Hotel Online  Special Report
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Starwood Hotels & Resorts Reports 1st Qtr Net Income Falls to $5 million from $79 million
a Year Earlier; Takes a $72 million Expense Related to a Change in Accounting for
Timeshare Transactions
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Management Fees Grew 55.6% to $56 million and Franchise Fees Grew 20% to $36 million
Hotel Operating Results
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WHITE PLAINS, N.Y. - April 27, 2006 -- Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT):

First Quarter 2006 Highlights

  • Excluding special items, EPS from continuing operations increased 17.1% to $0.41 compared to $0.35 for the first quarter of 2005. Including special items, EPS from continuing operations was $0.34 compared to $0.36 in the first quarter of 2005.
  • Worldwide system-wide REVPAR, excluding Le Meridien, increased 10.3% compared to the first quarter of 2005. System-wide REVPAR for Same-Store Hotels in North America increased 12.1% when compared to the first quarter of 2005.
  • Worldwide REVPAR for Same-Store Owned Hotels grew 9.8% in total; W Hotels (15.8%), Westin (10.6%), Sheraton (8.0%), and St. Regis/Luxury Collection (6.0%), with most of these brands experiencing both ADR and occupancy gains.
  • North America REVPAR at Same-Store Owned Hotels increased 12.8% when compared to the first quarter of 2005. ADR for these hotels increased 10.6%.
  • Margins at Starwood branded Same-Store Owned Hotels in North America and Worldwide improved approximately 300 and 225 basis points, respectively, when compared to the first quarter of 2005.
  • Management and franchise revenues increased 34.2% when compared to 2005, including fees from the Le Meridien hotels (15.8% excluding the Le Meridien hotels).
  • Excluding residential sales, contract sales at vacation ownership properties were up 18.5% when compared to 2005. However, reported revenues from vacation ownership and residential sales decreased $37 million when compared to 2005 primarily due to the higher amount of contract sales at properties which were in the preliminary stages of construction during 2006 and the application of percentage of completion accounting to such sales.
  • Excluding special items, income from continuing operations increased 18.2% to $91 million compared to $77 million in the same period of 2005. Net income, including special items and a one-time expense of $72 million (after-tax) related to the implementation of a new timeshare accounting rule, was $5 million compared to $79 million in the first quarter of 2005.
  • Total Company Adjusted EBITDA decreased 7.6% to $266 million when compared to $288 million in 2005. The year over year reduction is due primarily to asset sales, continued lost business from last year's hurricanes, stock option expenses, and a loss on an unconsolidated joint venture hotel being marketed for sale.
  • On April 10, 2006 the Company completed the sale of 28 hotels to Host Hotels & Resorts, Inc. ("Host") for $3.54 billion. An additional seven hotels are expected to be sold to Host during the second quarter with $661 million of additional cash consideration to be paid to the Company and $31 million of additional debt to be assumed by Host.
  • Since January 1, 2006, the Company has returned more than $3.5 billion to shareholders including $2.8 billion in connection with the Host transaction, $447 million for the repurchase of 7 million shares of its stock and $276 million in dividends. 
Starwood Hotels & Resorts Worldwide, Inc. ("Starwood" or the "Company") today reported EPS from continuing operations for the first quarter of 2006 of $0.34 compared to $0.36 in the first quarter of 2005. Excluding special items, EPS from continuing operations was $0.41 for the first quarter of 2006 compared to $0.35 in the first quarter of 2005. Special items net to a $14 million loss and include debt defeasance costs and transition costs associated with the Le Meridien transaction, offset by net gains realized on the sale of several hotels.
Income from continuing operations, including the special items discussed above, was $77 million in the first quarter of 2006 compared to $79 million in 2005. Excluding special items, income from continuing operations was $91 million for the first quarter of 2006 compared to $77 million in 2005.

Income from continuing operations for the first quarter of 2006 as compared to 2005 was impacted by four major items:

  • Operating income (before depreciation) was impacted as a result of the sale of 16 hotels since the first quarter of 2005. These hotels had $5 million of revenues and $5 million of expenses in 2006 as compared to $56 million of revenues and $44 million of expenses in the same quarter of 2005.
  • As a result of last year's hurricanes, operating income at the Company's owned hotels in New Orleans and Cancun, Mexico was down $4 million, net of business interruption insurance.
  • The Company implemented SFAS 123®, "Share Based Payment" on January 1, 2006 which resulted in approximately $12 million of non-cash stock option expense.
  • The Company recorded an $8 million impairment loss on an unconsolidated joint venture hotel that is being marketed for sale. 
Net income (after a one-time expense of $72 million (after-tax) related to the implementation of SFAS No. 152, "Accounting for Real Estate Time-Sharing Transactions" which was recorded as a cumulative effect of a change in accounting) was $5 million and EPS was $0.02 in the first quarter of 2006 compared to $79 million and EPS of $0.36 in the first quarter of 2005. The effective tax rate for the first quarter of 2006 was 15.8%.

Total Company Adjusted EBITDA decreased 7.6% to $266 million when compared to $288 million in 2005. Cash flow from operations was $145 million compared to cash flow from operations of $59 million in 2005.

Steven J. Heyer, CEO, said "It was an outstanding quarter. We beat our growth expectations in all business segments, delivering North America Owned REVPAR growth of 12.8% and margin growth of 300 basis points. Worldwide System-wide REVPAR grew 10.3% and our management and franchise revenues grew over 34%, continued evidence that the lodging business remains robust.

We remain focused on our strategic initiatives - service excellence; brand development; pipeline development; vacation ownership growth; real estate development and repositioning. We launched new advertising programs for Westin and Sheraton, and we began to retrain our associates around the world to deliver branded signature services to our guests. We also completed the most significant component of the Le Meridien integration.

Since the beginning of the year, we returned more than $3.5 billion in value to our shareholders. We closed on the bulk of the assets sales to Host, returning $2.8 billion directly to shareholders in Host stock and cash, we repurchased $447 million or 7 million shares of our stock and we paid $276 million in dividends."

Operating Results

First Quarter Ended March 31, 2006

Owned, Leased and Consolidated Joint Venture Hotels

Worldwide REVPAR for Same-Store Owned Hotels increased 9.8%. REVPAR at Same-Store Owned Hotels in North America increased 12.8%; 15.8% at W, 13.6% at Westin, 13.4% at St. Regis/Luxury Collection and 10.3% at Sheraton. REVPAR growth was particularly strong at the Company's owned hotels in New York, San Diego, Atlanta, Seattle and Chicago. Internationally, Same-Store Owned Hotel REVPAR increased 3.4% excluding the impact of foreign exchange. As reported, in US dollars, Same-Store Owned Hotel REVPAR increased 1.8%, with Latin America up 21.0%, Europe down 2.2%, and Asia Pacific down 16.2%.

Revenues at Same-Store Owned Hotels in North America increased 12.0% while costs and expenses increased 7.9% when compared to 2005. Margins at Starwood branded Same-Store Hotels increased 300 basis points.

Revenues at Same-Store Owned Hotels Worldwide increased 8.9% while costs and expenses increased 6.0% when compared to 2005. Margins at Starwood branded Same-Store Hotels increased 225 basis points.

Reported revenues at owned, leased and consolidated joint venture hotels were $822 million when compared to $813 million in 2005. 
Reported revenues were impacted by the sale of 16 hotels since the end of the first quarter of 2005. These hotels contributed $5 million in revenues in 2006 compared to $56 million in the same quarter of 2005. Reported revenues were also negatively impacted by $10 million from changes in foreign exchange rates.

Reported operating income (before depreciation) from owned, leased and consolidated joint venture hotels was impacted by two factors:

  • As discussed earlier, total Company operating income (before depreciation) was impacted as a result of the sale of 16 hotels since the first quarter of 2005. These hotels had $5 million of revenues and $5 million of expenses in 2006 as compared to $56 million of revenues and $44 million of expenses in the same quarter of 2005.
  • As a result of last year's hurricanes, operating income at the Company's owned hotels in New Orleans and Cancun, Mexico was down $4 million, net of business interruption insurance. 
Management and Franchise Fees

Worldwide system-wide (owned, managed and franchised) REVPAR, excluding Le Meridien, increased 10.3% compared to the first quarter of 2005. System-wide REVPAR for Same-Store Hotels in North America, excluding Le Meridien hotels, increased 12.1%; W Hotels 15.1%, St. Regis/Luxury Collection 13.0%, Westin 12.4% and Sheraton 11.2%.

Management fees, franchise fees and other income were $132 million, up $28 million, or 26.9%, from the first quarter of 2005. Management fees grew by 55.6% to $56 million and franchise fees grew 20.0% to $36 million. The increase is related to the addition of new hotels (including Le Meridien), growth in REVPAR of existing hotels under management, offset in part by fees associated with hotels that left the system.

