A BETTER WAY TO EXPERIENCE THE WORLD.

2012 PROXY STATEMENT & 2011 ANNUAL REPORT

2011 NEW OPENINGS

The St. Regis Bangkok The St. Regis Saadiyat Island Resort, Abu Dhabi The St. Regis Sanya Yalong Bay Resort The St. Regis Shenzhen The St. Regis Tianjin The Chatwal, New York City, a Luxury Collection Hotel The Liberty Hotel, Boston, a Luxury Collection Hotel Lugal, Ankara, a Luxury Collection Hotel The Naka Island, Phuket, a Luxury Collection Resort & Spa Villarrica Park Lake Hotel & Spa, Villarrica, a Luxury Collection Hotel & Spa W London Leicester Square W Retreat & Spa Bali Seminyak W St. Petersburg W Taipei Le Mridien Coimbatore Le Mridien Koh Samui Resort & Spa Le Mridien Oran Hotel & Convention Centre The Westin Abu Dhabi Golf Resort & Spa The Westin Guadalajara The Westin Houston, Memorial City The Westin Lima Hotel & Convention Center The Westin Nanjing The New York Helmsley Hotel The Westin Pazhou The Westin Phoenix Downtown Sheraton Agoura Hills Hotel Sheraton At The Falls Hotel, Niagara Falls, New York Sheraton Baku Airport Sheraton Bangalore Hotel at Brigade Gateway Sheraton Beijing Dongcheng Hotel Sheraton Bijao Beach Resort Sheraton Changzhou Wujin Hotel Sheraton Changzhou Xinbei Hotel Sheraton Chongqing Hotel Sheraton Columbus Hotel at Capitol Square Sheraton Daqing Hotel Sheraton Detroit Metro Airport Sheraton Guangzhou Hotel

Sheraton Guangzhou Huadu Resort Sheraton Hangzhou Wetland Park Resort Sheraton Hiroshima Hotel Sheraton Jinzhou Hotel Sheraton Kansas City Hotel at Crown Center Sheraton Montreal Airport Hotel Sheraton Omaha Hotel Sheraton Red Deer Hotel Sheraton Seoul D Cube City Hotel Sheraton Shanghai Hongkou Hotel Sheraton Shenzhou Peninsula Resort Sheraton Stamford Hotel Sheraton Wilmington South Hotel Sheraton Zhenjiang Hotel

Aloft Bangkok - Sukhumvit 11 Aloft Bogota Airport Aloft Coimbatore Singanallur Aloft Haiyang Aloft Jacksonville Tapestry Park Aloft London Excel Aloft Nanhai, Foshan Aloft New York Brooklyn Aloft Zhengzhou Shangjie Four Points by Sheraton Barcelona Diagonal Four Points by Sheraton College Station Four Points by Sheraton Downtown Seattle Center Four Points by Sheraton Hotel & Serviced Apartments, Pune

Four Points by Sheraton Houston Hobby Airport Four Points by Sheraton Langkawi Resort Four Points by Sheraton Long Island City/Queensboro Bridge Four Points by Sheraton Memphis East Four Points by Sheraton Minneapolis Airport Four Points by Sheraton Nashville - Brentwood Four Points by Sheraton Niagara Falls Four Points by Sheraton Peoria Downtown Four Points by Sheraton Qingdao, Chengyang Four Points by Sheraton San Antonio Airport Four Points by Sheraton Tripoli Four Points by Sheraton Visakhapatnam Four Points by Sheraton Zaporozhye

WORLDWIDE REVPAR

+ 9.7% SAME STORE

+140BPS IN WORLDWIDE
REVPAR INDEX

DEAR FELLOW STOCKHOLDERS

Starwood posted another great year in 2011. We grew REVPAR index and room count faster than the industry. We played offense in the marketplace. But we played it safe with our finances, as we enter 2012 with our strongest ever balance sheet. This has been Starwoods game plan since the crisis has receded, and it is paying off as we further distance ourselves from the competition and accelerate our growth trajectory. We delivered strong financial results despite a turbulent global economy. As the most global company in our industry, we witness firsthand world events like the Arab Spring, the disaster in Japan or the euro-zone drama. Behind those headlines, though, we see encouraging trend lines. Our REVPAR gains were fueled by rapid economic growth in emerging markets and tight supply in the developed world. The global economic recovery continued through 2011, bringing occupancies close to pre-crisis levels. With many hotels full on weeknights and during peak periods, we saw rates increase. For the full year, higher rates accounted for over half of our REVPAR gains. We are encouraged to see robust demand for business travel, which drives 75% of our total revenue. Corporate profits and cash on hand are at record levels, and companies are scouring the globe in search of growth opportunities. Against this backdrop, here are just a few highlights from the year: We grew Same Store Worldwide REVPAR by 9.7% (or 7.4% in constant dollars) We gained 140bps in Worldwide REVPAR index We opened 81 hotels, for a record 20,900 rooms We signed 112 new deals, bringing our pipeline to almost 90,000 rooms We drove guest satisfaction scores to record levels We held our SG&A growth below inflation, up 2.3% These strong results are thanks to the hard work of our 154,000 employees around the world. Our surveys tell us that our associates have never been more engaged, energized and committed to our global growth. We share a belief that people want a better way to experience the world. Those better experiences drive growth, brand loyalty and market-leading returns.

81 HOTELS OPENED,
FOR A RECORD

20,900 ROOMS

GLOBAL GROWTH
Growing our footprint of hotels is a key driver of value over the long term, and we will continue to generate and deliver on our pipeline of great new hotels year after year. This momentum gives us the confidence to be selective in where we open hotels and in culling lagging ones from our system. Between 2007 and 2011, Starwood opened 389 hotels. This equates to an average of 8% growth per year, and means over one-third of our properties are newly opened. Bear in mind also that this growth continued even in the wake of the Great Recession of 2008 and 2009. In the midst of the credit crisis, new hotel activity in the developed world ground to a halt. Factoring in the typical three-year gestation period for building a new hotel, you might have expected a drop in new hotel openings today. Filling the gap were a record number of conversions of existing hotels to our brands in the developed world. We also went from strength to strength in emerging markets. During 2010 and 2011, we opened more hotels in Asia Pacific than our three largest US-based lodging competitors combined. Overall, emerging markets accounted for 61% of our new rooms last year, up from 50% in 2010 and 31% in 2009. More importantly, the rise of these markets is the single biggest growth opportunity in our lifetimes. Take China, for example, where we are the leading operator of four- and five-star hotels, with almost 100 properties open today and another 100 in the

90,000 ROOMS

BRINGING OUR PIPELINE TO ALMOST

112 NEW DEALS,

DROVE GUEST SATISFACTION SCORES TO RECORD LEVELS SG&A GROWTH BELOW INFLATION,

+ 2.3%

pipeline. Domestic travel volume there is already roughly equal to the US and likely to double in the next five years. China could one day be our largest market, eclipsing the 480 hotels we have today in the United States. Two-thirds of the 112 hotel deals we signed in 2011 were in emerging markets. This means we are positioned to lengthen our lead and strengthen our brands with great new hotels. Globalization is adding to the ranks of elite travelers like never before, and our brands have captured more than our fair share of that demand. Our luxury room count doubled during the last five years, which underscores the value of our investments in brands and in loyalty.

more reasons to stay after they reached a certain level and more choices. All of these are part of our program. They also wanted to know whether their loyalty with us over time counted for something, so we introduced lifetime status. Our guests asked for a more flexible definition of a stay. So we tested our ability to meet that need, and today we are offering 24-hour check-in for our most elite guests. Even in this digital age, they appreciated a oneon-one contact, which we have made a part of our program for our most loyal guests. We believe that the changes to SPG will not only set the program apart, but will take loyalty to a whole new level. A great benefit for guests means more business at our hotels. For every dollar, euro or yuan that we spend on the transformation, our experience tells us that we should expect to see over four times that amount in top-line growth. In other words, happy guests mean better returns for our owners, and stronger brands.

At Starwood, we are sticking to a cautiously confident worldview. Our caution is reflected in our conservative balance sheet and cost base. After all, the world remains an uncertain place. Our confidence is rooted in the long-term growth prospects for high-end travel and for our portfolio of brands. To lengthen our lead in 2012, we will stay on offense, targeting additional REVPAR index gains, opening more rooms than ever, signing the most hotel deals since the beginning of the crisis and further deepening our ties to elite guests. Thank you for your interest in Starwood. And, of course, we look forward to welcoming you as a Starwood guest in 2012.

A BETTER WAY TO EXPERIENCE THE WORLD

As we sell real estate, we are making a shift from owning hotels to owning guest relationships. Compelling brands, great service and best-in-class properties are three key ingredients to fostering these relationships. Starwood Preferred Guest (SPG) is what binds our brands and properties together. To great fanfare, we recently announced changes to our SPG program that will deepen our connection to global mega-travelers. Here is how these changes came to life, what it does for our guests and how it creates value for our hotel owners. In any branded business, the best marketing investments are geared to recruiting and retaining new brand-loyal customers and getting even more business from existing ones. The more targeted and the more focused on their needs, the better. Over the last five years, weve doubled our number of elite members, and spending per elite member is up 60%. Today, the top 2% of our guests account for 30% of hotel profits. Our Platinum SPG members give us nearly 50 times the business of our average guest. Our first-mover advantage has enabled us to benefit from the rising wealth around the world. Today, 40% of our elite members live outside the US, and these mega-travelers are more diverse, more informed and more sophisticated than ever. We engaged in a dialog with these travelers, and what we learned made a lot of sense. High-end travelers want more than just a good deal. They want that personal touch, and to be treated in a special way. Their comments helped us to recast SPG. They told us that not all trips are equal and not all benefits matter. They asked for more milestones,

DELIVER MARKET-LEADING RETURNS

We are focused on delivering market-leading returns for all of our stakeholders, and we have four financial levers at our disposal. It starts with driving REVPAR premiums, growing our footprint, holding down costs and unlocking the value of our balance sheet. As we have noted, 2011 was a strong year along each of these measures. We made progress in getting cash from the sale of our real estate assets. We sold two hotels and a joint venture in 2011 for net proceeds of $281 million. Other sources of cash include over $200 million from timeshare and $74 million from residential units at The St. Regis Bal Harbour Resort. We expect 2012 to build on our momentum. We will generate cash as we work toward our target of being at least 80% fee-driven. From Bal Harbour and from our timeshare business, we expect to generate $375 million in cash. When it comes to selling our owned hotels, we will continue to be patient and disciplined sellers, searching for the right prices, partners and management contracts. We also expect to continue to gain share. Our margins will grow, as REVPAR is driven by rising rates. Our corporate customers expect to keep hitting the road in 2012. Corporate negotiated rates are set to be up mid- to high-single digits, and our group meetings are being booked at higher rates as well.

FRITS VAN PAASSCHEN Chief Executive Officer

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

2012 PROXY STATEMENT & 2011 ANNUAL REPORT

This page intentionally left blank.

Starwood Hotels & Resorts Worldwide, Inc. One StarPoint Stamford, CT 06902 March 21, 2012 Dear Stockholder: We cordially invite you to attend our 2012 Annual Meeting of Stockholders (the Annual Meeting), which will be held on Thursday, May 3, 2012, at 10:00 a.m., local time, at The St. Regis Bal Harbour Resort, 9703 Collins Avenue, Bal Harbour, Florida 33154. At the Annual Meeting, you will be asked to (i) elect ten director nominees to serve on our board of directors until the 2013 Annual Meeting of Stockholders, (ii) approve, on a non-binding advisory basis, the compensation of our named executive officers, (iii) ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012 and (iv) act on any other matters that may be properly presented at the Annual Meeting or any adjournment or postponement thereof. We hope you will attend the Annual Meeting, but whether or not you are planning to attend, we encourage you to vote your shares. You can vote in person at the Annual Meeting or authorize proxies to vote your shares either by telephone, electronically through the Internet, or by completing, signing and returning your proxy card by mail prior to the Annual Meeting. To ensure your vote is counted, please vote as promptly as possible. We thank you for your continued support and look forward to seeing you at the Annual Meeting. Sincerely,

Frits van Paasschen Chief Executive Officer and President

Bruce W. Duncan Chairman of the Board

YOUR VOTE IS IMPORTANT. PLEASE PROMPTLY SUBMIT YOUR PROXY BY MAIL, TELEPHONE OR OVER THE INTERNET.

Starwood Hotels & Resorts Worldwide, Inc. One StarPoint Stamford, CT 06902 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF STARWOOD HOTELS & RESORTS WORLDWIDE, INC. DATE: TIME: PLACE: May 3, 2012 10:00 a.m. local time The St. Regis Bal Harbour Resort 9703 Collins Avenue Bal Harbour, Florida 33154 1. 2. 3. To elect ten directors to serve until the 2013 Annual Meeting of Stockholders and until their successors are duly elected and qualify; To consider and vote upon a proposal to approve, on a non-binding advisory basis, the compensation of our named executive officers; To consider and vote upon a proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2012; and To transact such other business as may properly come before the meeting or any postponement or adjournment thereof.

ITEMS OF BUSINESS:

4. RECORD DATE:

Holders of record at the close of business on March 9, 2012 are entitled to notice of, and to vote at, the meeting and any adjournment or postponement thereof. By Order of the Board of Directors,

Kenneth S. Siegel Corporate Secretary March 21, 2012 Stamford, Connecticut THE BOARD OF DIRECTORS URGES YOU TO VOTE IN PERSON AT THE ANNUAL MEETING OR TO AUTHORIZE PROXIES TO VOTE YOUR SHARES BY TELEPHONE, THROUGH THE INTERNET OR BY COMPLETING, SIGNING AND RETURNING YOUR PROXY CARD PRIOR TO THE ANNUAL MEETING.

TABLE OF CONTENTS THE ANNUAL MEETING AND VOTING QUESTIONS AND ANSWERS . . . . . . . . . . . . . . . . . . . . . . CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . EXECUTIVE AND DIRECTOR COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMPENSATION DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMPENSATION COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011 SUMMARY COMPENSATION TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011 GRANTS OF PLAN-BASED AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS SECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OUTSTANDING EQUITY AWARDS AT 2011 FISCAL YEAR-END . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011 OPTION EXERCISES AND STOCK VESTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011 NONQUALIFIED DEFERRED COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL . . . . . . . . . . . . . . . . . . DIRECTOR COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AUDIT COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION . . . . . . . . . . . . . . . . . CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SOLICITATION COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HOUSEHOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 8 14 14 15 16 18 18 20 36 37 38 39 40 41 42 43 47 51 52 52 53 53 54 55

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

ONE STARPOINT STAMFORD, CT 06902

PROXY STATEMENT FOR 2012 ANNUAL MEETING OF STOCKHOLDERS

Our Board of Directors (the Board) solicits your proxy for the 2012 Annual Meeting (the Annual Meeting) of Stockholders of Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (we, us, Starwood or the Company), to be held on Thursday May 3, 2012, at 10:00 a.m. local time, at The St. Regis Bal Harbour Resort, 9703 Collins Avenue, Bal Harbour, Florida 33154, and at any postponement or adjournment thereof. Proxy materials or a Notice of Meeting and Internet Availability were first sent to stockholders on or about March 21, 2012. IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS. THE PROXY STATEMENT FOR THE 2012 ANNUAL MEETING OF STOCKHOLDERS AND THE ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011 ARE AVAILABLE AT www.starwoodhotels.com/corporate/investor_relations.html. THE ANNUAL MEETING AND VOTING QUESTIONS AND ANSWERS What is the purpose of the Annual Meeting? At our Annual Meeting, stockholders will act upon the matters outlined in the Notice of Annual Meeting of Stockholders. These include the election of the ten director nominees, a non-binding advisory vote to approve the compensation of our named executive officers, ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm and any other matters that may be properly presented at the meeting. We are not aware of any matters to be presented at the meeting, other than those described in this proxy statement. If any matters not described in the proxy statement are properly presented at the meeting, or any adjournment or postponement thereof, the proxies may vote your shares pursuant to the discretionary authority granted in the proxy. Why did I receive a notice in the mail regarding the Internet availability of the proxy materials instead of a paper copy of the proxy materials? The Securities and Exchange Commission has adopted rules permitting the electronic delivery of proxy materials. In accordance with those rules, we have elected to provide access to our proxy materials, which include the Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2011, over the Internet at www.starwoodhotels.com/corporate/investor_relations.html. We sent a Notice of Meeting and Internet Availability of Proxy Materials (the Notice) to our stockholders of record and beneficial owners as of the close of business on March 9, 2012, directing them to a website where they can access the proxy materials and view instructions on how to authorize proxies to vote their shares over the Internet or by telephone. Stockholders who previously indicated a preference for paper copies of our proxy materials going forward received paper copies. If you received a Notice but would like to request paper copies of our proxy materials, you may still do so by following the instructions described in the Notice. Choosing to receive your proxy materials by email will save us the cost of printing and mailing the documents to you and will also help preserve environmental resources. Unless you affirmatively elect to receive paper copies of our proxy materials in the future by following the instructions included in the Notice, you will continue to receive a Notice directing you to a website for electronic access to our proxy materials. 1

When and where will the Annual Meeting be held? The Annual Meeting will be held on May 3, 2012 at 10:00 a.m., local time, at The St. Regis Bal Harbour Resort, 9703 Collins Avenue, Bal Harbour, Florida 33154. Seating will begin at 9:00 a.m. If you plan to attend the Annual Meeting and have a disability or require special assistance, please contact the Companys Investor Relations department at (203) 351-3500. Who can attend the Annual Meeting? Only stockholders of record at the close of business on March 9, 2012, the record date, or their duly authorized proxies, may attend the Annual Meeting. To gain admittance, you must present valid picture identification, such as a drivers license or passport. If you hold your shares in street name (through a broker, bank or other nominee), you will also need to bring a copy of a brokerage statement or a letter from your broker or other nominee (in a name matching your photo identification) reflecting your stock ownership as of the record date. If you are a representative of a corporate or institutional stockholder, you must present valid photo identification, along with proof that you are a representative of such stockholder. Please note that cameras, phones, or other similar electronic devices and the bringing of large bags, packages or sound or video recording equipment will not be permitted in the meeting room. How many shares must be present to hold the Annual Meeting? In order for us to conduct the Annual Meeting, holders of a majority of the shares entitled to vote as of the close of business on the record date must be present in person or by proxy. This constitutes a quorum for the transaction of business at the Annual Meeting. You are counted as present if you attend the Annual Meeting and vote in person, if you properly authorize proxies to vote your shares over the Internet or by telephone or if you properly execute and return a proxy card by mail prior to the Annual Meeting. Abstentions and broker non-votes are counted as present for purposes of determining whether a quorum is present at the Annual Meeting. If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained. Whether or not a quorum is present when the Annual Meeting is convened, the presiding officer may adjourn the Annual Meeting to a date not more than 120 days after March 9, 2012, the record date, without notice other than announcement at the Annual Meeting. If a motion is made to adjourn the Annual Meeting, the persons named as proxies on the enclosed proxy card may vote your shares pursuant to the discretionary authority granted in the proxy. Who is entitled to vote at the Annual Meeting? If you were a stockholder of record at the close of business on March 9, 2012, the record date, you are entitled to notice of, and to vote at, the Annual Meeting, or at any adjournment or postponement thereof, on any matter that is properly submitted to a vote. On March 9, 2012, there were 197,101,127 shares of common stock issued, outstanding and entitled to vote. Each owner of record on the record date is entitled to one vote for each share of common stock held. How do I vote my shares? In Person. If you are a stockholder of record, you may vote in person at the Annual Meeting. If you are a stockholder of record who holds shares in street name (through a broker, bank or other nominee), you may also vote in person at the Annual Meeting provided you have legal authorization from such broker, bank or other 2

nominee to vote the shares held on your behalf. Please contact your broker, bank or other nominee for further information on such authorization. Ballots will be made available and distributed at the Annual Meeting. If you do not plan to attend the Annual Meeting or do not wish to vote in person, you may authorize proxies to vote your shares by written proxy, by telephone or over the Internet. By Written Proxy. If you are a stockholder of record and wish to authorize proxies to vote your shares by written proxy, you may request a proxy card at any time by following the instructions on the Notice. If you are a stockholder of record who holds shares in street name you should receive instructions on how you may vote by written proxy from your broker, bank or other nominee. By Telephone or Internet. If you are a stockholder of record and wish to authorize proxies to vote your shares by telephone or over the Internet, you may use the toll-free telephone number or access the electronic link to the proxy voting site by following the instructions on the Notice. If you are a stockholder of record who holds shares in street name, you may authorize proxies to vote your shares by telephone or over the Internet if your broker, bank or other nominee makes these methods available, in which case you will receive instructions with the proxy materials. Each share represented by a properly completed written proxy or properly authorized proxy by telephone or over the Internet will be voted at the Annual Meeting in accordance with the stockholders instructions specified in the proxy, unless such proxy has been revoked. If no instructions are specified, the shares will be voted FOR the election of each of the ten nominees for director named in this proxy statement, FOR the approval, on a non-binding advisory basis, of the compensation of our named executive officers, FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2012, and, with respect to other matters to properly come before the meeting, pursuant to the discretionary authority granted in the proxy to the proxy holder. How many Notices will I receive? What does it mean if I receive more than one Notice? If you are a stockholder of record, you will receive only one Notice (or proxy card upon request) for all of the shares of common stock you hold in certificate form, book entry form and in any of our savings plans. If you are a stockholder of record who holds in street name, you will receive one Notice or voting instruction form for each account you have with a bank or broker. If you hold shares in multiples accounts, you may need to provide voting instructions for each account. Please sign and return all proxy cards or voting instruction forms you receive to ensure that all of the shares you hold are voted. What if I hold shares through the Companys 401(k) savings plan or employee stock purchase plan? If you participate in the Companys Savings and Retirement Plan (the Savings Plan) or Employee Stock Purchase Plan (the ESPP), your proxy card or vote by telephone or over the Internet will serve as a voting instruction for the trustee of the Savings Plan or ESPP. Whether you authorize vote by proxy card, telephone or over the Internet, you must transmit your vote to the transfer agent on or prior to 11:59 p.m., Eastern Time on April 30, 2012. If you participate in the Savings Plan and your vote is not received by the transfer agent by that date or if you sign and return your proxy card without specifying your voting instructions, the trustee for the Savings Plan will vote your shares in the same proportion as the other shares for which such trustee has received timely voting instructions unless contrary to ERISA. If you participate in the ESPP and your proxy card is not received by the transfer agent by that date or if you sign and return your proxy card without specifying your voting instructions, the trustee of the ESPP will not vote your shares. If I submit a proxy, may I later revoke it and/or change my vote? If you are a stockholder of record, you may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting by: signing and returning another proxy card with a later date; 3

 submitting a proxy on a later date by telephone or over the Internet (only your latest proxy will be counted); or attending the meeting and voting in person if you hold your shares in your own name or, provided you have obtained a legal proxy from your broker, bank or other nominee, if you are a stockholder who holds in street name. Are votes confidential? Who counts the votes? The votes of all stockholders are kept confidential except: as necessary to meet applicable legal requirements and to assert or defend claims for or against us; in case of a contested proxy solicitation; if a stockholder makes a written comment on the proxy card or otherwise communicates his or her vote to management; or to allow the independent inspector of election to certify the results of the vote. We have retained Broadridge Financial Solutions to tabulate the votes. We have retained The Carideo Group, Inc. to act as independent inspector of the election. How can I confirm my vote was counted? For the first time, and in furtherance of our commitment to the highest standards of corporate governance practices, we are offering our stockholders the opportunity to confirm their votes were cast in accordance with their instructions. We believe that the implementation of a vote confirmation mechanism promotes a more fair and transparent electoral process. Beginning April 18, 2012 through July 3, 2012, you may confirm your vote beginning twenty-four hours after your vote is received, whether it was cast by proxy card, electronically or telephonically. To obtain vote confirmation, log onto www.proxyvote.com using your control number (located on your Notice or proxy card) and receive confirmation on how your vote was cast. If you hold your shares through a bank or brokerage account, the ability to confirm your vote may be affected by the rules of your bank or broker and the confirmation will not confirm whether your bank or broker allocated the correct number of shares to you. How does the Board recommend that I vote? The Board of Directors recommends that you vote: FOR each of the ten director nominees; FOR approval of the non-binding advisory vote on the compensation of our named executive officers; and FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2012. What vote is needed to approve each proposal? The election of directors requires a plurality of votes cast in the election of directors at the Annual Meeting, either in person or by proxy. The ten nominees who receive the largest number of FOR votes will be elected to serve as directors until the 2013 Annual Meeting of Stockholders and until their successors are duly elected and qualify. Stockholders cannot cumulate votes in the election of directors. Brokers are not permitted to vote on the election of directors without instructions from the beneficial owner, so if you hold your shares through a broker or other nominee, your shares will not be voted in the election of directors unless you affirmatively vote your shares in accordance with the voting instructions provided by such broker or other nominee. Instructions to ABSTAIN will have no effect on the result of the vote. 4

Adoption of a resolution approving, on a non-binding advisory basis, the compensation of our named executive officers requires a majority of the votes cast at the Annual Meeting, either in person or by proxy. Abstentions and broker non-votes will have no effect on the result of the vote. The Board of Directors expects to take the result of the advisory vote into consideration when making future compensation decisions. The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2012 requires a majority of the votes cast at the Annual Meeting, either in person or by proxy. Brokers may vote uninstructed shares on this matter. Abstentions will have no effect on the result of the vote. If a majority of the votes cast are AGAINST ratification of the appointment of Ernst & Young, the Board of Directors and the Audit Committee will reconsider its appointment. What are broker non-votes? If you hold shares through a broker, bank or other nominee, you may give voting instructions to such party and the broker, bank or other nominee must vote as you directed. If you do not give any instructions, the broker, bank or other nominee may vote on all routine matters, such as ratification of the appointment of an independent registered public accounting firm, at its discretion. A broker, bank or other nominee, however, may not vote uninstructed shares on non-routine matters, such as the election of directors or an advisory vote on executive compensation, at its discretion. This is referred to as a broker non-vote. What happens if a director nominee does not receive a majority of the votes cast? Under our Bylaws, a director nominee, running uncontested, who receives more WITHHELD votes than FOR votes is required to tender his or her resignation for consideration by the Board of Directors. The Corporate Governance and Nominating Committee will then make a recommendation to the Board of Directors as to whether the Board of Directors should accept or reject such resignation. The Board of Directors will act on the tendered resignation and publicly disclose its decision within 90 days following certification of the election results. The director nominee in question will not participate in the deliberation process. When are stockholder proposals for the 2013 Annual Meeting of Stockholders due? In order to be eligible for inclusion in our proxy statement for our 2013 Annual Meeting of Stockholders, stockholder proposals must be received no later than November 22, 2012. Stockholder proposals received after November 22, 2012 would be untimely. In order to be eligible for consideration at our 2013 Annual Meeting of Stockholders but not included in our proxy statement, stockholder proposals must be received no later than February 17, 2013 nor earlier than January 23, 2013. All stockholder proposals must be in writing and received by the deadlines described above at our principal executive offices at Starwood Hotels & Resorts Worldwide, Inc., One StarPoint, Stamford, Connecticut 06902, Attention: Kenneth S. Siegel, Corporate Secretary. Stockholder proposals must be in the form provided in our Bylaws and must include the information set forth in the Bylaws. If we do not receive the required information on a timely basis, the proposal may be excluded from the proxy statement and from consideration at the 2013 Annual Meeting of Stockholders.

CORPORATE GOVERNANCE Overview Starwood Resorts & Hotels Worldwide, Inc. is committed to maintaining the highest standards of corporate governance and ethical business conduct across all aspects of its operations and decision-making processes. Important documents governing our corporate governance practices include our Charter, Bylaws, Corporate Governance Guidelines, Board of Directors Committee Charters, Finance Code of Ethics, Code of Business Conduct and Ethics and Corporate Opportunity and Related Person Transaction Policy. These documents can be accessed on our website at www.starwoodhotels.com and are discussed in more detail below. Board Leadership Structure Our board leadership structure currently consists of a Chairman (who is not the Chief Executive Officer and President of the Company), the Chief Executive Officer and President of the Company, nine outside directors and four committee Chairs. The Board of Directors believes that having a separate independent director serve as Chairman promotes clear, independent board leadership and engagement. The Board of Directors also believes it is well served by having the Chief Executive Officer and President of the Company serve as a member of the Board, as the Chief Executive Officer and President of the Company has primary responsibility for managing the Companys day-to-day operations and, consequently, a unique understanding of the Companys operations, and the hotel and leisure industry generally. Board Role in Risk Oversight The Board of Directors regularly receives reports from members of the Companys senior management regarding any strategic, operational, financial, legal, regulatory or reputational risk that the Company may be facing. The Board of Directors then reviews managements assessment, discusses options for mitigating any such risk with management, and directs management to manage and minimize the Companys exposure. Management is ultimately responsible for identifying any such risk, and for developing and implementing mitigation plans during the strategic planning process. The Boards role is one of oversight. The Boards committees assist it with the risk oversight function as follows: the Audit Committee oversees the Companys controls and compliance activities and oversees managements process for identifying and quantifying risks facing the Company; the Compensation and Option Committee oversees risk associated with our compensation policies and practices and structures the Companys incentive compensation in a way that discourages the taking of excessive risks; the Corporate Governance and Nominating Committee oversees Board processes and corporate governance-related risk; and the Capital Committee oversees risks related to our hotel portfolio, capital improvement plans and capital budgets, and any investments, divestitures, significant asset sales, mergers and acquisitions and other extraordinary transactions. Corporate Governance Policies In addition to our Charter and Bylaws, we have adopted the Corporate Governance Guidelines (the Guidelines), which are posted on our website at www.starwoodhotels.com/corporate/investor_relations.html. The Guidelines address significant corporate governance matters and provide the framework for the Companys corporate governance policies and practices including: board and committee composition, director and executive ownership guidelines, incentive recoupment and anti-hedging policies, and board and committee assessment. The Corporate Governance and Nominating Committee is responsible for overseeing and reviewing the Guidelines and for reporting and recommending to the Board of Directors any changes to the Guidelines. 6

We have adopted a Finance Code of Ethics (the Finance Code), applicable to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, Corporate Treasurer, Senior Vice President-Taxes and other persons performing similar functions. The Finance Code is posted on the Companys website at www.starwoodhotels.com/corporate/investor_relations.html. The Company intends to post amendments to, and waivers from, the Finance Code on its website, as required by applicable rules of the Securities and Exchange Commission (the SEC). The Company also has a Code of Business Conduct and Ethics (the Code of Conduct), applicable to all employees and directors, that addresses legal and ethical issues that may be encountered in carrying out their duties and responsibilities. Subject to applicable law, employees are required to report any conduct they believe to be a violation of the Code of Conduct. The Code of Conduct is posted on the Companys website at www.starwoodhotels.com/corporate/investor_relations.html. To further promote transparency and ensure accurate and adequate disclosure, the Company has established a Disclosure Committee comprised of certain senior executives, to design, establish and maintain the Companys internal controls and other procedures with respect to the preparation of periodic reports required to be filed with the SEC, earnings releases and other written information that the Company decides to disclose to the investment community. The Disclosure Committee evaluates the effectiveness of the Companys disclosure controls and procedures on a regular basis and maintains written records of its meetings. The Board of Directors also has certain policies relating to retirement and a change in a directors principal occupation. One policy provides that directors who are not employees of the Company or any of its subsidiaries may not stand for re-election after reaching the age of 72 and that directors who are employees of the Company must retire from the Board upon retirement from the Company. Another policy provides that in the event a director changes his or her principal occupation (including through retirement), such director should voluntarily tender his or her resignation to the Board. The Company indemnifies its directors and officers to the fullest extent permitted by law so that they will be free from undue concern about personal liability in connection with their service to the Company. Indemnification is required pursuant to our Charter and the Company has entered into agreements with its directors and executive officers undertaking a contractual obligation to provide the same. Director Independence In accordance with New York Stock Exchange (the NYSE) rules, the Board of Directors makes an annual determination as to the independence of the directors and director nominees. A director or director nominee is not deemed independent unless the Board of Directors affirmatively determines that such director or director nominee has no material relationship with the Company, directly or as an officer, stockholder or partner of an organization that has a relationship with the Company. The Board of Directors observes all criteria for independence established by the NYSE listing standards and other governing laws and regulations. When assessing materiality of a directors relationship with the Company, the Board of Directors considers all relevant facts and circumstances, not merely from the directors standpoint, but from that of the persons or organizations with which the director has an affiliation, and the frequency or regularity of the services, whether the services are being carried out at arms length in the ordinary course of business and whether the services are being provided substantially on the same terms to the Company as those prevailing at the time from unrelated parties for comparable transactions. Material relationships can include any commercial, banking, consulting, legal, accounting, charitable or other business relationships each director or director nominee may have with the Company. In addition, the Board of Directors consults with the Companys external legal counsel to ensure that the Boards determinations are consistent with all relevant securities laws and other applicable laws and regulations regarding the definition of independent director, including but not limited to those set forth in pertinent listing standards of the NYSE.

