued in the 2009-A Securitization (the 2009-A Amendment). The amendment to the terms included a reduction of the coupon rate and an increase in the effective advance rate. As the increase in the advance rate produced additional cash proceeds of $9 million, this resulted effectively in additional loans sold to the QSPE from the original over collateralization. The discount rates used in measuring the fair value of the Retained Interests at the time of the 2009-A Amendment were 6.5% for the interest only strip and 12.8% for the remaining loans effectively not sold (unchanged from June 2009). The resulting retained interest was $6 million and resulting loans effectively owned were $33 million. The related gain on the 2009-A Amendment of $4 million is included in vacation ownership and residential sales and services in the Companys consolidated statements of income. Although the notes effectively owned after the transfers were measured at fair value on the transfer date, they required prospective accounting treatment as the notes receivable were carried at the basis established at the date of transfer and accreted interest over time to return to the historical cost basis. During 2009, the Company recorded a reserve of $4 million related to these loans. As of December 31, 2009, the value of the notes that the Company effectively owned from the 2009-A Securitization, the 2009-B Securitization and the 2009-A Amendment was approximately $56 million, which the Company classified as Other assets in its consolidated balance sheets. The Company received aggregate cash proceeds of $21 million and $26 million from the Retained Interests during 2009 and 2008, respectively. The Company received aggregate servicing fees of $4 million and $3 million related to these VOI notes receivable during 2009 and 2008, respectively. At the time of each VOI notes receivable securitization and at the end of each financial reporting period, the Company estimates the fair value of its Retained Interests using a discounted cash flow model. All assumptions used in the models are reviewed and updated, if necessary, based on current trends and historical experience. The key assumptions used in measuring the fair value associated with its note securitizations as of December 31, 2009 was as follows: an average discount rate of 7.8%, an average expected annual prepayment rate including defaults of 15.8% and an expected weighted average remaining life of prepayable notes receivable of 86 months. The fair value of the Companys Retained Interest as of December 31, 2009 was $25 million with amortized cost basis of $22 million. Temporary differences in the fair value of the retained interests recorded in other F-21

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) comprehensive income totaled a $3 million gain for the year ended December 31, 2009. Total other-than-temporary impairments related to credit losses recorded in loss on asset dispositions and impairments totaled $22 million and $23 million during 2009 and 2008, respectively. Note 11. Notes Receivable

As discussed in Notes 2 and 10, beginning January 1, 2010, the Company was required to consolidate certain entities associated with securitization transactions completed in prior years. Notes receivable (net of reserves) related to the Companys vacation ownership loans consist of the following (in millions):
December 31, 2010 2009

Vacation ownership loans-securitized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership loans-unsecuritized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: current portion Vacation ownership loans-securitized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership loans-unsecuritized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$467 152 619 (59) (20) $540

$ 242 242 (20) $222

The current and long-term maturities of unsecuritized VOI notes receivable are included in accounts receivable and other assets, respectively, in the Companys consolidated balance sheets. The Company records interest income associated with VOI notes in its vacation ownership and residential sale and services line item in its consolidated statements of income. Interest income related to the Companys VOI notes receivable was as follows (in millions):
Year Ended December 31, 2010 2009 2008

Vacation ownership loans-securitized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership loans-unsecuritized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$66 21 $87

$ 48 $48

$ 57 $57

The following tables present future maturities of gross VOI notes receivable and interest rates (in millions):
Securitized Unsecuritized Total

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . Weighted Average Interest Rates . . . . . . . . . . . . . . . . . . . . . . Range of interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-22

69 72 75 75 258 549 12.71% 6 to 18%

30 21 21 20 139 231 12.07%

99 93 96 95 397 780 12.49% 5 to 18%

5 to 18%

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) For the vacation ownership and residential segment, the Company records an estimate of expected uncollectibility on its VOI notes receivable as a reduction of revenue at the time it recognizes profit on a timeshare sale. The Company holds large amounts of homogeneous VOI notes receivable and therefore assesses uncollectibility based on pools of receivables. In estimating loss reserves, the Company uses a technique referred to as static pool analysis, which tracks uncollectible notes for each years sales over the life of the respective notes and projects an estimated default rate that is used in the determination of its loan loss reserve requirements. As of December 31, 2010, the average estimated default rate for the Companys pools of receivables was 10.0%. The activity and balances for the Companys loan loss reserve are as follows (in millions):
Securitized Unsecuritized Total

Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Write-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Write-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adoption of ASU No. 2009-17 . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 14 77 (9) $82

$ 68 73 (50) 91 64 (61) 94 32 (52) (4) 9 $ 79

$ 68 73 (50) 91 64 (61) 94 46 (52) 73 $161

The primary credit quality indicator used by the Company to calculate the loan loss reserve for the vacation ownership notes is the origination of the notes by brand (Sheraton, Westin, and Other) as the Company believes there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired. In addition to quantitatively calculating the loan loss reserve based on its static pool analysis, the Company supplements the process by evaluating certain qualitative data, including the aging of the respective receivables, current default trends by brand and origination year, and the FICO scores of the buyers. Given the significance of the Companys respective pools of VOI notes receivable, a change in the projected default rate can have a significant impact to its loan loss reserve requirements, with a 0.1% change estimated to have an impact of approximately $3 million. The Company considers a VOI note receivable delinquent when it is more than 30 days outstanding. All delinquent loans are placed on nonaccrual status and the Company does not resume interest accrual until payment is made. Upon reaching 120 days outstanding, the loan is considered to be in default and the Company commences the repossession process. Uncollectible VOI notes receivable are charged off when title to the unit is returned to the Company. The Company generally does not modify vacation ownership notes that become delinquent or upon default.

F-23

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Past due balances of VOI notes receivable by credit quality indicators are as follows (in millions):
30-59 Days Past Due 60-89 Days Past Due H90 Days Past Due Total Past Due Current Total Receivables

As of December 31, 2010: Sheraton . . . . . . . . . . . . . . . . . . . . Westin . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . .

$ 6 5 1 $12

$4 3 1 $8 $2 3 2 $7

$30 33 4 $67 $25 27 2 $54

$40 41 6 $87 $30 33 6 $69

$314 342 37 $693 $ 97 128 42 $267

$354 383 43 $780 $127 161 48 $336

As of December 31, 2009: Sheraton . . . . . . . . . . . . . . . . . . . . Westin . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . .

$ 3 3 2 $ 8

Note 12.

Fair Value

The following table presents the Companys fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2010 (in millions):
Level 1 Level 2 Level 3 Total

Assets: Interest Rate Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities: Forward contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ $ $

$16 $16 $ 9

$ $ $

$16 $16 $ 9

The forward contracts are over the counter contracts that do not trade on a public exchange. The fair values of the contracts are based on inputs such as foreign currency spot rates and forward points that are readily available on public markets, and as such, are classified as Level 2. The Company considered both its credit risk, as well as its counterparties credit risk in determining fair value and no adjustment was made as it was deemed insignificant based on the short duration of the contracts and the Companys rate of short-term debt. The interest rate swaps are valued using an income approach. Expected future cash flows are converted to a present value amount based on market expectations of the yield curve on floating interest rates, which is readily available on public markets. Prior to ASU No. 2009-17, the Company estimated the fair value of its Retained Interests using a discounted cash flow model with unobservable inputs, which is considered Level 3. See Note 10 for the assumptions used to calculate the estimated fair value and sensitivity analysis based on changes in assumptions. The following table presents a reconciliation of the Companys Retained Interests measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2010 (in millions): Balance at January 1, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adoption of ASU No. 2009-17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-24 $ 25 (25) $

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Note 13. Deferred Gains

The Company defers gains realized in connection with the sale of a property for which the Company continues to manage the property through a long-term management agreement and recognizes the gains over the initial term of the related agreement. As of December 31, 2010 and 2009, the Company had total deferred gains of $1.011 billion and $1.093 billion, respectively, included in accrued expenses and other liabilities in the Companys consolidated balance sheets. Amortization of deferred gains is included in management fees, franchise fees and other income in the Companys consolidated statements of income and totaled approximately $81 million, $82 million and $83 million in 2010, 2009 and 2008, respectively. Note 14. Restructuring, Goodwill Impairment and Other Special Charges (Credits), Net

Restructuring, Goodwill Impairment and Other Special Charges (Credits) by operating segment are as follows (in millions):
Year Ended December 31, 2010 2009 2008

Segment Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation Ownership & Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(74) (1) $(75)