Le Meridien hotels contributed approximately $14 million of management and franchise fees during the first quarter of 2006. The integration of Le Meridien, which the Company acquired in November of last year, is proceeding well. During the first quarter, the Company completed the full integration of the reservations, distribution, loyalty and sales functions, allowing Le Meridien hotels to take advantage of the power of Starwood's global infrastructure and sales and marketing systems, giving it a solid foundation for growth.

During the first quarter of 2006, the Company signed 28 hotel management and franchise contracts (representing approximately 7,700 rooms; 12 Westin, 10 Sheraton, 2 W Hotels, 2 Four Points by Sheraton, 1 St. Regis and 1 Le Meridien) including the Sheraton Philadelphia City Center (Philadelphia, Pennsylvania, 757 rooms), Westin Beijing at Chaoyang (Beijing, China, 558 rooms) and the Sheraton Guangzhou-Teem Plaza (Guangzhou, China, 442 rooms). Of the hotels signed in the quarter, 20 were new builds and 8 were conversions from other brands. The Company had approximately 260 hotels and approximately 76,000 rooms in its active global development pipeline at March 31, 2006, with roughly half of that number in international locations. The Company expects to sign approximately 150 hotel management and franchise contracts in 2006.

During the first quarter of 2006, nine new hotels and resorts (representing approximately 1,600 rooms) entered the system, including the Westin Arlington Gateway (Arlington, Virginia, 336 rooms) and the Le Meridien St. Julians (St. Julians, Malta, 276 rooms). Eight properties (representing approximately 2,100 rooms) were removed from the system during the quarter. The Company expects to open more than 50 hotels (representing approximately 14,000 rooms) in 2006.

Vacation Ownership

While sales of vacation ownership intervals were up 18.5%, total vacation ownership revenues decreased $32 million or 17.1% to $155 million when compared to 2005 due primarily to the impact of percentage of completion accounting for pre-sales at projects under construction. The average price per vacation ownership unit sold increased approximately 6.1% to $28,708, and the number of contracts signed increased approximately 11.3% when compared to 2005. Fractional sales at the St. Regis in New York in the first quarter of 2006 were higher than anticipated due to a faster than expected start to the project.

While reported revenues were down year over year as discussed above, reported expenses were relatively flat primarily as a result of the accelerated recognition of sales and marketing expenses in accordance with the new timeshare accounting rules which were implemented effective January 1, 2006.

During the first quarter of 2006, the Company was actively selling vacation ownership interests at 15 resorts, compared to 11 resorts in the first quarter 2005. New resorts in active sales included the Westin Lagunamar Resort in Cancun, Mexico. In addition, the Company started pre-sales at the Westin Princeville Resort in Kauai, Hawaii and the St. Regis Residence Club in New York during the quarter. Starwood Vacation Ownership is also in the predevelopment phase of several new vacation ownership resorts.

During the first quarter of 2006, the Company recorded a one time expense of $72 million (after-tax) as a cumulative effect of a change in accounting associated with the adoption of SFAS No.152, "Accounting for Real Estate Time-Share Transactions."

Residential

The Company recognized residential revenues of approximately $39 million from continuing sales at the St. Regis Museum Tower in San Francisco, a decrease of $5 million compared to 2005. To date, the Company has invested approximately $334 million in the St. Regis San Francisco project which opened in November 2005. Through March 31, 2006, the Company has recognized approximately $237 million in revenues from the sale of the project's 102 condominiums. The condominiums have sold faster than anticipated in the first quarter and, as of the end of the quarter, only three condominiums remained available for sale.

Selling, General, Administrative and Other

Selling, general, administrative and other expenses increased 29.3% over the first quarter of 2005. Approximately $10 million of the increase is related to stock based compensation, including approximately $9 million of stock option expense. The remainder of the increase primarily relates to costs of sales and other expenses at the Company's Bliss Spa business.

Asset Sales

On April 10, 2006, the Company completed the sale of 28 hotels to Host for total consideration of approximately $3.54 billion (including cash, Host stock and the assumption of debt). The Company expects to complete the sale of the seven remaining hotels in the portfolio later this quarter and expects to receive proceeds of $661 million in cash and $31 million in the form of property level debt which Host will assume when those sales are closed.

In addition to the portfolio of hotels sold to Host, during the first quarter of 2006, the Company sold five wholly-owned hotels for cash proceeds of approximately $269 million and recorded a net pre-tax gain of approximately $30 million associated with these sales. It is anticipated that two additional hotels will be sold in the second quarter of 2006 for approximate cash proceeds of $105 million.

Capital

Gross capital spending during the quarter included approximately $70 million in renovations of hotel assets including construction capital at the Sheraton Hotel & Towers in New York, New York and the Sheraton Centre Toronto Hotel in Toronto, Canada. Investment spending on gross VOI inventory was $39 million, which was offset by cost of sales of $34 million associated with VOI sales during the quarter. The inventory spend included VOI construction at the Westin Ka'anapali Ocean Resort Villas North in Maui, Hawaii, the Sheraton Vistana Villages in Orlando, Florida, the Westin Princeville Resort in Kauai, Hawaii and the Westin Kierland Villas in Scottsdale, Arizona.

Share Repurchase

During the first quarter of 2006, the Company repurchased approximately 7 million shares at a total cost of approximately $447 million. At March 31, 2006, approximately $596 million remained available under the Company's Board authorized share repurchase program. Starwood had approximately 218 million shares outstanding (including partnership units and exchangeable preferred shares) at March 31, 2006.

Dividend

The 2005 annual dividend of $0.84 per share, declared on December 20, 2005, was paid on January 20, 2006. Also during the first quarter of 2006, Starwood Hotels & Resorts (the "Trust") declared a dividend of $0.21 per share, which was paid on March 10, 2006. In addition, the Trust declared a second quarter dividend of $0.21 per share, which was paid on April 7, 2006. It is currently expected that, subject to the approval of the Board of Directors, the remaining 2006 dividend of $0.42 per share will be declared by the Corporation in December 2006 to be paid in January 2007, as set forth in the recently announced dividend policy that was adopted by the Board of Directors.

Balance Sheet

At March 31, 2006, the Company had total debt (including debt classified as held for sale) of $4.226 billion and cash and cash equivalents (including $295 million of restricted cash) of $1.055 billion, or net debt of $3.171 billion, compared to net debt of $2.941 billion at the end of 2005. Following the first phase of the Host transaction, net debt decreased by approximately $677 million (representing the gross cash proceeds received by Starwood in the transaction and debt assumed by Host) to approximately $2.5 billion and is expected to further decrease upon the closing of the sale of the remaining assets to Host later this quarter with $661 million of expected cash consideration and $31 million of debt to be assumed.

At March 31, 2006, debt was approximately 56% fixed rate and 44% floating rate and its weighted average maturity was 4.9 years with a weighted average interest rate of 6.09%. The Company had cash (including total restricted cash) and availability under domestic and international revolving credit facilities of approximately $1.619 billion.

Outlook

All comments in the following paragraphs and certain comments in this release above are deemed to be forward-looking statements. These statements reflect expectations of the Company's performance given its current base of assets and its current understanding of external economic and geo-political environments. Actual results may differ materially.

The Company's guidance for 2006 assumes:

  • The closing of the 28 hotels sold to Host on April 10th, the closing of four deferred European hotels in early May and three deferred hotels by the end of the second quarter. Revenues and direct expenses in the second quarter from the Host hotels are expected to be $37 million and $27 million.
  • Additional owned, leased and consolidated joint venture hotel revenues and expenses of $110 million and $90 million for the balance of the year from the three Canadian hotels which were originally included in the Host portfolio and which are now being retained by Starwood.
  • Stock option expense of $45 million or $0.13 per Share for the full year per our previous guidance.
  • Income of $30 million related to the amortization of the deferred gain associated with the sale of the hotels to Host for the period subsequent to the sale (annualized amount of $42 million is lower than the previous guidance of $50 million per year primarily due to the three Canadian hotels which are now being retained by Starwood). 
  • For the three months ended June 30, 2006, if REVPAR at Same-Store Owned Hotels in North America increases approximately 10% - 12% versus the same period in 2005:
  • Adjusted EBITDA would be expected to be approximately $295 million assuming: 
    • Worldwide and North America Same-Store Owned Hotel EBITDA growth of 15% to 17%.
    • Worldwide and North America Same-Store Owned Hotel margin improvement of approximately 150 - 200 basis points.
    • Growth from management and franchise fees of approximately 45% to 50% including fees earned from the hotels sold to Host and 20% to 22%, excluding these hotels sold to Host.
    • A decline in operating income from our vacation ownership and residential business of $10 million to $15 million due to percentage of completion accounting for pre-sales at new timeshare projects. This guidance reflects a shift of approximately $10 million of operating income for the vacation ownership and residential business from the second quarter to the first quarter of 2006 as a result of faster than anticipated fractional sales at the St. Regis New York and faster sales of the condominiums at the St. Regis in San Francisco.
  • Income from continuing operations, excluding special items, would be expected to be approximately $130 million at an effective tax rate of approximately 20%.
  • EPS would be expected to be approximately $0.58.