Our Board of Directors has determined that each of the directors and director nominees, with the exception of Mr. van Paasschen, is independent under the NYSE rules and that these directors have no material relationship with the Company that would prevent the directors from being considered independent. Mr. van Paasschen, as Chief Executive Officer and President of the Company, is not an independent director under the NYSE rules. In making this determination, the Board of Directors took into account that three of the non-employee directors, Messrs. Aron and Daley and Ms. Galbreath, have no relationship with the Company except as a director and stockholder of the Company and that the remaining six non-employee directors have relationships with companies that do business with the Company that are consistent with the NYSE independence standards as well as independence standards adopted by the Board of Directors. Communications with the Board The Company has adopted a policy which permits stockholders and other interested parties to contact the Board of Directors. If you are a stockholder or interested party and would like to contact the Board of Directors, you may send a letter to the Board of Directors, c/o the Corporate Secretary of the Company, One StarPoint, Stamford, Connecticut 06902 or contact us online at www.hotethics.com. It is important that you identify yourself as a stockholder or an interested party in the correspondence. If the correspondence contains complaints about our Companys accounting, internal or auditing matters or is directed to the non-employee directors, the Corporate Secretary will advise a member of the Audit Committee. If the correspondence concerns other matters, the Corporate Secretary will forward the correspondence to the director to whom it is addressed or otherwise as would be appropriate under the circumstances, attempt to handle the inquiry directly (for example where it is a request for information or a stock-related matter), or not forward the communication altogether if it is primarily commercial in nature or relates to an improper or irrelevant topic. At each regularly scheduled Board meeting, the Corporate Secretary or his designee will present a summary of all such communications received since the last meeting that were not forwarded and shall make those communications available to the directors upon request. This policy is also posted on the Companys website at www.starwoodhotels.com/corporate/investor_relations.html. Posted Documents You may also obtain a free copy of any of the aforementioned posted documents by sending a letter to the Investor Relations Department of the Company, One StarPoint, Stamford, Connecticut 06902. Please note that the information on the Companys website is not incorporated by reference in this proxy statement. ELECTION OF DIRECTORS Under the Companys Charter, each of the Companys directors is elected to serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Set forth below is information as of March 9, 2012 regarding the nominees of the Board of Directors for election as a director, which has been confirmed by each of them for inclusion in this proxy statement. Each nominee has agreed to serve on the Board of Directors if elected. If a nominee becomes unavailable for election, proxy holders and stockholders may vote for another nominee proposed by the Board of Directors or, as an alternative, the Board of Directors may reduce the number of directors to be elected at the meeting. On February 16, 2012, Kneeland C. Youngblood, a director of the Company since 2001, notified the Board of Directors of his intention not to stand for re-election at the Annual Meeting. Dr. Youngblood will continue to serve on the Board of Directors and the Compensation and Option and Audit Committees of the Board until immediately prior to the Annual Meeting. The director nominees, if elected, will serve until the 2013 Annual Meeting or until their successor is duly elected and qualifies. Frits van Paasschen, 51, has been Chief Executive Officer and President of the Company since September 2007. From March 2005 until September 2007, he served as President and Chief Executive Officer of Molson Coors Brewing Companys largest division, Coors Brewing Company, a brewing company, prior to its merger 8

with Miller Brewing Company and the formation of MillerCoors LLC. Prior to joining Coors, from April 2004 until March 2005, Mr. van Paasschen worked independently through FPaasschen Consulting, a consulting company, and Mercator Investments, a private equity firm, evaluating, proposing, and negotiating private equity transactions. Prior thereto, Mr. van Paasschen spent seven years at Nike, Inc., a designer, developer and marketer of footwear, apparel and accessory products, most recently as Corporate Vice President/General Manager, Europe, Middle East and Africa from 2000 to 2004. From 1995 to 1997, Mr. van Paasschen served as Vice President, Finance and Planning at Disney Consumer Products, a business segment of The Walt Disney Company that extends the Disney brand to a range of merchandise, and earlier in his career was a management consultant for eight years at the global management consulting firm of McKinsey & Company and the Boston Consulting Group. Mr. van Paasschen has been a director of the Company since September 2007. The Corporate Governance and Nominating Committee considered these qualifications, his valuable insight and unique understanding of the Companys operations, and the hotel and leisure industry generally, his significant public company managerial experience, and a requirement under his employment agreement that he serve on the Companys Board of Directors (subject to customary procedures and conditions to Board membership, including stockholder election) in making the determination that Mr. van Paasschen should be a nominee for director of the Company. Bruce W. Duncan, 60, has been President, Chief Executive Officer and a director of First Industrial Realty Trust, Inc., a real estate investment trust that engages in the ownership, management, acquisition, sale, development and redevelopment of industrial real estate properties, since January 2009. He was a private investor prior to that time and since January 2006. From April to September 2007, Mr. Duncan served as Chief Executive Officer of the Company on an interim basis. He also has been a senior advisor to Kohlberg Kravis & Roberts & Co., a global investment firm, from July 2008 to January 2009. From May 2005 to December 2005, Mr. Duncan was Chief Executive Officer and Trustee of Equity Residential (EQR), a publicly traded real estate investment trust, and held various positions at EQR from March 2002 to December 2005, including President, Chief Executive Officer and Trustee from January 2003 to May 2005, and President and Trustee from March 2002 to December 2002. Mr. Duncan has served as a director of the Company since April 1999. The Corporate Governance and Nominating Committee considered these qualifications, his experience as Chief Executive Officer of other publicly traded companies, and his tenure with the Company in making the determination that Mr. Duncan should be a nominee for director of the Company. Adam M. Aron, 57, has been Chief Executive Officer of the Philadelphia 76ers, a professional basketball team and Alternate Governor of the National Basketball Association since 2011 and, since 2006, has been the Chairman and Chief Executive Officer of World Leisure Partners, Inc., a leisure-related consultancy. From 1996 through 2006, Mr. Aron served as Chairman and Chief Executive Officer of Vail Resorts, Inc., an owner and operator of ski resorts and hotels. Mr. Aron is a director of Norwegian Cruise Line Limited, Prestige Cruise Holdings, Inc. and Cap Juluca Properties Ltd. In the past 5 years, Mr. Aron also served as a director of e-Miles LLC, FTD Group, Inc., Rewards Network, Inc. and Marathon Acquisition Corp. Mr. Aron has been a director of the Company since August 2006. The Corporate Governance and Nominating Committee considered these qualifications, his significant experience in the leisure travel industry, his financial expertise, and his tenure with the Company in making the determination that Mr. Aron should be a nominee for director of the Company. Charlene Barshefsky, 61, has been Senior International Partner at the law firm of WilmerHale, LLP, in Washington, D.C. since September 2001. From March 1997 to January 2001, Ambassador Barshefsky was the United States Trade Representative, the chief trade negotiator and principal trade policymaker for the United States and a member of the Presidents Cabinet. Ambassador Barshefsky has been a director of The Estee Lauder Companies, Inc. since July 2001, American Express Company since July 2001, and Intel Corporation since 9

January 2004. Ambassador Barshefsky is a member of the Council on Foreign Relations, a Trustee of the Howard Hughes Medical Institute and a member of the Global Advisory Board of Moelis & Company. In the past 5 years Ambassador Barshefsky also served as a director of Idenix Pharmaceuticals, Inc. and of the Council on Foreign Relations. She has been a director of the Company since October 2001. The Corporate Governance and Nominating Committee considered these qualifications, her significant public policy experience, her governance experience as a result of having served on a number of other public company boards of directors and board committees, and her tenure with the Company in making the determination that Ambassador Barshefsky should be a nominee for director of the Company. Thomas E. Clarke, 60, has been President of New Business Ventures of Nike, Inc., a designer, developer and marketer of footwear, apparel and accessory products, since 2001. Dr. Clarke joined Nike in 1980. He was appointed Divisional Vice President in charge of marketing in 1987, Corporate Vice President in 1990, and served as President and Chief Operating Officer from 1994 to 2000. Dr. Clarke previously held various positions with Nike, primarily in research, design, development and marketing. Dr. Clarke has also been a director of Newell Rubbermaid Inc., a global marketer of consumer and commercial products, since 2003. Dr. Clarke has been a director of the Company since April 2008. The Corporate Governance and Nominating Committee considered these qualifications, his expertise in brand marketing, and his tenure with the Company in making the determination that Dr. Clarke should be a nominee for director of the Company. Clayton C. Daley, Jr., 60, spent his entire professional career with The Procter & Gamble Company, a global consumer packaged goods company, joining the company in 1974, and has held a number of key accounting and finance positions including Chief Financial Officer and Vice Chair for Procter & Gamble; Comptroller, U.S. Operations for Procter & Gamble USA; Vice President and Comptroller of Procter & Gamble International and Vice President and Treasurer. Mr. Daley retired from Procter & Gamble in October 2009. Mr. Daley has also been a director of Nucor Corporation since 2001 and Foster Wheeler, AG since 2009. In the past 5 years, Mr. Daley served as a director of Boy Scouts of America. In addition, Mr. Daley is Senior Advisor to TPG Capital. Mr. Daley has been a director of the Company since November 2008. The Corporate Governance and Nominating Committee considered these qualifications, his experience in corporate strategy and planning for a global consumer products company, his financial expertise, and his tenure with the Company in making the determination that Mr. Daley should be a nominee for director of the Company. Lizanne Galbreath, 54, has been Managing Partner of Galbreath & Company, a real estate investment firm, since 1999. From April 1997 to 1999, Ms. Galbreath was Managing Director of LaSalle Partners/Jones Lang LaSalle, a real estate services and investment management firm, where she also served as a director. From 1984 to 1997, Ms. Galbreath served as a Managing Director, Chairman and Chief Executive Officer of The Galbreath Company, the predecessor entity of Galbreath & Company. Ms. Galbreath has been a director of the Company since May 2005. The Corporate Governance and Nominating Committee considered these qualifications, her expertise in real estate, and her tenure with the Company in making the determination that Ms. Galbreath should be a nominee for director of the Company. Eric Hippeau, 60, has been a Partner with Lerer Ventures, a venture capital fund, since June 2011. From 2009 to 2011 he was the Chief Executive Officer of The Huffington Post, a news website. From 2000 to 2009, he was a Managing Partner of Softbank Capital, a technology venture capital firm. Mr. Hippeau served as Chairman and Chief Executive Officer of Ziff-Davis Inc., an integrated media and marketing company, from 1993 to March 2000 and held various other positions with Ziff-Davis from 1989 to 1993. In the past 5 years, Mr. Hippeau served as a director of Yahoo! Inc. Mr. Hippeau has been a director of the Company since April 1999. 10

The Corporate Governance and Nominating Committee considered these qualifications, his significant experience as a director (including at many privately held companies), and his tenure with the Company in making the determination that Mr. Hippeau should be a nominee for director of the Company. Stephen R. Quazzo, 52, is the Chief Executive Officer and has been the Managing Director and co-founder of Pearlmark Real Estate Partners, L.L.C., formerly known as Transwestern Investment Company, L.L.C., a real estate principal investment firm, since March 1996. From April 1991 to March 1996, Mr. Quazzo was President of Equity Institutional Investors, Inc., a private investment firm and a subsidiary of Equity Group Investments, Inc. Mr. Quazzo has been a director of the Company since April 1999. The Corporate Governance and Nominating Committee considered these qualifications, his expertise in real estate, and his tenure with the Company in making the determination that Mr. Quazzo should be a nominee for director of the Company. Thomas O. Ryder, 67, retired as Chairman of the Board of The Readers Digest Association, Inc., a global media and direct marketing company, in January 2007, a position he had held since January 1, 2006. Mr. Ryder was Chairman of the Board and Chief Executive Officer of that company from April 1998 through December 31, 2005. In addition, Mr. Ryder was Chairman of the Board and Chairman of the Audit Committee of Virgin Mobile USA, Inc., a wireless service provider, from October 2007 to November 2009. Mr. Ryder was President, American Express Travel Related Services International, a division of American Express Company, which provides travel, financial and network services, from October 1995 to April 1998. In addition, he has been a director of Amazon.com, Inc. since November 2002, Quad/Graphics, Inc. since September 2010, and RPX Corporation since December 2009. In the past 5 years, Mr. Ryder has also served as a director of World Color Press, Inc., a company acquired by Quad/Graphics, Inc. in July 2010. Mr. Ryder has been a director of the Company since April 2001. The Corporate Governance and Nominating Committee considered these qualifications, his financial expertise, and his tenure with the Company in making the determination that Mr. Ryder should be a nominee for director of the Company. The Board of Directors unanimously recommends a vote FOR the election of each of these nominees. Board Meeting, Committee Meeting and Annual Meeting Attendance Directors are expected to attend Board of Directors meetings, meetings of committees on which they serve and the annual meeting of stockholders. The Company encourages all directors to attend all meetings and believes that attendance at the annual meeting is as important as attendance at meetings of the Board of Directors and its committees. All of our incumbent directors attended the 2011 Annual Meeting of Stockholders. During the year ended December 31, 2011, the Board of Directors held five meetings. In addition, directors attended meetings of individual Board of Directors committees. Each incumbent director who was a member of the Board of Directors in 2011 attended at least 75% of the meetings of the Board of Directors and the Board of Directors committees on which he or she served. Board Committees The Board of Directors has established four standing committees: the Audit Committee, the Capital Committee, the Compensation and Option Committee and the Corporate Governance and Nominating Committee. Each of the standing committees operates pursuant to a written charter adopted by the Board, which is available on the Companys website at www.starwoodhotels.com/corporate/investor_relations.html. Each committees principal functions are described below: Audit Committee. The Audit Committee, which has been established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the Exchange Act), is currently 11

comprised of Messrs. Daley (chairperson), Aron, Clarke and Youngblood, all of whom are independent directors, as determined by the Board in accordance with the NYSE listing requirements and applicable federal securities laws. The Board of Directors has determined that each of Messrs. Daley and Aron is an audit committee financial expert under federal securities laws. The Board of Directors has adopted a written charter for the Audit Committee which states that the Audit Committee provides oversight regarding accounting, auditing and financial reporting practices of the Company. The Audit Committee selects and engages the Companys independent registered public accounting firm to audit the Companys annual consolidated financial statements and discusses with it the scope and results of the audit. The Audit Committee also discusses with the independent registered public accounting firm, and with management, financial accounting and reporting principles, policies and practices and the adequacy of the Companys accounting, financial, operating and disclosure controls. The Audit Committee met nine times during 2011. Capital Committee. The Capital Committee is currently comprised of Mr. Quazzo (chairperson), Ms. Galbreath and Messrs. Hippeau and Ryder, all of whom are independent directors, as determined by the Board in accordance with the NYSE listing requirements and applicable federal securities laws. The Capital Committee was established in November 2005 to exercise some of the power of the Board relating to, among other things, capital plans and needs, mergers and acquisitions, divestitures and other significant corporate opportunities between meetings of the Board. The Capital Committee met six times during 2011. Compensation and Option Committee. Under the terms of its charter, the Compensation and Option Committee (the Compensation Committee) is required to consist of three or more members of the Board who meet the independence requirements of the NYSE, are non-employee directors pursuant to Exchange Act Rule 16b-3, and are outside directors for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code). The Compensation Committee is currently comprised of Messrs. Aron (chairperson), Clarke, Daley, Ryder and Youngblood, all of whom are independent directors, as determined by the Board in accordance with the NYSE listing requirements and applicable federal securities laws. The Compensation Committee makes recommendations to the Board with respect to the salaries and other compensation to be paid to the Companys executive officers and other members of senior management, and administers the Companys employee benefits plans, including the Companys 2004 Long-Term Incentive Compensation Plan. The Compensation Committee met six times during 2011. Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee (the Governance Committee) is currently comprised of Ambassador Barshefsky (chairperson), Ms. Galbreath, and Messrs. Duncan and Hippeau, all of whom are independent directors, as determined by the Board in accordance with the NYSE listing requirements and applicable federal securities laws. The Governance Committee, operating pursuant to a written charter, was established in May 2004 and combines the functions of the Corporate Governance Committee and the Nominating Committee. The Governance Committee establishes, or assists in the establishment of, the Companys governance policies (including policies that govern potential conflicts of interest) and monitors and advises the Company as to compliance with those policies. The Governance Committee reviews, analyzes, advises and makes recommendations to the Board with respect to situations, opportunities, relationships and transactions that are governed by such policies, such as opportunities in which a director or executive officer or their affiliates has a personal interest. In addition, the Governance Committee is responsible for making recommendations for candidates to the Board (taking into account suggestions made by officers, directors, employees and stockholders), recommending directors for service on Board committees, developing and reviewing background information for candidates, and making recommendations to the Board of Directors for changes to the Guidelines related to the nomination or qualifications of directors or the size or composition of the Board of Directors. The Governance Committee met five times during 2011. There are no firm prerequisites to qualify as a candidate for the Board, although the Board of Directors seeks a diverse group of candidates who possess the background, skills and expertise relevant to the business of the Company, or candidates that possess a particular geographical or international perspective. The Board of 12

Directors looks for candidates with qualities that include strength of character, an inquiring and independent mind, practical wisdom and mature judgment. The Board of Directors seeks to insure that at least two-thirds of the directors are independent under the Guidelines, and that members of the Audit Committee meet the financial literacy requirements under the rules of the NYSE and at least one of them qualifies as an audit committee financial expert under applicable federal securities laws. The Governance Committee does not have a set policy for considering or weighing diversity in identifying nominees but does seek to have a diversity of backgrounds, skills and perspectives among Board members, and considers how the background, skills and perspectives of the nominee would contribute to the total mix of backgrounds, skills and perspectives that would be available to the Board as a whole. The Governance Committee reviews the qualifications and backgrounds of the directors and the overall composition of the Board on an annual basis, and recommends to the full Board of Directors the slate of directors to be recommended for nomination for election at the next annual meeting of stockholders. The Board of Directors does not believe that its members should be prohibited from serving on boards and/ or committees of other organizations, and the Board of Directors has not adopted any guidelines limiting such activities. However, the Governance Committee and the full Board of Directors will take into account the nature of, and time involved in, a directors service on other boards in evaluating the suitability of individual directors and in making its recommendations to Company stockholders. However, service on boards and/or committees of other organizations must be consistent with the Companys conflict of interest policies. The Governance Committee may from time-to-time utilize the services of a search firm to help identify and evaluate candidates for director who meet the criteria and qualifications outlined above. The Governance Committee will consider candidates for nomination recommended by stockholders and submitted for consideration. Although it has no formal policy regarding stockholder candidates, the Governance Committee believes that stockholder candidates should be reviewed in substantially the same manner as other candidates. Under the Companys current Bylaws, stockholder nominations of individuals to be elected as directors at an annual meeting of our stockholders must be made in writing and delivered to the Corporate Secretary of the Company, One StarPoint, Stamford, Connecticut 06902, and be received by the Corporate Secretary no later than the close of business on the 75th day nor earlier than the close of business on the 100th day prior to the first anniversary of the preceding years annual meeting. In accordance with the Companys current Bylaws, in addition to other required information specified in the Bylaws, such notice shall set forth as to each proposed nominee (i) the name, age and business address of each nominee proposed in such notice, and a statement as to the qualification of each nominee, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares which are beneficially owned and owned of record by the nominating stockholder, and (iv) any other information concerning the nominee that must be disclosed of nominees in proxy solicitations regulated by Regulation 14A of the Exchange Act, including, without limitation, such persons written consent to being named in the proxy statement as a nominee and to serving as a director if elected. The Company provides a comprehensive orientation for all new directors. The process involves a corporate overview, one-on-one meetings with members of senior management and an orientation meeting. In addition, all directors are given written materials providing information on the Companys business, its operations and decision-making processes. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires that the Companys directors and executive officers, and persons who own more than 10 percent of the outstanding shares of the Company, file with the SEC (and provide a copy to the Company) certain reports relating to their ownership of shares. To the Companys knowledge, based solely on a review of the copies of these reports furnished to the Company for the fiscal year ended December 31, 2011, and written representations from our directors and executive officers, all Section 16(a) filing requirements applicable to its directors, executive officers and greater than 10 percent beneficial owners were complied with for the most recent fiscal year. 13

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors has appointed and is requesting ratification by stockholders of the appointment of Ernst & Young LLP (Ernst & Young) as the Companys independent registered public accounting firm for fiscal year 2012. While not required by law, the Board is asking its stockholders to ratify the selection of Ernst & Young as a matter of good corporate governance practice. Representatives of Ernst & Young are expected to be present at the Annual Meeting, will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions. If the appointment of Ernst & Young is not ratified, the Board and the Audit Committee will reconsider the selection of Ernst & Young as the independent registered public accounting firm for fiscal year 2012. The Board of Directors unanimously recommends a vote FOR ratification of the appointment of Ernst & Young as the Companys independent registered public accounting firm for fiscal year 2012.

ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION The Board of Directors is committed to the highest standards of corporate governance and recognizes the significant interest of stockholders and investors in executive compensation matters. The Company has designed its executive compensation programs to attract, motivate, reward and retain the senior management talent required to achieve our corporate objectives and increase stockholder value. We believe that our compensation programs are centered on pay-for-performance principles and are strongly aligned with the long-term interests of our stockholders. See the discussion of the compensation of our named executive officers in the section entitled Compensation Discussion and Analysis beginning on page 20 of this proxy statement. At last years annual meeting, we provided our stockholders with the opportunity to cast a non-binding advisory vote regarding the compensation of our named executive officers as disclosed in the proxy statement for the 2011 Annual Meeting of Stockholders. Our stockholders overwhelmingly approved the proposal, with more than 96% of the votes cast in favor of the proposal. We also asked our stockholders to indicate if we should hold a say-on-pay vote every one, two or three years. Consistent with the recommendation of our Board of Directors, our stockholders indicated by non-binding advisory vote their preference to hold a say-on-pay vote annually. After consideration of the 2011 voting results, and based upon its prior recommendation, our Board of Directors elected to hold say-on-pay votes on an annual basis. Accordingly, this year we are again asking our stockholders to indicate their support for the compensation of our Chief Executive Officer, Chief Financial Officer and our three most highly compensated executive officers, as determined for 2011 (the Named Executive Officers) as disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion of this proxy statement, as required by Section 14A of the Exchange Act. The say-on-pay vote is not intended to address any specific item of compensation, but, rather, the overall compensation of our Named Executive Officers and the philosophy, policies and practices related thereto. We expect to hold the next say-on-pay vote in connection with our 2013 Annual Meeting of Stockholders. Accordingly, we are asking our stockholders to vote FOR the following resolution at the Annual Meeting: RESOLVED, that the Companys stockholders hereby approve, on a non-binding advisory basis, the compensation paid to our Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion in our proxy statement for the 2012 Annual Meeting of Stockholders.

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This say-on-pay vote is advisory, and therefore is not binding on the Company, the Compensation Committee or the Board of Directors. However, the Compensation Committee and the Board of Directors value the opinions of our stockholders and expect to consider the outcome of the say-on-pay vote when making future compensation decisions. The Board of Directors unanimously recommends a vote FOR the approval, on a non-binding advisory basis, of the executive compensation program for the Companys Named Executive Officers as disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion of this proxy statement.

BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS The table below shows the number of Company shares beneficially owned by principal stockholders who beneficially own more than five percent of the Companys outstanding shares as of March 9, 2012. The information in this table is based upon the latest filings of either a Schedule 13D, Schedule 13G or Form 13F (or amendments thereto) as filed by the respective stockholder with the SEC as of the date stated in the below footnotes. We calculate the stockholders percentage of ownership assuming the stockholder beneficially owned that number of shares on March 9, 2012, the record date for the Annual Meeting. Unless otherwise indicated, the stockholder had sole voting and dispositive power over the shares.
Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership Percent of Class

T. Rowe Price Associates, Inc.(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 E. Pratt Street Baltimore, MD 21202 Waddell & Reed Financial, Inc.(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6300 Lamar Avenue Overland Park, KS 66202 The Vanguard Group, Inc.(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Vanguard Blvd. Malvern, PA 19355

19,508,619

9.90%

16,253,864

8.25%

10,379,391

5.27%

(1) Based on information contained in a Schedule 13G/A, dated February 14, 2012 (the Price Associates 13G/ A), filed by T. Rowe Price Associates, Inc. (Price Associates) with the SEC, with respect to the Company, reporting beneficial ownership as of December 31, 2011. The Price Associates 13G/A reports that Price Associates has sole voting power over 6,587,053 shares and sole dispositive power over 19,508,619 shares. These securities are owned by various individual and institutional investors which Price Associates serves as an investment adviser with power to direct investments and/or sole power to vote the securities. For the purposes of the reporting requirements of the Exchange Act, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. (2) Based on information contained in a Schedule 13G/A, dated February 14, 2012 (the Waddell & Reed 13G/ A), filed by Waddell & Reed Financial, Inc. (WDR), Waddell & Reed Financial Services, Inc. (WRFSI), Waddell & Reed, Inc. (WRI), Waddell & Reed Investment Management Company (WRIMCO), and Ivy Investment Management Company (IICO) (collectively Waddell & Reed) with the SEC, with respect to the Company reporting beneficial ownership as of December 31, 2011. The Waddell & Reed 13G/A reports that Waddell & Reed has sole voting power and sole dispositive power over 16,253,864 shares as follows: WDR holds 16,253,864 shares indirectly; WRFSI holds 3,646,205 shares indirectly; WRI holds 3,646,205 shares indirectly; WRIMCO holds 3,646,205 shares directly; and IICO holds 12,607,659 shares directly. 15

(3) Based on information contained in a Schedule 13G/A, dated February 6, 2012 (the Vanguard 13G/A) filed by The Vanguard Group, Inc. (Vanguard) with the SEC, with respect to the Company, reporting beneficial ownership as of December 31, 2011. The Vanguard 13G/A reports that Vanguard has sole voting power over 271,130 shares, sole dispositive power over 10,108,261 shares and shared dispositive power over 271,130 shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, holds 271,130 shares and directs the voting of those shares.

BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS The table below shows the beneficial ownership of Company shares of (i) each director, (ii) each nominee for director, (iii) our Chief Executive Officer, our Chief Financial Officer and each of the other three most highly paid executive officers and (iv) all directors and executive officers as a group, as of January 31, 2012. Beneficial ownership includes any shares that a director, nominee for director or executive officer may acquire pursuant to stock options and other derivative securities that are exercisable on that date or that will become exercisable within 60 days thereafter. Unless otherwise indicated, the stockholder had sole voting and dispositive power over the shares.
Name (Listed alphabetically) Amount and Nature of Beneficial Ownership Percent of Class

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

55,378(1)(2) 127,451(1) 45,769(1)(4) 31,254(1) 28,286(1)(4)(5) 225,979(1)(4)(6) 54,245(1)(4) 68,069(1)(4) 433,130(1) 79,509(1)(7) 84,814(1)(4) 287,451(1) 393,345(1)(8) 845,863(1) 40,128(1) 3,040,619(1)

(3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3)

(1) Includes shares subject to presently exercisable options, and options, restricted stock and restricted stock units that will become exercisable or vest within 60 days of January 31, 2012, as follows: 32,970 for Mr. Aron; 127,451 for Mr. Avril; 29,614 for Ambassador Barshefsky; 112,047 for Mr. Jeffrey M. Cava; 24,860 for Dr. Clarke; 20,573 for Mr. Daley; 76,014 for Mr. Duncan; 40,593 for Ms. Galbreath; 40,593 for Mr. Hippeau; 117,151 for Mr. Philip P. McAveety; 409,780 for Mr. Prabhu; 40,593 for Mr. Quazzo; 40,593 for Mr. Ryder; 223,662 for Mr. Siegel; 366,405 for Mr. Turner; 843,832 for Mr. van Paasschen and 29,614 for Dr. Youngblood. (2) Includes 10,000 shares owned jointly with spouse. (3) Less than 1%. (4) Amount includes the following number of phantom stock units received as a result of the following directors election to defer directors annual fees: 4,056 for Ambassador Barshefsky; 4,198 for Mr. Daley; 7,300 for Mr. Duncan; 12,623 for Ms. Galbreath; 25,625 for Mr. Hippeau; and 20,579 for Mr. Ryder.

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(5) Includes 3,000 shares held by the Clayton C. Daley, Jr. Revocable Trust of which Mr. Daley is a trustee and beneficiary. (6) Includes 121,866 shares held by The Bruce W. Duncan Revocable Trust of which Mr. Duncan is a trustee and beneficiary. (7) Includes 33,020 shares held by a trust of which Mr. Quazzo is settlor and over which he shares investment control, and 397 shares owned by Mr. Quazzos wife in a retirement account. (8) Includes 19,958 shares owned jointly with spouse. The following table provides information as of December 31, 2011 regarding shares that may be issued under equity compensation plans maintained by the Company.

Equity Compensation Plan Information-December 31, 2011

Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)

Plan Category

Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)

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

13,567,571 13,567,571

$15.14 $15.14

55,717,431(1) 55,717,431

(1) Does not include shares underlying deferred restricted stock units that vest over three years and may be settled in shares that were granted pursuant to the Annual Incentive Plan for Certain Executives, amended and restated as of December 2008 (the Executive Plan). The Executive Plan, as it was approved by stockholders at the 2010 Annual Meeting, did not limit the number of deferred restricted stock units that may be issued. In addition, 10,048,154 shares remain available for issuance under our Employee Stock Purchase Plan, a stock purchase plan meeting the requirements of Section 423 of the Code.

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EXECUTIVE AND DIRECTOR COMPENSATION I. EXECUTIVE OFFICERS Our executive officers and their positions as of March 9, 2012 are:
Name (listed alphabetically, after Chief Executive Officer)

Position

Frits van Paasschen . . . . . . . . . . . . . . . . . Matthew E. Avril . . . . . . . . . . . . . . . . . . . Jeffrey M. Cava . . . . . . . . . . . . . . . . . . . . Philip P. McAveety . . . . . . . . . . . . . . . . . Vasant M. Prabhu . . . . . . . . . . . . . . . . . . Kenneth S. Siegel . . . . . . . . . . . . . . . . . . Simon M. Turner . . . . . . . . . . . . . . . . . . .

Chief Executive Officer and President and a Director President, Hotel Group Executive Vice President and Chief Human Resources Officer Executive Vice President and Chief Brand Officer Vice Chairman and Chief Financial Officer Chief Administrative Officer, General Counsel and Secretary President, Global Development

The biography for Mr. van Paasschen, our Chief Executive Officer and President, follows the table listing our directors under the section entitled Election of Directors beginning on page 8 of this proxy statement. Biographies for our other executive officers follow: Matthew E. Avril. Mr. Avril, 51, has been President, Hotel Group since September 2008. From May 2005 until August 2008, he was President and Managing Director of Operations for Starwood Vacation Ownership, Inc. (SVO), a subsidiary of the Company that focuses on the development and operation of vacation ownership resorts and marketing, selling and financing vacation ownership interests in the resorts; and immediately prior, from September 2002 to May 2005, served as Senior Vice President for SVO. Mr. Avril was with Vistana, Inc. (SVOs predecessor entity) for the ten year period from January 1989 to December 1998, serving as its Executive Vice President and Chief Operating Officer and, prior to that, as the companys Chief Financial Officer. Prior to joining Vistana, Mr. Avril, a certified public accountant, spent five years with KPMG Peat Marwick, a public accounting firm. Mr. Avril is also a member of the board of directors of API Technologies Corp. Jeffrey M. Cava. Mr. Cava, 60, has been Executive Vice President and Chief Human Resources Officer since May 2008. Mr. Cava served as Executive Vice President and Chief Human Resources Officer for Wendys International, Inc., a restaurant franchising company specializing in quick-service hamburgers, from June 2003 to May 2008. Prior to joining Wendys, Mr. Cava was Vice President and Chief Human Resources Officer for Nike, Inc., a designer, developer and marketer of footwear, apparel and accessory products; Vice President Human Resources for The Walt Disney Company, Consumer Products Group, a business segment of The Walt Disney Company that extends the Disney brand to a range of merchandise; and Vice President of Global Staffing, Training and Development for ITT Sheraton Corporation, a hotel company. Mr. Cava is also a member of the board of directors and chairs the compensation committee of The Society for Human Resources Management, a non-profit global human resources professional organization. Philip P. McAveety. Mr. McAveety, 45, has been Executive Vice President and Chief Brand Officer since April 2008. Prior to joining the company, Mr. McAveety was Global Brand Director of Camper, SL, a fashion footwear company, from January 2007 until March 2008. From July 1997 until December 2006, he served as Vice President, Brand Marketing, Europe, Middle East and Africa at Nike, Inc., a designer, developer and marketer of footwear, apparel and accessory products. Vasant M. Prabhu. Mr. Prabhu, 52, has been Vice Chairman and Chief Financial Officer since February 2010. Prior to that, he was Executive Vice President and Chief Financial Officer since January 2004. Prior to joining the Company, Mr. Prabhu served as Executive Vice President and Chief Financial Officer for Safeway Inc., a North American food and drug retailer specializing in grocery and general merchandise, from September 2000 through December 2003. Mr. Prabhu was previously the President of the Information and Media Group at 18

the McGraw-Hill Companies, Inc., a provider of information services for the financial, education, commercial, and commodities market worldwide, from June 1998 to August 2000, and held several senior positions at divisions of PepsiCo, Inc., a global food, snack and beverage company, from June 1992 to May 1998. From August 1983 to May 1992 he was a partner at Booz Allen Hamilton Inc., an international management consulting firm. Mr. Prabhu is a member of the board of directors of Mattel, Inc. Kenneth S. Siegel. Mr. Siegel, 56, has been Chief Administrative Officer and General Counsel since May 2006. From November 2000 to May 2006, Mr. Siegel held the position of Executive Vice President and General Counsel. In February 2001, he was also appointed as the Secretary of the Company. Mr. Siegel was formerly the Senior Vice President and General Counsel of Gartner, Inc., a provider of research and analysis on information technology industries, from January 2000 to November 2000. Prior to that time, he served as Senior Vice President, General Counsel and Corporate Secretary of IMS Health Incorporated, an information services company, and its predecessors from February 1997 to December 1999. Prior to that time, Mr. Siegel was a Partner in the law firm of Baker & Botts, LLP. Mr. Siegel is also a Trustee of Cancer Hope Network, a non-profit entity, a Trustee of Minority Corporate Counsel Association, and a Trustee of the American Hotel & Lodging Educational Foundation. Simon M. Turner. Mr. Turner, 50, has been President, Global Development since May 2008. From June 1996 to April 2008, he was a principal of Hotel Capital Advisers, Inc., a hotel investment advisory firm. During this period, Mr. Turner served on the board of directors of Four Season Hotels, Inc., serving as a member of the Human Resources Committee and the Audit Committee. He was also a member of the board of directors of Fairmont Raffles Hotels International and was chairman of the Audit Committee. From July 1987 to May 1996, Mr. Turner was a member of the Investment Banking Department of Salomon Brothers, based in both New York and London.

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II. COMPENSATION DISCUSSION AND ANALYSIS Executive Summary Our executive compensation program is designed to attract, motivate and retain executive officers and other key employees who contribute to the Companys success in a way that rewards performance and aligns pay with our stockholders long-term interests. The Compensation Committee reviews the Companys overall compensation strategy for all employees, including our Named Executive Officers, on an annual basis. In the course of this review, the Compensation Committee considers the Companys current compensation programs and whether to modify them or introduce new programs to better meet the Companys overall compensation objectives. Key highlights of our executive compensation program for fiscal 2011 included: Pay Decisions Base Salaries Remained Generally Unaltered the base salary of Mr. van Paasschen was the same as fiscal 2010; the base salaries of the other Named Executive Officers remained relatively unchanged compared to fiscal 2010, with the exception of Mr. Turner, whose salary went up 15.6% when compared to fiscal 2010, to more closely align with the median base salary of executives at peer companies. Incentive Pay Largely Contingent upon the Companys Performance 75% of our Named Executive Officers total target annual bonus opportunity was dependent upon the Companys financial results, up 15% for Mr. van Paasschen and 25% for the other Named Executive Officers compared to fiscal 2010; maximum payout eligibility for the Company financial portion of the annual bonus was 98% for 2011, compared with 120% in 2010. Decrease in Equity Grants the total equity grants made to our Named Executive Officers decreased by approximately 2% when compared to fiscal 2010. CEOs Stock Ownership Requirement Increased Mr. van Paasschens stock ownership requirement was increased to a multiple of six times his base salary, up one multiple when compared to fiscal 2010, to keep in line with market practices. Pay Practices Minimum Compensation Levels in our Executive Plan Removed to Better Align Executive Compensation to the Companys Financial Results minimum compensation levels tied to the Companys financial results were previously removed so that bonus pool funding is based solely on the Companys financial performance. No More Tax Gross-Ups except for tax gross-ups required to be paid under existing employment agreements, the Compensation Committee does not intend to approve any other tax gross-ups. All Incentive Awards Subject to Clawback all incentive awards received by any senior vice president or more senior officer, including our Named Executive Officers, remain subject to a clawback policy that mandates repayment in certain instances where there is a restatement of the Companys financial statements. No Hedging Activities Linked to Company Stock officers and directors of the Company, including our Named Executive Officers, were required to refrain from engaging in any hedging or monetization transaction directly linked to Company stock. Stock Ownership Requirements all of our executive officers, including our Named Executive Officers, were required to hold a number of shares having a market value equal to or greater than a multiple of each executives base salary. Formal Evaluation Process the Compensation Committee conducted a formal performance review of Mr. van Paasschen and determined whether and to what extent the Companys financial performance goals were achieved; Mr. van Paasschen, together with the Chief Human Resources Officer and with oversight and input from the Compensation Committee conducted a formal performance review of the other Named Executive Officers through the Performance Management Process. Compensation Consultants Retained the Compensation Committee retained Meridian Compensation Partners, LLC to assist it in the review and determination of compensation awards for the Named Executive Officers. 20

A. Overview of Starwoods Executive Compensation Program 1. Program Objectives and Other Considerations

Objectives. As a consumer lifestyle company with a branded hotel portfolio at its core, the Company operates in a competitive, dynamic and challenging business environment. In step with this mission and environment, the Companys compensation program for our Named Executive Officers has the following key objectives: Attract and Retain: We seek to attract and retain talented executives from within and outside the hospitality industry who understand the importance of innovation, brand enhancement and consumer experience. We are working to reinvent the hospitality industry, and one element of this endeavor is to bring in key talent from other industries. Therefore, overall program competitiveness must take these other markets into account. We broadly target total compensation opportunities at the median (50th percentile) of the market for target performance levels; however, we also review the range of values around the median, including the 25th and 75th percentiles. However, we believe that benchmarking alone does not provide a complete basis for establishing compensation levels or design practices. Actual individual compensation may be above or below targeted levels based on Company and individual performance, key responsibilities, unique market demands, and experience level. Motivate: We seek to motivate our executives to sustain high performance and achieve Company financial and strategic/operational goals over the course of business cycles in various market conditions. However, our compensation programs are designed to not encourage excessive risk taking; we assess compensated-related risk annually. In addition, we have a policy which allows us to recoup incentives paid in the event of a financial restatement. See the section entitled Potential Impact on Compensation for Executive Misconduct beginning on page 33 of this proxy statement. Align Interests: We endeavor to align the interests of stockholders and our executives by linking executive compensation to the Companys annual business results and stock performance. Moreover, we strive to keep the executive compensation program transparent, in line with market practices and consistent with the highest standards of corporate governance practices. The following changes were designed to better align compensation with the creation and preservation of stockholder value: Tax gross-ups were eliminated for arrangements put in place in 2008 and thereafter. The structure for determining annual incentive compensation under the Companys Executive Plan was revised so that with respect to the goal based upon the Companys financial performance, the floor below which incentive compensation could not fall was removed, and with respect to bonus pool funding, funding is based entirely on the Companys financial performance. What the Program Intends to Reward. Our executive compensation program is strongly weighted toward variable compensation tied to the Companys annual business results and stock performance. Specifically, our compensation program for our Named Executive Officers is designed to ensure the following: Alignment with Stockholders: A significant portion of Named Executive Officer compensation is delivered in the form of equity incentives with significant performance and/or vesting requirements, ensuring that long-term compensation is strongly linked to stockholder returns. Further, our executive officers, including our Named Executive Officers, are required to own a requisite amount of Company shares. See the section entitled Share Ownership Guidelines beginning on page 35 of this proxy statement. Achievement of Company Financial Objectives: A portion of Named Executive Officer compensation is tied directly to the Companys financial performance. 21

 Achievement of Strategic/Operational Objectives: A portion of Named Executive Officer compensation is tied to achievement of specific individual objectives that are directly aligned with the execution of our business strategy. These objectives may be related to, among others, operational excellence, brand enhancement, innovation, growth, cost containment/efficiency, customer experience and/or teamwork. Overall Leadership and Stewardship of the Company: Leadership, teambuilding, and development of future talent are key success factors for the Company and a portion of Named Executive Officer compensation is dependent on satisfaction of core leadership competencies. 2. Roles and Responsibilities

The Compensation Committee is responsible for, among other things, the establishment and review of compensation policies and programs for our executive officers and ensuring that the executive officers are compensated in a manner consistent with the objectives and principles outlined above. It also monitors the Companys executive succession plan, and reviews and monitors the Companys performance as it affects the Companys employees and the overall compensation policies for the Companys employees. The Compensation Committee makes all compensation decisions with respect to our Named Executive Officers. Our Chief Executive Officer, together with the Chief Human Resources Officer, reviews the performance of each other Named Executive Officer and presents to the Compensation Committee his conclusions and recommendations, including salary adjustments and annual incentive compensation amounts (as described in more detail in the Annual Incentive Compensation section beginning on page 25 of this proxy statement). The Compensation Committee may exercise its discretion in modifying any recommended salary adjustments or awards to these executives. The role of the Companys management is to provide reviews and recommendations for the Compensation Committees consideration, and to manage operational aspects of the Companys compensation programs, policies and governance. Direct responsibilities include, but are not limited to, (i) providing an ongoing review of the effectiveness of the compensation programs, including competitiveness, and alignment with the Companys objectives, (ii) recommending changes, if necessary, to ensure achievement of all program objectives and (iii) recommending pay levels, payout and/or awards for executive officers other than the Chief Executive Officer. Management also prepares tally sheets which describe and quantify all components of total compensation for our Named Executive Officers, including salary, annual incentive compensation, long-term incentive compensation, deferred compensation, outstanding equity awards, benefits, perquisites and potential severance and change in control payments. The Compensation Committee reviews and considers these tally sheets in making compensation decisions for our Named Executive Officers. The Compensation Committee directly engaged Meridian Compensation Partners, LLC (Meridian) to assist it in the review and determination of compensation awards to the Named Executive Officers (including the Chief Executive Officer) for the 2011 performance period, as well as the annual fees or other compensation paid to our Board. Meridian worked with management and the Compensation Committee in reviewing the compensation structure of the Company and of the companies in the peer group. Meridian does not provide any services to the Company. At last years annual meeting, we provided our stockholders with the opportunity to cast a non-binding advisory vote regarding the compensation of our named executive officers as disclosed in the proxy statement for the 2011 Annual Meeting of Stockholders. Our stockholders overwhelmingly approved the proposal, with more than 96% of the votes cast in favor of the proposal. We also asked our stockholders to indicate if we should hold a say-on-pay vote every one, two or three years. Consistent with the recommendation of our Board, our stockholders indicated by non-binding advisory vote their preference to hold a say-on-pay vote annually. After consideration of the 2011 voting results, and based upon its prior recommendation, our Board of Directors elected to hold say-on-pay votes on an annual basis. In addition, the Compensation Committee 22

considered the strong support for our say-on-pay proposal as evidence of our stockholders support for the named executive officer compensation decisions and actions that the Compensation Committee has been making. As a result, the Compensation Committee made no material changes in the structure of our named executive officer compensation program that were directly motivated by the results of our say-on-pay vote. We have, however, continued to review and make adjustments to this program as necessary to achieve our objectives described above.