$ 21 358 $379

$ 41 100 $141

During the year ended December 31, 2010, the Company received cash proceeds of $75 million in connection with the favorable settlement of a lawsuit. The Company recorded this settlement, net of the reimbursement of legal costs of approximately $10 million incurred in connection with the litigation, as a credit to restructuring, goodwill impairment, and other special charges (credits) line item. During the year ended December 31, 2010, the Company recorded a credit of $8 million to the restructuring, goodwill impairment, and other special (credits) charges line item as a liability associated with an acquisition in 1998 that was no longer deemed necessary (see Note 26). During the year ended December 31, 2009, the Company completed a comprehensive review of its vacation ownership business. The Company decided not to develop certain vacation ownership sites and future phases of certain existing projects. As a result of these decisions, the Company recorded a primarily non-cash impairment charge of $255 million. The impairment included a charge of approximately $148 million primarily related to land held for development; a charge of $64 million for the reduction in inventory values at four properties; the write-off of fixed assets of $21 million; facility exit costs of $15 million and $7 million in other costs. Additionally, as a result of this decision and the current economic climate, the Company recorded a $90 million non-cash charge for the impairment of goodwill in the vacation ownership reporting unit (see Note 8). Additionally, in 2009, the Company recorded restructuring and other special charges of $34 million, primarily related to severance charges and costs to close vacation ownership sales galleries, associated with its ongoing initiative of rationalizing its cost structure. During the year ended December 31, 2008, the Company recorded restructuring and other special charges of $141 million, including $62 million of severance and related charges associated with the start of its initiative of rationalizing the Companys cost structure. The Company also recorded impairment charges of approximately $79 million primarily related to the decision not to develop two vacation ownership projects as a result of the current economic climate and its impact on business conditions. In determining the fair value associated with the impairment charges the Company primarily used the income and market approaches. Under the income approach, fair value was determined based on estimated future cash flows taking into consideration items such as operating margins and the sales pace of vacation ownership intervals, F-25

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) discounted using a rate commensurate with the inherent risk of the project. Under the market approach, fair value was determined with the comparable sales of similar assets and appraisals. The Company had remaining restructuring accruals of $29 million as of December 31, 2010, which are primarily long-term in nature and recorded in other liabilities. The activity in the restructuring and other special charges account for the year ended December 31, 2010 included payments of $3 million primarily related to the remaining severance accruals and a restructuring credit of $2 million associated with the reversal of previous restructuring accruals no longer deemed necessary. Note 15. Income Taxes

Income tax data from continuing operations of the Company is as follows (in millions):
Year Ended December 31, 2010 2009 2008

Pretax income U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 85 Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 $335 Provision (benefit) for income tax Current: U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (61) State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Deferred: U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (7) 12 27 $ 27

$ (76) (220) $(296)

$315 6 $321

$ (84) 12 38 (34) (117) (18) (124) (259) $(293)

$ (15) 32 48 65 28 (23) 2 7 $ 72

No provision has been made for U.S. taxes payable on undistributed foreign earnings amounting to approximately $2.3 billion as of December 31, 2010 since these amounts are permanently reinvested.

F-26

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. Deferred tax assets (liabilities) include the following (in millions):
December 31, 2010 2009

Plant, property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivables (net of reserves) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net operating loss, capital loss and tax credit carryforwards . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . $ (21) ..... 178 ..... 183 ..... 346 ..... 25 ..... 43 ..... 37 ..... 102 ..... 406 ..... 83 ..... (34) 1,348 (397)

$ (51) 104 197 359 (2) 43 36 126 591 87 (22) 1,468 (517) $ 951

Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 951

At December 31, 2010, the Company had federal and state net operating losses, which have varying expiration dates extending through 2028, of approximately $1 million and $2 billion, respectively. The Company had federal and state capital losses, which expire at the end of 2011, of approximately $495 million and $842 million, respectively. The Company had state tax credit carryforwards, which expire at the end of 2026, of $4 million. The Company also had foreign net operating loss and tax credit carryforwards of approximately $210 million and $3 million, respectively. The majority of foreign net operating loss and the tax credit carryforwards will fully expire by 2020. The Company has established a valuation allowance against substantially all of the tax benefit for federal and state loss carryforwards as it is unlikely that the benefit will be realized prior to their expiration. The Company is currently considering certain tax-planning strategies that may allow it to utilize these tax attributes within the statutory carryforward period.

F-27

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) A reconciliation of the tax provision of the Company at the U.S. statutory rate to the provision for income tax as reported is as follows (in millions):
Year Ended December 31, 2010 2009 2008

Tax provision at U.S. statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $117 U.S. state and local income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) Tax on repatriation of foreign earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Foreign tax rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70) Italian incentive program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nondeductible goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Change in uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Tax settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42) Tax benefit on the deferred gain from asset sales . . . . . . . . . . . . . . . . . . . . (7) Basis difference on asset sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (99) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Provision for income tax (benefit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27

$(104) (3) (45) (25) (120) 39 9 1 (3) (29) (13) $(293)

$112 8 (14) (20) (10) 16 (31) 11 $ 72

During 2009, the Company completed an evaluation of its ability to claim U.S. foreign tax credits generated in prior years on its federal tax return. As a result of this analysis, the Company determined that it could realize the credits for the 2001 through 2004 tax years. The Company had not previously accrued this benefit since the realization of the benefit was determined to be unlikely. Therefore, during 2009, a $37 million tax benefit, net of incremental taxes and interest, was recorded for these foreign tax credits. Additionally, during 2010, the Company adjusted its deferred income tax balances by approximately $30 million for items related to prior periods. As discussed below, as a result of final negotiations during 2010 related to the tax settlement on the 1998 disposition of World Directories, the Company agreed to forgo foreign tax credits generated in tax years 2000 through 2002. Therefore, during 2010, a portion of the 2009 tax benefit discussed in this paragraph was reversed. During 2009, the Company entered into an Italian tax incentive program through which the tax basis of its Italian owned hotels were stepped up in exchange for paying $9 million of current tax over a three year period. As a result, the Company was able to recognize a tax benefit of $129 million to establish the deferred tax asset related to the basis step up. This benefit was offset by a $9 million tax charge to accrue the current tax payable under the program, resulting in a net benefit of $120 million. During 2010, the Company recognized goodwill impairments associated with the sale of a wholly-owned hotel. During 2009, the Company recognized goodwill impairments associated with the sale of a wholly-owned hotel and the overall value of its timeshare operations. For tax purposes, the impairments are not deductible. As a result, the Company did not recognize a tax benefit on the impairments and the provision for income tax was unfavorably impacted by a $3 million and $39 million charge in 2010 and 2009, respectively. During 2010, the Company finalized the details of its settlement with the IRS with respect to the 1998 disposition of World Directories. Final negotiations in 2010 resulted in the Company agreeing to forgo foreign tax credit claims for tax years 2000 through 2002. As a result of the settlement, the Company obtained a refund of previously paid taxes, plus interest, of approximately $245 million. The Company recognized a $42 million tax benefit in continuing operations, which included a $92 million tax benefit primarily for interest on taxes previously paid offset by a $50 million tax charge to derecognize previously benefited foreign tax credits. In addition, the Company recognized a $134 million tax benefit in discontinued operations primarily related to the portion of the tax no longer due. F-28

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Pursuant to ASC 740, Income Taxes, the Company is required to accrue tax and associated interest and penalty on uncertain tax positions. The Company recorded charges of $23 million, $9 million and $0 million, for the years ended December 31, 2010, 2009, and 2008, respectively, primarily associated with interest due on existing uncertain tax positions. When the Company sells a wholly-owned hotel subject to a long-term management contract, the pretax gain is deferred and is recognized over the life of the contract. In such instances, the Company establishes a deferred tax asset on the deferred gain and recognizes the related tax benefit through the tax provision. The Company recorded benefits of $7 million, $3 million and $10 million, for the years ended December 31, 2010, 2009, and 2008, respectively, to establish the deferred tax assets on these types of dispositions. During 2010 and 2008, the Company completed certain transactions that generated capital gains for U.S. tax purposes. These gains were offset by capital losses upon which the Company had not previously accrued a benefit since the realization was determined to be unlikely. Therefore, during 2010 and 2008, the Company recorded tax benefits of $99 million and $31 million, respectively, to reverse the capital loss valuation allowance. As of December 31, 2010, the Company had approximately $510 million of total unrecognized tax benefits, of which $37 million would affect its effective tax rate if recognized. It is reasonably possible that zero to substantially all of the Companys unrecognized tax benefits as of December 31, 2010 will reverse within the next twelve months. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in millions):
Year Ended December 31, 2010 2009 2008

Beginning of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions based on tax positions related to the current year . . . . . . . . Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . Settlements with tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reductions for tax positions in prior years . . . . . . . . . . . . . . . . . . . . . Reductions due to the lapse of applicable statutes of limitations . . . . . End of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 999 29 18 (499) (5) (32) $ 510

$1,003 4 2 (7) (1) (2) $ 999

$ 968 41 2 (3) (4) (1) $1,003

The Company recognizes interest and penalties related to unrecognized tax benefits through income tax expense. The Company had $92 million and $233 million accrued for the payment of interest and no accrued penalties as of December 31, 2010 and December 31, 2009, respectively. The Company is subject to taxation in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. As of December 31, 2010, the Company is no longer subject to examination by U.S. federal taxing authorities for years prior to 2004 and to examination by any U.S. state taxing authority prior to 1998. All subsequent periods remain eligible for examination. In the significant foreign jurisdictions in which the Company operates, the Company is no longer subject to examination by the relevant taxing authorities for any years prior to 2001.