For the full year 2006, assuming REVPAR at Same-Store Owned Hotels in North America increases approximately 9% - 11% versus 2005:

  • Full year Adjusted EBITDA would be expected to be approximately $1.260 billion assuming: 
    • Worldwide and North America Same-Store Owned Hotel EBITDA growth of 15% to 17%.
    • Worldwide and North America Same-Store Owned Hotel margin improvement of approximately 150 - 200 basis points.
    • Growth from management and franchise fees of approximately 45% to 50% including fees from the hotels sold to Host and 20% to 22%, excluding fees from the hotels sold to Host.
    • An increase in operating income from our vacation ownership and residential business of $25 million to $35 million (including gains on sales of vacation ownership notes receivable of $10 million to $15 million)
  • Full year income from continuing operations, excluding special items, would be expected to be approximately $513 million at an effective tax rate of approximately 28.5%. This assumes a 20% tax rate in the second quarter and a 35% tax rate for the remainder of the year.
  • Full year EPS would be expected to be approximately $2.28.
  • Full year capital expenditures (excluding timeshare inventory) would be approximately $500 million, including $200 million for maintenance, renovation and technology and $300 million for other growth initiatives. Additionally, net capital expenditures for timeshare inventory would be approximately $175 million.
  • For the full year the Company expects cash interest expense of approximately $205 million and cash taxes of approximately $150 million. 
The Company's guidance excludes the first quarter special items discussed below as well as:
  • Transition costs associated with the Le Meridien transaction which closed in 2005 of approximately $9 million in the second quarter and $25 million in the full year.
  • A one time income tax item which will be recorded in the second quarter in connection with the closing of the Host transaction. 
Special Items

The Company recorded net charges of $14 million (after-tax) for special items in the first quarter of 2006 compared to $2 million of net credits (after-tax) in the same period of 2005.

Special items in the first quarter of 2006 primarily relate to debt defeasance costs and transition costs associated with the Le Meridien transaction, partially offset by the net gains realized on the sale of several hotels.

The following represents a reconciliation of income from continuing operations before special items to income from continuing operations after special items (in millions, except per share data):
 

                                                   Three Months Ended
                                                       March 31,
                                                  --------------------
                                                    2006       2005
                                                  ---------  ---------

Income from continuing operations before special
 items                                                 $91        $77
                                                  ---------  ---------
EPS before special items                             $0.41      $0.35
                                                  ---------  ---------

Special Items
Restructuring and other special charges, net(a)         (9)        --
Debt defeasance costs(b)                               (37)        --
Gain on asset dispositions and impairments,
 net(c)                                                 25          1
                                                  ---------  ---------
Total special items - pre-tax                          (21)         1
Income tax benefit (expense) for special items(d)        8         (1)
Reserves and credits associated with tax
 matters(e)                                             (1)         2
                                                  ---------  ---------
Total special items - after-tax                        (14)         2
                                                  ---------  ---------

Income from continuing operations                      $77        $79
                                                  ---------  ---------
EPS including special items                          $0.34      $0.36
                                                  =========  =========

(a) Restructuring and other special charges, net primarily related to
    transition costs associated with the Le Meridien transaction.

(b) During the three months ended March 31, 2006, the Company
    completed two transactions whereby it was released from certain
    debt obligations that allowed Starwood to sell certain hotels that
    previously served as collateral for such debt. The Company
    incurred expenses totaling $37 million in connection with the
    early extinguishment of these debt obligations. These expenses are
    reflected in interest expense in the Company's consolidated
    statement of income.

(c) For the three months ended March 31, 2006, primarily reflects the
    net gains recorded on the sale of five hotels partially offset by
    an adjustment to reduce the gain on the sale of a hotel in 2004 as
    certain contingencies associated with that sale became probable in
    the quarter. For the three months ended March 31, 2005, reflects
    the reversal of a reserve related to the financing of a hotel
    previously sold, which is no longer required as the loan has been
    repaid, offset in part by the net loss from the sale of two
    hotels.

(d) Represents taxes on special items at the Company's incremental tax
    rate.

(e) During the three months ended March 31, 2006, the Company recorded
    an adjustment to the deferred taxes related to the deferred gain
    on the sale of a hotel in 2005. Income tax benefit in the three
    months ended March 31, 2005 reflects a state tax refund related to
    tax years prior to the 1995 split-up of ITT Corporation.

 
 
 
 
               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
              UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
                 (In millions, except per Share data)

                                                Three Months Ended
                                                     March 31,
                                             -------------------------
                                                                 %
                                              2006    2005    Variance
                                             ------  ------  ---------
Revenues
Owned, leased and consolidated joint venture
 hotels                                       $822    $813        1.1
Vacation ownership and residential sales and
 services                                      194     231      (16.0)
Management fees, franchise fees and other
 income                                        132     104       26.9
Other revenues from managed and franchised
 properties (a)                                293     258       13.6
                                             ------  ------  ---------
                                             1,441   1,406        2.5
Costs and Expenses
Owned, leased and consolidated joint venture
 hotels                                        640     641        0.2
Vacation ownership and residential             165     167        1.2
Selling, general, administrative and other     106      82      (29.3)
Restructuring and other special charges, net     9      --        n/m
Depreciation                                    68     105       35.2
Amortization                                     5       5         --
Other expenses from managed and franchised
 properties (a)                                293     258      (13.6)
                                             ------  ------  ---------
                                             1,286   1,258       (2.2)
Operating income                               155     148        4.7
Equity earnings from unconsolidated
 ventures, net                                   6      13      (53.8)
Interest expense, net of interest income of
 $6 and $2                                     (97)    (62)     (56.5)
Gain on asset dispositions and impairments,
 net                                            25       1        n/m
                                             ------  ------  ---------
Income from continuing operations before
 taxes and minority equity                      89     100      (11.0)
Income tax expense                             (14)    (21)      33.3
Minority equity in net loss                      2      --        n/m
                                             ------  ------  ---------
Income from continuing operations               77      79       (2.5)
Cumulative effect of accounting change       ( (72)     --        n/m
                                             ------  ------  ---------
Net income                                      $5     $79      (93.7)
                                             ======  ======  =========
Earnings (Loss) Per Share - Basic
Continuing operations                        $0.35   $0.37       (5.4)
Cumulative effect of accounting change       (0.33)     --        n/m
                                             ------  ------  ---------
Net income                                   $0.02   $0.37      (94.6)
                                             ======  ======  =========
Earnings (Loss) Per Share - Diluted
Continuing operations                        $0.34   $0.36       (5.6)
Cumulative effect of accounting change       (0.32)     --        n/m
                                             ------  ------  ---------
Net income                                   $0.02   $0.36      (94.4)
                                             ======  ======  =========

Weighted average number of Shares              215     212
                                             ======  ======
Weighted average number of Shares assuming
 dilution                                      225     221
                                             ======  ======

(a) The Company includes in revenues the reimbursement of costs
    incurred on behalf of managed hotel property owners and
    franchisees with no added margin and includes in costs and
    expenses these reimbursed costs. These costs relate primarily to
    payroll costs at managed properties where the Company is the
    employer.

    n/m = not meaningful
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                      CONSOLIDATED BALANCE SHEETS
                   (in millions, except share data)

                                             March 31,    December 31,
                                               2006          2005
                                            ------------  ------------
                                            (unaudited)
Assets
Current assets:
 Cash and cash equivalents                         $760          $897
 Restricted cash                                    286           295
 Accounts receivable, net of allowance for
  doubtful accounts of $48 and $50                  576           642
 Inventories                                        363           280
 Prepaid expenses and other                         161           169
                                            ------------  ------------
 Total current assets                             2,146         2,283
Investments                                         393           403
Plant, property and equipment, net                3,986         4,113
Assets held for sale  (a)                         2,848         2,955
Goodwill and intangible assets, net               2,299         2,298
Other assets (b)                                    410           402
                                            ------------  ------------
                                                $12,082       $12,454
                                            ============  ============
Liabilities and Stockholders' Equity
Current liabilities:
 Short-term borrowings and current
  maturities of long-term debt (c)                 $758        $1,219
 Accounts payable                                   150           156
 Accrued expenses                                   931         1,049
 Accrued salaries, wages and benefits               212           297
 Accrued taxes and other                            108           158
                                            ------------  ------------
   Total current liabilities                      2,159         2,879
Long-term debt (c)                                3,361         2,818
Long-term debt held for sale  (d)                   107           108
Deferred income taxes                               514           562
Other liabilities                                 1,042           851
                                            ------------  ------------
                                                  7,183         7,218
Minority interest                                    23            25
Commitments and contingencies
Stockholders' equity:
   Class A exchangeable preferred shares of
    the Trust; $0.01 par value; authorized
    30,000,000 shares; outstanding 562,222
    and 562,222 shares at March 31, 2006 and
    December 31, 2005, respectively                  --            --
   Class B exchangeable preferred shares of
    the Trust; $0.01 par value; authorized
    15,000,000 shares; outstanding 0 and
    24,627 shares at March 31, 2006 and
    December 31, 2005, respectively                  --            --
   Corporation common stock; $0.01 par
    value; authorized 1,050,000,000 shares;
    outstanding 216,254,061 and 217,218,781
    shares at March 31, 2006 and December
    31, 2005, respectively                            2             2
   Trust Class B shares of beneficial
    interest; $0.01 par value; authorized
    1,000,000,000 shares; outstanding
    216,254,061 and 217,218,781 shares at
    March 31, 2006 and December 31, 2005,
    respectively                                      2             2
Additional paid-in capital                        5,106         5,412
Deferred compensation                                --           (53)
Accumulated other comprehensive loss               (317)         (322)
Retained earnings                                    83           170
                                            ------------  ------------
   Total stockholders' equity                     4,876         5,211
                                            ------------  ------------
                                                $12,082       $12,454
                                            ============  ============

