• Pro forma comparable diluted EPS from continuing operations increased 3% to $0.38 (15% excluding a $15 million pro forma adjustment, in 1998, relating to prior quarters)
• REVPAR for 153 Same-Store Owned Hotels increased 4.7% worldwide, including a 6.2% increase in Europe (11.0% excluding foreign exchange) and a 5.4% increase in North America
• EBITDA increased 6.3% for 153 Same-Store Owned Hotels worldwide; 7.1% in Europe and 4.4% in North America
• Total revenues increased 8.1% to $956 million
• 15 hotels with approximately 4,200 rooms added during the quarter

Pro Forma Comparable Results - Third Quarter Ended September 30, 1999

For the third quarter of 1999, pro forma comparable income from continuing operations was $0.38 per diluted share on revenues of $956 million compared to $0.37 per diluted share on revenues of $884 million in the corresponding period in 1998.  Pro forma comparable income from continuing operations decreased to $74 million in the third quarter of 1999 compared to $79 million in the same period of 1998.  The decrease was primarily related to a $15 million pro forma adjustment to reduce selling, general and administrative costs in the third quarter of 1998 related to prior quarters.  Net income was also negatively impacted by the interest expense incurred as a result of the Company�s stock buy-back program although the impact on EPS was offset by a reduction in the number of shares outstanding. 

Nine Months Ended September 30, 1999

For the nine months ended September 30, 1999, pro forma comparable income from continuing operations increased 34.2% to $1.02 per diluted share on revenues of approximately $2.775 billion compared to pro forma comparable income from continuing operations of $0.76 per diluted share on pro forma comparable revenues of approximately $2.655 billion for the corresponding period in 1998.  Pro forma comparable income from continuing operations was approximately $199 million in the nine months ended September 30, 1999 compared to $167 million in the same period of 1998. 

Hotel Group Results

Revenues for the third quarter of 1999 at the Company�s 170 owned and leased hotels (excluding the W hotels in San Francisco and Seattle which were not open in 1998) increased 5.6% to $794 million from $752 million in 1998 and EBITDA increased 5.9% to $249 million from $235 million in 1998.  Excluding 17 additional hotels under significant renovation, or for which comparable results are not available, EBITDA at 153 owned and leased hotels worldwide (�Same-Store Owned Hotels�), increased 6.3% in the third quarter of 1999 to $230 million when compared to the same period in 1998 and EBITDA margins increased to 31.6% from 31.2%. 

EBITDA at 105 Same-Store Owned Hotels in North America increased 4.4% to $152 million in the third quarter of 1999 when compared to the same period in 1998.  EBITDA at 30 Same-Store Owned Hotels in Europe increased 7.1% (approximately 12% excluding foreign exchange impacts) to $45 million in the third quarter of 1999 when compared to the same period of 1998.

For the third quarter of 1999, Same-Store Owned Hotels� REVPAR increased 4.7% to $106.58 from $101.77 in the corresponding period of 1998. The increase in REVPAR primarily resulted from an increase in ADR of 3.2% to $145.94 from $141.46, and an increase in occupancy to 73.0% from 71.9% in the corresponding period in 1998.  These results exclude the W Hotel New York, which fully opened in the second quarter of 1999 after a significant renovation, the W Hotel in San Francisco, California which opened in May, 1999 and the W Hotel in Seattle, Washington which opened in September, 1999. The W New York had REVPAR growth of 243% for the third quarter of 1999, the W San Francisco had an ADR of $199 with occupancy of 81% in its first full quarter of operation, and the W Seattle had an ADR of $171 with 47% occupancy in its first full month of operation.  During the third quarter, the Company signed management and franchise agreements for 31 hotels with approximately 6,300 rooms, bringing the year-to-date total to 75 hotels with approximately 16,500 rooms. In addition to the opening of the 426-room W Hotel in Seattle, Washington, during the quarter, 14 managed or franchised hotels with approximately 3,800 rooms were added.

�We are pleased with our operating performance during the quarter,� said Barry S. Sternlicht, chairman and chief executive officer of Starwood. �During the quarter, we achieved industry leading REVPAR on a worldwide basis.  Europe remains strong, despite the unfavorable movement of the Euro throughout the year. Asia is clearly recovering and Latin America achieved EBITDA growth despite a 6% drop in REVPAR. In our North American owned properties, where we derive more than 50% of total Company EBITDA, we achieved our best REVPAR growth of the year and strong margin improvement in Same-Store Owned Hotels. Of particular note, our 6-owned New York City properties achieved an outstanding 9.1% increase in REVPAR during the period (excluding W New York).