F-29

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Note 16. Debt

Long-term debt and short-term borrowings consisted of the following (in millions):
December 31, 2010 2009

Senior Credit Facilities: Revolving Credit Facility interest rates ranging from 1.10% to 2.50% at December 31, 2010, maturing 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revolving Credit Facility, terminated in 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 7.875%, maturing 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 6.25%, maturing 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 7.875%, maturing 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 7.375%, maturing 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 6.75%, maturing 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 7.15%, maturing 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgages and other, interest rates ranging from 2.15% to 9.00%, various maturities. . . . . . Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

609 504 490 450 400 245 159

114 608 498 485 449 400 244 162

2,857 (9) $2,848

2,960 (5) $2,955

Aggregate debt maturities for each of the years ended December 31 are as follows (in millions): 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................... ............................... ............................... ............................... ............................... ............................... $ 9 653 557 494 457 687

$2,857 The Company maintains lines of credit under which bank loans and other short-term debt are drawn. In addition, smaller credit lines are maintained by the Companys foreign subsidiaries. The Company had approximately $1.4 billion of available borrowing capacity under its domestic and foreign lines of credit as of December 31, 2010. The short-term borrowings at December 31, 2010 and 2009 were insignificant. The Company is subject to certain restrictive debt covenants under its short-term borrowing and long-term debt obligations including defined financial covenants, limitations on incurring additional debt, ability to pay dividends, escrow account funding requirements for debt service, capital expenditures, tax payments and insurance premiums, among other restrictions. The Company was in compliance with all of the short-term and long-term debt covenants at December 31, 2010. On April 20, 2010, the Company entered into a new $1.5 billion senior credit facility. The new facility matures on November 15, 2013 and replaces the previous $1.875 billion revolving credit agreement, which would have matured on February 11, 2011. The new facility includes an accordion feature under which the Company may increase the revolving loan commitment by up to $375 million subject to certain conditions and bank commitments. The multi-currency facility enhances the Companys financial flexibility and is expected to be used for general corporate purposes. The Company had no borrowings under the senior credit facility and $159 million of letters of F-30

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) credit outstanding as of December 31, 2010. The new credit agreement includes various customary covenants, including maintaining leverage and coverage ratios. The Consolidated Leverage Ratio (as defined) maximum of 5.50x will decrease to 5.25x beginning on July 1, 2011 and will thereafter step down in 0.25x increments every six months, reaching 4.50x beginning on January 1, 2013. The Consolidated Coverage Ratio (as defined) minimum remains at 2.5x through the term of the agreement. During 2009, the Company reduced debt by over $1 billion. The Company issued new debt of $750 million and prepaid debt of $1.675 billion including term loans maturing in 2009, 2010 and 2011 totaling $1.375 billion. Additional sources of cash generated to pay down debt were proceeds from asset sales, securitizations and a cobranding arrangement, as described in Notes 5, 10 and 18. During 2009, the Company entered into six interest rate swap agreements with a notional amount of $500 million, under which the Company pays floating and receives fixed interest rates (see Note 24). On December 7, 2009, the Company used the proceeds from a public offering of Senior Notes described below, together with other borrowings, to complete a tender offer to repurchase $195 million of the principal amount of its 7.875% Senior Notes due 2012 and $105 million of its 6.25% Senior Notes due 2013. In connection with this tender offer, the Company recorded a $17 million charge to interest expense related to the tender premium and unamortized debt issue costs. On November 24, 2009, the Company completed a public offering of $250 million of Senior Notes (the 7.15% Notes) due December 1, 2019. The Company received net proceeds of approximately $241 million, which were used to repurchase a portion of outstanding Senior Notes (discussed above). Interest on the 7.15% Notes is payable semi-annually on June 1 and December 1. The Company may redeem all or a portion of the 7.15% Notes at any time at the Companys option at a price equal to the greater of (1) 100% of the aggregate principal plus accrued and unpaid interest and (2) the sum of the present values of the remaining scheduled payments of principal and interest discounted at the redemption rate on a semi-annual basis at the Treasury rate plus 50 basis points, plus accrued and unpaid interest. The 7.15% Notes rank parri passu with all other unsecured and unsubordinated obligations. Upon a change in control of the Company, the holders of the 7.15% Notes will have the right to require repurchase of the respective 7.15% Notes at 101% of the principal amount plus accrued and unpaid interest. Certain covenants on the 7.15% Notes include restrictions on liens, sale and leaseback transactions, mergers, consolidations and sale of assets. On April 30, 2009, the Company completed a public offering of $500 million of senior notes with a coupon rate of 7.875% (the 7.875% Notes) due October 15, 2014, issued at a discount price of 96.285%. The Company received net proceeds of approximately $475 million which were used to reduce the outstanding borrowings under its previous revolving credit facility and for general purposes. Interest on the 7.875% Notes is payable semiannually on April 15 and October 15. The Company may redeem all or a portion of the 7.875% Notes at any time at the Companys option at a discount rate of Treasury plus 50 basis points. The 7.875% Notes will rank parri passu with all other unsecured and unsubordinated obligations. Upon a change in control of the Company, the holders of the 7.875% Notes will have the right to require repurchase of the 7.875% Notes at 101% of the principal amount plus accrued and unpaid interest. Certain covenants on the 7.875% Notes include restrictions on liens, sale and leaseback transactions, mergers, consolidations and sale of assets.

F-31

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Note 17. Securitized Vacation Ownership Debt

As discussed in Note 10, the Companys VIEs associated with the securitization of its vacation ownership notes receivable were consolidated following the adoption of ASU Nos. 2009-16 and 2009-17. As of December 31, 2010, long-term and short-term securitized vacation ownership debt consisted of the following (in millions): 2003 2005 2006 2009 2010 securitization, securitization, securitization, securitization, securitization, interest interest interest interest interest rates ranging from 3.95% to 6.96%, maturing 2017 . . . . . . . . . . $ 17 rates ranging from 5.25% to 6.29%, maturing 2018 . . . . . . . . . . 55 rates ranging from 5.28% to 5.85%, maturing 2018 . . . . . . . . . . 39 rate at 5.81%, maturing 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 rates ranging from 3.65% to 4.75%, maturing 2020 . . . . . . . . . . 255 494 (127)

Less current maturities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 367 During the year ended December 31, 2010, interest expense associated with securitized vacation ownership debt was $27 million. Note 18. Other Liabilities

Other liabilities consisted of the following (in millions):

December 31, 2010 2009

Deferred gains on asset sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SPG point liability(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income including VOI and residential sales . . . . . . . . . . . . . . . . . Benefit plan liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . $ 930 ..... 702 ..... 20 ..... 61 ..... 46 ..... 127 $1,886

$1,009 634 33 65 46 116 $1,903

(a) Includes the actuarially determined liability related to the SPG program and the liability associated with the American Express transaction discussed below. During the year ended December 31, 2009, the Company entered into an amendment to its existing co-branded credit card agreement (Amendment) with American Express and extended the term of its co-branding agreement to June 15, 2015. In connection with the Amendment in July 2009, the Company received $250 million in cash toward the purchase of future SPG points by American Express. In accordance with ASC 470, Debt, the Company has recorded this transaction as a financing arrangement with an implicit interest rate of 4.5%. The Amendment requires a fixed amount of $50 million per year to be deducted from the $250 million advance over the five year period regardless of the total amount of points purchased. As a result, the liability associated with this financing arrangement is being reduced ratably over a five year period beginning in October 2009. In accordance with the terms of the Amendment, if the Company fails to comply with certain financial covenants, the Company would have to repay the remaining balance of the liability, and, if the Company does not pay such liability, the Company is required to pledge certain receivables as collateral for the remaining balance of the liability. F-32

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Note 19. Discontinued Operations

Summary of financial information for discontinued operations is as follows (in millions):

Year Ended December 31, 2010 2009 2008

Income Statement Data Gain on disposition, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from operations, net of tax . . . . . . . . . . . . . . . . . . . . . .