(a) Includes 35 hotels expected to be sold in connection with the
    definitive agreement signed on November 14, 2005 with Host Hotels
    & Resorts, Inc. The Company completed the sale of 28 of these
    hotels on April 10, 2006 and expects to sell the remaining seven
    hotels in the second quarter of 2006.

(b) Includes restricted cash of $9 million and $12 million at March
    31, 2006 and December 31, 2005, respectively.

(c) Excludes Starwood's share of unconsolidated joint venture debt
    aggregating approximately $478 million and $469 million at March
    31, 2006 and December 31, 2005, respectively.

(d) Represents the debt that is expected to be assumed by Host Hotels
    & Resorts, Inc. in connection with the definitive agreement signed
    on November 14, 2005.
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
          Non-GAAP to GAAP Reconciliations - Historical Data
                             (in millions)

                                                 Three Months Ended
                                                     March 31,
                                              ------------------------
                                                                %
                                               2006    2005   Variance
                                              ------  ------ ---------

Reconciliation of Net Income to EBITDA and
 Adjusted EBITDA
Net income                                       $5     $79     (93.7)
Interest expense(a)                             108      69      56.5
Income tax expense                               14      21     (33.3)
Depreciation(b)                                  76     114     (33.3)
Amortization(c)                                   7       6      16.7
                                              ------  ------ ---------
EBITDA                                          210     289     (27.3)
Gain on asset dispositions and impairments,
 net                                            (25)     (1)      n/m
Restructuring and other special charges, net      9      --       n/m
Cumulative effect of accounting change           72      --       n/m
                                              ------  ------ ---------
Adjusted EBITDA                                $266    $288      (7.6)
                                              ======  ====== =========

(a) Includes $5 million and $5 million of interest expense related to
    unconsolidated joint ventures for the three months ended March 31,
    2006 and 2005, respectively.

(b) Includes $8 million and $9 million of Starwood's share of
    depreciation expense of unconsolidated joint ventures for the
    three months ended March 31, 2006 and 2005, respectively.

(c) Includes $2 million and $1 million of Starwood's share of
    amortization expense of unconsolidated joint ventures for the
    three months ended March 31, 2006 and 2005, respectively.
 
 

                                                    Three Months Ended
                                                        March 31,
                                                    ------------------
                                                      2006      2005
                                                    --------  --------
Cash Flow Data
Net income                                               $5       $79
(Increase) decrease in restricted cash                   12       (58)
Adjustments to income from continuing operations,
 changes in working capital, and other                  128        38
                                                    --------  --------
Cash from operating activities                         $145       $59
                                                    ========  ========
Cash from (used for) investing activities              $204      $(69)
                                                    ========  ========
Cash from (used for) financing activities             $(487)       $2
                                                    ========  ========
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
         Non-GAAP to GAAP Reconciliations - Future Performance
                             (In millions)

Three Months Ended                                      Year Ended
   June 30, 2006                                     December 31, 2006
------------------                                   -----------------

             $124  Net income                                    $418
               50  Interest expense                               242
               29  Income tax expense                             195
               83  Depreciation and amortization                  335
------------------                                   -----------------
              286  EBITDA                                       1,190
                   Gain on asset disposition and
               --   impairments, net                              (25)
                   Restructuring and other special
                9   charges, net                                   23
                   Cumulative effect of accounting
               --   change                                         72
------------------                                   -----------------
             $295  Adjusted EBITDA                             $1,260
==================                                   =================
 
 

Three Months Ended                                      Year Ended
  June 30, 2006                                      December 31, 2006
------------------                                   -----------------

             $124  Income from continuing operations              490
------------------                                   -----------------
            $0.55  EPS.                                         $2.18
------------------                                   -----------------

                   Special Items
                   Restructuring and other special
                9   charges, net                                   23
               --  Debt defeasance costs                           37
                   Gain on asset dispositions and
               --   impairments, net                              (25)
------------------                                   -----------------
                9  Total special items - pre-tax                   35
                   Income tax (benefit) expense on
               (3)  special items.                                (13)
                   Reserves and credits associated
               --   with tax matters                                1
------------------                                   -----------------
                6  Total special items - after-tax                 23
------------------                                   -----------------

                   Income from continuing operations
             $130   excluding special items                      $513
------------------                                   -----------------
            $0.58  EPS excluding special items                  $2.28
==================                                   =================
 
 

Three Months Ended                                      Year Ended
  June 30, 2005                                      December 31, 2005
------------------                                   -----------------

             $145  Net income                                    $422
               68  Interest expense                               283
               47  Income tax expense                             218
              108  Depreciation                                   423
                6  Amortization                                    26
------------------                                   -----------------
              374  EBITDA                                       1,372
                   Loss on asset dispositions and
               17   impairments, net                               30
               --  Discontinued operations                          2
                   Restructuring and other special
               --   charges, net                                   13
------------------                                   -----------------
             $391  Adjusted EBITDA                             $1,417
==================                                   =================
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
   Non-GAAP to GAAP Reconciliations - Future Performance (continued)
                             (in millions)

Reconciliation from Previous Full Year Guidance to Current Full Year 
Guidance

Previous full year 2006 EBITDA guidance (1)                    $1,210
First Quarter Impact
Add: Q1 performance above prior guidance                           28
Less: Residential and vacation ownership operating income
 accelerated into Q1 from Q2                                      (10)
                                                             ---------
                                                                   18
Impact related to the Host transaction
Add: Expected balance of year results from retained Canadian
 hotels
  Revenues                                                        110
  Expenses                                                        (90)
Add: Expected second quarter results from deferred hotels to
 be sold to Host in the second quarter
  Revenues                                                         37
  Expenses                                                        (27)
Less: Reduction in gain amortization (primarily due to
 retained Canadian hotels)                                         (8)
                                                             ---------
                                                                   22
Balance of year forecast
Add: Increase in management and franchise fees                     10
Add:  Additional business interruption insurance and other
 income                                                            10
Less:  Reduced residential and vacation ownership operating
 income                                                           (10)
                                                             ---------
                                                                   10
Current full year 2006 EBITDA guidance                         $1,260
                                                             =========
 
 
 
 

Previous full year EPS guidance (1)                             $2.14

Add:  EPS associated with the EBITDA increase discussed
      above                                                      0.15

Less: Increased depreciation expense primarily associated
      with the retained Canadian hotels.                        (0.04)

Less: Increased interest expense due to the retention of
      the Canadian hotels, delayed closing of the Host
      transaction and the retention of the SHC bonds.           (0.08)

Add:  Lower tax rate primarily due to the benefit from the
      payment of the second quarter 2006 dividend from the
      Trust.                                                     0.14

Less: Higher shares outstanding primarily due to
      adjustments to stock options and restricted stock as 
      a result of the depairing of the class B shares in
      connection with the Host transaction.                     (0.03)
                                                          ------------
Current full year 2006 EPS guidance                             $2.28
                                                          ============

(1) See Starwood's fourth quarter 2005 earnings release for the
    non-GAAP to GAAP reconciliation of the previous EPS and EBITDA
    guidance.
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                  Non-GAAP to GAAP Reconciliations -
              Same Store Owned Hotel Revenue and Expenses
                             (In millions)

                                                Three Months Ended
                                                     March 31,
                                             -------------------------
        Same-Store Owned Hotels (1)                              %
                 Worldwide                    2006    2005   Variance
                                             ------  ------  ---------

Revenue
  Same-Store Owned Hotels                     $735    $675        8.9
  Hotels Sold or Closed in 2006 and 2005
   (16 hotels)                                   5      56      (91.1)
  Hotels Without Comparable Results
   (14 hotels)                                  82      82         --
                                             ------  ------  ---------
Total Owned, Leased and Consolidated Joint
 Venture Hotels Revenue                       $822    $813        1.1
                                             ======  ======  =========