�Our margins and total EBITDA were negatively impacted by foreign exchange, ongoing hotel renovations, pre-opening expenses for the two new W�s in San Francisco and Seattle, one time Y2K expenses and most importantly, our continued heavy investment in our Starwood Preferred Guest� (SPG) frequency program.  Since its launch in February, we have signed up more than 2 million members worldwide. We continue to monitor the effectiveness of this program, but we expect it to result in significant increases in occupancy and brand loyalty in the future. We are making significant strides in our e-commerce initiatives with the knowledge that our 30 million customers represent a critical and unrealized asset of our Company. These efforts cut across all of our operating departments and have the potential to significantly improve our profitability,� Mr. Sternlicht said.  �In new business development, we are also on pace to sign 100 new management and franchise contracts for the year. Through the first nine months of 1999 we have signed 75 new hotel contracts representing approximately 16,500 rooms,� Mr.  Sternlicht said, �an 8% increase in our worldwide room inventory.

�During the quarter, we announced that we had identified for sale $500 million of non-core hotel assets by mid-year 2000. In October we reported the sale of our stake in the Grande Bretagne Hotel in Athens for $186 million. As we continue to decrease our real estate exposure, year over year EBITDA growth will be difficult to follow but may be offset by lower in depreciation, amortization and interest charges. On October 1, we closed the important acquisition of Vistana, entering the vacation ownership business for the first time and we expect Vistana to be an important new avenue of growth for the company in the future.  In September, with great fanfare, we unveiled a new marketing initiative�the Westin �Heavenly Bed��the most comfortable bed in the hotel industry. There are currently about 15,000 beds installed in 23 Westin hotels, and we expect to have the Heavenly Bed in all Westins by June 2000. Today we launch a new advertising campaign for Sheraton, which is being coordinated with a dramatic renovation program at our owned Sheraton hotels and is aimed at positioning our Sheraton brand as the �Brand that cares about you.� �In conclusion, we are making progress in all areas of the Company. We believe we own the best assets in the industry and are building one of the most innovative management teams in the travel business. We will continue to focus on realizing the benefits of our global scale,� Mr. Sternlicht concluded.

Renovations and New Construction

During the third quarter, the Company invested approximately $120 million in new construction and capital improvements on hotel assets.  In September, the Company opened the 426-room W Seattle.

Significant renovations continued in the third quarter with approximately 129,000 available room nights, or nearly 3.5% of the total available room nights at North America owned properties, not in inventory due to renovations.  These included the Sheraton Newton, MA; Sheraton Braintree, MA; Sheraton Stamford, CT; and Boston Park Plaza Hotel in Boston, MA. Major renovations also continued in the quarter at the Grand Hotel in Rome (which will be closed for most of 1999).

Financing

On September 30, 1999, the Company had pro forma total debt of approximately $5.254 billion (assuming the sales of Caesars and the Desert Inn) and cash of approximately $195 million versus $169 million at the end of the prior quarter.  Starwood has no significant debt maturing until November 2000, and the weighted average maturity of the Company�s debt portfolio exceeds five years.

The Company expects to significantly improve its balance sheet by retiring the increasing rate notes with the proceeds from the sales of Caesars and the Desert Inn. At the end of the third quarter, the Company�s debt was approximately 50% fixed and 50% floating. Adjusting for the sale of the Company�s gaming operations, the debt portfolio is expected to shift to approximately 70% fixed and 30% floating.  During the third quarter, the Company declared a dividend of $0.15 per share. At September 30, 1999, Starwood had approximately 193 million shares outstanding (including partnership units and exchangeable preferred shares). Also, during the third quarter, the Company repurchased approximately 1.6 million shares at an average price of $25.67 under the Company�s stock buy-back program.  On October 1, 1999, the Company completed the acquisition of Vistana, Inc., one of the premier developers and operators of high quality vacation interval ownership. The Company financed the acquisition of Vistana with cash of approximately $110 million, the assumption of approximately $280 million of debt and the issuance of approximately 10.1 million shares.

Starwood is one of the world�s largest lodging and leisure companies which, through its subsidiaries, operates the Sheraton, Westin, St. Regis, Luxury Collection, Four Points, W and Caesars brands. Starwood�s portfolio of owned, managed and franchised hotels include approximately 710 hotels in 76 countries with approximately 217,000 rooms. Additional information, including more detailed financial information, is available at the Company�s website at www.starwoodhotels.com.

This release contains certain statements that may be deemed �forward-looking statements� within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.