$168 $ (1)

$76 $ (2)

$75 $ 5

During the year ended December 31, 2010, the Company recorded a gain of $134 million related to the final settlement with the IRS regarding the World Directories disposition (see Note 15) and a gain of approximately $36 million primarily related to a tax benefit in connection with the sale of one wholly-owned hotel for $78 million. The tax benefit on this hotel sale was related to the realization of a high tax basis in this hotel that was generated through a previous transaction. For the year ended December 31, 2009, the $76 million (net of tax) gain on dispositions includes the gains from the sale of the Companys Bliss spa business, other non-core assets and three hotels. The operations from the Bliss spa business, and the revenues and expenses from one hotel, which was in the process of being sold and was later sold in 2010, are included in discontinued operations, resulting in a loss of $2 million, net of tax. For the year ended December 31, 2008, the gain on dispositions includes a $124 million gain ($129 million pretax) on sale of three hotels which were sold unencumbered by management or franchise contracts partially offset by a $49 million tax charge as a result of a 2008 administrative tax ruling for an unrelated taxpayer that impacts the tax liability associated with the disposition of one of the Companys businesses several years ago. Additionally, $5 million ($9 million pretax) of 2008 results from operations relating to Bliss and the one owned hotel that was in the process of being sold at December 31, 2009, was reclassified to discontinued operations for the year ended December 31, 2008.

Note 20.

Employee Benefit Plan

During the year ended December 31, 2010, the Company recorded net actuarial losses of $4 million (net of tax) related to various employee benefit plans. These losses were recorded in other comprehensive income. The amortization of actuarial loss, a component of other comprehensive income, for the year ended December 31, 2010 was $1 million (net of tax). Included in accumulated other comprehensive (loss) income at December 31, 2010 are unrecognized net actuarial losses of $66 million ($56 million, net of tax) that have not yet been recognized in net periodic pension cost. The actuarial loss included in accumulated other comprehensive (loss) income and expected to be recognized in net periodic pension cost during the year ended December 31, 2011 is $1 million ($1 million, net of tax). Defined Benefit and Postretirement Benefit Plans. The Company and its subsidiaries sponsor or previously sponsored numerous funded and unfunded domestic and international pension plans. All defined benefit plans covering U.S. employees are frozen. Certain plans covering non-U.S. employees remain active. The Company also sponsors the Starwood Hotels & Resorts Worldwide, Inc. Retiree Welfare Program. This plan provides health care and life insurance benefits for certain eligible retired employees. The Company has prefunded a portion of the health care and life insurance obligations through trust funds where such prefunding can be accomplished on a tax effective basis. The Company also funds this program on a pay-as-you-go basis. F-33

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) The following table sets forth the benefit obligation, fair value of plan assets, the funded status and the accumulated benefit obligation of the Companys defined benefit pension and postretirement benefit plans at December 31, 2010 and 2009 (in millions):
Domestic Pension Benefits 2010 2009 Foreign Pension Benefits 2010 2009 Postretirement Benefits 2010 2009

Change in Benefit Obligation Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . $ 17 Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Settlements and curtailments . . . . . . . . . . . . . . . . . . . . . . . . Effect of foreign exchange rates . . . . . . . . . . . . . . . . . . . . . Plan participant contributions . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefit obligation at end of year. . . . . . . . . . . . . . . . . . . . . . . $ 19 Change in Plan Assets Fair value of plan assets at beginning of year . . . . . . . . . . . . . $ Actual return on plan assets, net of expenses . . . . . . . . . . . . Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Plan participant contributions . . . . . . . . . . . . . . . . . . . . . . . Effect of foreign exchange rates . . . . . . . . . . . . . . . . . . . . . Settlements and curtailments . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . $ Unfunded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(19) Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . $ 19 Plans with Accumulated Benefit Obligations in Excess of Plan Assets Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . $ 19 Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . $ 19 Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $

$ 17 1 (1) $ 17 $ 1 (1) $ $(17) $ 17

$178 10 5 (3) (7) $183 $159 14 13 (3) (7) $176 $ (7) $182

$199 5 13 11 (50) 8 (6) (2) $178 $132 28 21 9 (25) (6) $159 $ (19) $176

$ 19 1 2 1 (3) $ 20 $ 1 2 1 (3) $ 1 $(19) n/a

$ 18 1 3 1 (4) $ 19 $ 2 2 1 (4) $ 1 $(18) n/a

$ 17 $ 17 $

$121 $121 $ 97

$117 $115 $ 87

n/a n/a n/a

n/a n/a n/a

The net underfunded status of the plans at December 31, 2010 was $45 million, of which $59 million is in other liabilities and $3 million is in accrued expenses and $17 million is in other assets in the accompanying balance sheet. All domestic pension plans are frozen plans, where employees do not accrue additional benefits. Therefore, at December 31, 2010 and 2009, the projected benefit obligation is equal to the accumulated benefit obligation. In 2009, the Company elected to freeze its Foreign Service pension plan and settled its defined benefit pension plans in Canada, resulting in a $50 million reduction in the projected benefit obligation.

F-34

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) The following table presents the components of net periodic benefit cost and the impact of the plan curtailments and settlements for the years ended December 31, 2010, 2009 and 2008 (in millions):
Domestic Pension Benefits 2010 2009 2008 Foreign Pension Benefits 2010 2009 2008 Postretirement Benefits 2010 2009 2008

Service cost . . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . . Expected return on plan assets . . . . . . . . . . Amortization of actuarial loss . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ASC 715, Compensation . . . . . . . . . . . . . . Settlement and curtailment (gain) loss. . . . . Net periodic benefit cost. . . . . . . . . . . . . . .

$ 1 1 $ 1

$ 1 1 $ 1

$ 1 1 $ 1

$ 10 (10) 1 1 $ 1

$ 5 13 (10) 5 13 (4) $ 9

$ 4 11 (10) 2 1 8 1 $ 9

$ 1 1 $ 1

$ 1 1 $ 1

$ 1 1 $ 1

For measurement purposes, an 8% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2011, gradually decreasing to 5% in 2016. A one-percentage point change in assumed health care cost trend rates would have approximately a $0.6 million effect on the postretirement obligation and a nominal impact on the total of service and interest cost components of net periodic benefit cost. The majority of participants in the Foreign Pension Plans are employees of managed hotels, for which the Company is reimbursed for costs related to their benefits. The impact of these reimbursements is not reflected above. The weighted average assumptions used to determine benefit obligations at December 31 were as follows:
Domestic Pension Benefits 2010 2009 Foreign Pension Benefits 2010 2009 Postretirement Benefits 2010 2009

Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.00% 5.51% 5.34% 5.93% 4.75% 5.50% Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . n/a n/a 3.64% 3.50% n/a n/a The weighted average assumptions used to determine net periodic benefit cost for the years ended December 31 were as follows:
Domestic Pension Benefits 2010 2009 2008 Foreign Pension Benefits 2010 2009 2008 Postretirement Benefits 2010 2009 2008

Discount rate . . . . . . . . . . . . . . . . . . . . . Rate of compensation increase . . . . . . . . Expected return on plan assets . . . . . . . .

5.51% 5.99% 5.75% 5.93% 6.19% 5.88% 5.50% 6.00% 5.74% n/a n/a n/a 3.50% 3.93% 3.89% n/a n/a n/a n/a n/a n/a 6.56% 6.25% 6.38% 7.10% 7.50% 7.50%

A number of factors were considered in the determination of the expected return on plan assets. These factors included current and expected allocation of plan assets, the investment strategy, historical rates of return and Company and investment expert expectations for investment performance over approximately a ten year period.

F-35

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) The following table presents the Companys fair value hierarchy of the plan assets measured at fair value on a recurring basis as of December 31, 2010 (in millions):
Level 1 Level 2 Level 3 Total

Assets: Mutual Funds . . . . . . . . . . . . . . . . . . . . Collective Trusts . . . . . . . . . . . . . . . . . . Equity Index Funds . . . . . . . . . . . . . . . . Bond Index Funds . . . . . . . . . . . . . . . . .

................ ................ ................ ................

$44 $44

$ 5 72 56 $133

$ $

$ 44 5 72 56 $177

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The following table presents the Companys fair value hierarchy of the plan assets measured at fair value on a recurring basis as of December 31, 2009 (in millions):
Level 1 Level 2 Level 3 Total

Assets: Mutual Funds . . . . . . . . . . . . . . . . . . . . Collective Trusts . . . . . . . . . . . . . . . . . . Equity Index Funds . . . . . . . . . . . . . . . . Bond Index Funds . . . . . . . . . . . . . . . . .

................ ................ ................ ................