Costs and Expenses
  Same-Store Owned Hotels                     $570    $538       (6.0)
  Hotels Sold or Closed in 2006 and 2005
   (16 hotels)                                   5      44       88.6
  Hotels Without Comparable Results
   (14 hotels)                                  65      60       (8.3)
  Other ancillary hotel operations              --      (1)    (100.0)
                                             ------  ------  ---------
Total Owned, Leased and Consolidated Joint
 Venture Hotels Costs and Expenses            $640    $641        0.2
                                             ======  ======  =========
 

                                                Three Months  Ended
                                                     March 31,
                                             -------------------------
          Same-Store Owned Hotels                                %
               North America                  2006    2005   Variance
                                             ------  ------  ---------

Revenue
  Same-Store Owned Hotels                     $543    $485       12.0
  Hotels Sold or Closed in 2006 and 2005
   (14 hotels)                                   5      47      (89.4)
  Hotels Without Comparable Results
   (7 hotels)                                   72      62       16.1
                                             ------  ------  ---------
Total Owned, Leased and Consolidated Joint
 Venture Hotels Revenue                       $620    $594        4.4
                                             ======  ======  =========

Costs and Expenses
  Same-Store Owned Hotels                     $417    $387       (7.9)
  Hotels Sold or Closed in 2006 and 2005
   (14 hotels)                                   5      36       86.1
  Hotels Without Comparable Results
   (7 hotels)                                   54      44      (22.7)
  Other ancillary hotel operations              (1)     (2)     (50.0)
                                             ------  ------  ---------
Total Owned, Leased and Consolidated Joint
 Venture Hotels Costs and Expenses            $475    $465       (2.2)
                                             ======  ======  =========

                                                Three Months Ended
                                                     March 31,
                                             -------------------------
          Same-Store Owned Hotels                                %
               International                  2006    2005   Variance
                                             ------  ------  ---------

Revenue
    Same-Store Owned Hotels                   $192    $190        1.0
    Hotels Sold or Closed in 2006 and 2005
     (2 hotels)                                 --       9     (100.0)
    Hotels Without Comparable Results
     (7 hotels)                                 10      20      (50.0)
                                             ------  ------  ---------
Total Owned, Leased and Consolidated Joint
 Venture Hotels Revenue                       $202    $219       (7.8)
                                             ======  ======  =========

Costs and Expenses
    Same-Store Owned Hotels                   $153    $151       (1.0)
    Hotels Sold or Closed in 2006 and 2005
     (2 hotels)                                 --       8      100.0
    Hotels Without Comparable Results
     (7 hotels)                                 11      16       31.3
    Other ancillary hotel operations             1       1         --
                                             ------  ------  ---------
Total Owned, Leased and Consolidated Joint
 Venture Hotels Costs and Expenses            $165    $176        6.3
                                             ======  ======  =========

(1) Same-Store Owned Hotel Results exclude 16 hotels sold or closed in
    2006 and 2005 and 14 hotels without comparable results.
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                 Owned Hotel Results - Same Store (1)
                      For the Three Months Ended
                            March 31, 2006
                               UNAUDITED

                                WORLDWIDE            NORTH AMERICA
                          ---------------------- ---------------------
                           2006    2005    Var.   2006    2005   Var.
                          ------- ------- -------------- ------- -----

                                111 Hotels             75 Hotels
                          ---------------------- ---------------------
SAME STORE OWNED HOTELS
        REVPAR ($)        119.15  108.54    9.8% 119.36  105.85  12.8%
        ADR ($)           177.01  165.26    7.1% 177.57  160.55  10.6%
        OCCUPANCY (%)       67.3%   65.7%   1.6    67.2%   65.9%  1.3

                                   47                     29
                          ---------------------- ---------------------
SHERATON
        REVPAR ($)         94.35   87.33    8.0%  94.82   85.98  10.3%
        ADR ($)           146.61  137.43    6.7% 151.52  137.28  10.4%
        OCCUPANCY (%)       64.4%   63.5%   0.9    62.6%   62.6%  0.0

                                   27                     18
                          ---------------------- ---------------------
WESTIN
        REVPAR ($)        142.10  128.48   10.6% 133.59  117.57  13.6%
        ADR ($)           192.90  178.69    8.0% 178.60  159.84  11.7%
        OCCUPANCY (%)       73.7%   71.9%   1.8    74.8%   73.6%  1.2

                                   10                     2
                          ---------------------- ---------------------
ST. REGIS/LUXURY
 COLLECTION
        REVPAR ($)        222.45  209.85    6.0% 290.19  255.90  13.4%
        ADR ($)           345.34  349.41  (1.2%) 365.79  345.51   5.9%
        OCCUPANCY (%)       64.4%   60.1%   4.3    79.3%   74.1%  5.2

                                   10                     10
                          ---------------------- ---------------------
W
        REVPAR ($)        183.03  158.10   15.8% 183.03  158.10  15.8%
        ADR ($)           253.90  228.50   11.1% 253.90  228.50  11.1%
        OCCUPANCY (%)       72.1%   69.2%   2.9    72.1%   69.2%  2.9

                                   17                     16
                          ---------------------- ---------------------
OTHER
        REVPAR ($)         78.16   71.58    9.2%  71.94   63.37  13.5%
        ADR ($)           126.10  121.43    3.8% 123.28  116.51   5.8%
        OCCUPANCY (%)       62.0%   58.9%   3.1    58.4%   54.4%  4.0
 

                                                    INTERNATIONAL
                                               -----------------------
                                                2006    2005    Var.
                                               ------- ------- -------

                                                      36 Hotels
                                               -----------------------
SAME STORE OWNED HOTELS
        REVPAR ($)                             118.54  116.47     1.8%
        ADR ($)                                175.36  179.38   (2.2%)
        OCCUPANCY (%)                            67.6%   64.9%    2.7

                                                         18
                                               -----------------------
SHERATON
        REVPAR ($)                              93.36   90.15     3.6%
        ADR ($)                                137.17  137.73   (0.4%)
        OCCUPANCY (%)                            68.1%   65.5%    2.6

                                                         9
                                               -----------------------
WESTIN
        REVPAR ($)                             176.18  172.07     2.4%
        ADR ($)                                254.80  263.60   (3.3%)
        OCCUPANCY (%)                            69.1%   65.3%    3.8

                                                         8
                                               -----------------------
ST. REGIS/LUXURY COLLECTION
        REVPAR ($)                             161.76  168.59   (4.1%)
        ADR ($)                                316.86  354.85  (10.7%)
        OCCUPANCY (%)                            51.1%   47.5%    3.6

                                                    
W
        REVPAR ($)
        ADR ($)
        OCCUPANCY (%)

                                                         1
                                               -----------------------
OTHER
        REVPAR ($)                             114.17  119.15   (4.2%)
        ADR ($)                                137.60  139.59   (1.4%)
        OCCUPANCY (%)                            83.0%   85.4%   (2.4)
 
 

(1) Hotel Results exclude 16 hotels sold or closed and 14 hotels
    without comparable results during 2005 & 2006
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                 Owned Hotel Results - Same Store (1)
                      For the Three Months Ended
                            March 31, 2006
                        UNAUDITED ($ thousands)

                           WORLDWIDE               NORTH AMERICA
                    ------------------------ -------------------------
                     2006     2005     Var.   2006     2005     Var.
                    -------- -------- ------ -------- -------- -------

                           111 Hotels                75 Hotels
                    ------------------------ -------------------------
SAME STORE OWNED
 HOTELS
      Total REVENUE 734,842  674,796    8.9% 543,439  485,199    12.0%
      Total EXPENSE 569,939  537,871  (6.0%) 416,908  386,405   (7.9%)
 

                              47                        29
                    ------------------------ -------------------------
SHERATON
      REVENUE       277,712  255,820    8.6% 183,639  163,778    12.1%
      EXPENSE       223,405  210,692  (6.0%) 151,945  141,720   (7.2%)
 

                              27                        18
                    ------------------------ -------------------------
WESTIN
      REVENUE       244,778  225,330    8.6% 182,059  163,910    11.1%
      EXPENSE       173,645  164,920  (5.3%) 125,588  117,247   (7.1%)
 

                              10                        2
                    ------------------------ -------------------------
ST. REGIS/LUXURY
 COLLECTION
      REVENUE        76,248   71,943    6.0%  50,515   44,975    12.3%
      EXPENSE        57,476   55,718  (3.2%)  32,113   29,162  (10.1%)
 

                              10                        10
                    ------------------------ -------------------------
W
      REVENUE        89,451   78,706   13.7%  89,451   78,706    13.7%
      EXPENSE        72,201   66,433  (8.7%)  72,201   66,433   (8.7%)
 

                              17                        16
                    ------------------------ -------------------------
OTHER
      REVENUE        46,653   42,997    8.5%  37,775   33,830    11.7%
      EXPENSE        43,212   40,108  (7.7%)  35,061   31,842  (10.1%)
 