3.

Risk Assessment

In setting compensation, our Compensation Committee also considers the risks to our stockholders, and the Company as a whole, arising out of our compensation programs. In February 2012, management held a special meeting to discuss and assess the risk profile of our compensation programs. The Chief Human Resources Officer, our Chief Administrative Officer, General Counsel and Secretary, our Vice Chairman and Chief Financial Officer and the Companys external legal counsel for compensation matters were among the participants in the special meeting. Their review considered risk-determining characteristics of the overall structure and individual components of our Company-wide compensation program, including our base salaries, incentive plans (both at the executive and property management levels) and equity plans. A report of the findings was provided to the Compensation Committee for its review and consideration. Following this assessment, we believe that the Company has instituted policies that align our executive officers interests with those of our stockholders without creating incentives for our executive officers or other employees to take risks that are reasonably likely to have a material adverse effect on the Company. For example, Balance of Compensation: Across the Company, individual elements of our compensation program include base salaries, incentive compensation, and for certain of our employees, equity-based awards. By providing a mix of different elements of compensation which reward both short-term and long-term performance, the Companys compensation programs, as a whole, provide a balanced approach to incentivizing and retaining employees, without placing an inappropriate emphasis on any particular form of compensation. Objective Formula and Pre-established Performance Measures Dictate Annual Incentives: Under the Executive Plan, payment of annual incentives to our Named Executive Officers is subject to the satisfaction of specific company-wide annual performance targets determined under an incentive formula established by our Compensation Committee within the first 90 days of each fiscal year. Similarly, the Companys employees other than the Named Executive Officers that are eligible to receive an annual incentive receive such incentive subject to the satisfaction of specific company-wide annual performance targets determined under an incentive formula established by our Compensation Committee. These performance targets are directly and specifically tied to one or more of the following company-wide business criteria: earnings before interest, taxes, depreciation and amortization (or EBITDA), consolidated pre-tax earnings, net revenues, net earnings, operating income, earnings before interest and taxes, cash flow measures, return on equity, return on net assets employed or earnings per share for the applicable fiscal year. Minimum and Maximum Thresholds for Annual Incentives: Each year our Compensation Committee establishes within the first 90 days of any fiscal year a threshold level of EBITDA that the Company must achieve in order for any bonus to be paid to our Named Executive Officers or other Company employees eligible to receive an annual incentive for any given year. The Executive Plan also specifies a maximum incentive amount, in dollars, that may be paid to any executive officer for any 12-month performance period. As a result of this threshold performance requirement and the design of our Executive Plan, incentive compensation is payable under our incentive plans only upon the attainment of performance targets related to business criteria that are in the interests of our stockholders. Use of Long-Term Incentive Compensation: Equity-based long-term incentive compensation that vests over a period of years is a key component of total compensation of our executive employees. This vesting 23

period encourages our executives to focus on sustaining the Companys long-term performance. These grants are also made annually, so executives always have unvested awards that could decrease significantly in value if our business is not managed for the long-term. Share Ownership Guidelines: Our share ownership guidelines require our executive officers, including the Named Executive Officers, to hold that number of shares having a market value equal to or greater than a multiple of each executives base salary. For the Chief Executive Officer, the multiple was increased from five times base salary to six times base salary in 2011 to be more in line with market practices, and for the other Named Executive Officers, the multiple is four times base salary. A retention requirement of 35% is applied to restricted shares upon vesting (net shares after tax withholding) and shares obtained from option exercises until the executive meets the target, or if an executive falls out of compliance. See the section entitled Share Ownership Guidelines beginning on page 35 of this proxy statement for a description of the securities that count towards meeting the target and other considerations. Restrictions on Related Party Transactions: We have a corporate opportunity and related person transaction approval process regarding the review, approval and ratification by our Governance Committee of all transactions with related parties, executive officers, and their respective family members and/or corporate affiliates. See the section entitled Certain Relationships and Related Transactions beginning on page 52 of this proxy statement for a complete description of this policy. Incentive Recoupment Policy: We have an incentive recoupment policy that allows the Company to recover any annual incentive payment or long-term incentive payment to any individual executive at the senior vice president level and above, including our Named Executive Officers, under certain circumstances. See the section entitled Potential Impact on Compensation for Executive Misconduct beginning on page 33 of this proxy statement. Anti-Hedging Policy: We have an anti-hedging policy that restricts all officers and directors from engaging in short sales, entering into any derivative transactions, such as swaps, straddles, puts, or calls, or engaging in any hedging or monetization transactions, such as collars or forward sale contracts, that are directly linked to Company shares. Internal Processes Further Restrict Risk: The Company has in place additional processes to limit risk to the Company from our compensation programs. Specifically, the Company has financial policies that restrict the amount of capital that any individual may deploy absent obtaining internal approvals, which reduces the risk of inappropriate expenditures by an individual. Further, the processes and controls associated with respect to our compensation programs are audited each year to insure that expenditures have been approved within the Companys guidelines and by required approval authorities. In addition, the Company engages an external compensation consulting firm for design and review of our compensation programs, as well as external legal counsel to assist it with the periodic review of our compensation plans to ensure compliance with applicable laws and regulations. B. Elements of Compensation 1. Primary Elements

The primary elements of the Companys compensation program for our Named Executive Officers are: Base Salary Incentive Compensation Annual Incentive Compensation Long-Term Incentive Compensation Benefits and Perquisites 24

Total compensation for Named Executive Officers is evaluated against the peer group identified in this proxy statement. Evaluated on this basis, the Compensation Committee believes the actual cash and equity compensation delivered for the 2011 performance year was appropriate in light of the Companys overall performance and the performance of the particular executives. We describe each of the compensation elements below and explain why we pay each element and how we determine the amount of each element. Base Salary. The Company believes it is essential to provide our Named Executive Officers with competitive base salaries that will enable the Company to continue to attract and retain critical senior executives from within and outside the hospitality industry. In the case of Named Executive Officers other than the Chief Executive Officer, base salary typically accounts for approximately 20% of total compensation at target (in other words, total compensation assuming performance goals are satisfied at targeted levels, but excluding benefits and perquisites). In the case of Mr. van Paasschen, base salary for 2011 was $1,250,000. As a result, base salary accounted for approximately 14% of total compensation at target for Mr. van Paasschen. Base salary serves as a minimum level of compensation to Named Executive Officers in circumstances when achieving Company financial and strategic/operational objectives becomes challenging and the level of incentive compensation is impacted. Salaries for Named Executive Officers are generally based on the responsibilities of each position, Company and individual performance, unique market demands and experience level. Salaries are reviewed annually against similar positions among a group of peer companies developed by the Company and approved by the Compensation Committee after consultation with Meridian, consisting of similarly-sized hotel and property management companies as well as other companies representative of markets in which the Company competes for key executive talent. See the section entitled Background Information on the Executive Compensation Program Use of Peer Data section beginning on page 34 of this proxy statement for a list of the peer companies used in this analysis. Similar to other companies, the Company generally seeks to position base salaries of our Named Executive Officers at or near the median base salary of the Companys peer group for similar positions but also reviews the range of values around the median, including the 25th and 75th percentile for reference purposes. See additional detail regarding base salaries in the section entitled Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards beginning on page 39 of this proxy statement. Incentive Compensation. Incentive compensation includes annual cash bonus awards under the Companys Executive Plan and long-term incentive compensation in the form of equity awards under the Companys LTIP. Incentive compensation typically accounts for approximately 80% of total compensation at target (86% for Mr. van Paasschen in 2011), with annual cash bonus compensation and long-term incentive compensation accounting for 19% and 61%, respectively (29% and 57% for Mr. van Paasschen, respectively, in 2011). The Company believes that this structure allows it to provide each Named Executive Officer with substantial incentive compensation opportunities if performance objectives are met. The Company believes that the allocation between base salary and incentive compensation is appropriate and beneficial because: it promotes the Companys competitive position by allowing it to provide Named Executive Officers with above-median total competitive compensation if targets are met; it targets and attracts highly motivated and talented executives within and outside the hospitality industry; it aligns senior managements interests with those of stockholders; it promotes achievement of business and individual performance objectives; and it provides long-term incentives for Named Executive Officers to remain in the Companys employ. Annual Incentive Compensation. Annual cash bonuses are a key part of the Companys executive compensation program. The bonuses directly link the achievement of Company financial and strategic/ operational performance objectives to executive pay. Annual bonuses also provide a complementary balance to 25

equity incentives (discussed below). Each Named Executive Officer has an annual opportunity to receive an incentive award under the stockholder-approved Executive Plan. If and when earned, awards are typically paid to Named Executive Officers partly in cash and, unless the Compensation Committee otherwise elects, partly as deferred stock awards (under the Executive Plan). The deferred stock awards generally vest over a three-year period. See additional detail regarding these deferred stock awards in the section entitled Long-Term Incentive Compensation beginning on page 30 of this proxy statement. Viewed on a combined basis, once minimum performance is attained, the annual bonus payments attributable to both Company financial and strategic/operational performance can range from 0% 238% of target, not to exceed 200% for the Named Executive Officers. See additional detail regarding targets in the section entitled Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards beginning on page 39 of this proxy statement. Minimum Threshold. For the Named Executive Officers, an annual bonus award for 2011 was paid under the Executive Plan. Under the Executive Plan, each year, the Compensation Committee establishes, in advance, a threshold level of EBITDA that the Company must achieve in order for any bonus to be paid under the Executive Plan for that year (the EP Threshold). The Executive Plan also specifies a maximum bonus amount, in dollars, that may be paid to any executive for any 12-month performance period. When the threshold is established at the beginning of a year, the achievement of the threshold is considered substantially uncertain for purposes of Section 162(m), which is one of the requirements for compensation paid under the Executive Plan to be deductible as performance-based compensation under Section 162(m). For 2011, the EP Threshold was $820,000,000. Generally, a Named Executive Officer will receive payment of a bonus award under the Executive Plan only if he remains employed by the Company on the award payment date. However, subject to attaining the EP Threshold in the relevant year, pro rata awards may be paid at the discretion of the Compensation Committee in the event of death, disability, retirement or other termination of employment. Once the EP Threshold is achieved, the maximum annual bonus amount specified in the Executive Plan becomes available for each Named Executive Officer and the Compensation Committee may apply its discretion to reduce such amount to determine the actual bonus amount for each individual. To determine the actual bonus to be paid for a year under the Executive Plan, the Compensation Committee also establishes specific annual Company financial and strategic/operational performance goals and a related target bonus amount for each executive. These financial and strategic/operational goals are described below. Additional Performance Criteria. If the EP Threshold under the Executive Plan is met for a year, the Companys performance in comparison to the financial and strategic/operational goals for the year set by the Compensation Committee is then used to determine a Named Executive Officers actual bonus, as follows: Financial Goals The Company financial goals for Named Executive Officers under the Executive Plan consist of EBITDA and earnings per share targets, with each criteria accounting for half of the financial goal portion of the annual bonus. The Company deems EBITDA and EPS to be the most appropriate metrics to measure performance and has consistently used these metrics since 2009. As the Compensation Committee generally sets target bonus award opportunities above the median and monitors awards around the median, including the 25th and 75th percentile, among the Companys peer group, the Company financial and strategic/operational goals to achieve such award levels are considered challenging but achievable, representing a superior level of performance. Consistent with maintaining these high standards and subject to achieving the EP Threshold, the Compensation 26

Committee retains the ability to consider whether an adjustment of the financial goals for any year is necessitated by exceptional circumstances, for example, an unanticipated and material downturn in the business cycle that triggers, in response, an increased focus by the Compensation Committee on the Companys performance relative to the industry. This ability is intended to be narrowly and infrequently used and, if applicable, the basis for its use would be detailed in the Companys proxy statement. Performance against the financial goals determined 75% of Named Executive Officers total target annual bonus opportunity. Subject to achieving the EP Threshold, actual bonuses paid to Named Executive Officers for financial performance may range from 0% to 200% of the pre-determined target bonus for this category of performance, as determined by the Compensation Committee. For Named Executive Officers, the Company financial performance portion is based 50% on earnings per share and 50% on EBITDA of the Company. As noted above, once the EP Threshold is achieved, the minimum and maximum annual bonus amount specified in the Executive Plan becomes available for award. The maximum bonus payout for the applicable Company financial performance metric is limited to 200% of target (Maximum) and the Compensation Committee may apply its discretion to reduce such amount to the actual bonus amount for each Named Executive Officer. The table below sets forth for each metric the performance levels for 2011 which would have resulted in 100% bonus payout (Target), the minimum performance level (Minimum) that would have resulted in a 40% bonus pool payout and the Maximum that would have resulted in a 200% target of bonus pool payout. In addition, the table sets forth the approximate mid-points of payout between the Minimum to Target and Target to Maximum and indicates the related required performance level:
Minimum (40%) Mid-point (70%) Target (100%) Mid-point (150%) Maximum (200%)

Earnings per share . . . . . . Company EBITDA . . . . . .

$ 0.99 $820,000,000

$ 1.39 $ 1.80 $ 2.47 $ 3.15 $923,000,000 $1,025,000,000 $1,196,000,000 $1,367,000,000

For the 2011 performance period, adjusted EBITDA (which exceeded the EP Threshold) for purposes of determining annual bonuses was $1,021,000,000. EBITDA was adjusted to exclude the impact of asset sales and changes in foreign exchange rates versus budgeted. Earnings per share from continuing operations for 2011 for bonus purposes was $1.76 which excludes tax benefits related to non-core items partially offset by restructuring, goodwill impairment and other special charges and debt extinguishment charges. Using the metrics described above resulted in a payout eligibility of 98% of target for the Company financial portion of the annual bonus for the 2011 fiscal year for the Named Executive Officers. Strategic/Operational Goals The strategic/operational performance goals for Named Executive Officers under the Executive Plan consists of Big 5 and leadership competency objectives that link individual contributions to execution of our business strategy and major financial and operating goals. Big 5 refers to each executives specific deliverables within the Companys critical performance categories win with talent, execute brilliantly, build great brands, deliver global growth, and drive outstanding results. As part of a structured process that cascades down throughout the Company, these objectives are developed at the beginning of the year, and they integrate and align an executive with the Companys strategic and operational plan. Achievement of Big 5 objectives typically accounts for 80% of the strategic/operational performance evaluation, and achievement of leadership competency objectives typically accounts for 20% of such evaluation. The portion of annual bonus awards attributable to strategic/operational management performance represents 25% of Named Executive Officers total target. Actual bonuses paid to Named Executive Officers for strategic/operational performance may range from 0% to 175% of the pre-determined target amount for this category of performance, as determined by the Compensation Committee. The strategic/operational performance goals are generally established at levels that are reasonably difficult to achieve relative to historical trends and future expectations, and that will generally require significant effort on the part of our Named Executive Officers to achieve. 27

Evaluation Process. In the case of Mr. van Paasschen, the Compensation Committee conducts a formal performance review process each year during which the Compensation Committee evaluates how Mr. van Paasschen performed against the strategic/operational/talent management performance goals established for the prior year. The Compensation Committee also determines the extent to which the Companys financial performance goals were achieved and whether the Company achieved the applicable minimum threshold(s) required to pay awards. With respect to the other Named Executive Officers, Mr. van Paasschen, together with the Chief Human Resources Officer and with oversight and input from the Compensation Committee, conducts a formal performance review process each year to evaluate performance against the officers strategic/operational performance goals for the prior year. The Chief Executive Officer conducts this evaluation through the Performance Management Process (PMP), which results in a PMP rating for each executive. This PMP rating corresponds to a payout range under the Executive Plan determined annually by the Compensation Committee for that rating. As noted, for 2011 the portion of the Executive Plan payouts based on PMP ratings could range from 0% to 175% of target once the target has been adjusted to reflect the Companys performance. Where necessary to preserve the competitive position of the Companys compensation scale, the Chief Executive Officer may recommend a market adjustment to the base amount that is subject to this percentage. At the conclusion of his review, the Chief Executive Officer submits his recommendations to the Compensation Committee for final review and approval. In determining the actual award payable to a Named Executive Officer under the Executive Plan, the Compensation Committee reviews the Chief Executive Officers evaluation and makes a final determination as to how the executive performed against his strategic/operational goals for the year. The Compensation Committee also determines, based on managements report, the extent to which the Companys financial performance goals were achieved and whether the Company achieved the applicable minimum threshold(s) required to pay awards. The Chief Executive Officer also meets in executive session with the Board of Directors to inform the Board of Directors of his performance assessments regarding the Named Executive Officers and the basis for the compensation recommendations he presented to the Compensation Committee. The evaluation of Mr. van Paasschen and the other Named Executive Officers with respect to each executives strategic/operational goals for 2011 is described below. Mr. van Paasschens accomplishments for 2011 show a clear connection between motivated associates, through strong brands, to better financial results: drove record high associate engagement, according to 138,000 responses to an annual survey; reached record high guest satisfaction levels across system of nearly 1,100 hotels; drove growth in relative brand performance to a record high for the Company, based on revenue per available room index measures from over 600 hotels where data is tracked; opened a record number of nearly 21,000 new rooms in the system, including a record number of conversions from other brands; pushed the Companys innovation agenda further in guest relationships and loyalty, including e-folio, 24 hour check-in, and next generation Starwood Preferred Guest; and delivered an increase in adjusted EBITDA of approximately 17% and earnings per share from continuing operations excluding special items of approximately 54%, as compared to fiscal year 2010. Generated significant cash through the sale of three hotels and timeshare and residential closings at the The St. Regis Bal Harbour Resort. In light of Mr. van Paasschens accomplishments and impact on the Company, the Compensation Committee awarded him a payout at 98% of target for the strategic/operational portion of the annual bonus, for a total annual bonus of $2,450,000 for 2011, representing 98% of his overall annual bonus target. 28

Mr. Avrils accomplishments for the 2011 performance year included the following: achieved significant market share increases across all Company brands, including an 2.0% increase over last year in our North American division (fueled by a 2.2% increase in our Westin brand and a 1.4% increase in our Sheraton brand); adjusted for asset sales, grew hotel group EBITDA by 16% and owned hotels EBITDA by 12%, despite the challenging world events in Japan, the Middle East and Europe; furthered strong growth in the Companys hotel worldwide portfolio by opening 81 hotels with approximately 21,000 rooms; and strengthened key relationships with hotel owners, joint venture partners and our Companys personnel to drive revenue, strong owner relations, and retention of management talent throughout our hotels. In light of Mr. Avrils accomplishments in 2011, he received an accomplished objectives PMP performance rating and was awarded a payout at 98% of target for the strategic/operational portion of the annual bonus, for a total annual bonus of $736,715 for 2011, representing 98% of his overall annual bonus target. Mr. Prabhus accomplishments for the 2011 performance year included the following: reduced interest expense through effective use of fixed to variable swaps and debt reduction. Vacation ownership receivable securitization achieved on favorable terms; maintained low effective tax rate with good tax planning on a global basis. Concluded 2004-06 IRS audit with a refund. Ensured structures are in place to continue tax effective hotel sales; sustained tight control of SG&A. Achieved Company financial objectives while maintaining a high level of control and compliance; and information technology organization delivered on significant projects while ensuring a high level of operational stability and enhanced IT security. In light of Mr. Prabhus accomplishments, he received an accomplished objectives PMP performance rating and the Compensation Committee awarded him a payout at 98% of target for the strategic/operational portion of the annual bonus, for a total annual bonus of $736,715 for 2011, representing 98% of his overall annual bonus target. Mr. Siegels individual accomplishments for the 2011 performance year included the following: provided legal support for over 112 new hotel management and franchise transactions, including new deals, changes in ownership and re-engagements worldwide; strategic hotel sales; sale-and-manage-back transactions; corporate transactions including the execution of interest rate swap agreements, the early redemption of our 2012 Senior Notes, corporate restructurings and the Companys current share repurchase program; completed on budget the build-out and relocation of two of the Companys corporate offices, the offices in Scottsdale, Arizona and the Companys new headquarters at One StarPoint in Stamford, Connecticut, and the negotiation of the new lease for corporate offices in Atlanta, Georgia; designed and executed a series of initiatives to protect our most valuable intangible assets and trade secrets, including the roll-out of customized training on confidentiality obligations and the preservation of Company assets; and made significant progress in long-term Global Citizenship goals, including achieving significant reductions in energy and water consumptions at our corporate offices and hotels. 29

In light of Mr. Siegels accomplishments, he received an accomplished objectives PMP performance rating and was awarded a payout at 98% of target for the strategic/operational portion of the annual bonus, for a total annual bonus of $625,720 for 2011, representing 98% of his overall annual bonus target. Mr. Turners accomplishments for the 2011 performance year included the following: managed the Global Development team to execute agreements for 70 new managed hotels (approximately 20,000 rooms) and 42 new franchised hotels (approximately 9,000 rooms), a significant portion of which opened in 2011 and a portion of which will open in the future; achieved 4.2% global net rooms growth driven in large part by the opening of 81 new hotels representing approximately 21,000 rooms; streamlined processes to maximize conversion opportunities as evidenced by 32 conversion deals signed in 2011 (versus 23 in 2010), 17 of which resulted in opened hotels in 2011 (versus 8 in 2010); and completed strategic asset sale transactions generating net proceeds of $290 million. In light of Mr. Turners accomplishments in 2011, he received an accomplished objectives PMP performance rating and was awarded a payout at 98% of target for the strategic/operational portion of the annual bonus, for a total annual bonus of $735,020 for 2011, representing 98% of his overall annual bonus target. Overall, the Compensation Committee paid the Named Executive Officers individual bonuses under the Executive Plan at 98% of target, which reflected the target payout based upon the Companys financial performance goals, and the contribution made by each of the Named Executive Officers under his strategic/ operational goals. Annual awards made to our Named Executive Officers under the Executive Plan with respect to 2011 performance are reflected in the 2011 Summary Compensation Table on page 37 of this proxy statement and described in the accompanying narrative. Long-Term Incentive Compensation. Like the annual incentives described above, long-term incentives are a key part of the Companys executive compensation program. Long-term incentives are strongly tied to returns experienced by stockholders, providing a direct link between the interests of stockholders and the Named Executive Officers. Long-term incentive compensation for our Named Executive Officers consists primarily of equity compensation awards granted annually (in February of each year following the announcement of the Companys earnings for the previous year) under the Companys LTIP and secondarily of the portion of the Executive Plan awards that are deferred in the form of deferred stock awards. Taken together, approximately 60% of total compensation at target award levels is equity-based long-term incentive compensation. The Compensation Committee grants awards under the LTIP to Mr. van Paasschen consisting of a combination of stock options and restricted stock. Mr. van Paasschens employment agreement, which reflects an emphasis on performance and long-term incentives, provides that in the event of strong financial and individual performance, Mr. van Paasschen benefits greatly in the form of long-term incentive compensation that, for the 2011 fiscal year, would not be less than $5,000,000. The Compensation Committee generally grants awards under the LTIP to all other Named Executive Officers consisting of a combination of stock options and restricted stock awards. For the other Named Executive Officers, compensation is also geared towards performance and long-term incentives, but to a lesser degree than Mr. van Paasschen. The Compensation Committee believes an emphasis on long-term equity compensation (through the use of stock options and restricted stock) is particularly appropriate for the leader of a management team committed to the creation of stockholder value. In 2011, for all Named Executive Officers, the Compensation Committee used a grant approach in which the award was articulated as a dollar value. Under this approach, an overall award value, in dollars, was determined for each Named Executive Officer based upon our compensation strategy and competitive market positioning taking into account the Company and individual performance factors for the Named Executive Officers described in the Annual Incentive Compensation section beginning on page 25 of the proxy statement. 30

The Compensation Committee determines the appropriate mix of restricted stock and stock options to be given to our Named Executive Officers. For 2011, the Compensation Committee determined that a split of 75% of restricted stock awards and 25% of stock options was the appropriate balance to maximize cost effectiveness and encourage equity ownership among our management. The number of shares of restricted stock was calculated by dividing 75% of the award value by the fair market value of the Companys stock on the grant date. The number of stock options was determined by dividing the remaining 25% of the award value by the fair market value of the Companys stock on the grant date and multiplying the result by two and one-half, which we believe historically approximates the number of options determined through formal lattice model option valuation. The Named Executive Officers were able to elect a greater portion of options (up to 100% options). Based on the factors set forth above, including the Companys performance and individual performance of each Named Executive Officer in 2011, the Compensation Committee believes that the equity award grants in 2011 were appropriate. The exercise price for each stock option is equal to fair market value of the Companys common stock on the option grant date. See the section entitled Equity Grant Practices beginning on page 35 of this proxy statement for a description of the manner in which we determine fair market value for this purpose. Currently, most stock options vest in 25% increments annually starting with the first anniversary of the date of grant. For stock options granted in 2011, awards granted to associates who are retirement-eligible, as defined in the LTIP, vest in 16 equal quarterly periods. The only Named Executive Officer who currently meets the retirement criteria is Mr. Siegel, the Companys Chief Administrative Officer, General Counsel and Secretary. Unexercised stock options expire eight years from the date of grant, or earlier in the event of termination of employment. Stock options provide compensation only when vested and only if the Companys stock price appreciates and exceeds the exercise price of the option. Therefore, during business downturns, option awards may not represent any economic value to an executive. Named Executive Officers have a mandatory deferral of 25% of their annual long-term incentive compensation awards under the Executive Plan in the form of deferred restricted stock units. The Compensation Committee has the discretion to reduce the percentage of an annual long-term incentive compensation award that must be deferred. The deferred amount (as increased by the percentage described below) is converted into a number of deferred restricted stock units determined by dividing the amount of the deferred award by the average of the high and low fair market value of a share on the date of grant. The deferred restricted stock units are subject to time-based vesting. Upon vesting, shares of the Company common stock equal to the number of vested units are delivered to the Named Executive Officer. As such, the awards combine performance-based compensation with a further link to stockholder interests. First, amounts must be earned based on annual Company financial and strategic/operational performance under the Executive Plan. Second, these already earned amounts are put at risk through a vesting schedule. Vesting occurs in installments over a three-year period. Third, these earned amounts become subject to share price performance. Primarily in consideration of this vesting risk being applied to already earned compensation (but also taking into account the enhanced stockholder alignment that results from being subject to share performance), the amount of the deferred long-term incentive compensation amount is increased by 33%. For awards granted in 2009 or later, vesting will accelerate in the event of death, disability or retirement. Restricted stock and restricted stock unit awards provide some measure of mitigation of business cyclicality while maintaining a direct tie to share price. The Company seeks to enhance the link to stockholder performance by building a strong retention incentive into the equity program. Consequently, for 2011 grants, 100% of restricted stock unit awards vest on the fiscal year end of the year immediately prior to the third anniversary of the date of grant and 100% of restricted stock awards vest on the third anniversary of the date of grant. For restricted stock granted in 2011, awards granted to associates who are retirement-eligible, as defined in the LTIP, vest in twelve equal quarterly periods. This vesting places an executives long-term compensation at risk to share price performance for a significant portion of the business cycle, while encouraging long-term retention of executives. 31

Pursuant to his employment agreement, Mr. van Paasschen has agreed not to sell any shares earned under any stock awards or shares received upon the exercise of an option (except as may be withheld for taxes) without prior consultation with the Board of Directors. See additional detail regarding incentive awards in the section entitled 2011 Grants of Plan-Based Awards beginning on page 38 of this proxy statement. Benefits and Perquisites. perquisites, as described below. Base salary and incentive compensation are supplemented by benefits and

Perquisites. As reflected in the 2011 Summary Compensation Table below, the Company provides certain limited perquisites to select Named Executive Officers when necessary to provide an appropriate compensation package, particularly in connection with enabling the executives and their families to smoothly transition from previous positions which may require relocation. For example, Mr. van Paasschen may use the Company airplane whenever reasonable for both personal and business travel and the Companys other Named Executive Officers may use the airplane whenever air travel is required for business. Depending on availability, family members of executive officers are permitted to accompany our executives on the Company airplane. The cost of that travel is imputed as income to the executive and included in the All Other Compensation column in the 2011 Summary Compensation Table, and the executive is fully responsible for any associated tax liability. The Company also reimburses Named Executive Officers generally for travel expenses and other out-of-pocket costs incurred with respect to attendance by their spouses at one meeting of the Board each year. Retirement Benefits. The Company maintains a tax-qualified retirement savings plan pursuant to Code section 401(k) (the Savings Plan) for a broadly-defined group of eligible employees that includes the Named Executive Officers. Eligible employees may contribute a portion of their eligible compensation to the Savings Plan on a before-tax basis, subject to certain limitations prescribed by the Code. Beginning in 2008, the Company matches 100% of the first 1% of eligible compensation and 50% of the next 6% of eligible compensation that an eligible employee contributes. These matching contributions, as adjusted for related investment returns, become fully vested upon the eligible employees completion of two years of service with the Company. Our Named Executive Officers, in addition to certain other eligible employees, are permitted to make additional deferrals of base pay and regular annual incentive awards under our nonqualified deferred compensation plan. This plan is discussed in further detail under the 2011 Nonqualified Deferred Compensation section beginning on page 42 of this proxy statement. 2. Change in Control Arrangements On March 25, 2005, the Company adopted a policy proscribing certain terms of severance agreements triggered upon a change in control of the Company. Pursuant to the policy, the Company is required to seek stockholder approval of severance agreements with executive officers that provide Benefits (as defined in the policy) in excess of 2.99 times base salary plus such officers most recent annual incentive award. In 2006, the Board reviewed the change in control arrangements then in place with the Named Executive Officers and decided to enter into new change in control agreements with the Named Executive Officers at that time, which included Messrs. Prabhu and Siegel. In connection with the hiring of Mr. Turner in May 2008 as President, Global Development, and the promotion of Mr. Avril in September 2008 to President, Hotel Group, the Company entered into change in control arrangements with these executives that were similar to the arrangements in place for the other Named Executive Officers (other than the Chief Executive Officer). Pursuant to the Companys 2008 policy decision to cease paying tax gross-ups in change in control agreements, the arrangements with Messrs. Turner and Avril do not provide for a tax gross-up if the benefits payable thereunder are subject to the excise tax under Section 280G of the Code. Instead, the benefits provided are reduced to the point that it would be more advantageous to the executive to pay the excise tax rather than reduce benefits further. The Company also included change in control arrangements in Mr. van Paasschens employment agreement. 32

These change in control arrangements are described in more detail in the Potential Payments Upon Termination or Change in Control section beginning on page 43 of this proxy statement. The change in control severance agreements are intended to promote stability and continuity of senior management. The Company believes that the provision of severance pay to these Named Executive Officers upon a change in control aligns their interests with those of stockholders. By making severance pay available, the Company is able to mitigate executive concern over employment termination in the event of a change in control that benefits stockholders. In addition, the acceleration of equity compensation vesting in connection with a change in control provides these Named Executive Officers with protection against equity forfeiture due to termination and ample incentive to achieve Company goals, including facilitating a sale of the Company at the highest possible price per share, which would benefit both stockholders and executives. In addition, the Company acknowledges that seeking a new senior position is a long and time-consuming process. Lastly, each severance agreement permits the executive to maintain certain benefits for a period of two years following termination and to receive outplacement services. The aggregate effect of our change in control provisions is intended to focus executives on maximizing value to stockholders. In addition, should a change in control occur, benefits will be paid only after a double trigger event as described in the Potential Payments Upon Termination or Change in Control section beginning on page 43 of this proxy statement. The Company believes benefit levels have been set to be competitive with peer group practices. 3. Additional Severance Arrangements In 2007, the Company entered into a letter agreement with Mr. Prabhu clarifying that, pursuant to his employment agreement dated November 13, 2003, his severance included the acceleration of 50% of unvested stock options in the event that his employment was terminated without cause by us or by him for good reason. The clarification formally documented Mr. Prabhus existing severance arrangements as part of his employment with the Company. This additional severance arrangement is described in more detail beginning on page 43 of this proxy statement under the heading Potential Payments Upon Termination or Change in Control. 4. Potential Impact on Compensation for Executive Misconduct If the Board of Directors determines that an executive officer has engaged in misconduct, the Board of Directors may take a range of actions to remedy the misconduct. In 2011 the Compensation Committee adopted an incentive recoupment policy that allows the Company to recover any annual incentive payment or long-term incentive award to any individual executive at the senior vice president level or above, including our Named Executive Officers, if the Board of Directors determines that (i) the Company is required to prepare an accounting financial restatement due to the material non-compliance of the Company with any financial reporting requirement under applicable securities laws and the compensation payment previously made was based on erroneous data; or (ii) the Board of Directors determines that the executive engaged in intentional misconduct that caused or substantially caused the need for a financial restatement and a lower payment would have been made to the executive based upon the restated financial results. In such circumstances the Company will, to the extent practicable, seek to recover from the individual executive the amount by which the individual executives payments for the relevant period exceeded the lower payment that would have been made based on the restated financial results. In addition, the Companys LTIP provides that the Compensation Committee may cancel, suspend, withhold or otherwise restrict or limit any long-term incentive award to any participant under the LTIP, including executive officers, if the Compensation Committee determines that such participant engaged in misconduct.