$40 $40

$ 5 67 48 $120

$ $

$ 40 5 67 48 $160

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The mutual funds are valued using quoted market prices in active markets. The collective trusts, equity index funds and bond index funds are not publicly traded but are valued based on the underlying assets which are publicly traded. The following table represents the Companys expected pension and postretirement benefit plan payments for the next five years and the five years thereafter (in millions):
Domestic Pension Benefits Foreign Pension Benefits Postretirement Benefits

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1 $1 $1 $1 $1 $7

$ 7 $ 7 $ 8 $ 8 $ 8 $44

$2 $2 $2 $2 $2 $7

Defined Contribution Plans. The Company and its subsidiaries sponsor various defined contribution plans, including the Starwood Hotels & Resorts Worldwide, Inc. Savings and Retirement Plan, which is a voluntary defined contribution plan allowing participation by employees on U.S. payroll who meet certain age and service requirements. Each participant may contribute on a pretax basis between 1% and 50% of his or her compensation to the plan subject to certain maximum limits. The plan also contains provisions for matching contributions to be made by the Company, which are based on a portion of a participants eligible compensation. The amount of expense for matching contributions totaled $13 million in 2010, $15 million in 2009, and $16 million in 2008. Included as an investment choice is the Companys publicly traded common stock, which had a balance of $87 million and $59 million at December 31, 2010 and 2009, respectively. F-36

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Multi-Employer Pension Plans. Certain employees are covered by union sponsored multi-employer pension plans. Pursuant to agreements between the Company and various unions, contributions of $9 million in 2010, 2009 and 2008 were made by the Company and charged to expense. Note 21. Leases and Rentals

The Company leases certain equipment for the hotels operations under various lease agreements. The leases extend for varying periods through 2016 and generally are for a fixed amount each month. In addition, several of the Companys hotels are subject to leases of land or building facilities from third parties, which extend for varying periods through 2096 and generally contain fixed and variable components. The variable components of leases of land or building facilities are primarily based on the operating profit or revenues of the related hotels. The Companys minimum future rents at December 31, 2010 payable under non-cancelable operating leases with third parties are as follows (in millions): 2011 . . . . . . . . . . 2012 . . . . . . . . . . 2013 . . . . . . . . . . 2014 . . . . . . . . . . 2015 . . . . . . . . . . Thereafter. . . . . . . .................................................. .................................................. .................................................. .................................................. .................................................. .................................................. . . . . . . $ 96 ...... 81 ...... 80 ...... 78 ...... 71 . . . . . . 939

Minimum future rents have not been reduced by future minimum sublease income of approximately $13 million expected under non-cancelable subleases. Rent expense under non-cancelable operating leases consisted of the following (in millions):
Year Ended December 31, 2010 2009 2008

Minimum rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contingent rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sublease rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$90 6 (5) $91

$89 2 (3) $88

$93 10 (6) $97

Note 22.

Stockholders Equity

Share Repurchases. During the year ended December 31, 2010 and 2009, the Company did not repurchase any Company common shares. As of December 31, 2010, no repurchase capacity remained under the Share Repurchase Authorization. Note 23. Stock-Based Compensation

In 2004, the Company adopted the 2004 Long-Term Incentive Compensation Plan (2004 LTIP), which superseded the 2002 Long-Term Incentive Compensation Plan (2002 LTIP) and provides the terms of equity award grants to directors, officers, employees, consultants and advisors. Although no additional awards will be granted under the 2002 LTIP, the Companys 1999 Long-Term Incentive Compensation Plan or the Companys 1995 Share Option Plan, the provisions under each of the previous plans will continue to govern awards that have been granted and remain outstanding under those plans. The aggregate award pool for non-qualified or incentive stock options, performance shares, restricted stock and units or any combination of the foregoing which are available to be granted under the 2004 LTIP at December 31, 2010 was approximately 53 million. F-37

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Compensation expense, net of reimbursements during 2010, 2009 and 2008 was approximately $72 million, $53 million and $68 million, respectively, resulting in tax benefits of $28 million, $21 million and $26 million, respectively. The Company utilizes the Lattice model to calculate the fair value option grants. Weighted average assumptions used to determine the fair value of option grants were as follows:
Year Ended December 31, 2010 2009 2008

Dividend yield . . . . . . . . . . . Volatility: Near term . . . . . . . . . . . . Long term . . . . . . . . . . . . Expected life . . . . . . . . . . . . Yield curve: 6 month . . . . . . . . . . . . . . 1 year . . . . . . . . . . . . . . . 3 year . . . . . . . . . . . . . . . 5 year . . . . . . . . . . . . . . . 10 year . . . . . . . . . . . . . .

......................... ......................... ......................... ......................... ......................... ......................... ......................... ......................... .........................

0.75% 37.0% 45.0% 6 yrs. 0.19% 0.32% 1.36% 2.30% 3.61%

3.50% 74.0% 43.0% 7 yrs. 0.45% 0.72% 1.40% 1.99% 3.02%

1.50% 38.0% 36.0% 6 yrs. 1.90% 1.91% 2.17% 2.79% 3.73%

The dividend yield is estimated based on the current expected annualized dividend payment and the average expected price of the Companys common shares during the same periods. The estimated volatility is based on a combination of historical share price volatility as well as implied volatility based on market analysis. The historical share price volatility was measured over an 8-year period, which is equal to the contractual term of the options. The weighted average volatility for 2010 grants was 40%. The expected life represents the period that the Companys stock-based awards are expected to be outstanding and was determined based on an actuarial calculation using historical experience, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The yield curve (risk-free interest rate) is based on the implied zero-coupon yield from the U.S. Treasury yield curve over the expected term of the option. The following table summarizes the Companys stock option activity during 2010:
Options (In millions) Weighted Average Exercise Price Per Share

Outstanding at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited, Canceled or Expired . . . . . . . . . . . . . . . . . . . . . . . .

... ... ... ...

13.1 0.6 (4.9) (0.1) 8.7 4.2

$29.15 38.24 28.80 45.13 $29.72 $42.67

Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . Exercisable at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . .

The weighted-average fair value per option for options granted during 2010, 2009 and 2008 was $14.73, $4.69, and $17.24, respectively, and the service period is typically four years. The total intrinsic value of options exercised during 2010, 2009 and 2008 was approximately $115 million, $1 million and $89 million, respectively, resulting in tax benefits of approximately $44 million, $0.3 million and $35 million, respectively. As of December 31, 2010, F-38

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) there was approximately $21 million of unrecognized compensation cost, net of estimated forfeitures, related to nonvested options, which is expected to be recognized over a weighted-average period of 1.17 years on a straightline basis. The aggregate intrinsic value of outstanding options as of December 31, 2010 was $272 million. The aggregate intrinsic value of exercisable options as of December 31, 2010 was $77 million. The weighted-average contractual life was 4.50 years for outstanding options and 2.67 years for exercisable option as of December 31, 2010. The Company recognizes compensation expense equal to the fair market value of the stock on the date of grant for restricted stock and unit grants over the service period. The weighted-average fair value per stock or unit granted during 2010, 2009 and 2008 was $37.33, $11.15 and $46.49, respectively. The service period is typically three or four years except in the case of restricted stock and units issued in lieu of a portion of an annual cash bonus where the restriction lapse period is typically in equal installments over a two year period, or in equal installments on the first, second and third fiscal year ends following grant date with distribution on the third fiscal year end. At December 31, 2010, there was approximately $68 million (net of estimated forfeitures) in unamortized compensation cost related to restricted stock and units. The weighted average remaining term was 1.08 years for restricted stock and units outstanding at December 31, 2010. The fair value of restricted stock and units for which the restrictions lapsed during 2010, 2009 and 2008 was approximately $62 million, $33 million and $85 million, respectively. The following table summarizes the Companys restricted stock and units activity during 2010:
Number of Restricted Stock and Units (In millions) Weighted Average Grant Date Value Per Share

Outstanding at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lapse of restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited or Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

.. .. .. ..

8.0 2.0 (1.4) (0.1) 8.5

$28.48 37.33 43.00 27.82 $28.11

Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . .

2002 Employee Stock Purchase Plan In April 2002, the Board of Directors adopted (and in May 2002 the shareholders approved) the Companys 2002 Employee Stock Purchase Plan (the ESPP) to provide employees of the Company with an opportunity to purchase shares through payroll deductions and reserved 11,988,793 shares for issuance under the ESPP. The ESPP commenced in October 2002. All full-time employees who have completed 30 days of continuous service and who are employed by the Company on U.S. payrolls are eligible to participate in the ESPP. Eligible employees may contribute up to 20% of their total cash compensation to the ESPP. Amounts withheld are applied at the end of every three month accumulation period to purchase shares. The value of the shares (determined as of the beginning of the offering period) that may be purchased by any participant in a calendar year is limited to $25,000. The purchase price to employees is equal to 95% of the fair market value of shares at the end of each period. Participants may withdraw their contributions at any time before shares are purchased. Approximately 117,000 shares were issued under the ESPP during the year ended December 31, 2010 at purchase prices ranging from $36.77 to $54.00. Approximately 265,000 shares were issued under the ESPP during the year ended December 31, 2009 at purchase prices ranging from $11.01 to $30.42. F-39

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Note 24. Derivative Financial Instruments