                                                   INTERNATIONAL
                                              ------------------------
                                               2006     2005     Var.
                                              -------- -------- ------

                                                      36 Hotels
                                              ------------------------
SAME STORE OWNED HOTELS
        Total REVENUE                         191,403  189,597    1.0%
        Total EXPENSE                         153,031  151,467  (1.0%)
 

                                                        18
                                              ------------------------
SHERATON
        REVENUE                                94,073   92,042    2.2%
        EXPENSE                                71,460   68,972  (3.6%)
 

                                                         9
                                              ------------------------
WESTIN
        REVENUE                                62,719   61,420    2.1%
        EXPENSE                                48,057   47,673  (0.8%)
 

                                                         8
                                              ------------------------
ST. REGIS/LUXURY COLLECTION
        REVENUE                                25,733   26,968  (4.6%)
        EXPENSE                                25,363   26,556    4.5%
 
 

W
        REVENUE
        EXPENSE
 

                                                         1
                                              ------------------------
OTHER
        REVENUE                                 8,878    9,167  (3.2%)
        EXPENSE                                 8,151    8,266    1.4%

(1) Hotel Results exclude 16 hotels sold or closed and 14 hotels
    without comparable results during 2005 & 2006
 
 

              STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                 Worldwide Hotel Results - Same Store
              For the Three Months Ended March 31, 2006
                              UNAUDITED

                           Systemwide (1) -        Systemwide (1) -
                            North America           International
                       ------------------------ ----------------------
                         2006     2005    Var.   2006    2005    Var.
                       --------- ------- ------ ------- ------- ------

TOTAL HOTELS
        REVPAR ($)       104.92   93.61   12.1%  94.80   88.55    7.1%
        ADR ($)          153.83  141.12    9.0% 148.60  141.34    5.1%
        OCCUPANCY (%)      68.2%   66.3%   1.9    63.8%   62.7%   1.1

SHERATON
        REVPAR ($)        92.53   83.24   11.2%  89.23   82.05    8.8%
        ADR ($)          138.79  126.40    9.8% 138.76  128.87    7.7%
        OCCUPANCY (%)      66.7%   65.9%   0.8    64.3%   63.7%   0.6

WESTIN
        REVPAR ($)       127.43  113.35   12.4% 114.73  112.74    1.8%
        ADR ($)          179.81  164.30    9.4% 179.56  183.67  (2.2%)
        OCCUPANCY (%)      70.9%   69.0%   1.9    63.9%   61.4%   2.5

ST. REGIS/LUXURY
 COLLECTION
        REVPAR ($)       228.56  202.31   13.0% 145.95  147.40  (1.0%)
        ADR ($)          311.93  287.45    8.5% 273.79  279.84  (2.2%)
        OCCUPANCY (%)      73.3%   70.4%   2.9    53.3%   52.7%   0.6

W
        REVPAR ($)       185.04  160.74   15.1% 122.99   87.63   40.4%
        ADR ($)          256.84  232.74   10.4% 237.87  217.66    9.3%
        OCCUPANCY (%)      72.0%   69.1%   2.9    51.7%   40.3%  11.4

FOUR POINTS
        REVPAR ($)        57.13   51.44   11.1%  69.34   61.96   11.9%
        ADR ($)           91.44   84.00    8.9% 102.88   96.96    6.1%
        OCCUPANCY (%)      62.5%   61.2%   1.3    67.4%   63.9%   3.5

OTHER
        REVPAR ($)        99.01   83.99   17.9%
        ADR ($)          124.89  135.39  (7.8%)
        OCCUPANCY (%)      79.3%   62.0%  17.3

(1) Includes same store owned, leased, consolidated JV, managed,
    unconsolidated JV and franchised hotels
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                 Worldwide Hotel Results - Same Store
               For the Three Months Ended March 31, 2006
                               UNAUDITED

                             Systemwide (1)      Company Operated (2)
                         ---------------------- ----------------------
                          2006    2005    Var.   2006    2005    Var.
                         ------- ------- ------ ------- ------- ------

TOTAL WORLDWIDE
         REVPAR ($)      101.18   91.72   10.3% 112.75  102.23   10.3%
         ADR ($)         151.98  141.20    7.6% 166.79  155.36    7.4%
         OCCUPANCY (%)     66.6%   65.0%   1.6    67.6%   65.8%   1.8

NORTH AMERICA
         REVPAR ($)      104.92   93.61   12.1% 124.71  111.21   12.1%
         ADR ($)         153.83  141.12    9.0% 176.66  163.23    8.2%
         OCCUPANCY (%)     68.2%   66.3%   1.9    70.6%   68.1%   2.5

EUROPE
         REVPAR ($)       95.62   95.48    0.1% 104.19  103.14    1.0%
         ADR ($)         160.12  166.93  (4.1%) 173.52  181.65  (4.5%)
         OCCUPANCY (%)     59.7%   57.2%   2.5    60.0%   56.8%   3.2

ASIA PACIFIC
         REVPAR ($)       94.26   87.31    8.0%  89.44   85.18    5.0%
         ADR ($)         144.68  135.26    7.0% 140.35  134.56    4.3%
         OCCUPANCY (%)     65.1%   64.5%   0.6    63.7%   63.3%   0.4

AFRICA & MIDDLE EAST
         REVPAR ($)       97.16   87.80   10.7%  97.16   86.86   11.9%
         ADR ($)         149.72  128.61   16.4% 149.35  126.89   17.7%
         OCCUPANCY (%)     64.9%   68.3%  (3.4)   65.1%   68.4%  (3.3)

LATIN AMERICA
         REVPAR ($)       90.73   72.52   25.1% 102.98   82.71   24.5%
         ADR ($)         129.34  111.66   15.8% 145.35  122.69   18.5%
         OCCUPANCY (%)     70.1%   64.9%   5.2    70.8%   67.4%   3.4

(1) Includes same store owned, leased, consolidated JV, managed,
    unconsolidated JV and franchised hotels
      
(2) Includes same store owned, leased, consolidated JV, managed and
    unconsolidated JV hotels
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
           Management Fees, Franchise Fees and Other Income
                      For the Three Months Ended
                            March 31, 2006
                        UNAUDITED ($ millions)

                                              Worldwide
                                --------------------------------------
                                 2006     2005    Variance  % Variance
                                -------  -------  --------  ----------

Management Fees:
Base Fees                           32       24         8        33.3%
Incentive Fees                      24       12        12       100.0%
                                -------  -------  --------  ----------
Total Management Fees               56       36        20        55.6%

Franchise Fees                      36       30         6        20.0%
                                -------  -------  --------  ----------

Total Management & Franchise
 Fees                               92       66        26        39.4%

Other Management & Franchise
 Revenues (1)                       10       10         -           -
                                -------  -------  --------  ----------

Total Management & Franchise
 Revenues                          102       76        26        34.2%
                                =======  =======  ========  ==========

Other (2)                           30       28         2         7.1%
                                -------  -------  --------  ----------

Management Fees, Franchise Fees
 and Other Income                  132      104        28        26.9%
                                =======  =======  ========  ==========
 

(1) Other Management & Franchise Fees primarily includes the
    amortization of deferred gains resulting from the sales of hotels
    subject to long-term management contracts and termination fees.

(2) Other primarily includes revenues from Bliss and other
    miscellaneous revenue.
 
 

              STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
        Vacation Ownership & Residential Revenues and Expenses
              For the Three Months Ended March 31, 2006
                        UNAUDITED ($ millions)

                                        2006       2005     % Variance
                                      ---------  ---------  ----------

Originated Sales Revenues (1)  --
 Vacation Ownership Sales                  192        162        18.5%
Other Sales and Services Revenues (2)       33         28        17.9%
Deferred Revenues -- Percentage of
 Completion                                (64)         7         n/m
Deferred Revenues -- Other (3)              (6)       (10)       40.0%
                                      ---------  ---------  ----------
Vacation Ownership Sales and Services
 Revenues                                  155        187      (17.1%)
Residential Sales and Services
 Revenues                                   39         44      (11.4%)
                                      ---------  ---------  ----------
Total Vacation Ownership & Residential
 Sales and Services Revenues               194        231      (16.0%)
                                      =========  =========  ==========

Originated Sales Expenses (4)  --
 Vacation Ownership Sales                  125        104      (20.2%)
Other Expenses (5)                          39         31      (25.8%)
Deferred Expenses -- Percentage of
 Completion                                (31)         4         n/m
Deferred Expenses -- Other                   3         (6)        n/m
                                      ---------  ---------  ----------
Vacation Ownership Expenses                136        133       (2.3%)
Residential Expenses                        29         34        14.7%
                                      ---------  ---------  ----------
Total Vacation Ownership & Residential
 Expenses                                  165        167         1.2%
                                      =========  =========  ==========
 

(1) Timeshare sales revenue originated at each sales location before
    deferrals of revenue for U.S. GAAP reporting purposes