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C. Background Information on the Executive Compensation Program 1. Use of Peer Data In determining competitive compensation levels, the Compensation Committee reviews data prepared by Meridian, its executive compensation consultants, that reflect compensation practices for executives in direct hotel and property management companies. Due to the to the limited number of direct competitors of similar scale, a robust peer community requires expanding beyond these organizations to companies in related industries with a strong brand focus, and/or with similar talent needs, e.g., hospitality/entertainment industries, branddependent companies, companies of similar size, scale and complexity. To assess the appropriateness of including the company in Starwoods peer group, the following eight screening criteria was used: (i) revenue size with stronger consideration given to companies within a range of one-third to three times Starwoods revenue (given Starwoods unique role in managing property revenues beyond those captured in its financial statements, a couple larger revenue companies were included); (ii) market capitalization with stronger consideration given to companies within a range of one-third to three times Starwoods market capitalization; (iii) EBITDA with stronger consideration given to companies within a range of one-third to three times Starwoods EBITDA; (iv) financial performance with stronger consideration given to companies with financial results comparable to Starwood in terms of 1-year, 3-year and 5-year annualized revenue growth, operating income and total shareholder return; (v) direct competitors; (vi) related industries, e.g. cruise lines, entertainment; (vii) talent competitors; and (viii) global complexity with stronger consideration given to companies with global scope, where greater than 25% of revenues are generated outside U.S. The Compensation Committee along with Company reviews the peer group bi-annually to ensure it represents a relevant market perspective. The Compensation Committee utilizes the peer group for a broad set of comparative purposes, including levels of total compensation for executives and directors, pay mix, incentive plan design and equity usage and other terms of employment. The Company believes that by conducting the competitive analysis using a broad peer group, which includes companies outside the hospitality industry, it is able to attract and retain talented executives from outside the hospitality industry. The Companys experience has proven that key executives with diversified experience prove to be major contributors to its continued growth and success. The peer group approved by the Compensation Committee for 2011 is set out below. We expect that it will be necessary to update the list periodically. Avon Products, Inc. Carnival Corporation and Carnival plc* The Este Lauder Companies Inc. H.J. Heinz Company Host Hotels & Resorts, Inc. InterContinental Hotels Group PLC Kellogg Company Limited Brands, Inc. Marriott International, Inc. MGM Resorts International NIKE, Inc. Ralph Lauren Corporation Royal Caribbean Cruises Ltd. Simon Property Group, Inc. Starbucks Corporation V.F. Corporation The Walt Disney Company Wyndham Worldwide Corporation Yum! Brands, Inc.

* Carnival Corporation and Carnival plc are public companies with separate listings and shareholders but operate as if they are a single economic enterprise. In comparison to the peer group used in 2010, H.J Heinz Company, InterContinental Hotels Group PLC, Ralph Lauren Corporation, Royal Caribbean Cruises Ltd., and V.F. Corporation were added to the 2011 peer group. The following companies from the 2010 peer group were deleted: Coach, Inc., Colgate-Palmolive Company, FedEx Corporation, McDonalds Corporation, Staples, Inc. and Williams-Sonoma, Inc. In performing its competitive analysis for 2011, the Compensation Committee reviewed: base pay; target and actual total cash compensation, consisting of salary, target and actual annual incentive awards in prior years; 34

 direct total compensation consisting of salary, target and actual annual incentive awards, and the value of option and restricted stock/restricted stock unit awards; and retirement benefits. When establishing target compensation levels for 2011, the Compensation Committee reviewed peer group data on payments to named executive officers as reported in proxy statements available as of February 2011 as provided by Meridian.

2. Tax Considerations Section 162(m) generally disallows a federal income tax deduction to public companies for incentive compensation in excess of $1,000,000 paid to the chief executive officer and to each of the three other most highly compensated executive officers (other than the chief financial officer). Qualified performance-based compensation is not subject to the deduction limit if certain requirements are met. The Company believes that compensation paid under the Executive Plan for 2011 meets these requirements and is generally fully deductible for federal income tax purposes. In addition, for federal income tax purposes, compensation earned under option grants is also fully deductible for federal tax purposes. In designing the Companys compensation programs, the Compensation Committee carefully considers the effect of this provision together with other factors relevant to its business needs. In certain circumstances the Company may approve compensation that does not meet these requirements in order to advance the long-term interests of its stockholders. In February 2010, the Compensation Committee approved an increase in Mr. van Paasschens base salary from $1,000,000 to $1,250,000. For the 2011 and 2012 fiscal years, the Compensation Committee determined that Mr. van Paasschens base salary should remain $1,250,000. The Company has historically taken, and intends to continue taking, reasonably practicable steps to minimize the impact of the loss of deductibility under Section 162(m).

3. Share Ownership Guidelines The Company has adopted share ownership guidelines for our executive officers, including the Named Executive Officers. Pursuant to the guidelines, the Named Executive Officers, including the Chief Executive Officer, are required to hold that number of shares having a market value equal to or greater than a multiple of each executives base salary. For the Chief Executive Officer, the multiple was increased from five times base salary to six times base salary in 2011 to be more in line with market practice, and for the other Named Executive Officers, the multiple is four times base salary. A retention requirement of 35% is applied to restricted shares upon vesting (net shares after tax withholding) and shares obtained from option exercises until the executive meets the target, or if an executive falls out of compliance shares owned, stock equivalents (vested/unvested restricted stock units), and unvested restricted stock (pre-tax) count towards meeting ownership targets. However, stock options do not count towards meeting the target. Officers have five years from the date of hire or, if later, the date they first become subject to the policy, to meet the ownership requirements. All Named Executive Officers are in compliance with share ownership guidelines.

4. Equity Grant Practices Determination of Option Exercise Prices. The Compensation Committee grants stock options with an exercise price equal to the fair market value of a share on the grant date. Under the LTIP, the fair market value of our common stock on a particular date is determined as the average of the high and low trading prices of a share on the NYSE on that date. 35

Timing of Equity Grants. The Compensation Committee generally makes annual equity compensation grants to Named Executive Officers following its first regularly scheduled meeting that occurs after the release of the Companys earnings for the prior year (typically the grant date is February 28th or the last business day prior to that date). The timing of this meeting is determined based on factors unrelated to the pricing of equity grants. The Compensation Committee (or its delegates), however, has discretion under unusual circumstances to award grants at other times in the year. The Compensation Committee approves equity compensation awards to a newly hired executive officer at the time that the Board of Directors meets to approve the executives employment package. Generally, the date on which the Board of Directors approves the employment package becomes the grant date of the newly-hired executive officers equity compensation awards. However, if the Company and the new executive officer enter into an employment agreement regarding the employment relationship, the Company requires the executive officer to sign his employment agreement shortly following the date of Board approval of the employment package; the later of the date on which the executive officer signs his employment agreement or the date that the executive officer begins employment becomes the grant date of these equity compensation awards. III. COMPENSATION COMMITTEE REPORT The Compensation and Option Committee of the Board of Directors of Starwood Hotels & Resorts Worldwide, Inc. has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Companys Proxy Statement for the 2012 Annual Meeting of Stockholders and incorporated by reference into the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2011. COMPENSATION AND OPTION COMMITTEE Adam M. Aron, Chairman Thomas E. Clarke Clayton C. Daley, Jr. Thomas O. Ryder Kneeland C. Youngblood

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IV. 2011 SUMMARY COMPENSATION TABLE The table below sets forth a summary of the compensation received by the Named Executive Officers for the past three years:
Name and principal position (listed alphabetically following the Chief Executive Officer) Frits van Paasschen . . . . . . . . Chief Executive Officer and President Matthew E. Avril . . . . . . . . . . President, Hotel Group Vasant M. Prabhu . . . . . . . . . Vice Chairman and Chief Financial Officer Kenneth S. Siegel . . . . . . . . . . Chief Administrative Officer, General Counsel and Secretary Simon M. Turner . . . . . . . . . . President, Global Development Stock awards ($)(2) 3,997,530 3,956,262 150,125 1,574,435 1,550,838 44,269 2,174,427 2,312,035 1,298,096 1,600,725 1,468,148 46,166 1,314,216 693,824 34,369 Option awards ($)(3) 1,125,465 1,210,395 5,151,077 450,186 484,167 1,545,324 630,256 726,243 1,287,769 461,442 459,953 1,957,411 1,125,465 1,888,226 2,575,538 Non-equity incentive plan compensation ($)(4) 2,450,000 3,000,000 1,700,000 736,715 902,100 616,250 736,715 902,100 544,559 625,720 766,188 522,784 735,020 778,500 531,250 All other compensation ($)(5) 32,863 19,927 60,432 10,557 9,901 25,654 11,198 9,800 27,085 11,981 9,800 26,914 9,800 9,800 27,910

Year 2011 2010 2009 2011 2010 2009 2011 2010 2009 2011 2010 2009 2011 2010 2009

Salary ($)(1) 1,250,000 1,208,333 1,000,000 751,750 747,292 725,000 751,750 733,235 640,658 638,490 634,582 615,039 733,142 644,792 625,000

Bonus ($) 800,000(6) 207,191(6)

Total ($) 8,855,858 9,394,917 8,861,634 3,523,643 3,694,298 2,956,497 4,304,346 4,683,413 4,005,358 3,338,358 3,338,671 3,168,314 3,917,643 4,015,142 3,794,067

(1) Represents salary actually earned during the fiscal year listed. (2) Represents the grant date fair value for restricted stock and restricted stock unit awards granted during the year computed in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, or ASC 718. For additional information, refer to Note 22 of the Companys financial statements filed with the SEC as part of the Form 10-K for the year ended December 31, 2011. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Named Executive Officers. See the 2011 Grants of Plan-Based Awards Table on page 38 of this proxy statement for information on awards granted in 2011. (3) Represents the grant date fair value for stock option awards granted during the year computed in accordance with ASC 718. For additional information, refer to Note 22 of the Companys financial statements filed with the SEC as part of the Form 10-K for the year ended December 31, 2011. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Named Executive Officers. See the 2011 Grants of Plan-Based Awards Table on page 38 of this proxy statement for information on awards granted in 2011. (4) Represents cash awards paid in March 2012, 2011 and 2010 with respect to performance in 2011, 2010 and 2009, respectively, determined under the Executive Plan, as discussed under the section entitled Annual Incentive Compensation beginning on page 25 of this proxy statement. Cash incentive awards include the following amounts that were converted into restricted stock units and such number of restricted stock units was increased by 33% in accordance with the Executive Plan:
Name 2011 Amount Deferred 2010 Amount Deferred 2009 Amount Deferred

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

612,500 184,179 184,179 156,430 183,755

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

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

(A) This amount is an aggregate of cash incentive awards deferred in respect of the 2009 fiscal year, which includes $200,000 deferred from a special one-time cash bonus enhancement awarded by the Compensation Committee. 37

(B) This amount is an aggregate of cash incentive awards deferred in respect of the 2009 fiscal year, which includes $51,798 deferred from a special one-time cash bonus enhancement awarded by the Compensation Committee. (5) The amounts reported in the All Other Compensation for 2011 include Company contributions to the Companys Savings Plan, life insurance premiums for Mr. van Paasschen and tax gross-up payments (including a payment to Mr. van Paasschen in the amount of $18,738). Each officers perquisites and personal benefits for 2011 are less than $10,000, and no other item reported in this column for 2011 has a value that exceeds $10,000. (6) Represents special one-time cash bonus enhancements awarded by the Compensation Committee in recognition of 2009 accomplishments. V. 2011 GRANTS OF PLAN-BASED AWARDS The table below sets forth a summary of the grants of plan-based incentive awards to the Named Executive Officers made during 2011:
Grant date (or year with Compensation respect to Committee non-equity Approval incentive plan date award)(b)(1) (c)(1) All Other Stock Awards: Number of Shares of Stock or Units (#)(g) All Other Option Awards: Exercise Grant Date Number of or Base Fair Value Securities Price of of Stock Underlying Option and Option Options Awards Awards (#)(h)(3) ($/Sh)(i)(4) ($)(j)(5)

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

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

van Paasschen . . . . . .

2/28/2011 2/28/2011 3/01/2011 2011 2/28/2011 2/28/2011 3/01/2011 2011 2/28/2011 2/28/2011 3/01/2011 2011 2/28/2011 2/28/2011 3/01/2011 2011 2/28/2011 2/28/2011 3/01/2011 2011

2/17/2011 2/17/2011 (6) 1,000,000 2/17/2011 2/17/2011 (6) 300,700 2/17/2011 2/17/2011 (6) 300,700 2/17/2011 2/17/2011 (6) 255,396 2/17/2011 2/17/2011 (6) 300,008 750,020 1,500,040 638,490 1,276,980 751,750 1,503,500 751,750 1,503,500 2,500,000 5,000,000

50,995 61,195(7) 16,759(6) 20,398 24,478(7) 5,039(6) 28,557 34,269(7) 5,039(6) 20,908 25,090(7) 4,280(6) 50,995 20,398(7) 4,349(6)

61.28

1,125,465 3,750,030 997,496 450,186 1,500,012 299,921 630,256 2,100,004 299,921 461,442 1,537,515 254,746 1,125,465 1,249,989 258,852

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

61.28

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

61.28

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

61.28

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

61.28

(1) Grant date differs from Compensation Committee approval date in accordance with the procedure outlined in the section entitled Equity Grant Practices beginning on page 35 of this proxy statement. (2) Represents the potential values of the awards granted to the Named Executive Officers under the Executive Plan if the threshold, target and maximum goals are satisfied for all applicable performance measures. See detailed discussion of these awards in the section entitled Narrative Disclosure To Summary Compensation Table and Grants of Plan-Based Awards Section beginning on page 39 of this proxy statement. (3) The options generally vest in equal installments on the first, second, third and fourth anniversary of their grant. As of September 4, 2010, Mr. Siegels awards vest quarterly in equal installments over four years due to his retirement eligible status, as defined in the LTIP. As of December 15, 2014, Mr. Prabhus awards will vest in quarterly due to his retirement eligible status, as defined in the LTIP. (4) The exercise price was determined by using the average of the high and low price of shares on the grant date. 38

(5) Represents the fair value of the awards disclosed in columns (g) and (h) on their respective grant dates. For restricted stock and restricted stock units, fair value is calculated in accordance with ASC 718 using the average of the high and low price of shares on the grant date. For stock options, fair value is calculated in accordance with ASC 718 using a lattice valuation model. For additional information, refer to Note 22 of the Companys financial statements filed with the SEC as part of the Form 10-K for the year ended December 31, 2011. There can be no assurance that these amounts will correspond to the actual value that will be recognized by the Named Executive Officers. (6) On March 1, 2011, in accordance with the Executive Plan, 25% of Messrs. van Paasschen, Avril, Prabhu, Siegel and Turners annual bonus with respect to 2010 performance was converted into restricted stock units and the number of units was increased by 33%. The amount included in Stock awards column in the 2011 Summary Compensation Table only includes the 33% increase, as the deferral of the bonus amount is disclosed separately. These restricted stock units vest in equal installments on the first, second and third fiscal year-ends following the date of grant, and vested units are distributed on the earlier of (i) the third fiscal year-end or (ii) a termination of employment. Dividends are paid to the Named Executive Officers in amounts equal to those paid to holders of shares. No separate Compensation Committee approval was required for award of these deferred stock units, which are provided by plan terms. (7) This award vests on the third anniversary of the grant date, except with respect to Mr. Siegel whose awards as of September 4, 2010, vest quarterly in equal installments over three years due to his retirement-eligible status, as defined in the LTIP. Dividends are accrued and paid upon vesting. VI. NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS SECTION We describe below the Executive Plan awards granted to our Named Executive Officers in 2011. These awards are reflected in both the 2011 Summary Compensation Table beginning on page 37 of the proxy statement and the 2011 Grants of Plan-Based Awards section beginning on page 38 of the proxy statement. Each of the Named Executive Officers received an award in March 2012 relating to his 2011 performance. The table below sets forth for each Named Executive Officer his salary, target award as both a percentage of salary and a dollar amount, actual award, the portion of the award that is deferred into restricted stock units and the related 33% increase in his restricted stock units.
Award Target Relative to Salary (%) Increased Award Deferred into Restricted Stock Units ($)

Name

Salary ($)

Award Target ($)

Actual Award ($)

Award Deferred into Restricted Stock Units ($)

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

1,250,000 751,750 751,750 638,490 750,020

200% 2,500,000 100% 751,750 100% 751,750 100% 638,490 100% 750,020

2,450,000 736,715 736,715 625,720 735,020

612,500 184,179 184,179 156,430 183,755

814,625 244,958 244,958 208,052 244,394

The following factors contributed to the Compensation Committees determination of the 2011 Executive Plan awards for the Named Executive Officers: the Companys 2011 financial performance as measured by EBIDTA and earnings per share, the strategic and operational performance goals for each Named Executive Officer that link individual contributions to execution of our business strategy and major financial and operating goals, and the bonuses paid to executive officers performing comparable functions in peer companies as further described in the Annual Incentive Compensation assessment beginning on page 25 of the proxy statement. 39

VII.

OUTSTANDING EQUITY AWARDS AT 2011 FISCAL YEAR-END

The following table provides information on the current holdings of stock options and stock awards by the Named Executive Officers as of December 31, 2011. This table includes unexercised and unvested stock options, unvested restricted stock and unvested restricted stock units. Each equity grant is shown separately for each Named Executive Officer. The market value of the stock awards is based on the closing price of a share on December 30, 2011, the last business day of the fiscal year, which was $47.97.
Option awards Number of Securities Underlying Unexercised OptionsExercisable (#)(1)(2) Number of Securities Underlying Unexercised Options Unexercisable (#)(1)(2) Stock awards Market value of Shares or Units of Stock That Have Not Vested ($)

Name (listed alphabetically following the Chief Executive Officer)

Grant Date

Option Exercise Price ($)(1)

Option Expiration Date

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

van Paasschen . . . . . . . . . . . . . . .

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

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

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

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

9/24/2007 2/28/2008 2/27/2009 2/26/2010 2/28/2011 2/26/2010 3/01/2010 2/28/2011 3/01/2011 2/28/2007 2/28/2008 2/27/2009 2/26/2010 2/28/2011 2/28/2008 2/26/2010 3/01/2010 2/28/2011 3/01/2011 2/07/2006 2/28/2007 2/28/2008 2/27/2009 2/26/2010 2/28/2011 2/28/2008 2/27/2009 2/26/2010 3/01/2010 2/28/2011 3/01/2011 2/28/2007 2/28/2008 2/27/2009 2/26/2010 2/28/2011 2/28/2008 2/26/2010 3/01/2010 2/28/2011 3/01/2011 5/07/2008 2/27/2009 2/26/2010 2/28/2011 2/26/2010 3/01/2010 2/28/2011 3/01/2011

63,895 77,153 348,968 20,433

25,717 548,968 61,298 50,995

58.69 48.61 11.39 38.24 61.28

9/24/2015 2/28/2016 2/27/2017 2/26/2018 2/28/2019 98,078(3) 7,156(4) 61,195(3) 11,172(4) 4,704,802 343,273 2,935,524 535,921

20,723

5,555 164,690 24,519 20,398

65.15 48.61 11.39 38.24 61.28

2/28/2015 2/28/2016 2/27/2017 2/26/2018 2/28/2019 5,555(3) 39,231(3) 1,764(4) 24,478(3) 3,359(4) 266,473 1,881,911 84,619 1,174,210 161,131

79,913 34,538 59,022 12,260

19,674 137,242 36,779 28,557

48.80 65.15 48.61 11.39 38.24 61.28

2/07/2014 2/28/2015 2/28/2016 2/27/2017 2/26/2018 2/28/2019 6,558(3) 109,794(3) 58,847(3) 2,152(4) 34,269(3) 3,359(4) 314,587 5,266,818 2,822,891 103,231 1,643,884 161,131

34,538 28,933 104,304 13,589 3,921

1,928 130,380 17,469 16,987

65.15 48.61 11.39 38.24 61.28

2/28/2015 2/28/2016 2/27/2017 2/26/2018 2/28/2019 1,928(3) 15,528(3) 1,496(4) 18,817(3) 2,853(4) 92,486 744,878 71,763 902,651 136,858

33,806 118,857 31,876

33,806 274,484 95,625 50,995

53.25 11.39 38.24 61.28

5/07/2016 2/27/2017 2/26/2018 2/28/2019 17,000(3) 1,520(4) 20,398(3) 2,899(4) 815,490 72,914 978,492 139,065

(1) In connection with the sale of 33 hotels to Host Hotels & Resorts, Inc. (or Host), Company stockholders received 0.6122 Host shares and $0.503 in cash for each of their Class B Shares. Holders of Company 40

employee stock options and restricted stock did not receive this consideration while the market price of shares was reduced to reflect the payment of this consideration directly to the holders of the Class B Shares. In order to preserve the value of the Companys options immediately before and after the Host transaction, the Company adjusted its stock options to reduce the strike price and increase the number of stock options using the intrinsic value method based on the share price immediately before and after the transaction. The option information provided reflects the number of options granted and the option exercise prices after these adjustments were made. As of December 31, 2011, this impacts Mr. Prabhus holdings only. (2) These options generally vest in equal installments on the first, second, third and fourth anniversary of their grant. As of September 4, 2010, Mr. Siegels 2008, 2009, 2010 and 2011 awards vest quarterly in equal installments over four years due to his retirement-eligible status, as defined in the LTIP. As of December 15, 2014, Mr. Prabhus awards will vest quarterly due to his retirement-eligible status, as defined in the LTIP. (3) For awards granted in 2008, the restricted stock or restricted stock units generally vest 75% on the third anniversary and 25% on the fourth anniversary of the date of grant. For awards granted in 2009, 2010 and 2011, the restricted stock or restricted stock units generally vest 100% on the third anniversary of their grant. As of September 4, 2010, Mr. Siegels 2008, 2010 and 2011 awards vest quarterly in equal installments due to his retirement eligible status, as defined in the LTIP. (4) These restricted stock units vest in equal installments on the first, second and third fiscal year-ends following the date of grant, and are distributed on the earlier of: (a) the third fiscal year-end or (b) a termination of employment. Shares underlying the restricted stock units that vested as of December 31, 2011, but which shares will not be distributed to the Named Executive Officers until either December 31, 2012 or 2013, are non-forfeitable with respect to each Named Executive Officer and will be included in the 2011 Option Exercises and Stock Vested table for the year in which they are settled. VIII. 2011 OPTION EXERCISES AND STOCK VESTED

The following table discloses, for each Named Executive Officer, (i) option awards representing shares acquired pursuant to exercise of stock options during 2011; and (ii) stock awards representing (A) shares of restricted stock that vested in 2011 and (B) shares acquired in 2011 on account of vesting of restricted stock units. The table also discloses the value realized by the Named Executive Officer for each such event, calculated prior to the deduction of any applicable withholding taxes and brokerage commissions.
Option Awards Number of Shares Acquired on Value Realized Exercise on Exercise (#) ($) Stock Awards Number of Shares Acquired on Value Realized Vesting on Vesting (#) ($)

Name

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

96,074 108,621 18,385

4,379,200 4,083,261 925,041

88,662 84,088 55,111 43,852 12,984

4,017,527 4,168,058 3,143,017 2,186,718 628,296

41

IX. 2011 NONQUALIFIED DEFERRED COMPENSATION The Companys Deferred Compensation Plan (the Plan) permits eligible executives, including our Named Executive Officers, to defer up to 100% of their Executive Plan cash bonus award, as applicable, and up to 75% of their base salary for a calendar year. The Company does not contribute to the Plan. No Named Executive Officer made deferrals under the Plan in 2011.
Executive Contributions in Last FY ($) Registrant Contributions in Last FY ($) Aggregate Earnings in Last FY ($) Aggregate Withdrawals/ Distributions ($) Aggregate Balance at Last FYE ($)

Name

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

47,353

632,729(1)

(1) $500,000 of this amount previously was reported as salary in the Summary Compensation Table. Deferral elections are made in December for base salary paid in pay periods beginning in the following calendar year. Deferral elections are made in June for annual incentive awards that are earned for performance in that calendar year but paid in March of the following year. Deferral elections are irrevocable. Elections as to the time and form of payment are made at the same time as the corresponding deferral election. A participant may elect to receive payment on February 1 of a calendar year while still employed or either 6 or 12 months following employment termination. Payment will be made immediately in the event a participant terminates employment on account of death, disability or on account of certain changes in control. A participant may elect to receive payment of his account balance in either a lump sum or in annual installments, so long as the account balance exceeds $50,000; otherwise payment will be made in a lump sum. If a participant elects an in-service distribution, the participant may change the scheduled distribution date or form of payment so long as the change is made at least 12 months in advance of the scheduled distribution date. Any such change must provide that distribution will commence at least five years later than the scheduled distribution date. If a participant elects to receive a distribution upon employment termination, that election and the corresponding form of payment election are irrevocable. Withdrawals for hardship that result from an unforeseeable emergency are available, but no other unscheduled withdrawals are permitted. The Plan uses the investment funds listed below as potential indices for calculating investment returns on a participants Plan account balance. The deferrals the participant directs for investment into these funds are adjusted based on a deemed investment in the applicable funds. The participant does not actually own the investments that he selects. The Company may, but is not required to, make identical investments pursuant to a variable universal life insurance product. When it does, participants have no direct interest in this life insurance.
Name of Investment Fund 1-Year Annualized Rate of Return (as of 2/28/11)

NVIT Money Market Class V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PIMCO VIT Total Return Admin Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fidelity VIP High Income Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NVIT Inv Dest Moderate Class 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T. Rowe Price Equity Income Class II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dreyfus Stock Index Initial Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fidelity VIP II Contrafund Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NVIT Mid Cap Index Class I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dreyfus IP Small Cap Stock Index Service Shares . . . . . . . . . . . . . . . . . . . . . . . . NVIT International Index Class 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Invesco V.I. International Growth Series I Shares . . . . . . . . . . . . . . . . . . . . . . . . . 42

0.25% 5.21% 5.78% 2.11% .99% 4.61% 1.47% 1.47% 4.41% -8.44% -1.32%

X. POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL The Company provides certain benefits to our Named Executive Officers in the event of employment termination, both in connection with a change in control and otherwise. These benefits are in addition to benefits available generally to salaried employees, such as distributions under the Companys Savings Plan, disability insurance benefits and life insurance benefits. These benefits are described below. A. Termination Before Change in Control: Involuntary Other than for Cause, Voluntary for Good Reason, Death or Disability

Pursuant to Mr. van Paasschens employment agreement, if Mr. van Paasschens employment is terminated by the Company other than for cause or by Mr. van Paasschen for good reason, the Company will pay Mr. van Paasschen as a severance benefit (i) any accrued benefits; (ii) two times the sum of his base salary and target annual bonus and (iii) a pro rated target bonus for the year of termination. None of the other equity awards granted to Mr. van Paasschen would be accelerated. If Mr. van Paasschens employment were terminated because of his death or permanent disability, Mr. van Paasschen (or his estate) would be entitled to receive, in addition to any accrued benefits, a pro-rated target bonus for the year of termination pursuant to the terms of the underlying award agreements, and all of his equity awards would accelerate and vest. Pursuant to Mr. Avrils employment agreement, if Mr. Avrils employment is terminated by the Company for any reason other than for cause, Mr. Avril will receive severance benefits of twelve months of base salary and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. In addition, Mr. Avril will also be entitled to acceleration of all of his restricted stock and options that were granted prior to August 19, 2008, but no acceleration for equity awards granted on or after August 19, 2008. If Mr. Avrils employment were terminated because of his death or permanent disability, pursuant to the terms of the underlying award agreements, all of his equity awards would accelerate and vest. Pursuant to his employment agreement, if Mr. Prabhus employment is terminated by the Company for any reason other than for cause or by Mr. Prabhu for good reason, Mr. Prabhu will receive severance benefits of twelve months of base salary and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. In addition, the Company will accelerate the vesting of 50% of Mr. Prabhus unvested restricted stock and options. The Company entered into a letter agreement on August 14, 2007 confirming the terms of the agreement as it relates to the acceleration of 50% of Mr. Prabhus unvested restricted stock and options if his employment is terminated by the Company without cause or is terminated by him voluntarily with good reason. If Mr. Prabhus employment were terminated because of his death or permanent disability, pursuant to the terms of the underlying award agreements, all of his equity awards would accelerate and vest. Pursuant to Mr. Siegels employment agreement, in the event Mr. Siegels employment is terminated by the Company for any reason other than for cause, Mr. Siegel will receive severance benefits of twelve months of base salary plus 100% of his target annual incentive and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. If Mr. Siegels employment were terminated because of his death or permanent disability, pursuant to the terms of the underlying award agreements, all of his equity awards would accelerate and vest. Pursuant to Mr. Turners employment agreement, if Mr. Turners employment is terminated by the Company for any reason other than for cause or by Mr. Turner for good reason, Mr. Turner will receive severance benefits of twelve months base salary and the Company will continue to provide medical benefits coverage for up to twelve months after the date of termination. The receipt of such severance benefits is subject to and conditioned upon Mr. Turners compliance with his agreement not to engage in competitive activities or solicit employees for a period of twelve months after the date of termination. If Mr. Turners employment we terminated because of his death or permanent disability, pursuant to the term of the underlying award agreements, all of his equity awards would accelerate and vest. 43

B. Termination in the Event of Change in Control The Company has entered into severance agreements with each of Messrs. Prabhu and Siegel. Each severance agreement provides for a term of three years, with automatic one-year extensions until either the executive or the Company notifies the other that such party does not wish to extend the agreement. If a Change in Control (as described below) occurs, the agreement will continue for at least 24 months following the date of such Change in Control. Each agreement provides that if, following a Change in Control, the executives employment is terminated without Cause (as defined in the agreement) or with Good Reason (as defined in the agreement), the executive would receive, in addition to any accrued salary or normal post-termination compensation and benefits in accordance with the Companys retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the date of termination, the following: two times the sum of his base salary plus the average of the annual bonuses earned by the executive in the three fiscal years ending immediately prior to the fiscal year in which the termination occurs or, if higher, the annual bonus earned in the immediately prior year; continued medical benefits for two years, reduced to the extent benefits of the same type are received by or made available to the executive from another employer; a lump sum amount, in cash, equal to the sum of (A) any unpaid incentive compensation which had been allocated or awarded to the executive for any measuring period preceding termination under any annual or long-term incentive plan and which, as of the date of termination, is contingent only upon the continued employment of the executive until a subsequent date, and (B) the aggregate value of all contingent incentive compensation awards allocated or awarded to the executive for all then uncompleted periods under any such plan that the executive would have earned on the last day of the performance award period, assuming the achievement, at the target level, of the individual and corporate performance goals established with respect to such award; immediate vesting of stock options, restricted stock and restricted stock units held by the executive under any stock option or incentive plan maintained by the Company; outplacement services suitable to the executives position for a period of two years or, if earlier, until the first acceptance by the executive of an offer of employment, the cost of which will not exceed 20% of the executives base salary; a lump sum payment of the executives deferred compensation paid in accordance with Section 409A distribution rules; and immediate vesting of all unvested 401(k) contributions in the executives 401(k) account or payment by the Company of an amount equal to any such unvested amounts that are forfeited by reason of the executives termination of employment. In addition, to the extent that any executive becomes subject to the golden parachute excise tax imposed under Section 4999 of the Code, the executive would receive a gross-up payment in an amount sufficient to offset the effects of such excise tax. Under the severance agreements, a Change in Control is deemed to occur upon any of the following events: any person becomes the beneficial owner of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing 25% or more of the combined voting power of the Company; 44

 a majority of the directors cease to serve on the Companys Board in connection with a successful hostile proxy contest;
O

a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than: a merger or consolidation in which securities of the Company would represent at least 70% of the voting power of the surviving entity; or

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

C. Estimated Payments Upon Termination The tables below reflect the estimated amounts payable to the Named Executive Officers in the event their employment with the Company had terminated as of December 30, 2011 under various circumstances, and includes amounts earned through that date. The actual amounts that would become payable in the event of an actual employment termination can only be determined at the time of such termination. 45

1.

Involuntary Termination without Cause or Voluntary Termination for Good Reason

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

Name

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

10,000,000 751,750 751,750 1,276,980 750,020

10,070 10,070 9,524 9,524

266,473 5,443,396

2,689,526

10,000,000 1,028,293 8,894,742 1,286,504 759,544

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

Name

Total ($)

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

2,500,000 751,750 751,750 1,276,980 750,020

10,070 10,070 9,524 9,524

9,474,075 3,818,172 10,599,595 2,160,665 2,221,443

33,646,640 6,263,876 5,498,393 8,888,264 15,631,603

45,620,715 10,843,868 16,859,808 12,335,433 18,612,590

(1) Includes values for holdings of restricted stock and restricted stock units. Includes vested but deferred restricted stock units in accordance with the Executive Plan. (2) Includes vested stock options. Vested stock options could be subject to loss by the Named Executive Officers in the event of a termination for cause and certain other events but could not in the event of termination on account of death or disability. (3) Excludes $632,729 of Mr. van Paasschens nonqualified deferred compensation that is payable upon death, disability or certain changes in control as discussed in the 2011 Nonqualified Deferred Compensation section beginning on page 42.

46

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

Name

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

12,500,000 4,059,450 4,059,450 3,447,846 3,807,060

4,848 27,390 27,390 25,904 25,904

9,474,075 3,818,172 10,599,595 2,160,665 2,221,443

33,646,640 6,263,876 5,498,393 8,888,264 15,631,603

150,350 150,350 127,698 150,004

55,625,563 14,319,238 20,335,178 14,650,377 21,836,014

(1) Includes values for holdings of restricted stock and restricted stock units. Includes vested but deferred restricted stock units in accordance with the Executive Plan. (2) Includes vested stock options. Vested stock options could be subject to loss by the Named Executive Officers in the event of a termination for cause and certain other events but could not in the event of an involuntary termination without cause following a change in control or a voluntary termination with good reason following a change in control. (3) If the amount of severance pay and other benefits payable on change in control is greater than three times certain base period taxable compensation for Mr. van Paasschen, a 20% excise tax is imposed on the excess amount of such severance pay and other benefits. Excludes $632,729 of Mr. van Paasschens nonqualified deferred compensation that is payable upon death, disability or certain changes in control as discussed in the 2011 Nonqualified Deferred Compensation section beginning on page 42. XI. DIRECTOR COMPENSATION The Company uses a combination of cash and stock-based awards to attract and retain qualified candidates to serve on the Board. In setting director compensation, the Company considers the significant amount of time that members of the Board spend in fulfilling their duties to the Company as well as the skill level required by the Company of its directors. The current compensation structure is described below. For 2011, under the Companys director share ownership guidelines, each non-employee director (NonEmployee Director) was required to own shares (or deferred compensation stock equivalents) that have a market price equal to four times the annual Non-Employee Directors fees paid to such Non-Employee Director. If any Non-Employee Director fails to satisfy this requirement, sales of shares by such Non-Employee Director shall be subject to a 35% retention requirement. Any new Non-Employee Director shall be given a period of three years to satisfy this requirement. Non-Employee Directors receive compensation for their services as described below. A. Annual Fees Each Non-Employee Director receives an annual fee in the amount of $80,000, payable in four equal installments of shares issued under our LTIP. The number of shares to be issued is based on the fair market value of a share using the average of the high and low price of the Companys stock as of December 31 of the year prior to grant. A Non-Employee Director may elect to receive up to one-half of the annual fee in cash and to defer (at an annual interest rate of LIBOR plus 1 1/2 % for deferred cash amounts) any or all of such annual fee payable in cash. A Non-Employee Director is also permitted to elect to defer to a deferred unit account any or all of the annual fee payable in shares. Deferred cash or stock amounts are payable in accordance with the Non-Employee Directors advance election. 47

Non-Employee Directors serving as members of the Audit Committee receive an additional annual fee payable in cash of $10,000 ($25,000 for the Chairman of the Audit Committee). The chairperson of each other committee of the Board receives an additional annual fee payable in cash of $12,500. The Chairman of the Board receives an additional fee of $150,000, payable quarterly in restricted stock units which vest in three years. B. Attendance Fees Non-Employee Directors do not receive fees for attendance at meetings. C. Equity grant In 2011, each Non-Employee Director received an annual equity grant (made at the same time as the annual grant is made to Company employees) under our LTIP with a value of $125,000. The equity grant was delivered 50% in restricted stock units and 50% in stock options. The number of restricted stock units is determined by dividing the award value by the fair market value of the Companys stock on the date of grant (fair market value is calculated as the average of the high and low share price on such date). The number of options is determined by dividing the award value by the fair market value of the Companys stock on the date of grant (fair market value is calculated as the average of the high and low share price on such date) and multiplying by two and one half, which we believe historically approximates the number of options determined through formal lattice model option valuation. The options are fully vested and exercisable upon grant and are scheduled to expire eight years after the grant date. The restricted stock units awarded pursuant to the annual grant generally vest upon the earlier of (i) the third anniversary of the grant date and (ii) the date such person ceases to be a director of the Company. D. Starwood Preferred Guest Program Points and Rooms In 2011, each Non-Employee Director received an annual grant of 750,000 Starwood Preferred Guest (SPG) points to encourage them to visit and personally evaluate our properties. E. Other Compensation The Company reimburses Non-Employee Directors for travel expenses, other out-of-pocket costs they incur when attending meetings and, for one meeting per year, expenses related to attendance by spouses.