The Company, based on market conditions, enters into forward contracts to manage foreign exchange risk. The Company enters into forward contracts to hedge forecasted transactions based in certain foreign currencies, including the Euro, Canadian Dollar and Yen. These forward contracts have been designated and qualify as cash flow hedges, and their change in fair value is recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods in which the forecasted transaction occurs. To qualify as a hedge, the Company needs to formally document, designate and assess the effectiveness of the transactions that receive hedge accounting. The notional dollar amounts of the outstanding Euro and Yen forward contracts at December 31, 2010 are $31 million and $6 million, respectively, with average exchange rates of 1.3 and 83.7, respectively, with terms of primarily less than one year. The Company reviews the effectiveness of its hedging instruments on a quarterly basis and records any ineffectiveness into earnings. The Company discontinues hedge accounting for any hedge that is no longer evaluated to be highly effective. From time to time, the Company may choose to de-designate portions of hedges when changes in estimates of forecasted transactions occur. Each of these hedges was highly effective in offsetting fluctuations in foreign currencies. The Company also enters into forward contracts to manage foreign exchange risk on intercompany loans that are not deemed permanently invested. These forward contracts are not designated as hedges, and their change in fair value is recorded in the Companys consolidated statements of income during each reporting period. The Company enters into interest rate swap agreements to manage interest expense. The Companys objective is to manage the impact of interest rates on the results of operations, cash flows and the market value of the Companys debt. At December 31, 2010, the Company has six interest rate swap agreements with an aggregate notional amount of $500 million under which the Company pays floating rates and receives fixed rates of interest (Fair Value Swaps). The Fair Value Swaps hedge the change in fair value of certain fixed rate debt related to fluctuations in interest rates and mature in 2012, 2013 and 2014. The Fair Value Swaps modify the Companys interest rate exposure by effectively converting debt with a fixed rate to a floating rate. These interest rate swaps have been designated and qualify as fair value hedges. The counterparties to the Companys derivative financial instruments are major financial institutions. The Company evaluates the bond ratings of the financial institutions and believes that credit risk is at an acceptable level. The following tables summarize the fair value of our derivative instruments, the effect of derivative instruments on our Consolidated Statements of Comprehensive Income, the amounts reclassified from Other comprehensive income and the effect on the Consolidated Statements of Income during the year.

Fair Value of Derivative Instruments (In millions)

December 31, 2010 Balance Sheet Location Fair Value December 31, 2009 Balance Sheet Location Fair Value

Derivatives designated as hedging instruments Asset Derivatives Forward contracts . . . . . . . . . Prepaid and other current assets Interest rate swaps. . . . . . . . . Other assets Total assets . . . . . . . . . . . .

$ 16 $16

Prepaid and other current assets Other assets

$ 7 $ 7

F-40

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2010 Balance Sheet Location December 31, 2009 Balance Sheet Location

Fair Value

Fair Value

Derivatives not designated as hedging instruments Asset Derivatives Forward contracts . . . . . . . . . Prepaid and other current assets Total assets . . . . . . . . . . Liability Derivatives Forward contracts . . . . . . . . . Accrued expenses Total liabilities . . . . . . . . .

$ $ $ 9 $ 9

Prepaid and other current assets

$ $

Accrued expenses

$ 7 $ 7

Consolidated Statements of Income and Comprehensive Income For the Years Ended December 31, 2010 and 2009 (In millions) Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6) Mark-to-market gain on forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reclassification of gain from OCI to management fees, franchise fees, and other income . . . 6 Balance at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Balance at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Mark-to-market loss on forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Reclassification of loss from OCI to management fees, franchise fees, and other income . . . . (1) Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amount of Gain or (Loss) Recognized in Income on Derivative Year Ended December 31, 2010 2009 2008

Derivatives Not Designated as Hedging Instruments

Location of Gain or (Loss) Recognized in Income on Derivative

Foreign forward exchange contracts . . . . . Total (loss) gain included in income . . . . .

Interest expense, net

$(45) $(45)

$(15) $(15)

$14 $14

F-41

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Note 25. Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Companys financial instruments (in millions):
December 31, 2010 Carrying Fair Amount Value December 31, 2009 Carrying Fair Amount Value

Assets: Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VOI notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . Securitized vacation ownership notes receivable . . . . . . . Other notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . Total financial assets . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities: Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term securitized debt . . . . . . . . . . . . . . . . . . . . . . Other long-term debt liabilities . . . . . . . . . . . . . . . . . . . Total financial liabilities . . . . . . . . . . . . . . . . . . . . . . Off-Balance sheet: Letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Surety bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Off-Balance sheet . . . . . . . . . . . . . . . . . . . . . . .

10 132 408 19

10 153 492 19

7 222 14

7 253 14

$ 569 $2,848 367 $3,215 $ $

$ 674 $3,120 373 $3,493 $ 159 23 $ 182

$ 243 $2,955 8 $2,963 $ $

$ 274 $3,071 8 $3,079 $ 168 21 $ 189

The Company believes the carrying values of its financial instruments related to current assets and liabilities approximate fair value. The Company records its derivative assets and liabilities at fair value. See Note 12 for recorded amounts and the method and assumption used to estimate fair value. The carrying value of the Companys restricted cash approximates its fair value. The Company estimates the fair value of its VOI notes receivable and securitized VOI notes receivable using assumptions related to current securitization market transactions. The amount is then compared to a discounted expected future cash flow model using a discount rate commensurate with the risk of the underlying notes, primarily determined by the credit worthiness of the borrowers based on their FICO scores. The results of these two methods are then evaluated to conclude on the estimated fair value. The fair value of other notes receivable is estimated based on terms of the instrument and current market conditions. These financial instrument assets are recorded in the other assets line item in the Companys consolidated balance sheet. The Company estimates the fair value of its publicly traded debt based on the bid prices in the public debt markets. The carrying amount of its floating rate debt is a reasonable basis of fair value due to the variable nature of the interest rates. The Companys non-public, securitized debt, and fixed rate debt fair value is determined based upon discounted cash flows for the debt rates deemed reasonable for the type of debt, prevailing market conditions and the length to maturity for the debt. Other long-term liabilities represent a financial guarantee. The carrying value of this liability approximates its fair value based on expected funding under the guarantee. The fair values of the Companys letters of credit and surety bonds are estimated to be the same as the contract values based on the nature of the fee arrangements with the issuing financial institutions. F-42

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Note 26. Commitments and Contingencies

The Company had the following contractual obligations outstanding as of December 31, 2010 (in millions):
Total Due in Less Than 1 Year Due in 1-3 Years Due in 3-5 Years Due After 5 Years

Unconditional purchase obligations(a) . . . . . . . . . . . . . Other long-term obligations . . . . . . . . . . . . . . . . . . . . Total contractual obligations . . . . . . . . . . . . . . . . . . .

$225 3 $228

$69 2 $71

$124 1 $125

$28 $28

$ 4 $ 4

(a) Included in these balances are commitments that may be reimbursed or satisfied by the Companys managed and franchised properties. The Company had the following commercial commitments outstanding as of December 31, 2010 (in millions):
Amount of Commitment Expiration Per Period Less Than After 1 Year 1-3 Years 3-5 Years 5 Years

Total

Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . $159

$144

$12

$3

Variable Interest Entities. The Company has evaluated hotels in which it has a variable interest, which is generally in the form of investments, loans, guarantees, or equity. The Company determines if it is the primary beneficiary of the hotel by primarily considering the qualitative factors. Qualitative factors include evaluating if the Company has the power to control the VIE and has the obligation to absorb the losses and rights to receive the benefits of the VIE, that could potentially be significant to the VIE. The Company has determined it is not the primary beneficiary of these VIEs and therefore these entities are not consolidated in the Companys financial statements. See Note 10 for the VIEs in which the Company is deemed the primary beneficiary and has consolidated the entities. The 15 VIEs associated with the Companys variable interests represent entities that own hotels for which the Company has entered into management or franchise agreements with the hotel owners. The Company is paid a fee primarily based on financial metrics of the hotel. The hotels are financed by the owners, generally in the form of working capital, equity, and debt. At December 31, 2010, the Company has approximately $68 million of investments and a loan balance of $9 million associated with 12 VIEs. As the Company is not obligated to fund future cash contributions under these agreements, the maximum loss equals the carrying value. In addition, the Company has not contributed amounts to the VIEs in excess of their contractual obligations. Additionally, the Company has approximately $6 million of investments and certain performance guarantees associated with three VIEs. During 2010, the Company recorded a $3 million charge to selling, general and administrative expenses, relating to one of these VIEs, for a performance guarantee relating to a hotel managed by the Company. The maximum remaining exposure of this guarantee is $1 million. The Companys remaining performance guarantees have possible cash outlays of up to $68 million, $62 million of which, if required, would be funded over several years and would be largely offset by management fees received under these contracts. At December 31, 2009, the Company has approximately $81 million of investments associated with 18 VIEs, equity investments of $11 million associated with one VIE and a loan balance of $5 million associated with one VIE. Guaranteed Loans and Commitments. In limited cases, the Company has made loans to owners of or partners in hotel or resort ventures for which the Company has a management or franchise agreement. Loans outstanding under this program totaled $14 million at December 31, 2010. The Company evaluates these loans for impairment, and at December 31, 2010, believes these loans are collectible. Unfunded loan commitments F-43