(2) Includes resort income, interest income, gain on sale of notes
    receivable, and miscellaneous other revenues

(3) Includes deferral of revenue for contracts still in rescission
    period, contracts that do not yet meet the requirements of SFAS
    No. 66 or SFAS No. 152 and, in 2006, provision for loan loss

(4) Timeshare cost of sales and sales & marketing expenses before
    deferrals of sales expenses for U.S. GAAP reporting purposes

(5) Includes resort, general and administrative, and other
    miscellaneous expenses

Note: Deferred revenue is calculated based on the Percentage of
Completion ("POC") of the project. Deferred expenses, also based on
POC, includes product costs and direct sales and marketing costs only.
Indirect sales and marketing costs are no longer deferred per SFAS 152
as of January 1, 2006.

n/m = not meaningful
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                        Debt Portfolio Summary
                         As of March 31, 2006
                               UNAUDITED

                                                               Avg
                 Interest    Balance       % of    Interest  Maturity
      Debt        Terms   (in millions)  Portfolio   Rate   (in years)
---------------- -------- -------------  --------- -------- ----------

Floating Rate
 Debt:

Senior credit
 facility
Revolving credit  Various
 facility         + .525%       $1,116         26%    5.33%       4.7

Mortgages and    Various
 other                             424         10%    4.05%       1.2

Interest rate     LIBOR
 swaps           + 4.23%           300          7%    9.23%
                          -------------  --------- --------

Total Floating                   1,840         43%    5.67%       3.7

Fixed Rate Debt:

Sheraton Holding
 public debt                       598         14%    7.47%      12.1

Senior notes (1)                 1,485         35%    6.70%       3.7

Convertible debt                   360          9%    3.50%       0.1

Mortgages and
 other                             136          3%    7.52%       8.9

Interest rate
 swaps                            (300)       (7%)    7.88%
                          -------------  --------- --------

Total Fixed                      2,279         54%    6.34%       5.4
                          -------------  --------- --------

Total                           $4,119         97%    6.01%       4.8
                          =============  ========= ========

Floating rate
 debt classified
 as held for
 sale                               30          1%    5.30%       3.8

Fixed rate debt
 classified as
 held for sale                      77          2%    8.84%      11.3
                          -------------  --------- --------

Total debt
 classified as
 held for sale                    $107          3%    7.85%       9.2
                          =============  ========= ========

Total Debt                      $4,226        100%    6.09%       4.9
                          =============  ========= ========
 

                                                 Maturities
                                        ------------------------------
                                             less than 1 year    $758
                                                    1-3 years     807
                                                    4-5 years   1,112
                                         greater than 5 years   1,549
                                                            ----------
                                                               $4,226
                                                            ==========
                                        ------------------------------

(1) Balance consists of outstanding public debt of $1.497 billion and
    a $15 million fair value adjustment related to the unamortized
    gain on fixed to floating interest rate swaps terminated in
    September 2002 and March 2004 and a ($27) million fair value
    adjustment related to current fixed to floating interest rate
    swaps.
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
       Hotels without Comparable Results & Other Selected Items
                         As of March 31, 2006
                        UNAUDITED ($ millions)

Properties without comparable results in 2006:

Property                                       Location
--------                                       --------              
W New Orleans - French Quarter                 New Orleans, LA
W New Orleans                                  New Orleans, LA
St. Regis Aspen                                Aspen, CO
Sheraton Bal Harbour Beach Resort              Bal Harbour, FL
St. Regis New York                             New York, NY
Caesars Paradise Stream                        Mount Pocono, PA
St. Regis Hotel, San Francisco                 San Francisco, CA
Hotel Des Bains                                Venice Lido, Italy
The Westin Excelsior, Venice Lido              Venice Lido, Italy
Hotel Santa Maria de el Paular                 Rascafria, Spain
Westin Regina Resort - Cancun                  Cancun, Mexico
Sheraton Cancun Resort & Towers                Cancun, Mexico
Sheraton Fiji                                  Nadi, Fiji
Westin Royal Denarau                           Nadi, Fiji

Properties sold or closed in 2006 and 2005:

Property                                       Location
--------                                       --------
Sheraton Denver Tech Center                    Englewood, CO
Deerfield Beach Hilton                         Ft. Lauderdale, FL
Raphael                                        Chicago, IL
Sheraton Chapel Hill                           Chapel Hill, NC
St. Regis Washington, DC                       Washington, DC
Sheraton Russell Hotel                         New York, NY
Westin Philadelphia                            Philadelphia, PA
Westin Princeton at Forrestal Village          Princeton, NJ
Sheraton Ft. Lauderdale Airport Hotel          Dania, FL
Westin Hotel Long Beach                        Long Beach, CA
Sheraton Suites San Diego                      San Diego, CA
Sheraton Framingham Hotel                      Framingham, MA
Westin Embassy Row, Washington D.C.            Washington, DC
Sheraton Suites Key West                       Key West, FL
Hotel Danieli                                  Venice, Italy
Sheraton Lisboa Hotel & Towers                 Lisbon, Portugal
 
 

Selected Balance Sheet and Cash Flow Items:

Cash and cash equivalents 
 (including restricted cash of $295 million)                   $1,055
 Debt (including debt classified as held for sale)             $4,226
 
 

Revenues and Expenses Associated with Assets Sold in the First Quarter
of 2006 or Expected to be Sold in the Second Quarter of 2006 (1):

                            Q1       Q2      Q3      Q4     Full Year
                          --------------------------------------------
 Hotels Sold in the First
  Quarter of 2006:
 2006
 Revenues                     $5      $-      $-      $-           $5
 Expenses                     $6      $-      $-      $-           $6

 2005
 Revenues                    $21     $24     $18     $19          $82
 Expenses                    $15     $15     $15     $14          $59

 Hotels Classified as Held
  for Sale at March 31,
  2006:
 2006
 Revenues                   $271      $-      $-      $-         $271
 Expenses                   $206      $-      $-      $-         $206

 2005
 Revenues                   $248    $310    $283    $304       $1,145
 Expenses                   $194    $209    $199    $211         $813

(1) Results consist of 5 hotels sold in the first quarter of 2006 and
    35 hotels which are classified as held for sale at March 31, 2006.
    These amounts are included in the revenues and expenses from
    owned, leased and consolidated joint venture hotels in 2006 and
    2005.
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                         Capital Expenditures
         For the Three and Twelve Months Ended March 31, 2006
                        UNAUDITED ($ millions)

 Capital Expenditures:
   Owned, Leased and Consolidated Joint Venture Hotels             70
   Corporate/IT                                                    11
                                                          ------------
 Subtotal                                                          81

 Vacation Ownership Capital Expenditures:
   Capital expenditures (includes land acquisitions)               24
   Net capital expenditures for inventory (1)                       5
                                                          ------------
 Subtotal                                                          29

 Development Capital                                               20
                                                          ------------

 Total Capital Expenditures                                       130
                                                          ============

(1) Represents gross inventory capital expenditures of $39 less cost
    of sales of $34 for the three months ended March 31, 2006.
 
 
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
              Summary of Portfolio by Properties & Rooms
                         As of March 31, 2006
                               UNAUDITED

                            NAD             EAME            LAD
                     ---------------- --------------- ---------------
Owned                 Hotels   Rooms   Hotels  Rooms   Hotels  Rooms
                     ------- -------- ------- ------- ------- -------
Sheraton                 30   14,839      11   3,060       7   3,235
Westin                   18    9,108       8   1,949       3     901
Four Points               6    1,153       -       -       -       -
W                        12    4,294       -       -       -       -
Luxury Collection         1      654       7     828       2     320
St. Regis                 4      900       1     161       -       -
Other                    11    2,634       -       -       -       -
                     ------- -------- ------- ------- ------- -------
Total Owned              82   33,582      27   5,998      12   4,456
Managed & UJV
Sheraton                 41   20,561      71  20,761      13   2,370
Westin                   36   19,882       8   2,303       -       -
Four Points               1      475       7   1,019       2     263
W                         5      903       -       -       1     237
Luxury Collection         6    1,427       7   1,303       8     188
St. Regis                 3      596       1      95       -       -
Le Meridien               6    1,192      72  16,640       3     839
Other                     2    2,672       -       -       -       -
                     ------- -------- ------- ------- ------- -------
Total Managed & UJV     100   47,708     166  42,121      27   3,897
Franchised
Sheraton                119   37,190      27   6,747       4   1,294
Westin                   24    8,724       3   1,142       3     598
Four Points              86   14,831      11   1,482       9   1,350
Luxury Collection         1      249      14   1,721       -       -
Le Meridien               3      982      11   3,820       -       -
                     ------- -------- ------- ------- ------- -------
Total Franchised        233   61,976      66  14,912      16   3,242
----------------------------------------------------------------------
Systemwide
Sheraton                190   72,590     109  30,568      24   6,899
Westin                   78   37,714      19   5,394       6   1,499
Four Points              93   16,459      18   2,501      11   1,613
W                        17    5,197       -       -       1     237
Luxury Collection         8    2,330      28   3,852      10     508
St. Regis                 7    1,496       2     256       -       -
Le Meridien               9    2,174      83  20,460       3     839
Other                    13    5,306       -       -       -       -
                     ------- -------- ------- ------- ------- -------
Total Systemwide        415  143,266     259  63,031      55  11,595
                     ======= ======== ======= ======= ======= =======
----------------------------------------------------------------------
 