48

We have summarized the compensation paid by the Company to our Non-Employee Directors in 2011 in the table below.
Fees earned or Paid in Cash ($) Stock Awards(2) (3) ($) Option Awards(4) ($) All Other Compensation(5) ($) Total ($)

Name(1)

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

22,500 52,500 50,000 65,000 12,500 50,000

142,402 102,454 102,454 102,454 292,446 142,402 142,402 142,402 142,402 102,454

49,276 49,276 49,276 49,276 49,276 49,276 49,276 49,276 49,276 49,276

18,750 21,240 18,750 35,005 20,150 19,086 34,763 18,750 20,510 18,750

232,928 225,470 220,480 251,735 361,872 210,764 226,441 222,928 212,188 220,480

(1) Mr. van Paasschen is not included in this table because he was an employee of the Company and thus received no compensation for his services as a director. Mr. van Paasschens 2011 compensation from the Company is disclosed in the 2011 Summary Compensation Table on page 37. (2) As of December 31, 2011, every director, with the exception of Mr. Duncan, held 7,047 restricted stock units that had not vested. As of December 31, 2011, Mr. Duncan held 22,267 restricted stock units that had not vested. (3) Represents the grant date fair value for stock (deferred and otherwise) and restricted stock unit awards granted during the year computed in accordance with ASC 718. For additional information, refer to Note 22 of the Companys financial statements filed with the SEC as part of the Form 10-K for the year ended December 31, 2011. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Named Executive Officers. The grant date fair value of each stock award is set forth below:
Director Grant Date Number of Shares of Stock/Units Grant Date Fair Value ($)

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

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

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

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

2/28/2011 3/31/2011 6/30/2011 9/30/2011 12/31/2011 2/28/2011 3/31/2011 6/30/2011 9/30/2011 12/31/2011 2/28/2011 3/31/2011 6/30/2011 9/30/2011 12/31/2011 2/28/2011 3/31/2011 6/30/2011 9/30/2011 12/31/2011 49

1,020 328 328 328 328 1,020 164 164 164 164 1,020 164 164 164 164 1,020 164 164 164 164

62,506 19,974 19,974 19,974 19,974 62,506 9,987 9,987 9,987 9,987 62,506 9,987 9,987 9,987 9,987 62,506 9,987 9,987 9,987 9,987

Director

Grant Date

Number of Shares of Stock/Units

Grant Date Fair Value ($)

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

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

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

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

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

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

2/28/2011 3/31/2011 3/31/2011 6/30/2011 6/30/2011 9/30/2011 9/30/2011 12/31/2011 12/31/2011 2/28/2011 3/31/2011 6/30/2011 9/30/2011 12/31/2011 2/28/2011 3/31/2011 6/30/2011 9/30/2011 12/31/2011 2/28/2011 3/31/2011 6/30/2011 9/30/2011 12/31/2011 2/28/2011 3/31/2011 6/30/2011 9/30/2011 12/31/2011 2/28/2011 3/31/2011 6/30/2011 9/30/2011 12/31/2011

1,020 616 328 616 328 616 328 616 328 1,020 328 328 328 328 1,020 328 328 328 328 1,020 328 328 328 328 1,020 328 328 328 328 1,020 164 164 164 164

62,506 37,511 19,974 37,511 19,974 37,511 19,974 37,511 19,974 62,506 19,974 19,974 19,974 19,974 62,506 19,974 19,974 19,974 19,974 62,506 19,974 19,974 19,974 19,974 62,506 19,974 19,974 19,974 19,974 62,506 9,987 9,987 9,987 9,987

(4) Represents the aggregate grant date fair value for stock option awards granted during the year computed in accordance with ASC 718. For additional information, refer to Note 22 of the Companys financial statements filed with the SEC as part of the Form 10-K for the year ended December 31, 2011. These amounts reflect the grant date fair value for these awards and do not correspond to the actual value that will be recognized by the directors. As of December 31, 2011, each director has the following aggregate number of stock options outstanding: Mr. Aron, 28,578; Ambassador Barshefsky, 25,222; Dr. Clarke, 20,468; Mr. Daley, 16,181; Mr. Duncan, 69,447; Ms. Galbreath, 36,201; Mr. Hippeau, 36,201; Mr. Quazzo, 36,201; Mr. Ryder, 36,201; Dr. Youngblood, 25,222. All directors received a grant of 2,550 options on February 28, 2011 with a grant date fair value of $49,276. (5) We reimburse Non-Employee Directors for travel expenses and other out-of-pocket costs they incur when attending meetings and, for one meeting per year, attendance by spouses. In addition, in 2011 Non-Employee Directors received 750,000 SPG points valued at $18,750. Non-Employee Directors receive interest on deferred dividends. Pursuant to SEC rules, perquisites and personal benefits are not reported for any director for whom such amounts were less than $10,000 in the aggregate for 2011 but must be identified by type for each director for whom such amounts were equal to or greater than $10,000 in the aggregate. SEC rules do not require specification of the value of any type of perquisite or personal benefit provided to the Non-Employee Directors because no such value exceeded $25,000.

50

AUDIT COMMITTEE REPORT The information contained in this Audit Committee Report shall not be deemed to be soliciting material or filed or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act. The Audit Committee (the Audit Committee) of the Board of Directors (the Board) of Starwood Hotels & Resorts Worldwide, Inc. (the Company), which is comprised entirely of independent directors, as determined by the Board in accordance with the New York Stock Exchange (the NYSE) listing requirements and applicable federal securities laws, serves as an independent and objective party to assist the Board in fulfilling its oversight responsibilities including, but not limited to, (i) monitoring the quality and integrity of the Companys financial statements, (ii) monitoring compliance with legal and regulatory requirements, (iii) assessing the qualifications and independence of the independent registered public accounting firm and (iv) establishing and monitoring the Companys systems of internal controls regarding finance, accounting and legal compliance. The Audit Committee operates under a written charter which meets the requirements of applicable federal securities laws and the NYSE requirements. In the first quarter of 2012, the Audit Committee reviewed and discussed the audited financial statements for the year ended December 31, 2011 with management, the Companys internal auditors and the independent registered public accounting firm, Ernst & Young LLP, including the matters required to be discussed with the independent accountant by Statement of Auditing Standards No. 61, as amended. The Audit Committee also discussed with the independent registered public accounting firm matters relating to its independence, including a review of audit and non-audit fees and the written disclosures and letter from Ernst & Young LLP to the Audit Committee required pursuant to Rule 3526 of the Public Company Accounting Oversight Board regarding the independent accountants communications with the Audit Committee concerning independence. Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the financial statements referred to above be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2011. Audit Committee of the Board of Directors Clayton C. Daley, Jr., Chairman Adam M. Aron Thomas E. Clarke Kneeland C. Youngblood Audit Fees The aggregate amounts paid by the Company for the fiscal years ended December 31, 2011 and 2010 to the Companys principal accounting firm, Ernst & Young, are as follows (in millions):
2011 2010

Audit Fees(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Audit-Related Fees(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax Fees(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$6.6 $0.8 $1.5 $8.9

$5.6 $0.9 $0.6 $7.1

(1) Audit fees include the fees paid for the annual audit, the review of quarterly financial statements and assistance with financial reports required as part of regulatory and statutory filings and the audit of the Companys internal controls over financial reporting with the objective of obtaining reasonable assurance about whether effective internal controls over financial reporting were maintained in all material respects. 51

(2) Audit-related fees include fees for audits of employee benefit plans, audit and accounting consultation and other attest services. (3) Tax fees include domestic and foreign tax compliance and consultations regarding tax matters. The Company has adopted a policy which requires the Audit Committee of the Board of Directors to approve the hiring of any current or former employee (within the last five years) of the Companys independent registered public accounting firm into any position (i) as a manager or higher, (ii) in its accounting or tax departments, (iii) where the hire would have direct involvement in providing information for use in its financial reporting systems, or (iv) where the hire would be in a policy setting position. When undertaking its review, the Audit Committee considers applicable laws, regulations and related commentary regarding the definition of independence for independent registered public accounting firms. Pre-Approval of Services The Audit Committee pre-approves all services, including both audit and non-audit services, provided by the Companys independent registered public accounting firm. The independent registered public accounting firm submits an audit services fee proposal, which also must be approved by the Audit Committee before the audit commences. The Audit Committee may delegate authority to one of its members to pre-approve all audit/ non-audit services by the independent registered public accounting firm, as long as these approvals are presented to the full Audit Committee at its next regularly scheduled meeting. Management submits to the Audit Committee all non-audit services that it recommends the independent registered public accounting firm be engaged to provide and an estimate of the fees to be paid for each. Management and the independent registered public accounting firm must each confirm to the Audit Committee that the performance of the non-audit services on the list would not compromise the independence of the registered public accounting firm and would be permissible under all applicable legal requirements. The Audit Committee must approve both the list of non-audit services and the budget for each such service before commencement of the work. Management and the independent registered public accounting firm report to the Audit Committee at each of its regular meetings as to the non-audit services actually provided by the independent registered public accounting firm and the approximate fees incurred by the Company for those services. All audit and permissible non-audit services provided by Ernst & Young to the Company for the fiscal years ended December 31, 2011 and 2010 were pre-approved by the Audit Committee or our Board of Directors. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The members of the Compensation Committee during fiscal year 2011 were all independent directors, and no member was an employee or former employee of the Company. None of the Compensation Committee members had any relationship requiring disclosure under the Related Person Transaction Policy described below. During fiscal year 2011, none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity whose officer served on our Compensation Committee. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Board of Directors has adopted a Corporate Opportunity and Related Person Transaction Policy (the Related Person Transaction Policy), the purpose of which is to address the reporting, review and approval or ratification of transactions with directors, director nominees, executive officers, stockholders known to own of record or beneficially more than five percent of our shares (5% Holders) and each of the foregoings respective family members and/or corporate affiliates (collectively Covered Persons). As a general matter, we seek to avoid Related Person Transactions because they can involve potential or actual conflicts of interest and pose the risk that they may be, or be perceived to be, based on considerations other than the Companys best interests. For 52

purposes of the policy, a Related Person Transaction means any transaction involving the Company in which a Covered Person has a direct or indirect material interest. A transaction involving entities controlled by the Company shall be deemed a transaction in which the Company participates. However, we recognize that in some circumstances transactions between us and related persons may be incidental to the normal course of business or provide an opportunity that is in the best interests of the Company, or that is not inconsistent with the best interests of the Company, or is more efficient to pursue than an alternative transaction. The Board has charged the Governance Committee with establishing and periodically reviewing our Related Person Transaction Policy. A copy of the policy is posted on our website at www.starwoodhotels.com/corporate/investor_relations.html. The Related Person Transaction Policy also governs certain corporate opportunities to ensure that Corporate Opportunities are not pursued by Covered Persons unless and until the Company has determined that it is not interested in pursuing said opportunity. For purposes of the policy, a Corporate Opportunity means any opportunity (i) that is within the Companys existing line of business or is one in which the Company either has an existing interest or a reasonable expectancy of an interest; and (ii) the Company is reasonably capable of pursuing. Under the Related Person Transaction Policy, except as otherwise provided, each director, executive officer, and 5% Holder is required to submit any such Related Person Transaction or Corporate Opportunity to the Governance Committee for review. In its review, the Governance Committee is to consider all relevant facts and circumstances to determine whether it should (i) reject the proposed transaction; (ii) conclude that the proposed transaction is appropriate and suggest that the Company pursue it on the terms presented or on different terms, and in the case of a Corporate Opportunity, suggest that the Company pursue the Corporate Opportunity on its own, with the party who brought the proposed transaction to the Companys attention or with another third party; or (iii) ask the Board of Directors to consider the proposed transaction so that the Board of Directors may then take either of the actions described in (i) or (ii) above, and, at the Governance Committees option, in connection with (iii), make a recommendation to the Board of Directors. Any person bringing a proposed transaction to the Governance Committee is obligated to provide any and all information requested by the Governance Committee and, in the case of a director, such director must recuse himself or herself from any vote or other deliberation on the matter. The policy may be changed at any time by the Board of Directors. OTHER MATTERS The Board of Directors is not aware of any matters not referred to in this proxy statement that may properly be presented for action at the Annual Meeting. The deadline for stockholders to submit matters for consideration at the Annual Meeting and have it included in these proxy materials was November 22, 2011, and the deadline for stockholders to submit matters for consideration at the Annual Meeting without having the proposal included in these proxy materials expired on February 20, 2012. However, if any other matter properly comes before the Annual Meeting, it is the intention of the persons named in the enclosed proxy to vote the shares represented thereby in accordance with their discretion. SOLICITATION COSTS The Company will pay the cost of soliciting proxies for the Annual Meeting, including the cost of mailing. The solicitation is being made by mail and over the Internet and may also be made by telephone or in person using the services of a number of regular employees of the Company at nominal cost. The Company will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for expenses incurred in sending proxy materials to beneficial owners of shares. The Company has engaged D.F. King & Co., Inc. to solicit proxies and to assist with the distribution of proxy materials for a fee of $19,500 plus reasonable out-of-pocket expenses. 53

HOUSEHOLDING The SEC allows us to deliver a single proxy statement and annual report or Notice to an address shared by two or more of our stockholders. This delivery method, referred to as householding, can result in significant cost savings for us. In order to take advantage of this opportunity, the Company and banks and brokerage firms that hold your shares have delivered only one proxy statement and annual report or Notice to multiple stockholders who share an address unless one or more of the stockholders has provided contrary instructions. The Company will deliver promptly, upon written or oral request, a separate copy of the proxy statement and annual report or Notice to any stockholder at a shared address to which a single copy of the documents was delivered. A stockholder who wishes to receive a separate copy of the proxy statement and annual report or Notice, now or in the future, may obtain one, without charge, by addressing a request to Investor Relations, Starwood Hotels & Resorts Worldwide, Inc., One StarPoint, Stamford, Connecticut 06902 or by calling (203) 351-3500. You may also obtain a copy of the proxy statement and annual report from the investor relations page on the Companys website (www.starwoodhotels.com/corporate/investor_relations.html). Stockholders of record sharing an address who are receiving multiple copies of proxy materials and annual reports or Notices and wish to receive a single copy of such materials in the future should submit their request by contacting us in the same manner. If you are the beneficial owner, but not the record holder, of the shares and wish to receive only one copy of the proxy statement and annual report or Notice in the future, you will need to contact your broker, bank or other nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the future.

54

STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING If you want to make a proposal for consideration at next years annual meeting and have it included in the Companys proxy materials, the Company must receive your proposal by November 22, 2012, and the proposal must comply with the rules of the SEC. If you want to make a proposal or nominate a director for consideration at next years annual meeting without having the proposal included in the Companys proxy materials, you must comply with the then current advance notice provisions and other requirements set forth in the Companys Bylaws, including that the Company must receive your proposal on or after January 23, 2013 and on or prior to February 17, 2013, with certain exceptions if the date of next years annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date of the 2012 Annual Meeting. If the Company does not receive your proposal or nomination by the appropriate deadline and in accordance with the terms of the Companys Bylaws, then it may not properly be brought before the 2013 Annual Meeting of Stockholders. The fact that the Company may not insist upon compliance with these requirements should not be construed as a waiver by the Company of its right to do so at any time in the future. You should address your proposals or nominations to the Corporate Secretary, Starwood Hotels & Resorts Worldwide, Inc., One StarPoint, Stamford, Connecticut 06902, Attention: Kenneth S. Siegel, Corporate Secretary. By Order of the Board of Directors,

Kenneth S. Siegel Corporate Secretary

55

General Directions To The St. Regis Bal Harbour Resort From Miami International Airport (MIA) Proceed east on State Road 836. Exit onto Interstate 95 North towards Fort Lauderdale. Take Exit 9 for Bal Harbour and turn right onto 125th Street (922). Proceed east on 125th Street (922) as it becomes 123rd Street (Toll Road). After 123rd becomes 96th Street, turn left onto Collins Avenue. The hotel will be on the right. From North Follow Interstate 95 South to Exit 9 for Bal Harbour. Turn left onto 125th Street (922). Proceed east on 125th Street (922) as it becomes 123rd Street (Toll Road). After 123rd becomes 96th Street, turn left onto Collins Avenue. The hotel will be on the right. From Ft. Lauderdale International Airport (FLL) Exit the airport via Interstate 595. Proceed west and exit onto Interstate 95 South. Take Exit 9 for Bal Harbour and turn left onto 125th Street (922). Proceed east on 125th Street (922) as it becomes 123rd Street (Toll Road). After 123rd becomes 96th Street, turn left onto Collins Avenue. The hotel will be on the right. From South Follow Interstate 95 North towards Fort Lauderdale. Take Exit 9 for Bal Harbour and turn right onto 125th Street (922). Proceed east on 125th Street (922) as it becomes 123rd Street (Toll Road). After 123rd becomes 96th Street, turn left onto Collins Avenue. The hotel will be on the right.

56

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2011 OR

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period from to Commission File Number: 1-7959
(Exact name of registrant as specified in its charter)

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

Maryland
(State or other jurisdiction of incorporation or organization)

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

One StarPoint Stamford, CT 06902

(Address of principal executive offices, including zip code)

(203) 964-6000
(Registrants telephone number, including area code)

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

Title of Each Class Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( 232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ( 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. Smaller reporting company Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No As of the last business day of the registrants most recently completed second fiscal quarter, June 30, 2011, the aggregate market value of the registrants voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the closing sales price as quoted on the New York Stock Exchange was approximately $10.9 billion. As of February 10, 2012, the registrant had 196,106,079 shares of common stock outstanding. Documents Incorporated by Reference:
Document Where Incorporated

Proxy Statement

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

TABLE OF CONTENTS
Page

Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Item 9B. Item 10. Item 11. Item 12. Item 13. Item 14. Item 15.

PART I Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART II Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Managements Discussion and Analysis of Financial Condition and Results of Operations . . . Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes In and Disagreements with Accountants on Accounting and Financial Disclosure . . . Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART III Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . . Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART IV Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 6 15 15 22 22

22 25 25 42 43 43 43 44 44 44 44 44 44 44

This Annual Report is filed by Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the Corporation). Unless the context otherwise requires, all references to we, us, our, Starwood, or the Company refer to the Corporation and include those entities owned or controlled by the Corporation. PART I Forward-Looking Statements This Annual Report contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements other than statements of historical fact, including statements regarding the intent, belief or current expectations of Starwood, its directors or its officers with respect to the matters discussed in this Annual Report. In some cases, forwardlooking statements can be identified by the use of words such as may, will, expects, should, believes, plans, anticipates, estimates, predicts, potential, continue, or other words of similar meaning. Such forward-looking statements appear in several places in this Annual Report, including, without limitation, Item 1. Business and Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements including, without limitation, the risks and uncertainties disclosed under Item 1A. Risk Factors. We caution readers that any such statements are based on currently available operational, financial and competitive information, and they should not place undue reliance on these forward-looking statements, which reflect managements opinion only as of the date on which they were made. Except as required by law, Starwood undertakes no obligation to publicly update or revise any forward-looking statements to reflect current or future events or circumstances. Item 1. Business General We are one of the worlds largest hotel and leisure companies. We conduct our hotel and leisure business both directly and through our subsidiaries. Our brand names include the following: St. Regis (luxury full-service hotels, resorts and residences) is for connoisseurs who desire the finest expressions of luxury. They provide flawless and bespoke service to high-end leisure and business travelers. St. Regis hotels are located in the ultimate locations within the worlds most desired destinations, important emerging markets and yet to be discovered paradises, and they typically have individual design characteristics to capture the distinctive personality of each location. The Luxury Collection (luxury full-service hotels and resorts) is a group of unique hotels and resorts offering exceptional service to an elite clientele. From legendary palaces and remote retreats to timeless modern classics, these remarkable hotels and resorts enable the most discerning traveler to collect a world of unique, authentic and enriching experiences indigenous to each destination that capture the sense of both luxury and place. They are distinguished by magnificent decor, spectacular settings and impeccable service. W (luxury and upscale full-service hotels, retreats and residences) is where iconic design and cutting-edge lifestyle set the stage for exclusive and extraordinary experiences. Each hotel and retreat is uniquely inspired by its destination, where innovative design is inspired by local influences and creates energizing spaces to play or work by day or mix and mingle out by night. Guests are invited into extraordinary environments that combine entertainment, vibrant lounges, modern guestrooms, and innovative cocktail culture and cuisine. The beats per minute increase as the day transitions to night, amplifying the scene in every W Living Room for guests to socialize and see and be seen. W Hotels Worldwide, a global design powerhouse brought to life through W Happenings, exclusive partnerships and the signature Whatever/Whenever promises to grant its guests and local community alike access to Whats New/Next. Westin (luxury and upscale full-service hotels, resorts and residences) provides innovative programs and instinctive services which transform every aspect of a guests stay into a revitalizing experience. Indulge in a deliciously wholesome menu including exclusive SuperFoodsRx dishes. Energize in the fitness studio with the 1

industry-leading WestinWORKOUT. Revive in the Heavenly Bath where luxurious touches create a spa-like experience. And of course, experience truly restorative sleep in the world-renowned Heavenly Bedan oasis of lush sheets, down, and patented pillow-top mattress. Whether an epic city center location or refreshing resort destination, Westin ensures guests leave feeling better than when they arrived. Westin. For A Better You. Le Mridien (luxury and upscale full-service hotels, resorts and residences) is a Paris-born hotel brand, currently represented by approximately 100 properties in 43 countries worldwide. Le Mridien aims to target the creative mind: an audience inspired by creativity who are eager to learn something new and see things in a different light. A curated approach towards the arts connects Le Mridien with the creative mind in an authentic and credible way. A cultural curator was engaged, responsible for integrating the arts into the guest experience and identifying the appropriate creative talents, a family of cultural innovators, LM100 TM, to define and enrich the guest experience through their dedicated tailor-made creations. This esteemed group comprises of a global array of visionaries, from painters to photographers, musicians to designers and chefs. Le Mridien is more than a hotel, its a way of life that provides A New Perspective. Sheraton (luxury and upscale full-service hotels, resorts and residences) is our largest brand serving the needs of upscale business and leisure travelers worldwide. For over 75 years this full-service, iconic brand has welcomed guests, becoming a trusted friend to travelers and one of the worlds most recognized hotel brands. From being the first hotel brand to step into major international markets like China, to completely captivating entire destinations like Waikiki, Sheraton understands that travel is about bringing people together. In Sheraton lobbies youll find the Link@SheratonSM experienced with Microsoft. The Sheraton Club is a social space where guests indulge in the upside of everything. Sheraton Fitness programmed by Core Performance, our signature fitness program, brings guests together as they train and eat healthy on the road. Sheraton transcends lifestyles, generations and geographies and will continue to welcome generation after generation of world travelers as The Worlds Gathering Place. Four Points (select-service hotels) delights the self-sufficient traveler with what is needed for greater comfort and productivity. Great Hotels. Great Rates. All at the honest value our guests deserve. Our guests start their day feeling energized and finish up relaxed, maybe even with one of our Best Brews (local craft beer). Its the little indulgences that make their time away from home special. Aloft (select-service hotels) first opened in 2008. It will already be opening its 55th property in 2012. Aloft provides new heights: an oasis where you least expect it, a spirited neighborhood outpost, a haven at the side of the road. Bringing a cozy harmony of modern elements to the classic on-the-road tradition, Aloft offers a sassy, refreshing, ultra effortless alternative for both the business and leisure traveler. Fresh, fun, and fulfilling, Aloft is an experience to be discovered and rediscovered, destination after destination, as you ease on down the road. Style at a Steal. Element(SM) (extended stay hotels), a brand introduced in 2006 with the first hotel opened in 2008, provides a modern, upscale and intuitively designed hotel experience that allows guests to live well and feel in control. Inspired by Westin, Element hotels promote balance through a thoughtful, upscale environment. Decidedly modern with an emphasis on nature, Element is intuitively constructed with an efficient use of space that encourages guests to stay connected, feel alive, and thrive while they are away. Primarily all Element hotels are LEED certified, depicting the importance of the environment in todays world. Space to live your life. Through our brands, we are well represented in most major markets around the world. Our operations are reported in two business segments, hotels and vacation ownership and residential operations. Our revenue and earnings are derived primarily from hotel operations, which include management and other fees earned from hotels we manage pursuant to management contracts, the receipt of franchise and other fees and the operation of our owned hotels. Our hotel business emphasizes the global operation of hotels and resorts primarily in the luxury and upscale segment of the lodging industry. We seek to acquire interests in, or management or franchise rights with respect to properties in this segment. At December 31, 2011, our hotel portfolio included owned, leased, managed and franchised hotels totaling 1,076 hotels with approximately 315,300 rooms in approximately 100 countries, and is 2

comprised of 59 hotels that we own or lease or in which we have a majority equity interest, 518 hotels managed by us on behalf of third-party owners (including entities in which we have a minority equity interest) and 499 hotels for which we receive franchise fees. Our revenues and earnings are also derived from the development, ownership and operation of vacation ownership resorts, marketing and selling vacation ownership interests (VOIs) in the resorts and providing financing to customers who purchase such interests. Generally these resorts are marketed under the brand names described above. Additionally, our revenue and earnings are derived from the development, marketing and selling of residential units at mixed use hotel projects owned by us as well as fees earned from the marketing and selling of residential units at mixed use hotel projects developed by third-party owners of hotels operated under our brands. At December 31, 2011, we had 22 owned vacation ownership resorts and residential properties (including 13 stand-alone, eight mixed-use and one unconsolidated joint venture) in the United States, Mexico and the Bahamas. Due to the global economic crisis and its impact on the long-term growth outlook for the timeshare industry, in 2009 we evaluated all of our existing vacation ownership projects, as well as land held for future vacation ownership projects. At that time, we decided not to initiate any new vacation ownership projects. We also decided not to develop certain vacation ownership sites and future phases of certain existing projects. As the economy and market conditions improved in 2011, we commenced construction on a future phase at one timeshare location where we had ceased development. Our operations are in geographically diverse locations around the world. The following tables reflect our hotel and vacation ownership and residential properties by type of revenue source and geographical presence by major geographic area as of December 31, 2011:
Number of Properties Rooms

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

518 499 59 13 1,089

172,900 123,000 19,400 7,000 322,300

Number of Properties

Rooms

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

565 161 210 84 69 1,089

179,600 39,000 66,900 21,600 15,200 322,300

We have implemented a strategy of reducing our investment in owned real estate and increasing our focus on the management and franchise business. In furtherance of this strategy, since 2006, we have sold 65 hotels for approximately $5.6 billion. As a result, our primary business objective is to maximize earnings and cash flow by increasing the number of our hotel management contracts and franchise agreements; selling VOIs; and investing in real estate assets where there is a strategic rationale for doing so, which may include selectively acquiring interests in additional assets and disposing of non-core hotels (including hotels where the return on invested capital is not adequate) and trophy assets that may be sold at significant premiums. We plan to meet these objectives by leveraging our global assets, broad customer base and other resources and by taking advantage of our scale to reduce costs. The implementation of our strategy and financial planning is impacted by the uncertainty relating to geopolitical and economic environments around the world and its consequent impact on travel. 3

The Corporation was incorporated in 1980 under the laws of Maryland. Sheraton Hotels & Resorts and Westin Hotels & Resorts, Starwoods largest brands, have been serving guests for more than 60 years. Starwood Vacation Ownership (and its predecessor, Vistana, Inc.) has been selling VOIs for more than 20 years. Our principal executive offices are located at One StarPoint, Stamford, Connecticut 06902, and our telephone number is (203) 964-6000. For a full discussion of our revenues, profits, assets and geographical segments, see our consolidated financial statements of this Annual Report, including the notes thereto. For additional information concerning our business, see Item 2 Properties, of this Annual Report. Competition The hotel and timeshare industry is highly competitive. Competition is generally based on quality and consistency of room, restaurant and meeting facilities and services, attractiveness of locations, availability of a global distribution system, price, the ability to earn and redeem loyalty program points and other factors. Management believes that we compete favorably in these areas. Our properties compete with other hotels and resorts in their geographic markets, including facilities owned by local interests and facilities owned by national and international chains. Our principal competitors include other hotel operating companies, national and international hotel brands, and ownership companies (including hotel REITs). We encounter strong competition as a hotel, resort, residential and vacation ownership operator. While some of our competitors are private management firms, several are large national and international chains that own and operate their own hotels, as well as manage hotels for third-party owners and sell VOIs, under a variety of brands that compete directly with our brands. Intellectual Property We operate in a highly competitive industry and our intellectual property, including brands, logos, trademarks, service marks, and trade dress is an important component of our business. The success of our business depends, in part, on the increase in awareness of our brands and our ability to further develop our brands globally through the use of our intellectual property. To that end, we apply to register, register and renew our intellectual property, enforce our rights against the unauthorized use of our intellectual property by third parties; and otherwise protect our intellectual property through strategies and in jurisdictions where we reasonably deem appropriate. Environmental Matters We are subject to certain requirements and potential liabilities under various foreign and U.S. federal, state and local environmental laws, ordinances and regulations (Environmental Laws). Under such laws, we could be held liable for the costs of removing or cleaning up hazardous or toxic substances at, on, under, or in our currently or formerly owned or operated properties. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of hazardous or toxic substances may adversely affect the owners ability to sell or rent such real property or to borrow using such real property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic wastes may be liable for the costs of removal or remediation of such wastes at the treatment, storage or disposal facility, regardless of whether such facility is owned or operated by such person. We use certain substances and generate certain wastes that may be deemed hazardous or toxic under applicable Environmental Laws, and we from time to time have incurred, and in the future may incur, costs related to cleaning up contamination resulting from historic uses of certain of our current or former properties or our treatment, storage or disposal of wastes at facilities owned by others. Other Environmental Laws govern occupational exposure to asbestos-containing materials (ACMs) and require abatement or removal of certain ACMs (limited quantities of which are present in various building materials such as spray-on insulation, floor coverings, ceiling coverings, tiles, decorative treatments and piping located at certain of our hotels) in the event of damage or demolition, or certain renovations or remodeling. Environmental Laws also regulate polychlorinated biphenyls (PCBs), which may be present in electrical equipment. A number of our hotels have underground storage tanks (USTs) and equipment containing chlorofluorocarbons (CFCs); the operation and 4

subsequent removal or upgrading of certain USTs and the use of equipment containing CFCs also are regulated by Environmental Laws. In connection with our ownership, operation and management of our properties, we could be held liable for costs of remedial or other action with respect to PCBs, USTs or CFCs. Congress and some states are considering or have undertaken actions to regulate and reduce greenhouse gas emissions. New or revised laws and regulations or new interpretations of existing laws and regulations, such as those related to climate change, could affect the operation of our hotels and/or result in significant additional expense and operating restrictions. The cost impact of such legislation, regulation, or new interpretations would depend upon the specific requirements enacted and cannot be determined at this time. Environmental Laws are not the only source of environmental liability. Under common law, owners and operators of real property may face liability for personal injury or property damage because of various environmental conditions such as alleged exposure to hazardous or toxic substances (including, but not limited to, ACMs, PCBs and CFCs), poor indoor air quality, radon or poor drinking water quality. Although we have incurred and expect to incur remediation and various environmental-related costs during the ordinary course of operations, management does not anticipate that such costs will have a material adverse effect on our operations or financial condition. Seasonality and Diversification The hotel industry is seasonal in nature; however, the periods during which our properties experience higher revenue activities vary from property to property and depend principally upon location. Generally, our revenues and operating income have been lower in the first quarter than in the second, third or fourth quarters. Comparability of Owned Hotel Results We continually update and renovate our owned, leased and consolidated joint venture hotels. While undergoing renovation, these hotels are generally not operating at full capacity and, as such, these renovations can negatively impact our owned hotel revenues and operating income. Other events, such as the occurrence of natural disasters may cause a full or partial closure or sale of a hotel, and such events can negatively impact our revenues and operating income. Finally, as we pursue our strategy of reducing our investment in owned real estate assets, the sale of such assets can significantly reduce our revenues and operating income from owned, leased and consolidated joint venture hotels. Employees At December 31, 2011, approximately 154,000 people were employed at our corporate offices, owned and managed hotels and vacation ownership resorts, of which approximately 31% were employed in the United States. At December 31, 2011, approximately 25% of the U.S.-based employees were covered by various collective bargaining agreements providing, generally, for basic pay rates, working hours, other conditions of employment and orderly settlement of labor disputes. Generally, labor relations have been maintained in a normal and satisfactory manner, and management believes that our employee relations are satisfactory. Where You Can Find More Information We file an annual report on a Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, a proxy statement and other information with the Securities and Exchange Commission (SEC). Our SEC filings are available to the public over the Internet at the SECs website at http:// www.sec.gov. Our SEC filings are also available on our website at http://www.starwoodhotels.com/ corporate/ investor_relations.html as soon as reasonably practicable after they are filed with or furnished to the SEC. You may also read and copy any document we file with the SEC at its public reference room located at 100 F Street, NE, in Washington, D.C. 20549 on official business days during the hours of 10 a.m. to 3 p.m. Please call the SEC at (800) SEC-0330 for further information. Our filings with the SEC are also available at the New York Stock Exchange. For more information on obtaining copies of our public filings at the New York Stock Exchange, you should call (212) 656-5060. You may also obtain a copy of our filings free of charge by calling Investor Relations at (203) 351-3500. 5

Item 1A.

Risk Factors.