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) aggregating $18 million were outstanding at December 31, 2010, $0 million of which is expected to be funded in 2011, with $1 million expected to be funded in total. These loans typically are secured by pledges of project ownership interests and/or mortgages on the projects. The Company also has $56 million of equity and other potential contributions associated with managed or joint venture properties, $20 million of which is expected to be funded in 2011. Surety bonds issued on behalf of the Company at December 31, 2010 totaled $23 million, the majority of which were required by state or local governments relating to the Companys vacation ownership operations and by its insurers to secure large deductible insurance programs. To secure management contracts, the Company may provide performance guarantees to third-party owners. Most of these performance guarantees allow the Company to terminate the contract rather than fund shortfalls if certain performance levels are not met. In limited cases, the Company is obligated to fund shortfalls in performance levels through the issuance of loans. Many of the performance tests are multi-year tests, are tied to the results of a competitive set of hotels, and have exclusions for force majeure and acts of war and terrorism. The Company does not anticipate any significant funding under performance guarantees or losing a significant number of management or franchise contracts in 2011. In connection with the acquisition of the Le Mridien brand in November 2005, the Company assumed the obligation to guarantee certain performance levels at one Le Mridien managed hotel for the periods 2007 through 2014. During the year ended December 31, 2010, the Company reached an agreement with the owner of this property to fully release the Company of its performance guarantee obligation in return for a payment of approximately $1 million to the owner. Additionally, in connection with this settlement, the term of the management contract was extended by five years. As a result of this settlement, the Company recorded a credit to selling, general, administrative and other expenses of approximately $8 million for the difference between the carrying amount of the guarantee liability and the cash payment of $1 million. In connection with the purchase of the Le Mridien brand in November 2005, the Company was indemnified for certain of Le Mridiens historical liabilities by the entity that bought Le Mridiens owned and leased hotel portfolio. The indemnity is limited to the financial resources of that entity. However, at this time, the Company believes that it is unlikely that it will have to fund any of these liabilities. In connection with the sale of 33 hotels in 2006, the Company agreed to indemnify the buyer for certain liabilities, including operations and tax liabilities. At this time, the Company believes that it will not have to make any material payments under such indemnities. Litigation. The Company is involved in various legal matters that have arisen in the normal course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be determined, the Company does not expect that the resolution of all legal matters will have a material adverse effect on its consolidated results of operations, financial position or cash flow. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Companys future results of operations or cash flows in a particular period. Collective Bargaining Agreements. At December 31, 2010, approximately 34% of the Companys U.S.-based employees were covered by various collective bargaining agreements, providing, generally, for basic pay rates, working hours, other conditions of employment and orderly settlement of labor disputes. Generally, labor relations have been maintained in a normal and satisfactory manner, and management believes that the Companys employee relations are satisfactory. F-44

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Environmental Matters. The Company is subject to certain requirements and potential liabilities under various federal, state and local environmental laws, ordinances and regulations. Such laws often impose liability without regard to whether the current or previous owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Although the Company has incurred and expects to incur remediation and other environmental costs during the ordinary course of operations, management anticipates that such costs will not have a material adverse effect on the operations or financial condition of the Company. Captive Insurance Company. Estimated insurance claims payable at December 31, 2010 and 2009 were $72 million and $74 million, respectively. At December 31, 2010 and 2009, standby letters of credit amounting to $64 million and $83 million, respectively, had been issued to provide collateral for the estimated claims. The letters of credit are guaranteed by the Company. ITT Industries. In 1995, the former ITT Corporation, renamed ITT Industries, Inc. (ITT Industries), distributed to its stockholders all of the outstanding shares of common stock of ITT Corporation, then a wholly owned subsidiary of ITT Industries (the Distribution). In connection with this Distribution, ITT Corporation, which was then named ITT Destinations, Inc., changed its name to ITT Corporation. Subsequent to the acquisition of ITT Corporation in 1998, the Company changed the name of ITT Corporation to Sheraton Holding Corporation. For purposes of governing certain of the ongoing relationships between the Company and ITT Industries after the Distribution and spin-off of ITT Corporation and to provide for an orderly transition, the Company and ITT Industries have entered into various agreements including a spin-off agreement, Employee Benefits Services and Liability Agreement, Tax Allocation Agreement and Intellectual Property Transfer and License Agreements. The Company may be liable to or due reimbursement from ITT Industries relating to the resolution of certain pre-spinoff matters under these agreements. Based on available information, management does not believe that these matters would have a material impact on the Companys consolidated results of operations, financial position or cash flows. During the year ended December 31, 2010, the Company reversed a liability related to the 1998 acquisition (see Note 14). Note 27. Business Segment and Geographical Information

The Company has two operating segments: hotels and vacation ownership and residential. The hotel segment generally represents a worldwide network of owned, leased and consolidated joint venture hotels and resorts operated primarily under the Companys proprietary brand names including St. Regis, The Luxury Collection, Sheraton, Westin, W, Le Mridien, Four Points by Sheraton, Aloft and Element as well as hotels and resorts which are managed or franchised under these brand names in exchange for fees. The vacation ownership and residential segment includes the development, ownership and operation of vacation ownership resorts, marketing and selling VOIs, providing financing to customers who purchase such interests, licensing fees from branded condominiums and residences and the sale of residential units. The performance of the hotels and vacation ownership and residential segments is evaluated primarily on operating profit before corporate selling, general and administrative expense, interest expense, net of interest income, losses on asset dispositions and impairments, restructuring and other special charges (credits) and income tax benefit (expense). The Company does not allocate these items to its segments.

F-45

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) The following table presents revenues, operating income, assets and capital expenditures for the Companys reportable segments (in millions):
2010 2009 2008

Revenues: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,383 Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,071 Operating income: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 571 Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Total segment operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general, administrative and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restructuring, goodwill impairment and other special charges, net. . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity earnings and gains and losses from unconsolidated ventures, net: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on asset dispositions and impairments, net . . . . . . . . . . . . . . . . . . . . . . . . . 676 (151) 75 600 8 2 (236) (39)

$4,022 674 $4,696 $ 471 73 544 (139) (379) 26 (5) 1 (227) (91) $ (296) $ 229 27 53 $ 309 $5,924 1,639 1,198 $8,761 $ 171 145 27 $ 343

$4,860 894 $5,754 $ 776 136 912 (161) (141) 610 12 4 (207) (98) $ 321 $ 241 29 43 $ 313 $6,728 2,183 792 $9,703 $ 344 389 84 $ 817

Income (loss) from continuing operations before taxes and noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 335 Depreciation and amortization: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 207 Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 285 Assets: Hotel(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,440 Vacation ownership and residential(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,139 Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,197 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,776 Capital expenditures: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 184 Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Total(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 377

(a) Includes $285 million and $343 million of investments in unconsolidated joint ventures at December 31, 2010 and 2009, respectively.

F-46

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) (b) Includes $27 million and $25 million of investments in unconsolidated joint ventures at December 31, 2010 and 2009, respectively. (c) Includes $227 million, $196 million, and $476 million of property, plant, and equipment expenditures as of December 31, 2010, 2009, and 2008, respectively. Additional expenditures included in the amounts above consist of vacation ownership inventory and investments in management contracts and hotel joint ventures. The following table presents revenues and long-lived assets by geographical region (in millions):
2010 Revenues 2009 2008 Long-Lived Assets 2010 2009

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . Italy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other international . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,312 160 1,599 $5,071

$3,387 172 1,137 $4,696

$4,058 370 1,326 $5,754

$2,186 324 1,125 $3,635

$2,334 399 1,056 $3,789

Other than Italy, there were no individual international countries, which comprised over 10% of the total revenues of the Company for the years ended December 2010, 2009 or 2008, or 10% of the total long-lived assets of the Company as of December 31, 2010 or 2009.