                                            ASIA            Total
                                      --------------- ----------------
Owned                                  Hotels  Rooms   Hotels   Rooms
                                      ------- ------- ------- --------
Sheraton                                   3   1,028      51   22,162
Westin                                     -       -      29   11,958
Four Points                                1     630       7    1,783
W                                          -       -      12    4,294
Luxury Collection                          -       -      10    1,802
St. Regis                                  -       -       5    1,061
Other                                      -       -      11    2,634
                                      ------- ------- ------- --------
Total Owned                                4   1,658     125   45,694
Managed & UJV
Sheraton                                  45  15,751     170   59,443
Westin                                    11   4,253      55   26,438
Four Points                                2     387      12    2,144
W                                          1     253       7    1,393
Luxury Collection                          -       -      21    2,918
St. Regis                                  2     591       6    1,282
Le Meridien                               23   5,205     104   23,876
Other                                      -       -       2    2,672
                                      ------- ------- ------- --------
Total Managed & UJV                       84  26,440     377  120,166
Franchised
Sheraton                                  18   6,793     168   52,024
Westin                                     5   1,226      35   11,690
Four Points                                1     126     107   17,789
Luxury Collection                          -       -      15    1,970
Le Meridien                                5   2,774      19    7,576
                                      ------- ------- ------- --------
Total Franchised                          29  10,919     344   91,049
----------------------------------------------------------------------
Systemwide
Sheraton                                  66  23,572     389  133,629
Westin                                    16   5,479     119   50,086
Four Points                                4   1,143     126   21,716
W                                          1     253      19    5,687
Luxury Collection                          -       -      46    6,690
St. Regis                                  2     591      11    2,343
Le Meridien                               28   7,979     123   31,452
Other                                      -       -      13    5,306
                                      ------- ------- ------- --------
Total Systemwide                         117  39,017     846  256,909
                                      ======= ======= ======= ========
----------------------------------------------------------------------
 
 

               STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
                 Vacation Ownership Inventory Pipeline
                         As of March 31, 2006
                               UNAUDITED
 

----------------------------------------------------------------------
                                                 # Resorts
                                      --------------------------------
                                                     In      In Active
 Brand                                Total (2)  Operations    Sales
----------------------------------------------------------------------

 Sheraton                                    7           6          6
 Westin                                      7           4          6
 St. Regis                                   2           1          2
 Unbranded                                   3           3          -
                                      --------------------------------
 Total SVO, Inc.                            19          14         14
                                      --------------------------------

 Unconsolidated Joint Ventures
  (UJV's)                                    2           1          1
                                      --------------------------------
 Total including UJV's                      21          15         15
----------------------------------------------------------------------

----------------------------------------------------------------------
 Total Intervals Including UJV's (7)
----------------------------------------------------------------------
 

----------------------------------------------------------------------
                                       # of Units (1)
                      ------------------------------------------------
                                                     Future
 Brand                                Pre-sales/    Capacity  Total at
                      Completed(3)  Development(4)  (5),(6)   Buildout
----------------------------------------------------------------------

 Sheraton                   2,574             137     1,703     4,414
 Westin                       625             564       325     1,514
 St. Regis                     25              22         -        47
 Unbranded                    124               -         1       125
                     -------------------------------------------------
 Total SVO, Inc.            3,348             723     2,029     6,100
                     -------------------------------------------------

 Unconsolidated Joint
  Ventures (UJV's)            198               -        36       234
                     -------------------------------------------------
 Total including
  UJV's                     3,546             723     2,065     6,334
----------------------------------------------------------------------

----------------------------------------------------------------------
 Total Intervals
  Including UJV's (7)     184,392          37,596   107,380   329,368
----------------------------------------------------------------------

(1) Lockoff units are considered as one unit for this analysis.

(2) Includes resorts in operation, active sales, and announced new
    resorts, Sheraton Kauai and St. Regis Punta Mita (UJV)

(3) Completed units include those units that have a certificate of
    occupancy.

(4) Units in Pre-sales/Development are in various stages of
    development (including the permitting stage), most of which are
    currently being offered for sale to customers.

(5) Based on owned land and average density in existing marketplaces

(6) Future units indicated above include planned timeshare units on
    land owned by the Company or applicable UJV that have received all
    major governmental land use approvals for the development of
    timeshare. There can be no assurance that such units will in fact
    be developed and, if developed, the time period of such
    development (which may be more than several years in the future).
    Some of the projects may require additional third-party approvals
    or permits for development and build out and may also be subject
    to legal challenges as well as a commitment of capital by the
    Company. The actual number of units to be constructed may be
    significantly lower than the number of future units indicated.

(7) Assumes 52 intervals per unit.

The Company has included the above supplemental information concerning special items to assist investors in analyzing Starwood's financial position and results of operations. The Company has chosen to provide this information to investors to enable them to perform meaningful comparisons of past, present and future operating results and as a means to emphasize the results of core on-going operations.
Starwood will be conducting a conference call to discuss the first quarter financial results at 10:30 a.m. (EST) today. The conference call will be available through simultaneous webcast in the Investor Relations/Press Releases section of the Company's website at http://www.starwoodhotels.com. A replay of the conference call will also be available from 12:30 p.m. (EST) today through Thursday, May 4 at 12:00 midnight (EST) on both the Company's website and via telephone replay at (719) 457-0820 (access code 4397589).

Definitions

All references to EPS, unless otherwise noted, reflect earnings per diluted share from continuing operations. All references to "net capital expenditures" mean gross capital expenditures for timeshare and fractional inventory net of cost of sales. EBITDA represents net income before interest expense, taxes, depreciation and amortization. The Company believes that EBITDA is a useful measure of the Company's operating performance due to the significance of the Company's long-lived assets and level of indebtedness. EBITDA is a commonly used measure of performance in its industry which, when considered with GAAP measures, the Company believes gives a more complete understanding of the Company's ability to service debt, fund capital expenditures, pay income taxes and pay cash distributions. It also facilitates comparisons between the Company and its competitors. The Company's management has historically adjusted EBITDA (i.e., "Adjusted EBITDA") when evaluating operating performance for the total Company as well as for individual properties or groups of properties because the Company believes that the inclusion or exclusion of certain recurring and non-recurring items, such as the special items described on page 9 of this release and/or revenues and costs and expenses from hotels sold, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results. The Company's management also used Adjusted EBITDA as a measure in determining the value of acquisitions and dispositions and it is used in the annual budget process. Due to guidance from the Securities and Exchange Commission, the Company now does not reflect such items when calculating EBITDA; however, the Company continues to adjust for these special items and refers to this measure as Adjusted EBITDA. The Company has historically reported this measure to its investors and believes that the continued inclusion of Adjusted EBITDA provides consistency in its financial reporting and enables investors to perform more meaningful comparisons of past, present and future operating results and provides a means to evaluate the results of its core on-going operations. EBITDA and Adjusted EBITDA are not intended to represent cash flow from operations as defined by GAAP and such metrics should not be considered as an alternative to net income, cash flow from operations or any other performance measure prescribed by GAAP. The Company's calculation of EBITDA and Adjusted EBITDA may be different from the calculations used by other companies and, therefore, comparability may be limited.

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

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

All references to management and franchise revenues represent base and incentive fees, franchise fees and termination fees offset by payments by Starwood under performance and other guarantees.

Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with approximately 850 properties in more than 95 countries and 145,000 employees at its owned and managed properties. Starwood® Hotels is a fully integrated owner, operator and franchisor of hotels and resorts with the following internationally renowned brands: St. Regis®, The Luxury Collection®, Sheraton®, Westin®, Four Points® by Sheraton, W®, Le Meridien® and the recently announced aloft(SM). Starwood Hotels also owns Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. For more information, please visit www.starwoodhotels.com.

Note: This press release 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. 

.
Contact:

Starwood Hotels & Resorts Worldwide, Inc.
Alisa Rosenberg, 914-640-5214
.
Also See: Starwood Reports Net Income for the 4th Qtr of 2005 Increased 59% to $159 million; For the Full Year 2005, Starwood's Earnings Up 7% to $422 million / Hotel Operating Statistics / February 2006
Starwood Reports 15% Increase in 4th Qtr Profit; Net Income $100 million vs $87 million a Year Earlier, REVPAR for Same-Store Owned Hotels Worldwide Increased 11.1% / Hotel Operating Statistics / February 2005

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