Risks Relating to Hotel, Resort, Vacation Ownership and Residential Operations We Are Subject to All the Operating Risks Common to the Hotel and Vacation Ownership and Residential Industries. Operating risks common to the hotel and vacation ownership and residential industries include: changes in general economic conditions, including the severity and duration of downturns in the United States, Europe and global economies; impact of war and terrorist activity (including threatened terrorist activity) and heightened travel security measures instituted in response thereto; domestic and international political and geopolitical conditions; travelers fears of exposures to contagious diseases; decreases in the demand for transient rooms and related lodging services, including a reduction in business travel as a result of general economic conditions; decreases in demand or increases in supply for vacation ownership interests; the impact of internet intermediaries on pricing and our increasing reliance on technology; cyclical over-building in the hotel and vacation ownership industries; restrictive changes in zoning and similar land use laws and regulations or in health, safety and environmental laws, rules and regulations and other governmental and regulatory action; changes in travel patterns; changes in operating costs including, but not limited to, energy, labor costs (including the impact of unionization), food costs, workers compensation and health-care related costs, insurance and unanticipated costs such as acts of nature and their consequences; the costs and administrative burdens associated with compliance with applicable laws and regulations, including, among others, franchising, timeshare, privacy, licensing and labor and employment; disputes with owners of properties, including condominium hotels, franchisees and homeowner associations which may result in litigation; the availability and cost of capital to allow us and potential hotel owners and franchisees to fund construction, renovations and investments; foreign exchange fluctuations; the financial condition of third-party owners, project developers and franchisees, which may impact our ability to recover indemnity payments that may be owed to us and their ability to fund amounts required under development, management and franchise agreements and in most cases our recourse is limited to the equity value said party has in the property; the financial condition of the airline industry and the impact on air travel; and regulation or taxation of carbon dioxide emissions by airlines and other forms of transportation. If We Are Unable to Maintain Existing Management and Franchise Agreements or Obtain New Agreements on as Favorable Terms, our Operating Results May be Adversely Affected. We are impacted by our relationships with hotel owners and franchisees. Our hotel management contracts are typically long-term arrangements, but most allow the hotel owner to replace us in certain circumstances, such as the bankruptcy of the hotel owner or franchisee, the failure to meet certain financial or performance criteria and in certain cases, upon a sale of the property. Our ability to meet these financial and performance criteria is subject to, among other things, the risks common to hotel industries described above. Factors outside of our control, such as the current European sovereign debt crisis, could also have a significant negative impact on the financial condition and viability of our hotel property owners. Additionally, the nature of responsibilities under these management and franchise arrangements may give rise to disagreements with the property owners, making it difficult to maintain 6

positive relationships with current and potential hotel owners and franchisees. Consequently, our operating results would be adversely affected if we could not maintain existing management, franchise or representation agreements or obtain new agreements on as favorable terms as the existing agreements. We and Our Third Party Licensees May Not Be Able to Sell Residential Properties Using our Brands for a Profit or at Anticipated Prices. We utilize our brands in connection with the residential portions of certain properties that we develop and license our brands to third parties to use in a similar manner for a fee. Residential properties using our brands could become less attractive due to changes in mortgage rates and the availability of mortgage financing generally, market absorption or oversupply in a particular market. As a result, we and our third party licensees may not be able to sell these residences for a profit or at the prices that we or they have anticipated. The Recent Recession in the Lodging Industry and the Global Economy Generally Will Continue to Impact Our Financial Results and Growth. The recent economic recession and continued economic uncertainty in the United States, Europe and much of the rest of the world has had a negative impact on the hotel and vacation ownership and residential industries. Substantial increases in air and ground travel costs and decreases in airline capacity have reduced demand for our hotel rooms and interval and fractional timeshare products. Accordingly, our financial results have been impacted by the economic recession and both our future financial results and growth could be further harmed if recovery from the economic recession slows or the economic recession becomes worse. In certain cases, we have entered into third party hotel management contracts which contain performance guarantees specifying that certain operating metrics will be achieved. As a result of the impact of the economic downturn on the lodging industry (and despite the stabilization in lodging that began in 2010), we may not meet the requisite performance levels, and we may be forced to loan or contribute monies to fund the shortfall of performance levels or terminate the management contract. For a more detailed description of our performance guarantees, see Note 25 of the consolidated financial statements. Moreover, many businesses, particularly financial institutions, face restrictions on the ability to travel and hold conferences or events at resorts and luxury hotels. These restrictions as well as negative publicity associated with such companies holding large conference and corporate events has resulted in reduced corporate bookings that could impact our financial results in the future. Our Revenues, Profits, or Market Share Could Be Harmed If We Are Unable to Compete Effectively. The hotel, vacation ownership and residential industries are highly competitive. Our properties compete for customers with other hotel and resort properties, ranging from national and international hotel brands to independent, local and regional hotel operators, and, with respect to our vacation ownership resorts and residential projects, with owners reselling their VOIs, including fractional ownership, or apartments. We compete based on a number of factors, including quality and consistency of rooms, restaurant and meeting facilities and services, attractiveness of locations, availability of a global distribution system, price, and the ability to earn and redeem loyalty program points. Some of our competitors may have substantially greater marketing and financial resources than we do, and if we are unable to successfully compete in these areas, our operating results could be adversely affected. Moreover, our present growth strategy for development of additional lodging facilities entails entering into and maintaining various management agreements, franchise agreements, and leases with property owners. We compete with other hotel companies for this business primarily on the basis of fees, contract terms, brand recognition, and reputation. In connection with entering into these agreements, we may be required to make investments in, or guarantee the obligations of, third parties or guarantee minimum income to third parties. The terms of our management agreements, franchise agreements, and leases for each of our lodging facilities are influenced by contract terms offered by our competitors, among other things. We cannot assure you that any of our current arrangements will continue or that we will be able to enter into future collaborations, renew agreements, or enter into new agreements in the future on terms that are as favorable to us as those that exist today. Our Businesses Are Capital Intensive. For our owned, managed and franchised properties to remain attractive and competitive, the property owners and we have to spend money periodically to keep the properties well maintained, modernized and refurbished. This creates an ongoing need for cash. Third-party property owners may be unable to access capital or unwilling to spend available capital when necessary, even if required 7

by the terms of our management or franchise agreements. To the extent that property owners and we cannot fund expenditures from cash generated by operations, funds must be borrowed or otherwise obtained. Failure to make the investments necessary to maintain or improve such properties could adversely affect the reputation of our brands. Recent events, including the failures and near failures of financial services companies and the decrease in liquidity and available capital, have negatively impacted the capital markets for hotel and real estate investments. Any Failure to Protect our Trademarks Could Have a Negative Impact on the Value of Our Brand Names and Adversely Affect Our Business. We believe our trademarks are an important component of our business. We rely on trademark laws to protect our proprietary rights. The success of our business depends in part upon our continued ability to use our trademarks to increase brand awareness and further develop our brand in both domestic and international markets. From time to time, we apply to have certain trademarks registered and there is no guarantee that such trademark registrations will be granted. Further, monitoring the unauthorized use of our intellectual property is difficult. Litigation has been and may continue to be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of resources, may result in counterclaims or other claims against us and could significantly harm our results of operations. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States. We cannot assure you that all of the steps we have taken to protect our trademarks in the United States and foreign countries will be adequate to prevent imitation of our trademarks by others. The unauthorized reproduction of our trademarks could diminish the value of our brand and its market acceptance, competitive advantages or goodwill, which could adversely affect our business. Our Dependence on Hotel and Resort Development Exposes Us to Timing, Budgeting and Other Risks. We intend to develop hotel and resort properties and residential components of hotel properties, as suitable opportunities arise, taking into consideration the general economic climate. In addition, the owners and developers of new-build properties that we have entered into management or franchise agreements with are subject to these same risks which may impact the amount and timing of fees we had expected to collect from those properties. New project development has a number of risks, including risks associated with: construction delays or cost overruns that may increase project costs; receipt of zoning, occupancy and other required governmental permits and authorizations; development costs incurred for projects that are not pursued to completion; so-called acts of God such as earthquakes, hurricanes, floods or fires that could adversely impact a project; defects in design or construction that may result in additional costs to remedy or require all or a portion of a property to be closed during the period required to rectify the situation; ability to raise capital; and governmental restrictions on the nature or size of a project or timing of completion. We cannot assure you that any development project, including sites held for development of vacation ownership resorts, will in fact be developed, and, if developed, the time period or the budget of such development may be greater than initially contemplated and the actual number of units or rooms constructed may be less than initially contemplated. International Operations Are Subject to Unique Political and Monetary Risks. We have significant international operations which as of December 31, 2011 included 161 owned, managed or franchised properties in Europe (including 16 properties with majority ownership); 84 managed or franchised properties in Africa and the Middle East; 69 owned, managed or franchised properties in Latin America (including nine properties with majority ownership); and 210 owned, managed or franchised properties in the Asia Pacific region (including four properties with majority ownership). International operations generally are subject to various political, 8

geopolitical, and other risks that are not present in U.S. operations. These risks include exposure to local economic conditions, potential adverse changes in the diplomatic relations between foreign countries and the United States, hostility from local populations, including the risk of war and civil unrest, restrictions on the repatriation of non-U.S. earnings and withdrawal of foreign investments, restriction on the ability to pay dividends and remit earnings to affiliated companies, uncertainty as to the enforceability of contractual rights under local law, conflicts between local law and United States law and compliance with complex and changing laws, regulations and policies. In addition, sales in international jurisdictions typically are made in local currencies, which subject us to risks associated with currency fluctuations. Currency devaluations and unfavorable changes in international monetary and tax policies could have a material adverse effect on our profitability and financing plans, as could other changes in the international regulatory climate and international economic conditions. Additionally, our current growth strategy is heavily dependent upon growth in international markets. As of December 31, 2011, 85% of our pipeline represented international growth. Further, 61% of our pipeline represents new properties in Asia Pacific and 44% represents new growth in China alone. If our international expansion plans are unsuccessful, our financial results could be materially adversely affected. We Could be Adversely Affected by Violations of the U.S. Foreign Corrupt Practices Act. Our business operations in countries outside the United States are subject to anti-corruption laws and regulations, including restrictions imposed by the Foreign Corrupt Practices Act (FCPA). The FCPA and similar anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. We operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices. We train our employees concerning anticorruption laws and issues, and also require our third-party business partners and agents and others who work with us or on our behalf that they must comply with our anti-corruption policies. We also have procedures and controls in place to monitor internal and external compliance. We cannot provide assurance that our internal controls and procedures will always protect us from the reckless or criminal acts committed by our employees or third parties with whom we work. If we are found to be liable for violations of the FCPA or similar anticorruption laws in international jurisdictions, either due to our own acts or out of inadvertence, or due to the acts or inadvertence of others, we could suffer from criminal or civil penalties which could have a material and adverse effect on our results of operations, financial condition and cash flows. Third Party Internet Reservation Channels May Negatively Impact Our Bookings. Some of our hotel rooms are booked through third party internet travel intermediaries such as Travelocity.com, Expedia.com, Orbitz.com and Priceline.com. As the percentage of internet bookings increases, these intermediaries may be able to obtain higher commissions, reduced room rates or other significant contract concessions from us. Moreover, some of these internet travel intermediaries are attempting to commoditize hotel rooms by increasing the importance of price and general indicators of quality (such as three-star downtown hotel) at the expense of brand identification. Over time consumers may develop loyalties to these third party internet reservations systems rather than to our lodging brands. Although we expect to derive most of our business from traditional channels and our websites, if the amount of sales made through internet intermediaries increases significantly, our business and profitability may be significantly harmed. A Failure to Keep Pace with Developments in Technology Could Impair Our Operations or Competitive Position. The hospitality industry continues to demand the use of sophisticated technology and systems including technology utilized for property management, brand assurance and compliance, procurement, reservation systems, operation of our customer loyalty program, distribution and guest amenities. These technologies can be expected to require refinements, including to comply with the legal requirements such as privacy regulations and requirements established by third parties such as the payment card industry, and there is the risk that advanced new technologies will be introduced. Further, the development and maintenance of these technologies may require significant capital. There can be no assurance that as various systems and technologies become outdated or new technology is required, we will be able to replace or introduce them as quickly as our competition or within budgeted costs and timeframes. Further, there can be no assurance that we will achieve the benefits that may have been anticipated from any new technology or system. 9

Disasters, Disruptions and Other Impairment of Our Information Technologies and Systems Could Adversely Affect our Business. Our business involves the processing, use, storage and transmission of personal information regarding our employees, customers, hotel owners, and vendors for various business purposes, including marketing and promotional purposes. The protection of personal as well as proprietary information is critical to us. We are subject to numerous laws and regulations designed to protect personal information, including Member State implementation of the European Union Directive on Data Protection and various U.S. federal and state laws. We have established policies and procedures to help protect the privacy and security of our information. However, every year the number of laws and regulations continues to grow, as does the complexity of such laws. Further, privacy regulations, on occasion, may be inconsistent from one jurisdiction to another. Compliance with applicable privacy regulations may increase our operating costs and/or adversely impact our ability to market our products, properties and services to our guests. We are dependent on information technology networks and systems to process, transmit and store proprietary and personal information, and to communicate among our various locations around the world, which may include our reservation systems, vacation exchange systems, hotel/property management systems, customer and employee databases, call centers, administrative systems, and third party vendor systems. The complexity of this infrastructure contributes to the potential risk of security breaches. We rely on the security of our information systems and, those of our vendors and other authorized third parties, to protect our proprietary and personal information. Despite our efforts, information networks and systems may be vulnerable to threats such as system, network or Internet failures; computer hacking or business disruption; cyber-terrorism; viruses, worms or other malicious software programs; employee error, negligence, fraud, or misuse of systems; or other unauthorized attempts by third parties to access, modify or delete our proprietary and personal information. Although we have taken steps to address these concerns by implementing network security and internal controls, there can be no assurance that a system failure, unauthorized access, or breach will not occur. Any compromise of our networks or systems, public disclosure, or loss of personal or proprietary information could result in a disruption to our operations; damage to our reputation and a loss of confidence from our customers or employees; legal claims or proceedings, liability under laws that protect personal information, regulatory penalties, potentially resulting in significant monetary damages, regulatory enforcement actions, fines, and/or criminal or civil prosecution in one or more jurisdictions; and subjecting us to additional regulatory scrutiny, or additional costs and liabilities which could have a material adverse affect on our business, operations or financial condition. Significant Owners of Our Properties May Concentrate Risks. There is potential for a concentration of ownership of hotels operated under our brands by any single owner. Following the acquisition of the Le Mridien brand business and a large disposition transaction to one ownership group in 2006, single ownership groups own significant numbers of hotels operated by us. While the risks associated with such ownership are no different than exist generally (i.e., the financial position of the owner, the overall state of the relationship with the owner and their participation in optional programs and the impact on cost efficiencies if they choose not to participate), they are more concentrated. Our Real Estate Investments Subject Us to Numerous Risks. We are subject to the risks that generally relate to investments in real property because we own and lease hotels and resorts. The investment returns available from equity investments in real estate depend in large part on the amount of income earned and capital appreciation generated by the related properties, and the expenses incurred. In addition, a variety of other factors affect income from properties and real estate values, including governmental regulations, insurance, zoning, tax and eminent domain laws, interest rate levels and the availability of financing. For example, new or existing real estate zoning or tax laws can make it more expensive and/or time-consuming to develop real property or expand, modify or renovate hotels. When interest rates increase, the cost of acquiring, developing, expanding or renovating real property increases and real property values may decrease as the number of potential buyers decreases. Similarly, as financing becomes less available, it becomes more difficult both to acquire and to sell real property. Finally, under eminent domain laws, governments can take real property. Sometimes this taking is for less compensation than the owner believes the property is worth. Any of these factors could have a material 10

adverse impact on our results of operations or financial condition. In addition, equity real estate investments are difficult to sell quickly and we may not be able to adjust our portfolio of owned properties quickly in response to economic or other conditions. If our properties do not generate revenue sufficient to meet operating expenses, including debt service and capital expenditures, our income will be adversely affected. We May Be Subject to Environmental Liabilities. Our properties and operations are subject to a number of Environmental Laws. Under such laws, we could be held liable for the costs of removing or cleaning up hazardous or toxic substances at, on, under, or in our currently or formerly owned or operated properties. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The presence of hazardous or toxic substances may adversely affect the owners ability to sell or rent such real property or to borrow using such real property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic wastes may be liable for the costs of removal or remediation of such wastes at the treatment, storage or disposal facility, regardless of whether such facility is owned or operated by such person. We use certain substances and generate certain wastes that may be deemed hazardous or toxic under applicable Environmental Laws, and we from time to time have incurred, and in the future may incur, costs related to cleaning up contamination resulting from historic uses at certain of our current or former properties or our treatment, storage or disposal of wastes at facilities owned by others. Other Environmental Laws govern occupational exposure to ACMs and require abatement or removal of certain ACMs (limited quantities of which are present in various building materials such as spray-on insulation, floor coverings, ceiling coverings, tiles, decorative treatments and piping located at certain of our hotels) in the event of damage or demolition, or certain renovations or remodeling. Environmental Laws also regulate PCBs, which may be present in electrical equipment. A number of our hotels have USTs and equipment containing CFCs; the operation and subsequent removal or upgrading of certain USTs and the use of equipment containing CFCs also are regulated by Environmental Laws. In connection with our ownership, operation and management of our properties, we could be held liable for costs of remedial or other action with respect to PCBs, USTs or CFCs. Congress and some states are considering or have undertaken actions to regulate and reduce greenhouse gas emissions. New or revised laws and regulations or new interpretations of existing laws and regulations, such as those related to climate change, could affect the operation of our hotels and/or result in significant additional expense and operating restrictions on us. The cost impact of such legislation, regulation, or new interpretations would depend upon the specific requirements enacted and cannot be determined at this time. Risks Relating to Operations in Syria and Other Countries Subject to Sanction Laws From time to time the United States may impose sanctions that prohibit U.S. companies from engaging in business activities with certain persons or foreign countries or governments that it determines are adverse to U.S. foreign policy interests. For example, the United States has issued an executive order that prohibits U.S. companies from engaging in certain business activities with the government of Syria, a country that the United States has identified as a state sponsor of terrorism. During fiscal 2011, a foreign subsidiary of Starwood generated approximately $300,000 of revenue from management and other fees from existing hotels located in Syria. This amount constitutes significantly less than 1% of our worldwide annual revenues. We believe our activities in Syria are in full compliance with U.S. and local law. At any time, the United States may impose additional sanctions against Syria. If so, our existing activities in Syria may be adversely affected, or we may incur costs to respond to an executive order, depending on the nature of any further sanctions that might be imposed. In addition, in 2011 the United States issued an executive order that prohibited U.S. companies from transacting with the government of Libya and certain entities and individuals associated with the former Gaddafi regime. A foreign subsidiary of Starwood currently has a management contract for one hotel located in Libya, as well as three hotels outside Libya that are indirectly owned by the government of Libya. Although the restriction was released following the fall of the Gaddafi regime, the United States may impose additional sanctions against Libya at any time. Further, our activities in countries that are subject to U.S. sanction laws may reduce demand for our stock among certain investors. Any restrictions on Starwoods ability to conduct its business operations in a jurisdiction that is subject to U.S. sanctions laws could negatively impact our financial results. 11

Risks Relating to Debt Financing Our Debt Service Obligations May Adversely Affect our Cash Flow. As a result of our debt obligations, we are subject to: (i) the risk that cash flow from operations will be insufficient to meet required payments of principal and interest, (ii) restrictive covenants, including covenants relating to certain financial ratios, and (iii) interest rate risk. Although we anticipate that we will be able to repay or refinance our existing indebtedness and any other indebtedness when it matures, there can be no assurance that we will be able to do so or that the terms of such refinancing will be favorable. Our leverage may have important consequences including the following: (i) our ability to obtain additional financing for acquisitions, working capital, capital expenditures or other purposes, if necessary, may be impaired or such financing may not be available on terms favorable to us and (ii) a substantial decrease in operating cash flow, EBITDA (as defined in our credit agreements) or a substantial increase in our expenses could make it difficult for us to meet our debt service requirements and restrictive covenants and force us to sell assets and/or modify our operations. We Have Little Control Over the Availability of Funds Needed to Fund New Investments and Maintain Existing Hotels. In order to fund new hotel investments, as well as refurbish and improve existing hotels, both we and current and potential hotel owners must have access to capital. The availability of funds for new investments and maintenance of existing hotels depends in large measure on capital markets and liquidity factors over which we have little control. Current and prospective hotel owners may find hotel financing expensive and difficult to obtain. Delays, increased costs and other impediments to restructuring such projects may affect our ability to realize fees, recover loans and guarantee advances, or realize equity investments from such projects. Our ability to recover loans and guarantee advances from hotel operations or from owners through the proceeds of hotel sales, refinancing of debt or otherwise may also affect our ability to raise new capital. In addition, downgrades of our public debt ratings by rating agencies could increase our cost of capital. A breach of a covenant could result in an event of default that, if not cured or waived, could result in an acceleration of all or a substantial portion of our debt. For a more detailed description of the covenants imposed by our debt obligations, see Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Cash Used for Financing Activities in this Annual Report. Volatility in the Credit Markets Will Continue to Adversely Impact Our Ability to Sell the Loans That Our Vacation Ownership Business Generates. Our vacation ownership business provides financing to purchasers of our vacation ownership units, and we attempt to sell interests in those loans in the securities markets. Volatility in the credit markets may impact the timing and volume of the timeshare loans that we are able to sell. Although we expect to realize the economic value of our vacation ownership note portfolio even if future note sales are temporarily or indefinitely delayed, such delays may result in either increased borrowings to provide capital to replace anticipated proceeds from such sales or reduced spending in order to maintain our leverage and return targets. Risks Relating to So-Called Acts of God, Terrorist Activity and War Our financial and operating performance may be adversely affected by so-called acts of God, such as natural disasters, in locations where we own and/or operate significant properties and areas of the world from which we draw a large number of customers. Similarly, wars (including the potential for war), terrorist activity (including threats of terrorist activity), political unrest and other forms of civil strife and geopolitical uncertainty have caused in the past, and may cause in the future, our results to differ materially from anticipated results. In 2011, our hotels in Syria, Tunisia, Libya and Egypt experienced reduced bookings as a result of the political climate in these countries. If these conditions do not improve, our financial results could be negatively impacted. Risks Related to Pandemic Diseases Our business could be materially and adversely affected by the effect of a pandemic disease on the travel industry. For example, the past outbreaks of SARS and avian flu had a severe impact on the travel industry, and the recent outbreak of swine flu in Mexico had a similar impact. A prolonged recurrence of SARS, avian flu, swine flu or another pandemic disease also may result in health or other government authorities imposing restrictions on travel. Any of these events could result in a significant drop in demand for our hotel and vacation ownership businesses and adversely affect our financial condition and results of operations. 12

Our Insurance Policies May Not Cover All Potential Losses We carry insurance coverage for general liability, property, business interruption, and other risks with respect to our owned and leased properties and we make available insurance programs for owners of properties we manage. These policies offer coverage terms and conditions that we believe are usual and customary for our industry. Generally, our all-risk property policies provide that coverage is available on a per occurrence basis and that, for each occurrence, there is a limit as well as various sub-limits on the amount of insurance proceeds we will receive in excess of applicable deductibles. In addition, there may be overall limits under the policies. Sub-limits exist for certain types of claims such as service interruption, debris removal, expediting costs or landscaping replacement, and the dollar amounts of these sub-limits are significantly lower than the dollar amounts of the overall coverage limit. Our property policies also provide that for the coverage of critical earthquake (California and Mexico), hurricane and flood, all of the claims from each of our properties resulting from a particular insurable event must be combined together for purposes of evaluating whether the annual aggregate limits and sub-limits contained in our policies have been exceeded and any such claims will also be combined with the claims of owners of managed hotels that participate in our insurance program for the same purpose. Therefore, if insurable events occur that affect more than one of our owned hotels and/or managed hotels owned by third parties that participate in our insurance program, the claims from each affected hotel will be added together to determine whether the per occurrence limit, annual aggregate limit or sub-limits, depending on the type of claim, have been reached and if the limits or sub-limits are exceeded each affected hotel will only receive a proportional share of the amount of insurance proceeds provided for under the policy. In addition, under those circumstances, claims by third party owners will reduce the coverage available for our owned and leased properties. In addition, there are also other risks including but not limited to war, certain forms of terrorism such as nuclear, biological or chemical terrorism, political risks, some environmental hazards and/or acts of God that may be deemed to fall completely outside the general coverage limits of our policies or may be uninsurable or may be too expensive to justify insuring against. We may also encounter challenges with an insurance provider regarding whether it will pay a particular claim that we believe to be covered under our policy. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a hotel or resort, as well as the anticipated future revenue from the hotel or resort. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Our Acquisitions/Dispositions and Investments in New Brands May Ultimately Not Prove Successful and We May Not Realize Anticipated Benefits We consider corporate as well as property acquisitions and investments that complement our business. In many cases, we compete for these opportunities with third parties who may have substantially greater financial resources or different or lower acceptable financial metrics than we do. There can be no assurance that we will be able to identify acquisition or investment candidates or complete transactions on commercially reasonable terms or at all. If transactions are consummated, there can be no assurance that any anticipated benefits will actually be realized. Similarly, there can be no assurance that we will be able to obtain additional financing for acquisitions or investments, or that the ability to obtain such financing will not be restricted by the terms of our debt agreements. We periodically review our business to identify properties or other assets that we believe either are non-core, no longer complement our business, are in markets which may not benefit us as much as other markets during an economic recovery or could be sold at significant premiums. We are focused on restructuring and enhancing real estate returns and monetizing investments, and from time to time, may attempt to sell these identified properties and assets. There can be no assurance, however, that we will be able to complete dispositions on commercially reasonable terms or at all or that any anticipated benefits will actually be received. We may develop and launch additional brands in the future. There can be no assurance regarding the level of acceptance of these brands in the development and consumer marketplaces, that the cost incurred in developing the brands will be recovered or that the anticipated benefits from these new brands will be realized. 13

Investing Through Partnerships or Joint Ventures Decreases Our Ability to Manage Risk In addition to acquiring or developing hotels and resorts or acquiring companies that complement our business directly, we have from time to time invested, and expect to continue to invest, as a co-venturer. Joint venturers often have shared control over the operation of the joint venture assets. Therefore, joint venture investments may involve risks such as the possibility that the co-venturer in an investment might become bankrupt or not have the financial resources to meet its obligations, or have economic or business interests or goals that are inconsistent with our business interests or goals, or be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. Consequently, actions by a co-venturer might subject hotels and resorts owned by the joint venture to additional risk. Further, we may be unable to take action without the approval of our joint venture partners. Alternatively, our joint venture partners could take actions binding on the joint venture without our consent. Additionally, should a joint venture partner become bankrupt, we could become liable for our partners share of joint venture liabilities. Our Vacation Ownership Business is Subject to Extensive Regulation and Risk of Default We market and sell VOIs, which typically entitle the buyer to ownership of a fully-furnished resort unit for a one-week period on either an annual or an alternate-year basis. We also acquire, develop and operate vacation ownership resorts, and provide financing to purchasers of VOIs. These activities are all subject to extensive regulation by the federal government and the states in which vacation ownership resorts are located and in which VOIs are marketed and sold including regulation of our telemarketing activities under state and federal Do Not Call laws. In addition, the laws of most states in which we sell VOIs grant the purchaser the right to rescind the purchase contract at any time within a statutory rescission period. Although we believe that we are in material compliance with all applicable federal, state, local and foreign laws and regulations to which vacation ownership marketing, sales and operations are currently subject, changes in these requirements, or a determination by a regulatory authority that we were not in compliance, could adversely affect us. In particular, increased regulations of telemarketing activities could adversely impact the marketing of our VOIs. We bear the risk of defaults under purchaser mortgages on VOIs. If a VOI purchaser defaults on the mortgage during the early part of the loan amortization period, we will not have recovered the marketing, selling (other than commissions in certain events), and general and administrative costs associated with such VOI, and such costs will be incurred again in connection with the resale of the repossessed VOI. Accordingly, there is no assurance that the sales price will be fully or partially recovered from a defaulting purchaser or, in the event of such defaults, that our allowance for losses will be adequate. Risks Related to Our Dependence on Senior Management and Our Ability to Achieve Our Growth Strategy Our future success and our ability to manage future growth depend in large part upon the efforts of our senior management and our ability to attract and retain key officers and other highly qualified personnel. Competition for such personnel is intense. In the past several years, we have experienced significant changes in our senior management, including executive officers (see Item 10, Directors, Executive Officers and Corporate Governance of this Annual Report). There can be no assurance that we will continue to be successful in attracting and retaining qualified personnel. Accordingly, there can be no assurance that our senior management will be able to successfully execute and implement our growth and operating strategies. Over the last few years we have been pursuing a strategy of reducing our investment in owned real estate and increasing our focus on the management and franchise business. As a result, we are planning on substantially increasing the number of hotels we open every year and increasing the overall number of hotels in our system. This increase will require us to recruit and train a substantial number of new associates to work at these hotels as well as increasing our capabilities to enable hotels to open on time and successfully. There can be no assurance that our strategy will be successful. Tax Risks Evolving Government Regulation Could Impose Taxes or Other Burdens on Our Business. We rely upon generally available interpretations of tax laws and other types of laws and regulations in the countries and locales in which we operate. We cannot be sure that these interpretations are accurate or that the responsible taxing or 14

other governmental authority is in agreement with our views. The imposition of additional taxes or requirements to change the way we conduct our business could cause us to have to pay taxes that we currently do not collect or pay or increase the costs of our services or increase our costs of operations. Our current business practice with our internet reservation channels is that the intermediary collects hotel occupancy tax from its customer based on the price that the intermediary paid us for the hotel room. We then remit these taxes to the various tax authorities. Several jurisdictions have stated that they may take the position that the tax is also applicable to the intermediaries gross profit on these hotel transactions. If jurisdictions take this position, they should seek the additional tax payments from the intermediary; however, it is possible that they may seek to collect the additional tax payment from us and we would not be able to collect these taxes from the customers. To the extent that any tax authority succeeds in asserting that the hotel occupancy tax applies to the gross revenue on these transactions, we believe that any additional tax would be the responsibility of the intermediary. However, it is possible that we might have additional tax exposure. In such event, such actions could have a material adverse effect on our business, results of operations and financial condition. Risks Relating to Ownership of Our Shares Our Board of Directors May Issue Preferred Stock and Establish the Preferences and Rights of Such Preferred Stock. Our charter provides that the total number of shares of stock of all classes which the Corporation has authority to issue is 1,200,000,000, consisting of one billion shares of common stock and 200 million shares of preferred stock. Our Board of Directors has the authority, without a vote of stockholders, to establish the preferences and rights of any preferred shares to be issued and to issue such shares. The issuance of preferred shares having special preferences or rights could delay or prevent a change in control even if a change in control would be in the interests of our stockholders. Since our Board of Directors has the power to establish the preferences and rights of preferred shares without a stockholder vote, our Board of Directors may give the holders preferences, powers and rights, including voting rights, senior to the rights of holders of our shares. Our Board of Directors May Implement Anti-Takeover Devices and Our Charter and Bylaws Contain Provisions which May Prevent Takeovers. Certain provisions of Maryland law permit our Board of Directors, without stockholder approval, to implement possible takeover defenses that are not currently in place, such as a classified board. In addition, our charter contains provisions relating to restrictions on transferability of our common stock, which provisions may be amended only by the affirmative vote of our stockholders holding two-thirds of the votes entitled to be cast on the matter. As permitted under the Maryland General Corporation Law, our Bylaws provide that directors have the exclusive right to amend our Bylaws. We Cannot Provide Assurance That We Will Continue to Pay Dividends. There can be no assurance that we will continue to pay dividends. Our Board of Directors may suspend the payment of dividends if the Board deems such action to be in the best interests of the Company or stockholders. If we do not pay dividends, the price of our common stock must appreciate for you to realize a gain on your investment in the Company. This appreciation may not occur and our stock may, in fact, depreciate in value. Item 1B. Unresolved Staff Comments. Not applicable. Item 2. Properties. We are one of the largest hotel and leisure companies in the world, with operations in approximately 100 countries. We consider our hotels and resorts, including vacation ownership resorts (together Resorts), generally to be premier establishments with respect to desirability of location, size, facilities, physical condition, quality and variety of services offered in the markets in which they are located. Although obsolescence attributable to age, condition of facilities, and style can adversely affect our Resorts, Starwood and third-party 15

owners of managed and franchised Resorts expend substantial funds to renovate and maintain their facilities in order to remain competitive. For further information see Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources in this Annual Report. At December 31, 2011 our hotel business included 1,076 owned, managed or franchised hotels with approximately 315,300 rooms and our owned vacation ownership and residential business included 13 standalone vacation ownership resorts and residential properties at December 31, 2011, predominantly under seven brands. All brands (other than the Four Points by Sheraton and the Aloft and Element brands) represent fullservice properties that range in amenities from luxury hotels and extended stay resorts to more moderately priced hotels. Our Four Points by Sheraton, Aloft and Element brands are select-service properties that cater to more value oriented consumers. The following table reflects our hotel and vacation ownership properties, by brand, as of December 31, 2011:
Hotels, VOI and Residential(a) Properties Rooms

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

104 41 190 99 421 159 55 20 1,089

20,500 12,000 74,500 25,600 148,400 27.900 8,700 4,700 322,300

(a) Includes vacation ownership properties of which 13 are stand-alone, eight are mixed-use and one is an unconsolidated joint venture totaling rooms of 7,000. Hotel Business Managed and Franchised Hotels. Hotel and resort properties in the United States are often owned by entities that do not manage hotels or own a brand name. Hotel owners typically enter into management contracts with hotel management companies to operate their hotels. When a management company does not offer a brand affiliation, the hotel owner often chooses to pay separate franchise fees to secure the benefits of brand marketing, centralized reservations and other centralized administrative functions, particularly in the sales and marketing area. Management believes that companies, such as Starwood, that offer both hotel management services and well-established worldwide brand names appeal to hotel owners by providing the full range of management, marketing and reservation services. In 2011, we opened 80 managed and franchised hotels with approximately 21,000 rooms and 31 managed and franchised hotels with approximately 7,000 rooms left our system. Managed Hotels. We manage hotels worldwide, usually under a long-term agreement with the hotel owner (including entities in which we have a minority equity interest). Our responsibilities under hotel management contracts typically include hiring, training and supervising the managers and employees that operate these facilities. For additional fees, we provide centralized reservation services and coordinate national and international advertising and certain marketing and promotional services. We prepare and implement annual budgets for the hotels we manage and are responsible for allocating property-owner funds for periodic maintenance and repair of buildings and furnishings. In addition to our owned and leased hotels, at December 31,

16

2011, we managed 518 hotels with approximately 172,900 rooms worldwide. During the year ended December 31, 2011, we generated management fees by geographic area as follows: United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Americas (Latin America, Caribbean & Canada) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.8% 28.0% 15.9% 13.7% 8.6% 100.0%

Management contracts typically provide for base fees tied to gross revenue and incentive fees tied to profits as well as fees for other services, including centralized reservations, national and international advertising and sales and marketing. In our experience, owners seek hotel managers that can provide attractively priced base, incentive and marketing fees combined with demonstrated sales and marketing expertise and operations-focused management designed to enhance profitability. Some of our management contracts permit the hotel owner to terminate the agreement when the hotel is sold or otherwise transferred to a third party, as well as if we fail to meet established performance criteria. In addition, many hotel owners seek equity, debt or other investments from us to help finance hotel renovations or conversions to a Starwood brand, so as to align the interests of the owner and Starwood. Our ability or willingness to make such investments may determine, in part, whether we will be offered, will accept or will retain a particular management contract. During the year ended December 31, 2011, we opened 49 managed hotels with approximately 14,000 rooms, and 11 managed hotels with approximately 4,000 rooms left our system. In addition, during 2011, we signed management agreements for 70 hotels with approximately 20,000 rooms, a small portion of which opened in 2011 and the majority of which will open in the future. Brand Franchising and Licensing. We franchise our Sheraton, Westin, Four Points by Sheraton, Luxury Collection, Le Mridien, Aloft and Element brand names and generally derive licensing and other fees from franchisees based on a fixed percentage of the franchised hotels room revenue, as well as fees for other services, including centralized reservations, national and international advertising and sales and marketing. In addition, a franchisee may purchase hotel supplies, including brand-specific products, from certain Starwood-approved vendors. We also review certain plans for, and the location of, franchised hotels and review their design. At December 31, 2011, there were 499 franchised properties with approximately 123,000 rooms. During the year ended December 31, 2011, we generated franchise fees by geographic area as follows: United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Americas (Latin America, Caribbean & Canada) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66.9% 9.8% 13.4% 9.2% 0.7% 100.0%

In addition to the franchise contracts we retained in connection with the sale of hotels during the year ended December 31, 2011, we opened 31 franchised hotels with approximately 7,000 rooms, and 20 franchised hotels with approximately 4,000 rooms left our system. In addition, during 2011 we signed franchise agreements for 42 hotels with approximately 9,000 rooms, a portion of which opened in 2011 and a portion of which will open in the future. Owned, Leased and Consolidated Joint Venture Hotels. Historically, we have derived the majority of our revenues and operating income from our owned, leased and consolidated joint venture hotels and a significant portion of these results are driven by these hotels in North America. However, beginning in 2006, we embarked upon a strategy of selling a significant number of hotels. Since 2006 and through December 31, 2011, we have sold 65 wholly-owned hotels which has substantially reduced our revenues and operating income from owned, leased and consolidated joint-venture hotels. The majority of these hotels were sold subject to long-term 17

management or franchise contracts. To date, where we have sold hotels, we have not provided seller financing or other financial assistance to buyers. Total revenues generated from our owned, leased and consolidated joint venture hotels worldwide for the years ending December 31, 2011, 2010 and 2009 were $1.768 billion, $1.704 billion and $1.584 billion, respectively (total revenues from our owned, leased and consolidated joint venture hotels in North America were $1.001 billion, $1.067 billion and $1.024 billion for 2011, 2010 and 2009, respectively). The following represents our top five markets in the United States by metropolitan area as a percentage of our total owned, leased and consolidated joint venture revenues for the years ended December 31, 2011 and 2010: Top Five Domestic Markets in the United States as a % of Total Owned Revenues for the Years Ended December 31, 2011 and 2010 (1)
Metropolitan Area 2011 Revenues 2010 Revenues

New York, NY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hawaii . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Phoenix, AZ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . San Francisco, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chicago, IL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.4% 6.1% 5.3% 4.1% 3.1%

12.3% 6.2% 5.0% 4.0% 4.3%

The following represents our top five international markets by country as a percentage of our total owned, leased and consolidated joint venture revenues for the years ended December 31, 2011 and 2010: Top Five International Markets as a % of Total Owned Revenues for the Years Ended December 31, 2011 and 2010 (1)
Country 2011 Revenues 2010 Revenues

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Includes the revenues of hotels sold for the period prior to their sale.