F-47

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Note 28. Quarterly Results (Unaudited)
March 31 Three Months Ended June 30 September 30 December 31 (In millions, except per share data) Year

2010 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share: Basic Income (loss) from continuing operations. . . . . Discontinued operations . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted Income (loss) from continuing operations. . . . . Discontinued operations . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share: Basic Income (loss) from continuing operations. . . . . Discontinued operations . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted Income (loss) from continuing operations. . . . . Discontinued operations . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,187 $1,102 $ 28 $ $ 28

$1,289 $1,152 $ 79 $ 35 $ 114

$1,255 $1,133 $ (5) $ (1) $ (6)

$1,340 $1,084 $ 206 $ 133 $ 339

$5,071 $4,471 $ 308 $ 167 $ 475

$ 0.16 $ $ 0.16 $ 0.16 $ $ 0.16 $1,127 $1,066 $ 7 $ (3) $ 4

$ 0.44 $ 0.19 $ 0.63 $ 0.42 $ 0.19 $ 0.61 $1,167 $1,068 $ 140 $ (6) $ 134

$ (0.03) $ 0.00 $ (0.03) $ (0.03) $ 0.00 $ (0.03) $1,156 $1,070 $ 36 $ 4 $ 40

$ 1.13 $ 0.72 $ 1.85 $ 1.08 $ 0.70 $ 1.78 $1,246 $1,466 $ (186) $ 79 $ (107)

$ 1.70 $ 0.91 $ 2.61 $ 1.63 $ 0.88 $ 2.51 $4,696 $4,670 $ (3) $ 74 $ 71

$ 0.04 $ (0.01) $ 0.03 $ 0.04 $ (0.01) $ 0.03

$ 0.79 $ (0.04) $ 0.75 $ 0.78 $ (0.04) $ 0.74

$ 0.20 $ 0.02 $ 0.22 $ 0.20 $ 0.02 $ 0.22

$ (1.03) $ 0.44 $ (0.59) $ (1.03) $ 0.44 $ (0.59)

$ (0.00) $ 0.41 $ 0.41 $ (0.00) $ 0.41 $ 0.41

Due to the dispositions in the fourth quarter of 2009 that were recorded as discontinued operations (see Note 19), certain amounts in the table above have been reclassified to present comparable results for all periods presented.

F-48

SCHEDULE II STARWOOD HOTELS & RESORTS WORLDWIDE, INC. VALUATION AND QUALIFYING ACCOUNTS (In millions)
Additions (Deductions) Charged to/reversed Charged from to/from Other Payments/ Expenses Accounts(a) Other

Balance January 1,

Balance December 31,

2010 Trade receivables allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . Notes receivable allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . Reserves included in accrued and other liabilities: Restructuring and other special charges . . 2009 Trade receivables allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . Notes receivable allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . Reserves included in accrued and other liabilities: Restructuring and other special charges . . 2008 Trade receivables allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . Notes receivable allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . Reserves included in accrued and other liabilities: Restructuring and other special charges . .

.. .. .. .. .. .. .. .. ..

$ 54 $118 $ 34 $ 49 $117 $ 41 $ 50 $ 94 $ 9

$ 11 $ 64 $ $ 8 7

$(19) $(45) $ 62 $(10) $(60) $(54) $(12) $(32) $(26)

$ 55 $179 $ 29 $ 54 $118 $ 34 $ 49 $117 $ 41

$ 42 $ (75) $ 8

$ 64 $379 $ 8

$ (3) $(332) $ 3

$ 55 $141

$ $ (83)

(a) Charged to/from other accounts:

Description of Charged to/from Other Accounts

2010 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impact of ASU No. 2009-17 (See Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total charged to/from other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009 Plant, property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total charged to/from other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2008 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plant, property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total charged to/from other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1

2 8 73 $ 83 $(178) (90) (61) (5) (1) 2 5 $(328) $ (7) (66) 3 (14) 4

$ (80)

(This page intentionally left blank)

corporate information

starwood hotels & resorts Worldwide, Inc.

corporate offIces Starwood Hotels & Resorts Worldwide, Inc. 1111 Westchester Avenue, White Plains, New York 10604 914 640 8100, www.starwoodhotels.com Independent reGIstered publIc accountInG fIrM Ernst & Young LLP, New York, New York stock reGIstrar & transfer aGent Registered shareholders with questions concerning stock certificates, account information, dividend payments or stock transfers should contact our transfer agent at: American Stock Transfer & Trust Company 59 Maiden Lane, New York, New York 10038 800 350 6202, www.amstock.com forM 10-k and other Investor InforMatIon A copy of the Annual Report of Starwood Hotels & Resorts Worldwide, Inc. (Starwood) or Form 10-K filed with the Securities and Exchange Commission may be obtained online at www.starwoodhotels.com and by shareholders of record of Starwood Hotels & Resorts without charge by calling 914 640 8100 or upon written request to: Investor relatIons Starwood Hotels & Resorts Worldwide, Inc. 1111 Westchester Avenue, White Plains, New York 10604

Note: This Annual Report contains forward-looking statements within the meaning of federal securities regulations. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties and other factors that may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. Further results, performance and achievements may be affected by general economic conditions including the timing and robustness of a recovery from the current global economic downturn, the impact of war and terrorist activity, business and financing conditions, foreign exchange fluctuations, cyclicality of the real estate, including the sale of residential units, and the hotel and vacation ownership businesses, operating risks associated with the sale of residential units, hotel and vacation ownership businesses, relationships with associates, customers and property owners, the impact of the internet reservation channels, our reliance on technology, domestic and international political and geopolitical conditions, competition, governmental and regulatory actions (including the impact of changes in U.S. and foreign tax laws and their interpretation), travelers fears of exposure to contagious diseases, risk associated with the level of our indebtedness, risk associated with potential acquisitions and dispositions, and other circumstances and uncertainties. These risks and uncertainties are presented in detail in our filings with the Securities and Exchange Commission. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that results will not materially differ. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 2011 Starwood Hotels & Resorts Worldwide, Inc. All rights reserved. CONFIDENTIAL & PROPRIETARY. May not be reproduced or distributed without written permission of Starwood Hotels & Resorts Worldwide, Inc. Aloft, Element, Four Points, Le Mridien, Preferred Guest, Sheraton, SPG, St. Regis,The Luxury Collection, W, Westin, and their respective logos are the trademarks of Starwood Hotels & Resorts Worldwide, Inc., or its affiliates.

china isoutside ofhotels & resorts largestin3 starwood hotel market the united states, and 1
new starwood hotels will debut there

four- &emerging markets, five-star footprint in

including china, India, the Middle east and africa

largest

2010 neW openInGs

The St. Regis Bahia Beach Resort, Puerto Rico The St. Regis Lhasa Resort The St. Regis Osaka Al Maha Desert Resort & Spa, Dubai The Astor Hotel, Tianjin The Romanos, Costa Navarino Schloss Fuschl Resort & Spa, Fuschlsee-Salzburg Tambo del Inka Resort & Spa, Valle Sagrado W Austin W Hollywood W New York Downtown W Retreat Koh Samui Le Mridien Chambers Minneapolis Le Mridien Philadelphia Le Mridien Taipei Le Mridien Xiamen The Westin Austin at The Domain The Westin Resort, Costa Navarino The Westin Desert Willow Villas, Palm Desert The Westin Fuzhou Minjiang The Westin Gurgaon, New Delhi The Westin Hefei Baohe The Westin Mumbai Garden City The Westin Santa Fe, Mexico City The Westin Sendai The Westin Shenzhen Nanshan The Westin Siray Bay Resort & Spa, Phuket The Westin Tianjin The Westin Wall Centre, Vancouver Airport Sheraton Albuquerque Airport Hotel Sheraton Batumi Hotel Sheraton Bratislava Hotel Sheraton Brooklyn New York Hotel Sheraton Fuschlsee-Salzburg, Hotel Jagdhof Sheraton Hohhot Hotel Sheraton Hsinchu Hotel, Taiwan Sheraton Jiangyin Hotel

Starwood Hotels & Resorts is the worlds most hotel company

global

350hotels in the pipeline 84% of them outside

of the United States

with

85,000new roomsResorts is poised planned, Starwood Hotels &

to grow nearly 30% in the coming years

Sheraton Miami Airport Hotel & Executive Meeting Center Sheraton Milan Malpensa Airport Hotel & Conference Centre Sheraton Nha Trang Hotel & Spa Sheraton Orlando Downtown Hotel Sheraton Qiandao Lake Resort Sheraton Rhodes Resort Sheraton Tianjin Binhai Hotel Sheraton Tribeca New York Hotel Sheraton Udaipur Palace Resort & Spa

Sheraton Wenzhou Hotel Sheraton Wuxi Binhu Hotel Sheraton Zhongshan Hotel Aloft Bengaluru Whitefield Aloft Brussels Schuman Aloft Chapel Hill Aloft Chennai, OMR IT Expressway Aloft Harlem Aloft Tulsa Aloft Winchester Element Ewing Hopewell

Element Omaha Midtown Crossing Element New York Times Square West Four Points by Sheraton Bangkok, Sukhumvit 15 Four Points by Sheraton Biloxi Beach Boulevard Four Points by Sheraton Calgary Airport Four Points by Sheraton Galveston Four Points by Sheraton Lagos

Four Points by Sheraton Lianyungang Four Points by Sheraton Niagara Falls Fallsview Four Points by Sheraton Oklahoma City Quail Springs Four Points by Sheraton San Jose Downtown Four Points by Sheraton Saskatoon Four Points by Sheraton Taian Four Points by Sheraton Taicang Four Points by Sheraton Tucson Airport

ALOFT ABU DHABI, UNITED ARAB EMIRATES W RETREAT KOH SAMUI, THAILAND TAMBO DEL INKA RESORT & SPA, VALLE SAGRADO, PERU