11.0% 7.4% 5.9% 4.9% 4.2%

10.8% 7.1% 5.6% 4.1% 4.1%

18

Following the sale of a significant number of our hotels in the past three years, we currently own or lease 59 hotels as follows:
Hotel Location Rooms

U.S. Hotels: The St. Regis Hotel, New York St. Regis Hotel, San Francisco The Phoenician W New York Times Square W Chicago Lakeshore W Los Angeles Westwood W New Orleans W New Orleans, French Quarter The Westin Maui Resort & Spa The Westin Peachtree Plaza, Atlanta The Westin San Francisco Airport The Westin St. John Resort & Villas Sheraton Kauai Resort Sheraton Steamboat Springs Resort Sheraton Suites Philadelphia Airport Aloft Lexington Aloft Philadelphia Airport Element Lexington Four Points by Sheraton Philadelphia Airport Four Points by Sheraton Tucson University Plaza The Manhattan at Times Square Tremont Hotel Clarion Hotel Cove Haven Resort Pocono Palace Resort Paradise Stream Resort Perimeter Hotel, Atlanta

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

229 260 643 509 520 258 410 98 759 1,068 397 175 394 207 251 136 136 123 177 150 659 135 251 276 189 144 275

19

International Hotels:

Location

Rooms

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

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

161 160 100 90 181 147 138 69 136 473 192 316 243 280 171 379 273 163 1,377 557 542 106 229 431 44 264 742 755 474 825 252 303

20

An indicator of the performance of our owned, leased and consolidated joint venture hotels is revenue per available room (REVPAR), as it measures the period-over-period growth in rooms revenue for comparable properties. This is particularly the case in the United States where there is no impact on this measure from foreign exchange rates. The following table summarizes REVPAR, average daily rates (ADR) and average occupancy rates on a year-to-year basis for our 45 owned, leased and consolidated joint venture hotels (excluding six hotels sold or closed and 14 hotels undergoing significant repositionings or without comparable results in 2011 and 2010) (Same-Store Owned Hotels) for the years ended December 31, 2011 and 2010:
Year Ended December 31, 2011 2010 Variance

Worldwide (45 hotels with approximately 16,000 rooms) REVPAR (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North America (22 hotels with approximately 9,000 rooms) REVPAR (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International (23 hotels with approximately 7,000 rooms) REVPAR (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$159.12 $142.76 $218.65 $205.49 72.8% 69.5% $164.78 $153.63 $215.60 $207.44 76.4% 74.1% $152.01 $129.11 $222.95 $202.64 68.2% 63.7%

11.5% 6.4% 3.3 7.3% 3.9% 2.3 17.7% 10.0% 4.5

(1) REVPAR is calculated by dividing room revenue, which is derived from rooms and suites rented or leased, by total room nights available for a given period. REVPAR may not be comparable to similarly titled measures such as revenues. During the years ended December 31, 2011 and 2010, we invested approximately $283 million and $184 million, respectively, for capital expenditures at owned hotels. These capital expenditures included renovation costs at The Westin Peachtree Plaza in Atlanta, GA, Sheraton Kauai Resort in Koloa, HI, The St. Regis Florence in Florence, Italy, Hotel Alfonso XIII in Seville, Spain and the purchase of the Hotel Goldener Hirsch in Salzburg, Austria. The following table summarizes REVPAR, ADR and average occupancy rates for our same-store owned, leased, managed and franchised hotels (Same-Store Systemwide Hotels) on a year-to-year basis for the years ended December 31, 2011 and 2010.
Year Ended December 31, 2011 2010 Variance

Worldwide REVPAR (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North America REVPAR (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . International REVPAR (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$114.56 $104.43 $168.37 $158.57 68.0% 65.9% $108.57 $ 99.47 $155.11 $148.45 70.0% 67.0% $123.40 $111.74 $189.36 $174.17 65.2% 64.2%

9.7% 6.2% 2.1 9.1% 4.5% 3.0 10.4% 8.7% 1.0

(1) REVPAR is calculated by dividing room revenue, which is derived from rooms and suites rented or leased, by total room nights available for a given period. REVPAR may not be comparable to similarly titled measures such as revenues. 21

Vacation Ownership and Residential Business We develop, own and operate vacation ownership resorts, market and sell the VOIs in the resorts and, in many cases, provide financing to customers who purchase such ownership interests. Owners of VOIs can trade their interval for intervals at other Starwood vacation ownership resorts, intervals at certain vacation ownership resorts not otherwise sponsored by Starwood through an exchange company, or for hotel stays at Starwood properties. From time to time, we securitize or sell the receivables generated from our sale of VOIs. We have also entered into arrangements with several owners for mixed use hotel projects that will include a residential component. We have entered into licensing agreements for the use of certain of our brands to allow the owners to offer branded condominiums to prospective purchasers. In consideration, we typically receive a licensing fee equal to a percentage of the gross sales revenue of the units sold. The licensing arrangement generally terminates upon the earlier of sell-out of the units or a specified length of time. We recently completed the development of a residential project in Bal Harbour, Florida and are in the process of selling residential units. At December 31, 2011, we had 22 residential and vacation ownership resorts and sites in our portfolio with 17 actively selling VOIs and residences including one unconsolidated joint venture. During 2011 and 2010 we invested approximately $70 million and $151 million, respectively, for vacation ownership capital expenditures, including VOI construction at the Westin Desert Willow Villas in Palm Desert, CA, the Westin Lagunamar Ocean Resort in Cancun, as well as construction costs at The St. Regis Bal Harbour Resort in Miami Beach, FL (St. Regis Bal Harbour) . Due to the global economic crisis and its impact on the long-term outlook for the timeshare industry, during the fourth quarter of 2009, we completed a comprehensive review of our vacation ownership projects. We decided at that time that no new projects were to be initiated, and that we would not develop three vacation ownership sites and future phases of certain existing projects. As a result, inventories, fixed assets and land values at certain projects were determined to be impaired and were written down to their fair value, resulting in a primarily non-cash pre-tax impairment charge in 2009 of $255 million. Additionally, in connection with this review of the business, we made a decision to reduce the pricing of certain inventory at existing projects, resulting in a pre-tax charge of $17 million. As a result of these decisions and future plans for the vacation ownership business, we also recorded a $90 million non-cash charge for the impairment of goodwill associated with the vacation ownership reporting unit. As a result of the economic recovery, in 2011, we decided to construct additional timeshare inventory in a small portion of one of the projects where we had ceased development. Item 3. Legal Proceedings. Information regarding Legal Proceedings is incorporated by reference from the Litigation section in Note 25, Commitments and Contingencies, of our consolidated financial statements set forth in Item 8. Financial Statements and Supplementary Data of this Annual Report, which is incorporated herein by reference. Item 4. Mine Safety Disclosures. Not applicable.

PART II Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock, par value $0.01 per share (Corporation Shares), is traded on the New York Stock Exchange (the NYSE) under the symbol HOT. 22

The following table sets forth the quarterly range of the high and low sale prices of the Corporation Shares for the fiscal periods indicated as reported on the NYSE Composite Tape:
High Low

2011 Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010 Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Approximate Number of Equity Security Holders

$54.15 $59.45 $61.70 $65.51 $62.72 $54.25 $56.65 $47.52

$35.78 $37.88 $50.87 $54.95 $52.16 $39.60 $41.28 $33.15

As of February 10, 2012, there were approximately 14,000 holders of record of Corporation Shares. Dividends The following table sets forth the frequency and amount of cash dividends declared by the Corporation to holders of Corporation Shares for the fiscal years ended December 31, 2011 and 2010:
Dividends Declared

2011 Annual dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010 Annual dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$0.50 (a) $0.30 (b)

(a) The Corporation declared a dividend in the fourth quarter of 2011 to shareholders of record on December 15, 2011, which was paid in December 2011. (b) The Corporation declared a dividend in the fourth quarter of 2010 to shareholders of record on December 16, 2010, which was paid in December 2010. Conversion of Securities; Sale of Unregistered Securities Units of SLC Operating Limited Partnership, our wholly-owned subsidiary, are convertible into Corporation Shares at the unit holders option, provided that we have the option to settle conversion requests in cash or Corporation Shares. At December 31, 2011 and 2010 there were approximately 159,000 and 166,000 of these units outstanding, respectively. Issuer Purchases of Equity Securities During the year ended December 31, 2011, our Board of Directors authorized a share purchase program of $250 million. As of December 31, 2011, $250 million of repurchase capacity remained available under this program.

23

STOCK RETURN PERFORMANCE AND CUMULATIVE TOTAL RETURN Set forth below is a line graph comparing the cumulative total stockholder return on the Corporation Shares against the cumulative total return on the S&P 500 and the S&P 500 Hotel Index (the S&P 500 Hotel) for the five fiscal years beginning after December 31, 2006 and ending December 31, 2011. The graph assumes that the value of the investments was $100 on December 31, 2006 and that all dividends and other distributions were reinvested. The comparisons are provided in response to SEC disclosure requirements and are not intended to forecast or be indicative of future performance. 250 Starwood 200 S&P 500 S&P 500 Hotel 150

DOLLARS

100

50

0 2006 2007
12/31/06

2008
12/31/07

2009
12/31/08

2010
12/31/09 12/31/10

2011
12/31/11

Starwood S&P 500 S&P 500 Hotel

$100.00 $100.00 $100.00

71.89 105.49 87.56

30.69 66.47 45.28

63.05 84.06 70.57

105.31 96.74 108.15

83.98 98.76 87.28

24

Item 6. Selected Financial Data. The following selected financial data should be read in conjunction with the information set forth under Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations, and our consolidated financial statements and related notes thereto (the Notes) beginning on page F-1 of this Annual Report.
2011 Year Ended December 31, 2010 2009 2008 2007 (In millions, except per share data)

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations (a) . . . . . . . . . . . . . . . . . . Diluted earnings per share from continuing operations . . . . . . . . . .

$5,624 $ 630 $ 502 $ 2.57

$5,071 $ 600 $ 310 $ 1.63

$4,696 $ 26 $ (1) $ 0.00 $ $ $ $ $ 571 116 (993) 165 0.20

$5,754 $5,999 $ 610 $ 841 $ 249 $ 532 $ 1.34 $ 2.52 $ $ $ $ $ 646 (172) (243) 172 0.90 $ $ $ $ $ 884 (215) (712) 90 0.90

Cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 641 $ 764 Cash from (used for) investing activities . . . . . . . . . . . . . . . . . . . . . $ (176) $ (71) Cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . $ (775) $ (26) Aggregate cash distributions paid . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99 $ 93 Cash distributions and dividends declared per Share . . . . . . . . . . . . $ 0.50 $ 0.30

(a) Amounts represent income from continuing operations attributable to Corporation Shares (i.e. excluding non-controlling interests).
2011 2010 At December 31, 2009 2008 (In millions) 2007

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt, net of current maturities . . . . . . . . . . . . . . . . . . . .

$9,560 $2,596

$9,776 $3,215

$8,761 $2,955

$9,703 $3,502

$9,622 $3,590

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

25

CRITICAL ACCOUNTING POLICIES We believe the following to be our critical accounting policies: Revenue Recognition. Our revenues are primarily derived from the following sources: (1) hotel and resort revenues at our owned, leased and consolidated joint venture properties; (2) vacation ownership interests and residential unit revenues; (3) management and franchise revenues; (4) revenues from managed and franchised properties; and (5) other revenues which are ancillary to our operations. Generally, revenues are recognized when the services have been rendered. The following is a description of the composition of our revenues: Owned, Leased and Consolidated Joint Ventures Represents revenue primarily derived from hotel operations, including the rental of rooms and food and beverage sales from owned, leased or consolidated joint venture hotels and resorts. Revenue is recognized when rooms are occupied and services have been rendered. These revenues are impacted by global economic conditions affecting the travel and hospitality industry as well as relative market share of the local competitive set of hotels. REVPAR is a leading indicator of revenue trends at owned, leased and consolidated joint venture hotels as it measures the period-over-period growth in rooms revenue for comparable properties. Vacation Ownership Interests and Residential Units We recognize revenue from VOI sales and financings and the sales of residential units which are typically a component of mixed use projects that include a hotel. Such revenues are impacted by the state of the global economy and, in particular, the U.S. economy, as well as interest rates and other economic conditions affecting the lending market. Revenue is generally recognized upon the buyer demonstrating a sufficient level of initial and continuing investment, the period of cancellation with refund has expired and receivables are deemed collectible. We determine the portion of revenues to recognize for sales accounted for under the percentage of completion method based on judgments and estimates including total project costs to complete. Additionally, we record reserves against these revenues based on expected default levels. Changes in costs could lead to adjustments to the percentage of completion status of a project, which may result in differences in the timing and amount of revenues recognized from the projects. We have also entered into licensing agreements with third-party developers to offer consumers branded condominiums or residences. Our fees from these agreements are generally based on the gross sales revenue of units sold. Residential fee revenue is recorded in the period that a purchase and sales agreement exists, delivery of services and obligations has occurred, the fee to the owner is deemed fixed and determinable and collectability of the fees is reasonably assured. Residential revenue on whole ownership units is generally recorded using the completed contract method, whereby revenue is recognized only when a sales contract is completed or substantially completed. During the performance period, costs and deposits are recorded on the balance sheet. Management and Franchise Fees Represents fees earned on hotels and resorts managed worldwide, usually under long-term contracts, franchise fees received in connection with the franchise of our Sheraton, Westin, Four Points by Sheraton, Le Mridien and Luxury Collection brand names, termination fees and the amortization of deferred gains related to sold properties for which we have significant continuing involvement. Management fees are comprised of a base fee, which is generally based on a percentage of gross revenues, and an incentive fee, which is generally based on the propertys profitability. For any time during the year, when the provisions of our management contracts allow receipt of incentive fees upon termination, incentive fees are recognized for the fees due and earned as if the contract was terminated at that date, exclusive of any termination fees due or payable. Therefore, during periods prior to year-end, the incentive fees recorded may not be indicative of the eventual incentive fees that will be recognized at year-end as conditions and incentive hurdle calculations may not be final. Franchise fees are generally based on a percentage of hotel room revenues. As with hotel revenues discussed above, these revenue sources are affected by conditions impacting the travel and hospitality industry as well as competition from other hotel management and franchise companies. Other Revenues from Managed and Franchised Properties These revenues represent reimbursements of costs incurred on behalf of managed hotel properties and franchisees. These costs relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based 26

upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our operating income or our net income. Goodwill and Intangible Assets. Goodwill and intangible assets arise in connection with acquisitions, including the acquisition of management contracts. We do not amortize goodwill and intangible assets with indefinite lives. Intangible assets with finite lives are amortized over their respective useful lives. We review all goodwill and intangible assets for impairment annually, or upon the occurrence of a trigger event. Impairment charges, if any, are recognized in operating results. In September 2011, the Financial Accounting Standards Board (FASB) issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. This topic permits an entity to assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis to determine whether an additional impairment test is necessary. This topic is for annual and interim goodwill impairment tests performed for fiscal years beginning after December 13, 2011 with early adoption allowed. We early adopted this topic during the fourth quarter of 2011 in conjunction with our annual impairment testing (see Note 7). Frequent Guest Program. Starwood Preferred Guest (SPG) is our frequent guest incentive marketing program. SPG members earn points based on spending at our owned, managed and franchised hotels, as incentives to first-time buyers of VOIs and residences, and through participation in affiliated partners programs such as co-branded credit cards. Points can be redeemed at substantially all of our owned, managed and franchised hotels as well as through other redemption opportunities with third parties, such as conversion to airline miles. We charge our owned, managed and franchised hotels the cost of operating the SPG program, including the estimated cost of our future redemption obligation, based on a percentage of our SPG members qualified expenditures. The Companys management and franchise agreements require that we be reimbursed for the costs of operating the SPG program, including marketing, promotions and communications and performing member services for the SPG members. As points are earned, the Company increases the SPG point liability for the amount of cash it receives from its managed and franchised hotels related to the future redemption obligation. For our owned hotels we record an expense for the amount of our future redemption obligation with the offset to the SPG point liability. When points are redeemed by the SPG members, the hotels recognize revenue and the SPG point liability is reduced. Through the services of third-party actuarial analysts, we determine the value of the future redemption obligation based on statistical formulas which project the timing of future point redemptions based on historical experience, including an estimate of the breakage for points that will never be redeemed, and an estimate of the points that will eventually be redeemed as well as the cost of reimbursing hotels and other third parties in respect of other redemption opportunities for point redemptions. We consolidate the assets and liabilities of the SPG program including the liability associated with the future redemption obligation which is included in other long-term liabilities and accrued expenses in the accompanying consolidated balance sheets. The total actuarially determined liability (see Note 17), as of December 31, 2011 and 2010 is $844 million and $753 million, respectively, of which $251 million and $225 million, respectively, is included in accrued expenses. Long-Lived Assets. We evaluate the carrying value of our long-lived assets for impairment by comparing the expected undiscounted future cash flows of the assets to the net book value of the assets if certain trigger events occur. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value is charged to current earnings. Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, sales of similar assets, appraisals and, if appropriate, current estimated net sales proceeds from pending offers. We evaluate the carrying value of our long-lived assets based on our plans, at the time, for such assets and such qualitative factors as future development in the surrounding area, status of expected local competition and projected incremental income from renovations. Changes to our plans, including a decision to dispose of or change the intended use of an asset, can have a material impact on the carrying value of the asset. 27

Loan Loss Reserves. For the vacation ownership and residential segment, we record an estimate of expected uncollectibility on our VOI notes receivable as a reduction of revenue at the time we recognize a timeshare sale. We hold large amounts of homogeneous VOI notes receivable and therefore assess uncollectibility based on pools of receivables. In estimating loan loss reserves, we use a technique referred to as static pool analysis, which tracks defaults for each years mortgage originations over the life of the respective notes and projects an estimated default rate. As of December 31, 2011, the average estimated default rate for our pools of receivables was 9.9%. The primary credit quality indicator used by us to calculate the loan loss reserve for the vacation ownership notes is the origination of the notes by brand (Sheraton, Westin, and Other), as we believe there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired. In addition to quantitatively calculating the loan loss reserve based on its static pool analysis, we supplement the process by evaluating certain qualitative data, including the aging of the respective receivables, current default trends by brand and origination year, and the Fair Isaac Corporation (FICO) scores of the buyers. Given the significance of our respective pools of VOI notes receivable, a change in the projected default rate can have a significant impact to its loan loss reserve requirements, with a 0.1% change estimated to have an impact of approximately $4 million. We consider a VOI note receivable delinquent when it is more than 30 days outstanding. All delinquent loans are placed on nonaccrual status and we do not resume interest accrual until payment is made. Upon reaching 120 days outstanding, the loan is considered to be in default and we commence the repossession process. Uncollectible VOI notes receivable are charged off when title to the unit is returned to us. We generally do not modify vacation ownership notes that become delinquent or upon default. For the hotel segment, we measure the impairment of a loan based on the present value of expected future cash flows, discounted at the loans original effective interest rate, or the estimated fair value of the collateral. For impaired loans, we establish a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows or the estimated fair value of the collateral. We apply the loan impairment policy individually to all loans in the portfolio and do not aggregate loans for the purpose of applying such policy. For loans that we have determined to be impaired, we recognize interest income on a cash basis. Assets Held for Sale. We consider properties to be assets held for sale when management approves and commits to a formal plan to actively market a property or group of properties for sale and a signed sales contract and significant non-refundable deposit or contract break-up fee exist. Upon designation as an asset held for sale, we record the carrying value of each property or group of properties at the lower of its carrying value which includes allocable segment goodwill or its estimated fair value, less estimated costs to sell, and we stop recording depreciation expense. Any gain realized in connection with the sale of a property for which we have significant continuing involvement (such as through a long-term management agreement) is deferred and recognized over the initial term of the related agreement. The operations of the properties held for sale prior to the sale date are recorded in discontinued operations unless we will have continuing involvement (such as through a management or franchise agreement) after the sale. Legal Contingencies. We are subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. An estimated loss from a loss contingency should be accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. We evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our financial position or our results of operations. Income Taxes. We provide for income taxes in accordance with principles contained in ASC 740, Income Taxes. Under these principles, we recognize the amount of income tax payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our financial statements or tax returns. 28

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the new rate is enacted. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe a portion will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent cumulative earnings experience and expectations of future taxable income by taxing jurisdiction, the carry-forward periods available to us for tax reporting purposes and tax attributes. We measure and recognize the amount of tax benefit that should be recorded for financial statement purposes for uncertain tax positions taken or expected to be taken in a tax return. With respect to uncertain tax positions, we evaluate the recognized tax benefits for derecognition, classification, interest and penalties, interim period accounting and disclosure requirements. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. RESULTS OF OPERATIONS The following discussion presents an analysis of results of our operations for the years ended December 31, 2011, 2010 and 2009. The difficult business conditions that plagued the global lodging industry in 2008 and 2009 began to stabilize in 2010. The lodging recovery continued into 2011 as occupancies approached prior peak levels, average daily rate increased, and new hotel supply in the developed world fell well below historic rates of growth. While we remain cautiously optimistic, we acknowledge that known and unknown challenges could slow down or derail the lodging recovery. As we move forward, we believe we are uniquely positioned, due to the strength of our brands, our high-end focus, and our geographic diversification. Starwood is particularly well positioned to take advantage of global growth through our operating teams that have worked in the emerging markets for decades. We also expect to grow in the developed world as we build out our underpenetrated brands in these markets. We believe that we have the highest quality pipeline in the industry as measured by percentage growth potential as well as our focus on valuable management contracts in the four and five star segments. We and our hotel owners have continued to invest capital in our hotels and provide innovative ways to utilize public space, such as our Link@Sheraton, which fosters relationships face-to-face or webcam-to-webcam, and also by maximizing guest room conveniences. Finally, we believe our SPG loyalty guest program is an industry leader. With our recently announced changes to the program, we expect to drive further loyalty from our SPG members as well as attract the next wave of global elite members. As the program is constantly refined and new promotions are offered, it provides rewards to our patrons while its growth in membership favorably impacts our results. As we move forward to 2012, we will continue to focus on providing superior guest experiences for our business, leisure, and group customers while maintaining a commitment to controlling our costs. As discussed in Note 2 of our consolidated financial statements, following the adoption of ASU Nos. 2009-16 and 2009-17 on January 1, 2010, our statements of income beginning with the year ended December 31, 2010 no longer reflect securitization income, but instead report interest income, net charge-offs and certain other income associated with all securitized loan receivables, and interest expense associated with debt issued from the trusts to third-party investors in the same line items in our statements of income. Additionally, we no longer record initial gains or losses on new securitization activity since securitized vacation ownership notes receivable no longer receive sale accounting treatment. Finally, we no longer recognize gains or losses on the revaluation of the interest-only strip receivable as that asset is not recognized in a transaction accounted for as a secured borrowing. Our statement of income for the year ended December 31, 2009 has not been retrospectively adjusted to reflect the adoption of ASU Nos. 2009-16 and 2009-17. While the years ended December 31, 2010 and 2011 have been accounted for under the new accounting standards, these years are not comparable to 2009 amounts, particularly with regards to vacation ownership and residential sales and services and interest expense. 29

Year Ended December 31, 2011 Compared with Year Ended December 31, 2010 Continuing Operations
Year Ended December 31, 2011 Increase / Year Ended (decrease) December 31, from prior 2010 year (in millions) Percentage change from prior year

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

$1,768 814 703 2,339 $5,624

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

$ 64 102 165 222 $553

3.8% 14.3% 30.7% 10.5% 10.9%

The increase in revenues from owned, leased and consolidated joint venture hotels was primarily due to increased REVPAR (as discussed below) at our existing owned, leased and consolidated joint venture hotels, offset in part by lost revenues from six wholly owned hotels sold or closed in 2011 and 2010. These sold or closed hotels had revenues of $56 million in the year ended December 31, 2011 compared to $158 million in the corresponding period of 2010. Revenues at our Same-Store Owned Hotels (45 hotels for the year ended December 31, 2011 and 2010, excluding the six hotels sold or closed and 14 additional hotels undergoing significant repositionings or without comparable results in 2011 and 2010) increased 9.4%, or $123 million, to $1.441 billion for the year ended December 31, 2011 when compared to $1.318 billion in the corresponding period of 2010 due primarily to an increase in REVPAR. REVPAR at our Same-Store Owned Hotels increased 11.5% to $159.12 for the year ended December 31, 2011 when compared to the corresponding 2010 period. The increase in REVPAR at these Same-Store Owned Hotels was driven by a 6.4% increase in ADR to $218.65 for the year ended December 31, 2011 compared to $205.49 for the corresponding 2010 period and an increase in occupancy rates to 72.8% for the year ended December 31, 2011 when compared to 69.5% in the corresponding period in 2010. REVPAR at Same-Store Owned Hotels in North America increased 7.3% for the year ended December 31, 2011 when compared to the corresponding period of 2010. REVPAR growth was particularly strong at our owned hotels in San Francisco, California, Maui, Hawaii and Scottsdale, Arizona. REVPAR at our international Same-Store Owned Hotels increased by 17.7% for the year ended December 31, 2011 when compared to the corresponding period of 2010. REVPAR for Same-Store Owned Hotels internationally increased 8.1% excluding the favorable effects of foreign currency translation. The increase in management fees, franchise fees and other income was primarily a result of an $83 million or 12.0% increase in management and franchise revenue to $772 million for the year ended December 31, 2011 compared to $689 million in the corresponding period of 2010. Management fees increased $46 million or 11.2% and franchise fees increased $26 million or 16.1% compared to the corresponding period of 2010. These increases were due to growth in REVPAR at existing hotels as well as the net addition of 38 managed and 11 franchised hotels to our system since the beginning of 2011. Additionally, other income increased approximately $19 million, for the year ended December 31, 2011 when compared to the corresponding period of 2010, primarily due to payments received on promissory notes that had previously been reserved due to uncertainty around collection. Total vacation ownership and residential sales and services revenue increased 30.7% to $703 million, for the year ended December 31, 2011 when compared to $538 million in 2010, primarily driven by residential sales related to the St. Regis Bal Harbour project which received its certificate of occupancy in late 2011. Originated contract sales of VOI inventory increased 6.1% for the year ended December 31, 2011, when compared to the corresponding period in 2010. This increase was primarily driven by increased tour flow from new buyers and improved sales performance from existing owner channels. The average contract amount per vacation ownership unit sold was relatively unchanged, for the year ended December 31, 2011 when compared to the corresponding 30

period of 2010, at approximately $14,900. Residential revenue increased approximately $125 million for the year ended December 31, 2011 primarily due to residential sales related to the St. Regis Bal Harbour project as discussed above. Other revenues from managed and franchised properties increased primarily due to an increase in payroll costs commensurate with increased occupancy at our existing managed hotels and payroll costs for the new hotels entering the system. These revenues represent reimbursements of costs incurred on behalf of managed hotel and vacation ownership properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our operating income and our net income.
Year Ended December 31, 2011 Increase / Year Ended (decrease) December 31, from prior 2010 year (in millions) Percentage change from prior year

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

$352

$344

$8

2.3%

Selling, general, administrative and other expenses for the year ended December 31, 2011 increased 2.3% to $352 million, when compared to the corresponding period of 2010, primarily due to higher legal costs incurred in 2011, while results in 2010 benefitted from the reimbursement of legal costs as a result of a favorable legal settlement. This increase was partially offset by lower incentive compensation in 2011 compared to 2010.
Year Ended December 31, 2011 Increase / Year Ended (decrease) December 31, from prior 2010 year (in millions) Percentage change from prior year

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

$68

$(75)

$143

n/m

During the year ended December 31, 2011, we recorded a charge of approximately $70 million related to an unfavorable decision in a lawsuit. During the year ended December 31, 2010, we received cash proceeds of $75 million in connection with the favorable settlement of a lawsuit. We recorded this settlement, net of the reimbursement of legal costs incurred in connection with the litigation, as a credit to restructuring, goodwill impairment, and other special (credits) charges. Additionally, we recorded an $8 million credit related to the reversal of a reserve associated with an acquisition in 1998 as the liability is no longer deemed necessary.
Year Ended December 31, 2011 Increase / Year Ended (decrease) December 31, from prior 2010 year (in millions) Percentage change from prior year

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

$265

$285

$(20)

(7.0)%

The decrease in depreciation expense for the year ended December 31, 2011, when compared to the corresponding period of 2010, was primarily due to reduced depreciation expense from sold hotels, partially offset by additional depreciation related to capital expenditures made in the last twelve months.
Year Ended December 31, 2011 Increase / Year Ended (decrease) December 31, from prior 2010 year (in millions) Percentage change from prior year

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

$630

$600

$30

5.0%

The increase in operating income for the year ended December 31, 2011, when compared to the corresponding period of 2010, was primarily due to continued improvement in results from our owned and leased 31

hotels and the increase in management and franchise fees attributable to the increase in REVPAR as well as the net addition of 49 managed and franchised hotels to our system since the beginning of 2011. Additionally, residential sales at the St. Regis Bal Harbour favorably impacted 2011 operating income by $27 million. Operating income for the year ended December 31, 2011, as compared to 2010, was negatively impacted by a $70 million charge associated with an unfavorable legal decision in 2011, while 2010 benefited from a favorable settlement of a lawsuit of $75 million. Results were also negatively impacted by political unrest in the Middle East and North Africa, as well as the earthquake and tsunami in Japan.
Year Ended December 31, 2011 Increase / Year Ended (decrease) December 31, from prior 2010 year (in millions) Percentage change from prior year

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

$11

$10

$1

10.0%

The increase in equity earnings and gains and losses from unconsolidated joint ventures for the year ended December 31, 2011, when compared to the corresponding period of 2010 was primarily due to improved operating results at several properties owned by joint ventures in which we hold non-controlling interests, partially offset by unfavorable mark-to-market adjustments on US dollar denominated loans at several properties in Latin America.
Year Ended December 31, 2011 Increase / Year Ended (decrease) December 31, from prior 2010 year (in millions) Percentage change from prior year

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

$216

$236

$(20)

(8.5)%

The decrease in net interest expense for the year ended December 31, 2011, when compared to the corresponding period of 2010, was primarily due to a lower average debt balance and an increase in capitalized interest related to construction projects, primarily relating to the St. Regis Bal Harbour, partially offset by a $16 million charge for redemption premiums and other costs associated with the early payoff of all of our $605 million Senior Notes, which were originally issued in April 1, 2002 and due in May 2012. Our weighted average interest rate was 6.66% at December 31, 2011 as compared to 6.86% at December 31, 2010.
Year Ended December 31, 2011 Increase / Year Ended (decrease) December 31, from prior 2010 year (in millions) Percentage change from prior year

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

$(39)

$(39)

100.0%

During the year ended December 31, 2011, we recorded an impairment charge of $31 million to write-off our noncontrolling interest in a joint venture that owns a hotel in Tokyo, Japan, a $9 million loss due to significant renovations and related asset retirements at two properties, $7 million in losses relating to the impairment of six hotels whose carrying value exceeded their book value and a $2 million loss on an investment in a management contract that was terminated during the period. These amounts were offset by a $50 million gain as a result of the write-up to fair value of our previously held noncontrolling interest in two hotels in which we obtained a controlling interest (see Note 4). During the year ended December 31, 2010, we recorded a net loss on dispositions of approximately $39 million, primarily related to a $53 million loss on the sale of one wholly-owned hotel (see Note 5) as well as a $4 million impairment of fixed assets that are being retired in connection with a significant renovation of a whollyowned hotel, and a $2 million impairment on one hotel whose carrying value exceeded its fair value. These charges were partially offset by a gain of $14 million from insurance proceeds received for a claim at a whollyowned hotel that suffered damage from a storm in 2008, a $5 million gain as a result of an acquisition of a 32

controlling interest in a joint venture in which we previously held a non-controlling interest (see Note 4) and a $4 million gain from the sale of non-hotel assets.
Year Ended December 31, 2011 Increase / Year Ended (decrease) December 31, from prior 2010 year (in millions) Percentage change from prior year

Income Tax (Benefit) Expense . . . . . . . . . . . . $(75) $27 $(102) n/m In 2011, we completed transactions that involved certain domestic and foreign subsidiaries. These transactions generated capital gains, increased the tax basis in subsidiaries including U.S partnerships and resulted in the inclusion of foreign earnings for U.S. tax purposes. The capital gains were largely reduced by the utilization of capital losses. Due to the uncertainty regarding our ability to generate capital gain income, the deferred tax asset associated with these capital losses was offset by a full valuation allowance prior to these transactions. These transactions resulted in a net tax benefit of $87 million. Additionally, during 2011, an income tax benefit of approximately $60 million was generated as the result of the sale of two wholly-owned hotels. Also, in 2011, the Internal Revenue Service (IRS) closed its audit in respect to tax years 2004 through 2006 resulting in the recognition of a tax benefit of approximately $25 million, primarily for the reversal of tax and interest reserves. These benefits were partially offset by tax on increased pretax income and valuation allowance increases in 2011 compared to 2010. During 2010, the IRS closed its audit with respect to tax years 1998 through 2003 and we recognized a $42 million tax benefit in continuing operations, primarily associated with the refund of interest on taxes already paid. This benefit was partially offset by interest and taxes recorded on uncertain tax positions, which resulted in a charge of $23 million. Discontinued Operations, Net of Tax During the year ended December 31, 2011, we recorded a loss of $13 million primarily related to an $18 million pre-tax loss from the sale of our interest in a consolidated joint venture, offset by a $10 million income tax benefit on the sale. Additionally, we recorded $5 million of interest charges related to an uncertain tax position. During the year ended December 31, 2010, we recorded a gain of $134 million related to the final settlement with the IRS regarding the disposition of World Directories Inc. a pre-tax gain of approximately $3 million ($36 million after tax) related to the sale of one wholly-owned hotel. The tax benefit was related to the realization of a high tax basis in this hotel that was generated through a previous transaction. Year Ended December 31, 2010 Compared with Year Ended December 31, 2009 Continuing Operations
Year Ended December 31, 2010 Increase / Year Ended (decrease) December 31, from prior 2009 year (in millions) Percentage change from prior year

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

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

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

$120 54 15 186 $375

7.6% 8.2% 2.9% 9.6% 8.0%

The increase in revenues from owned, leased and consolidated joint venture hotels was primarily due to improved REVPAR (as discussed below) at our existing owned, leased and consolidated joint venture hotels, offset in part by lost revenues from eight wholly owned hotels sold or closed in 2010 and 2009. These sold or closed hotels had revenues of $18 million in the year ended December 31, 2010 compared to $98 million in the corresponding period of 2009. Revenues at our Same-Store Owned Hotels (54 hotels for the year ended 33

December 31, 2010 and 2009, excluding the eight hotels sold or closed and eight additional hotels undergoing significant repositionings or without comparable results in 2010 and 2009) increased 8.2%, or $107 million, to $1.421 billion for the year ended December 31, 2010 when compared to $1.314 billion in the corresponding period of 2009 due primarily to an increase in REVPAR. REVPAR at our Same-Store Owned Hotels increased 11.2% to $136.27 for the year ended December 31, 2010 when compared to the corresponding period of 2009. The increase in REVPAR at these Same-Store Owned Hotels resulted from a 2.6% increase in ADR to $196.62 for the year ended December 31, 2010 compared to $191.60 for the corresponding period of 2009 and an increase in occupancy rates to 69.3% in the year ended December 31, 2010 when compared to 64.0% in the corresponding period in 2009. REVPAR at Same-Store Owned Hotels in North America increased 11.6% for the year ended December 31, 2010 when compared to the corresponding period of 2009. REVPAR growth was particularly strong at our owned hotels in New York, New York, Chicago, Illinois, Toronto, Canada and New Orleans, Louisiana. REVPAR at our international Same-Store Owned Hotels increased by 10.5% for the year ended December 31, 2010 when compared to the corresponding period of 2009. REVPAR for Same-Store Owned Hotels internationally increased 11.6% excluding the unfavorable effects of foreign currency translation. The increase in management fees, franchise fees and other income was primarily a result of a $59 million or 9.4% increase in management and franchise revenue to $689 million for the year ended December 31, 2010 compared to $630 million in the corresponding period in 2009. Management fees increased $53 million or 14.9% and franchise fees increased $23 million or 16.7% compared to the corresponding period of 2009. These increases were due to growth in REVPAR at existing hotels as well as the net addition of 27 managed and 65 franchised hotels to our system since the beginning of 2009. Total vacation ownership and residential sales and services revenue increased 2.9% to $538 million compared to $523 million in 2009 primarily driven by the impact of ASU 2009-17. Originated contract sales of VOI inventory decreased 3.1% for the year ended December 31, 2010 when compared to the corresponding period in 2009. This decline was primarily driven by lower tour flow which was down 6.8% for the year ended December 31, 2010 when compared to the corresponding period in 2009. The decline in tour flow was a result of the economic climate and resulting closure of fractional sales centers in the latter part of 2009. Additionally, the average contract amount per vacation ownership unit sold decreased 6.0% to approximately $15,000, driven by price reductions and inventory mix. Residential revenue increased approximately $6 million in the year ended December 31, 2010 primarily due to the recognition of $4 million of marketing and license fees associated with a new hotel and residential project in Guangzhou, China which opened in 2010. Other revenues from managed and franchised properties increased primarily due to an increase in payroll costs commensurate with increased occupancy at our managed hotels and payroll costs for new hotels entering the system. These revenues represent reimbursements of costs incurred on behalf of managed hotel and vacation ownership properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our operating income and our net income.
Year Ended December 31, 2010 Increase / Year Ended (decrease) December 31, from prior 2009 year (in millions) Percentage change from prior year

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

$344

$314

$30

9.6%

The increase in selling, general, administrative and other expenses for the year ended December 31, 2010 was primarily a result of higher incentive based compensation when compared to the corresponding period of 2009. The increase was partially offset by the reimbursement of previously expensed legal costs in connection

34

with the favorable settlement of a lawsuit and an $8 million reversal of a guarantee liability which was favorably settled during the period (see Note 25).
Year Ended December 31, 2010 Increase / Year Ended (decrease) December 31, from prior 2009 year (in millions) Percentage change from prior year

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

$(75)

$379

$454

n/m

During the year ended December 31, 2010, we received cash proceeds of $75 million in connection with the favorable settlement of a lawsuit. We recorded this settlement, net of the reimbursement of legal costs incurred in connection with the litigation, as a credit to restructuring, goodwill impairment, and other special (credits) charges. Additionally, we recorded an $8 million credit related to the reversal of a reserve associated with an acquisition in 1998 as the liability is no longer deemed necessary. During the year ended December 31, 2009, we completed a comprehensive review of our vacation ownership business. We decided not to develop certain vacation ownership sites and future phases of certain existing projects. As a result of these decisions, we recorded a primarily non-cash impairment charge of $255 million in the restructuring, goodwill impairment and other special charges (credits) line item. Additionally, we recorded a $90 million non-cash charge for the impairment of goodwill in the vacation ownership reporting unit. Throughout 2009, we also recorded restructuring and other special charges of $34 million related to our ongoing initiative of rationalizing our cost structure. These charges related to severance charges and costs to close vacation ownership sales galleries.
Year Ended December 31, 2010 Increase / Year Ended (decrease) December 31, from prior 2009 year (in millions) Percentage change from prior year

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

$285

$309

$(24)

7.8%

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

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

$600

$26

$574

n/m

The increase in operating income for the year ended December 31, 2010, when compared to the corresponding period of 2009, was primarily related to the restructuring, goodwill impairments and other special charges (credits) favorable benefit of $75 million in 2010 compared to a charge of $379 million in 2009. Additionally, the increase in operating income was favorably impacted by improved operating results in primarily all of our revenue streams.
Year Ended December 31, 2010 Increase / Year Ended (decrease) December 31, from prior 2009 year (in millions) Percentage change from prior year

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

$10

$(4)

$14

n/m

The increase in equity earnings and gains and losses from unconsolidated joint ventures for the year ended December 31, 2010, when compared to the same period of 2009, was primarily due to improved operating results at several properties owned by joint ventures in which we hold non-controlling interests. The increase also 35

related to a charge of approximately $4 million, in 2009, related to an unfavorable mark-to-market adjustment on a US dollar denominated loan in an unconsolidated venture in Mexico.
Year Ended December 31, 2010 Increase / Year Ended (decrease) December 31, from prior 2009 year (in millions) Percentage change from prior year

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

$236

$227

$9

4.0%

The increase in net interest expense was primarily due to interest of $27 million on securitized debt related to the adoption of ASU No. 2009-17, partially offset by certain early debt extinguishment costs of $21 million that were incurred in 2009. Our weighted average interest rate was 6.86% at December 31, 2010 as compared to 6.73% at December 31, 2009.
Year Ended December 31, 2010 Increase / Year Ended (decrease) December 31, from prior 2009 year (in millions) Percentage change from prior year

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

$(39)

$(91)

$52

n/m

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

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

$27

$(293)

$320

n/m

The $320 million increase in income tax expense primarily related to 2009 items that did not recur in 2010, including a $120 million deferred tax benefit for an Italian tax incentive program in which the tax basis of land and building for the hotels we owned in Italy was stepped up to fair value in exchange for paying a current tax of $9 million, a $51 million tax benefit related to previously unrecognized foreign tax credits for prior tax years and a $10 million benefit to reverse the deferred interest accrual associated with the deferral of taxable income. The remaining increase was primarily due to higher pretax income in 2010, partially offset by a benefit of $42 million related to an IRS audit.

36

Discontinued Operations, Net of Tax During the year ended December 31, 2010, we recorded a tax benefit of $134 million related to the final settlement with the IRS regarding the disposition of World Directories, Inc. and a pre-tax gain of approximately $3 million ($36 million after tax) related to the sale of one wholly-owned hotel. The tax benefit was related to the realization of a high tax basis in this hotel that was generated through a previous transaction. During the year ended December 31, 2009, we sold our Bliss spa business and other non-core assets for cash proceeds of $227 million. Revenues and expenses from the Bliss spa business, together with revenues and expenses from one hotel that was sold in 2010, were reported in discontinued operations resulting in a loss of $2 million, net of tax. In addition, the net gain on the assets sold in 2009 and the one hotel held for sale at December 31, 2009 has been recorded in discontinued operations resulting in income of $76 million, net of tax.

37

LIQUIDITY AND CAPITAL RESOURCES Cash From Operating Activities Cash flow from operating activities is generated primarily from management and franchise revenues, operating income from our owned hotels and resorts and sales of VOIs and residential units. Other sources of cash are distributions from joint ventures, servicing financial assets and interest income. These are the principal sources of cash used to fund our operating expenses, interest payments on debt, capital expenditures, dividend payments and property and income taxes. We believe that our existing borrowing availability together with capacity for additional borrowings and cash from operations will be adequate to meet all funding requirements for our operating expenses, principal and interest payments on debt, capital expenditures, dividends and share repurchases. The majority of our cash flow is derived from corporate and leisure travelers and is dependent on the supply and demand in the lodging industry. In a recessionary economy, we experience significant declines in business and leisure travel. The impact of declining demand in the industry and higher hotel supply in key markets could have a material impact on our cash flow from operating activities. Our day-to-day operations are financed through net working capital, a practice that is common in our industry. The ratio of our current assets to current liabilities was 1.27 and 1.21 as of December 31, 2011 and 2010, respectively. Consistent with industry practice, we sweep the majority of the cash at our owned hotels on a daily basis and fund payables as needed by drawing down on our existing revolving credit facility. The majority of our restricted cash balance relates to cash used as collateral to reduce fees on letters of credit. Additionally, state and local regulations governing sales of VOIs and residential properties allow the purchaser of such a VOI or property to rescind the sale subsequent to its completion for a pre-specified number of days. In addition, cash payments received from buyers of units under construction are held in escrow during the period prior to obtaining a certificate of occupancy. These payments and the deposits collected from sales during the rescission period are another component of our restricted cash balances in our consolidated balance sheets. At December 31, 2011 and 2010, we had short-term restricted cash balances of $232 million and $53 million, respectively. During 2011, we completed the securitization of vacation ownership receivables resulting in proceeds of approximately $177 million and received a tax refund from the IRS of $45 million (see Note 14). Cash From Investing Activities Gross capital spending during the full year ended December 31, 2011 was as follows (in millions): Maintenance Capital Expenditures (1): Owned, Leased and Consolidated Joint Venture Hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $129 Corporate and information technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation Ownership and Residential Capital Expenditures (2): Net capital expenditures for inventory (excluding St. Regis Bal Harbour) . . . . . . . . . . . . . . . . Capital expenditures for inventory St. Regis Bal Harbour . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Development Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253 (43) 58 15 209 $477

(1) Maintenance capital expenditures includes renovations, asset replacements and improvements that extend the useful life of the asset. (2) Represents gross inventory capital expenditures of $165 less cost of sales of $150. 38

Gross capital spending during the year ended December 31, 2011 included approximately $253 million of maintenance capital, and $209 million of development capital. Investment spending on gross vacation ownership interest and residential inventory was $165 million, primarily related to the construction of our hotel and residential project in Bal Harbour, Florida. Our capital expenditure program includes both offensive and defensive capital. Defensive spending is related to maintenance and renovations that we believe are necessary to stay competitive in the markets we are in. Other than capital to address fire and life safety issues, we consider defensive capital to be discretionary, although reductions to this capital program could result in decreases to our cash flow from operations, as hotels in certain markets could become less desirable. The offensive capital expenditures, which are primarily related to new projects that we expect will generate a return, are also considered discretionary. We currently anticipate that our defensive capital expenditures for the full year 2012 (excluding vacation ownership and residential inventory) will be approximately $200 million for maintenance, renovations, and technology capital. In addition, for the full year 2012, we currently expect to spend approximately $375 million for investment projects, various joint ventures and other investments. In order to secure management or franchise agreements, we have made loans to third-party owners, minority investments in joint ventures and provided certain guarantees and indemnifications related thereto. See Note 25 of the consolidated financial statements for discussion regarding the amount of loans we have outstanding with owners, unfunded loan commitments, equity and other potential contributions, surety bonds outstanding, performance guarantees and indemnifications we are obligated under, and investments in hotels and joint ventures. We intend to finance the acquisition of additional hotel properties (including equity investments), hotel renovations, VOI and residential construction, capital improvements, technology spend and other core and ancillary business acquisitions and investments and provide for general corporate purposes, (including dividend payments and share repurchases) through our credit facility described below, the net proceeds from dispositions, the assumption of debt, and from cash generated from operations. We periodically review our business to identify properties or other assets that we believe either are non-core (including hotels where the return on invested capital is not adequate), no longer complement our business, are in markets which may not benefit us as much as other markets during an economic recovery or could be sold at significant premiums. We are focused on enhancing real estate returns and monetizing investments. Since 2006, we have sold 65 hotels realizing proceeds of approximately $5.6 billion in numerous transactions (see Note 5 of the consolidated financial statements). There can be no assurance, however, that we will be able to complete future dispositions on commercially reasonable terms or at all. During the year ended December 31, 2011 asset sales resulted in gross cash proceeds from investing activities of approximately $280 million. In late 2011, we received certificates of occupancy for our St. Regis Bal Harbour project. As a result, we began closings of units that had previously been sold and, in the fourth quarter of 2011, $74 million of cash was released from escrow accounts related to these closings.

39

Cash Used for Financing Activities The following is a summary of our debt portfolio (including capital leases) as of December 31, 2011:
Amount Outstanding at December 31, 2011 (a) (Dollars in millions) Weighted Average Interest Rate at December 31, 2011

Weighted Average Maturity (In years)

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

40 400

5.02% 4.69% 4.72%

1.9 5.0 5.0

$ 440

$2,093 64 (400) $1,757

7.08% 7.46% 6.86% 7.14%

3.9 11.5 4.1

$2,197

6.66%

4.2

(a) Excludes approximately $432 million of our share of unconsolidated joint venture debt and securitized vacation ownership debt of $532 million, all of which is non-recourse. For specifics related to our financing transactions, issuances, and terms entered into for the years ended December 31, 2011 and 2010, see Note 15 of the consolidated financial statements. We have evaluated the commitments of each of the lenders in our Revolving Credit Facility (the Facility) which matures on November 15, 2013. In addition, we have reviewed our debt covenants and do not anticipate any issues regarding the availability of funds under the Facility. On December 15, 2011, we redeemed all $605 million of our 7.875% Senior Notes, which would have matured in May 2012. We paid $628 million in connection with this early redemption, including $16 million for the call premium and other associated costs (see Note 15). Due to the adoption of ASU Nos. 2009-16 and 2009-17, as discussed in Notes 2, 9, and 10, our 2011 cash flows from financing activities include the borrowings and repayments of securitized vacation ownership debt.
December 31, December 31, 2011 2010 (in millions)

Gross Unsecuritized Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . less: cash (including restricted cash of $212 million in 2011 and $44 million in 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Unsecuritized Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross Securitized Debt (non-recourse) . . . . . . . . . . . . . . . . . . . . . . . . . . . less: cash restricted for securitized debt repayments (not included above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Securitized Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Net Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

$2,197 (666) $1,531 $ 532 (22) $ 510 $2,041

$2,857 (797) $2,060 $ 494 (19) $ 475 $2,535

The cost of borrowing of the Facilities is determined by a combination of our leverage ratios and credit ratings. Changes in our credit ratings may result in changes in our borrowing costs. Downgrades in our credit ratings would likely increase the relative costs of borrowing and reduce our ability to issue long-term debt, whereas upgrades would likely reduce costs and increase our ability to issue long-term debt. A credit rating is not a recommendation to buy, sell or hold securities, is subject to revision or withdrawal at any time by the assigning rating organization and should be evaluated independently of any other rating. On February 1, 2012, our longterm debt rating was upgraded to investment grade by one of the major credit rating agencies. Our Facility is used to fund general corporate cash needs. As of December 31, 2011, we have availability of over $1.5 billion under the Facility. The Facility allows for multi-currency borrowing and, if drawn upon, would have an applicable margin, inclusive of the commitment fee, of 2.5% plus the applicable currency LIBOR rate. Our ability to borrow under the Facility is subject to compliance with the terms and conditions under the Facility, including certain leverage and coverage covenants. Based upon the current level of operations, management believes that our cash flow from operations, together with our significant cash balances, available borrowings under the Facility, and our capacity for additional borrowings will be adequate to meet anticipated requirements for scheduled maturities (primarily our $500 million of Senior Notes due in early 2013), dividends, working capital, capital expenditures, marketing and advertising program expenditures, other discretionary investments, interest and scheduled principal payments and share repurchases for the foreseeable future. However, there can be no assurance that we will be able to refinance our indebtedness as it becomes due and, if refinanced, on favorable terms. Approximately $159 million, included in our cash balance above, is deemed to be permanently invested in foreign countries and we would be subject to income taxes if we repatriated these amounts. In addition, there can be no assurance that in our continuing business we will generate cash flow at or above historical levels, that currently anticipated results will be achieved or that we will be able to complete dispositions on commercially reasonable terms or at all. If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to sell additional assets at lower than preferred amounts, reduce capital expenditures, refinance all or a portion of our existing debt or obtain additional financing at unfavorable rates. Our ability to make scheduled principal payments, to pay interest on or to refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the hotel and vacation ownership industries and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control. We had the following contractual obligations (1) outstanding as of December 31, 2011 (in millions):
Total Due in Less Than 1 Year Due in 1-3 Years Due in 3-5 Years Due After 5 Years

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

$2,195 659 2 1,455 174 1 $4,486

3 155 84 66 1

$1,007 263 177 93 $1,540

$494 134 170 15 $813

$ 691 107 2 1,024 $1,824

$309

(1) This table excludes unrecognized tax benefits that would require cash outlays for $172 million, the timing of which is uncertain. Refer to Note 15 of the consolidated financial statements for additional discussion on this matter. In addition, the table excludes amounts related to the construction of our St. Regis Bal Harbour project that has a total project cost of $759 million, of which $714 million has been paid through December 31, 2011. (2) Excludes securitized debt of $532 million, all of which is non-recourse. (3) Excludes sublease income of $0 million. (4) Included in these balances are commitments that may be reimbursed or satisfied by our managed and franchised properties. 41

We had the following commercial commitments outstanding as of December 31, 2011 (in millions):
Total Less Than 1 Year 1-3 Years 3-5 Years After 5 Years

Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . .

$171

$168

$3

A dividend of $0.50 per share was paid in December 2011 to shareholders of record as of December 15, 2011. A dividend of $0.30 per share was paid in December 2010 to shareholders of record as of December 16, 2010. Off-Balance Sheet Arrangements Our off-balance sheet arrangements include letters of credit of $171 million, unconditional purchase obligations of $167 million and surety bonds of $21 million. These items are discussed in greater detail in Item 8, Financial Statements and Supplementary Data, and in the Notes. Item 7A. Quantitative and Qualitative Disclosures about Market Risk. In limited instances, we seek to reduce earnings and cash flow volatility associated with changes in interest rates and foreign currency exchange rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent they are not hedged. We enter into a derivative financial arrangement to the extent it meets the objectives described above, and we do not engage in such transactions for trading or speculative purposes. At December 31, 2011, we were party to the following derivative instruments: Forward contracts to hedge forecasted transactions for management and franchise fee revenues earned in foreign currencies. The aggregate dollar equivalent of the notional amounts was approximately $34 million. These contracts expire in 2012. Forward foreign exchange contracts to manage the foreign currency exposure related to certain intercompany loans not deemed to be permanently invested. The aggregate dollar equivalent of the notional amounts of the forward contracts was approximately $659 million. These contracts expire in 2012. The following table sets forth the scheduled maturities and the total fair value of our debt portfolio and other financial instruments as of December 31, 2011 (in millions, excluding average exchange rates):
Expected Maturity or Transaction Date At December 31, 2012 2013 2014 2015 2016 Total at December 31, 2011 Total Fair Value at December 31, 2011

Thereafter

Liabilities Fixed rate . . . . . . . . . . . . . . . . . . . . . . Average interest rate . . . . . . . . . . . . . Floating rate . . . . . . . . . . . . . . . . . . . . Average interest rate . . . . . . . . . . . . . Forward Foreign Exchange Hedge Contracts: Fixed (EUR) to Fixed (USD) . . . . . . . Average Exchange rate . . . . . . . . . . .

$ 3 $

$254 $251

$351 $151

$453 $ 2

$ 4 $35

$692 $ 1

$1,757 7.14% $ 440 4.72%

$2,005 $ 440

$34

3 1.44

42

Expected Maturity or Transaction Date At December 31, 2012 2013 2014 2015 2016

Thereafter

Total at December 31, 2011

Total Fair Value at December 31, 2011

Forward Foreign Exchange Contracts: Fixed (EUR) to Fixed (USD) . . . . . $104 $ $ $ $ Average Exchange rate . . . . . . . . . . Fixed (CLP) to Fixed (USD) . . . . . . $ 56 $ $ $ $ Average Exchange rate . . . . . . . . . . Fixed (THB) to Fixed (USD) . . . . . $ 14 $ $ $ $ Average Exchange rate . . . . . . . . . . Fixed (JPY) to Fixed (USD) . . . . . . $ 77 $ $ $ $ Average Exchange rate . . . . . . . . . . Fixed (MXP) to Fixed (USD) . . . . . $ 4 $ $ $ $ Average Exchange rate . . . . . . . . . . Fixed (AUD) to Fixed (USD) . . . . . $ 38 $ $ $ $ Average Exchange rate . . . . . . . . . . Fixed (CAD) to Fixed (USD) . . . . . $283 $ $ $ $ Average Exchange rate . . . . . . . . . . Fixed (GBP) to Fixed (EUR) . . . . . $ 65 $ $ $ $ Fixed (JPY) to Fixed (THB) . . . . . . $ 18 $ $ $ $ Item 8. Financial Statements and Supplementary Data.

$ $ $ $ $ $ $ $ $

$ 1.30 $ .00 $ .03 $ .01 $ .07 $ .98 $ (1) .98 $ 1 $

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

The financial statements and supplementary data required by this item appear beginning on page F-1 of this Annual Report and are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable. Item 9A. Controls and Procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)). Based upon the foregoing evaluation, our principal executive and principal financial officers concluded that our disclosure controls and procedures were effective and operating to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. There has been no change in our internal control over financial reporting (as defined in Rules 13(a)-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Managements Report on Internal Control over Financial Reporting and the Report of the Corporations Independent Registered Public Accounting Firm are set forth in Part II of the Annual Report and are incorporated herein by reference. 43

Item 9B. Other Information. Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance. Information regarding directors, executive officers and corporate governance will be included in our proxy statement for the 2012 Annual Meeting of Stockholders (the Proxy Statement). The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year ended December 31, 2011 and such information is incorporated herein by reference. Item 11. Executive Compensation. Information regarding executive compensation will be included in our Proxy Statement. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year ended December 31, 2011 and such information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Information regarding security ownership of certain beneficial owners and management and related stockholder matters will be included in our Proxy Statement. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year ended December 31, 2011 and such information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions and Director Independence. Information regarding certain relationships and related transactions and director independence will be included in our Proxy Statement. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year ended December 31, 2011 and such information is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. Information regarding principal accounting fees and services will be included in our Proxy Statement. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year ended December 31, 2011 and such information is incorporated herein by reference. Item 15. Exhibits, Financial Statement Schedules. (a) The following documents are filed as part of this Annual Report: 1-2. The financial statements and financial statement schedule listed in the Index to Financial Statements and Schedule following the signature pages hereof. 3. Exhibits:

44

Exhibit Number

Description of Exhibit

2.1

2.2

3.1 3.2

3.3

4.1 4.2

4.3

4.4

4.5

4.6

4.7

4.8 4.9

4.10

Formation Agreement, dated as of November 11, 1994, among the Company, Starwood Capital and the Starwood Partners (incorporated by reference to Exhibit 2 to the Companys Current Report on Form 8-K dated November 16, 1994). (The SEC file number of all filings made by the Company pursuant to the Securities Exchange Act of 1934, as amended, and referenced herein is 1-7959). Form of Amendment No. 1 to Formation Agreement, dated as of July 1995, among the Company and the Starwood Partners (incorporated by reference to Exhibit 10.23 to the Companys Registration Statement on Form S-2 filed with the SEC on June 29, 1995 (Registration Nos. 33-59155 and 3359155-01)). Articles of Amendment and Restatement of the Company, as of May 30, 2007 (incorporated by reference to Appendix A to the Companys 2007 Notice of Annual Meeting and Proxy Statement). Amended and Restated Bylaws of the Company, as amended and restated through April 10, 2006 (incorporated by reference to Exhibit 3.2 to the Companys Current Report on Form 8-K filed with the SEC on April 13, 2006 (the April 13 Form 8-K). Amendment to Amended and Restated Bylaws of the Company, dated as of March 13, 2008 (incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed with the SEC on March 18, 2008). Termination Agreement dated as of April 7, 2006 between the Company and the Trust (incorporated by reference to Exhibit 4.1 of the April 13 Form 8-K). Amended and Restated Rights Agreement, dated as of April 7, 2006, between the Company and American Stock Transfer and Trust Company, as Rights Agent (which includes the form of Amended and Restated Articles Supplementary of the Series A Junior Participating Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Stock as Exhibit C) (incorporated by reference to Exhibit 4.2 of the April 13 Form 8-K). Amended and Restated Indenture, dated as of November 15, 1995, as Amended and Restated as of December 15, 1995 between ITT Corporation (formerly known as ITT Destinations, Inc.) and the First National Bank of Chicago, as trustee (incorporated by reference to Exhibit 4.A.IV to the First Amendment to ITT Corporations Registration Statement on Form S-3 filed November 13, 1996). First Indenture Supplement, dated as of December 31, 1998, among ITT Corporation, the Company and The Bank of New York (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the SEC on January 8, 1999). Second Indenture Supplement, dated as of April 9, 2006, among the Company, Sheraton Holding Corporation and Bank of New York Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.3 to the April 13 Form 8-K). Indenture, dated as of April 19, 2002, among the Company, the guarantor parties named therein and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys and Sheraton Holding Corporations Joint Registration Statement on Form S-4 filed with the SEC on November 19, 2002 (the 2002 Forms S-4)). Indenture, dated as of September 13, 2007, between the Company and the U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the SEC on September 17, 2007 (the September 17 Form 8-K)). Supplemental Indenture, dated as of September 13, 2007, between the Company and the U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the September 17 Form 8-K). Supplemental Indenture No. 2, dated as of May 23, 2008, between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the SEC on May 28, 2008). Supplemental Indenture No. 3, dated as of May 7, 2009, between the Company and the U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K files with the SEC on May 12, 2009).

45

Exhibit Number

Description of Exhibit

4.11

10.1

10.2

10.3

10.4 10.5 10.6

10.7

10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15

10.16 10.17 10.18

Supplemental Indenture No. 4, dated as of November 20, 2009, between the Company and the U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the SEC on November 23, 2009). The registrant hereby agrees to file with the Commission a copy of any instrument, including indentures, defining the rights of long-term debt holders of the registrant and its consolidated subsidiaries upon the request of the Commission. Third Amended and Restated Limited Partnership Agreement for Operating Partnership, dated January 6, 1999, among the Company and the limited partners of Operating Partnership (incorporated by reference to Exhibit 10.2 to the 1998 Form 10-K). Form of Trademark License Agreement, dated as of December 10, 1997, between Starwood Capital and the Company (incorporated by reference to Exhibit 10.22 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (the 1997 Form 10-K)). Credit Agreement, dated as of April 20, 2010, among the Company, certain additional Dollar Revolving Loan Borrowers, certain additional Alternate Currency Revolving Loan Borrowers, various Lenders, Deutsche Bank AG New York Branch, as Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Banc of America Securities LLC, as Lead Arrangers and Book Running Managers, (the Credit Agreement) (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC on April 22, 2010). First Amendment to Credit Agreement, dated as of March 23, 2011.+ Second Amendment to Credit Agreement, dated as of December 9, 2011. + Starwood Hotels & Resorts Worldwide, Inc. 1999 Long-Term Incentive Compensation Plan (the 1999 LTIP) (incorporated by reference to Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999 (the 1999 Form 10-Q2)). * First Amendment to the 1999 LTIP, dated as of August 1, 2001 (incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001). * Second Amendment to the 1999 LTIP (incorporated by reference to Exhibit 10.2 to the 2003 10-Q1). * Form of Non-Qualified Stock Option Agreement pursuant to the 1999 LTIP (incorporated by reference to Exhibit 10.30 to the 2004 Form 10-K). * Form of Restricted Stock Agreement pursuant to the 1999 LTIP (incorporated by reference to Exhibit 10.31 to the 2004 Form 10-K). * Starwood Hotels & Resorts Worldwide, Inc. 2002 Long-Term Incentive Compensation Plan (the 2002 LTIP) (incorporated by reference to Annex B of the Companys 2002 Proxy Statement). * First Amendment to the 2002 LTIP (incorporated by reference to Exhibit 10.1 to the 2003 10-Q1). * Form of Non-Qualified Stock Option Agreement pursuant to the 2002 LTIP (incorporated by reference to Exhibit 10.49 to the 2002 Form 10-K filed on February 28, 2003 (the 2002 10-K)). * Form of Restricted Stock Agreement pursuant to the 2002 LTIP (incorporated by reference to Exhibit 10.35 to the 2004 Form 10-K). * 2004 Long-Term Incentive Compensation Plan, amended and restated as of December 31, 2008 (2004 LTIP) (incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed with the SEC on January 6, 2009 (the January 2009 8-K)). * Form of Non-Qualified Stock Option Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.4 to the 2004 Form 10-Q2). * Form of Restricted Stock Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.38 to the 2004 Form 10-K). * Form of Non-Qualified Stock Option Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed February 13, 2006 (the February 2006 Form 8-K)). *

46

Exhibit Number

Description of Exhibit

10.19 10.20

10.21 10.22 10.23

10.24

10.25 10.26

10.27

10.28

10.29 10.30

10.31 10.32

10.33 10.34

10.35 10.36 10.37 10.38

Form of Restricted Stock Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.1 to the February 2006 Form 8-K). * Form of Amended and Restated Non-Qualified Stock Option Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2006 (the 2006 Form 10-Q2)). * Form of Amended and Restated Restricted Stock Agreement pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.2 to the 2006 Form 10-Q2). * Annual Incentive Plan for Certain Executives, amended and restated as of December 2008 (incorporated by reference to Exhibit 10.2 to the January 2009 8-K). * Starwood Hotels & Resorts Worldwide, Inc. Amended and Restated Deferred Compensation Plan, effective as of January 22, 2008 (incorporate by reference to Exhibit 10.35 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007). * Form of Indemnification Agreement between the Company and each of its Directors and executive officers (incorporated by reference to Exhibit 10.10 to the Companys Current Report on Form 8-K filed with the SEC on November 25, 2009). * Employment Agreement, dated as of November 13, 2003, between the Company and Vasant Prabhu (incorporated by reference to Exhibit 10.68 to the 2003 10-K). * Letter Agreement, dated August 14, 2007, between the Company and Vasant Prabhu (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed August 17, 2007 (the August 17 Form 8-K)). * Amendment, dated as of December 30, 2008, to employment agreement between the Company and Vasant Prabhu (incorporated by reference to Exhibit 10.34 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the 2008 Form 10-K)). * Employment Agreement, dated as of September 25, 2000, between the Company and Kenneth Siegel (incorporated by reference to Exhibit 10.57 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (the 2000 Form 10-K)). * Letter Agreement, dated July 22, 2004 between the Company and Kenneth Siegel (incorporated by reference to Exhibit 10.73 to the 2004 Form 10-K). * Letter Agreement, dated August 14, 2007, between the Company and Kenneth S. Siegel (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed August 17, 2007 (the August 17 Form 8-K)). * Amendment, dated as of December 30, 2008, to employment agreement between the Company and Kenneth S. Siegel (incorporated by reference to reference to Exhibit 10.43 to the 2008 Form 10-K). * Employment Agreement, dated as of August 2, 2007, between the Company and Bruce W. Duncan (incorporated by reference to Exhibit 10.5 to the Companys quarterly report on Form 10-Q for the quarterly period ended June 30, 2007). * Form of Restricted Stock Unit Agreement between the Company and Bruce W. Duncan pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.2 to the 2007 Form 10-Q1). * Amended and Restated Employment Agreement, dated as of December 30, 2008, between the Company and Frits van Paasschen (incorporated by reference to Exhibit 10.52 to the 2008 Form 10-K). * Form of Non-Qualified Stock Option Agreement between the Company and Frits van Paasschen pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.5 to the 2007 Form 10-Q3). * Form of Restricted Stock Unit Agreement between the Company and Frits van Paasschen pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.6 to the 2007 Form 10-Q3). * Form of Restricted Stock Grant between the Company and Frits van Paasschen pursuant to the 2004 LTIP (incorporated by reference to Exhibit 10.7 to the 2007 Form 10-Q3). * Form of Severance Agreement between the Company and each of Messrs. Siegel and Prabhu (incorporated by reference to Exhibit 10.57 to the 2008 Form 10-K). *

47

Exhibit Number

Description of Exhibit

10.39

10.40 10.41 10.42 10.43 10.44 10.45 12.1 21.1 23.1 31.1 31.2 32.1 32.2

Letter Agreement, dated August 22, 2008, between the Company and Matthew Avril (incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009 (the 2009 Form 10-Q1). * Amendment, dated as of December 30, 2008, to employment agreement between the Company and Matthew Avril (incorporated by reference to Exhibit 10.2 to the 2009 Form 10-Q1). * Amendment, dated as of December 15, 2011, to employment agreement between the Company and Matthew Avril. *+ Amended and Restated Severance Agreement, dated as of December 30, 2008, between the Company and Matthew Avril (incorporated by reference to Exhibit 10.3 to the 2009 Form 10-Q1). * Letter Agreement, dated April 15, 2008, between the Company and Simon Turner (incorporated by reference to Exhibit 10.7 to the 2009 Form 10-Q1). * Amendment, dated as of December 30, 2008, to employment agreement between the Company and Simon Turner (incorporated by reference to Exhibit 10.8 to the 2009 Form 10-Q1). * Amended and Restated Severance Agreement, dated as of December 30, 2008, between the Company and Simon Turner (incorporated by reference to Exhibit 10.9 to the 2009 Form 10-Q1). * Calculation of Ratio of Earnings to Total Fixed Charges.+ List of our Subsidiaries. + Consent of Ernst & Young LLP. + Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 Chief Executive Officer. + Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 Chief Financial Officer. + Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code Chief Executive Officer. + Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code Chief Financial Officer. +

+ Filed herewith. * Indicates management contract or compensatory plan or arrangement

48

SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STARWOOD HOTELS & RESORTS WORLD WIDE, INC. By: /S/ FRITS VAN PAASSCHEN Frits van Paasschen Chief Executive Officer and Director Date: February 17, 2012 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature Title Date

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

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

February 17, 2012 February 17, 2012 February 17, 2012

February 17, 2012

February 17, 2012 February 17, 2012 February 17, 2012 February 17, 2012 February 17, 2012 February 17, 2012 February 17, 2012 February 17, 2012 February 17, 2012

49

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

Managements Report on Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Balance Sheets as of December 31, 2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Income for the Years Ended December 31, 2011, 2010 and 2009 . . . . . . . . . . . Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2011, 2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated Statements of Equity for the Years Ended December 31, 2011, 2010 and 2009 . . . . . . . . . . . Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009 . . . . . . . Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule: Schedule II Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-2 F-3 F-4 F-5 F-6 F-7 F-8 F-9 F-10 S-1

F-1

Managements Report on Internal Control over Financial Reporting Management of Starwood Hotels & Resorts Worldwide, Inc. and its subsidiaries (Company) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) or 15(d)-15(f). Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (GAAP) and includes those policies and procedures that: Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; Provide reasonable assurance that the transactions are recorded as necessary to permit the preparation of financial statements in accordance with GAAP, and the receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Our management assessed the effectiveness of the Companys internal controls over financial reporting as of December 31, 2011. In making this assessment, the Companys management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on assessment and those criteria, management believes that, as of December 31, 2011, the Companys internal control over financial reporting is effective. Management has engaged Ernst & Young LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, to attest to the Companys internal control over financial reporting. The report is included herein.

F-2

Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Starwood Hotels & Resorts Worldwide, Inc. We have audited Starwood Hotels & Resorts Worldwide, Inc.s (the Company) internal control over financial reporting as of December 31, 2011, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Companys management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011 based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2011 and 2010 and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2011 of the Company and our report dated February 17, 2012, expressed an unqualified opinion thereon. /s/ New York, New York February 17, 2012 Ernst & Young LLP

F-3

Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Starwood Hotels & Resorts Worldwide, Inc. We have audited the accompanying consolidated balance sheets of Starwood Hotels & Resorts Worldwide, Inc. (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2011. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 2 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets (formerly Statement of Financial Accounting Standards (SFAS) No. 166), and ASU No. 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (formerly SFAS No. 167) on January 1, 2010. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2012 expressed an unqualified opinion thereon. /s/ New York, New York February 17, 2012 Ernst & Young LLP

F-4

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED BALANCE SHEETS (In millions, except share data)
December 31, 2011 2010

ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, net of allowance for doubtful accounts of $46 and $45 . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securitized vacation ownership notes receivable, net of allowance for doubtful accounts of $10 and $10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plant, property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill and intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securitized vacation ownership notes receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 454 232 569 812 64 125 278 2,534 259 3,270 2,057 639 355 446 $9,560

$ 753 53 513 802 59 126 315 2,621 312 3,323 2,067 664 381 408 $9,776

LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Short-term borrowings and current maturities of long-term debt . . . . . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current maturities of long-term securitized vacation ownership debt . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued taxes and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term securitized vacation ownership debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commitments and contingencies Stockholders equity: Common stock; $0.01 par value; authorized 1,000,000,000 shares; outstanding 195,913,400 and 192,970,437 shares at December 31, 2011 and 2010, respectively . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Starwood stockholders equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 144 130 1,177 375 163 1,992 2,194 402 46 1,971 6,605

9 138 127 1,104 410 377 2,165 2,848 367 24 1,886 7,290

2 963 (348) 2,337 2,954 1 2,955 $9,560

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

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

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data)
Year Ended December 31, 2011 2010 2009

Revenues Owned, leased and consolidated joint venture hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership and residential sales and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management fees, franchise fees and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other revenues from managed and franchised properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Costs and Expenses Owned, leased and consolidated joint venture hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general, administrative and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restructuring, goodwill impairment and other special charges (credits), net . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other expenses from managed and franchised properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity earnings (losses) and gains and losses from unconsolidated ventures, net . . . . . . . . . . . . . . Interest expense, net of interest income of $3, $2 and $3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on asset dispositions and impairments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations before taxes and noncontrolling interests . . . . . . . . . . . Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations: Income (loss) from operations, net of tax (benefit) expense of $0, $0 and $(2) . . . . . . . . . . . . . . Gain (loss) on dispositions, net of tax (benefit) expense of $(5), $(166) and $(35) . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net (income) loss attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income attributable to Starwood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings (Losses) Per Share Basic Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings (Losses) Per Share Diluted Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts attributable to Starwoods Common Shareholders Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average number of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average number of shares assuming dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,768 703 814 2,339 5,624 1,449 521 352 68 235 30 2,339 4,994 630 11 (216) 425 75 500 (13) 487 2 $ 489

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

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

$ 2.65 $ 1.70 (0.07) 0.91 $ 2.58 $ 2.61

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

$ 2.57 $ 1.63 (0.06) 0.88 $ 2.51 $ 2.51

$ 502 $ 310 (13) 167 $ 489 189 195 $ 0.50 $ 477 183 190 $ 0.30

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

F-6

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions)
Year Ended December 31, 2011 2010 2009

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $487 Other comprehensive income (loss), net of taxes: Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (48) Reclassification of accumulated foreign currency translation adjustments on sold hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Defined benefit pension and postretirement benefit plans net gains (losses) arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20) Net curtailment and settlement gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of actuarial gains and losses included in net periodic pension cost . . . 1 Change in fair value of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Reclassification adjustments for losses (gains) included in net income . . . . . . . . . . . . . 2 Change in fair value of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive (income) loss attributable to noncontrolling interests . . . . . . . . . . . . . . Foreign currency translation adjustments attributable to noncontrolling interests . . . . . Comprehensive income attributable to Starwood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64) 423 2 (1) $424

$475 3 (4) 1 (1) 1 (1) (1) 474 2 1 $477

$ 71 87 (13) 10 23 5 (6) 3 109 180 2 (1) $181

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

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

Equity Attributable to Starwood Stockholders Accumulated Other Additional Comprehensive Shares Paid-in (Loss) Retained Shares Amount Capital (1) Income (2) Earnings (in millions)

Equity Attributable to Noncontrolling Interests

Total

Balance at December 31, 2008 . . . Net income (loss) . . . . . . . . . . . . . Stock option and restricted stock award transactions, net . . . . . . . ESPP stock issuances . . . . . . . . . . Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . Dividends declared . . . . . . . . . . . . Balance at December 31, 2009 . . . Net income (loss) . . . . . . . . . . . . . Stock option and restricted stock award transactions, net . . . . . . . ESPP stock issuances . . . . . . . . . . Impact of adoption of ASU No. 2009-17 . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . Dividends declared . . . . . . . . . . . . Balance at December 31, 2010 . . . Net income (loss) . . . . . . . . . . . . . Stock option and restricted stock award transactions, net . . . . . . . ESPP stock issuances . . . . . . . . . . Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . Dividends declared . . . . . . . . . . . . Sale of controlling interest . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2011 . . .

183 4 187 6 193 3 196

$ 2 2 2 $ 2

$493 54 5 552 248 5 805 154 5 (1) $963

$(391) 108 (283) (283) (65) $(348)

$1,517 73 (37) 1,553 477 (26) (57) 1,947 489 (99) $2,337

$ 23 (2) 1 (1) 21 (2) (1) (3) 15 (2) 1 (1) (13) 1 $ 1

$1,644 71 54 5 109 (38) 1,845 475 248 5 (26) (1) (60) 2,486 487 154 5 (64) (100) (13) $2,955

(1) Stock option and restricted stock award transactions are net of a tax (expense) benefit of $26 million, $28 million and $(18) million in 2011, 2010, and 2009 respectively. (2) As of December 31, 2011, this balance is comprised of $276 million of cumulative translation adjustments and $75 million of net unrecognized actuarial losses, partially offset by $3 million of unrecognized gains on forward contracts.

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

F-8

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
Year Ended December 31, 2011 Operating Activities Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to net income: Discontinued operations: (Gain) loss on dispositions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other adjustments relating to discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess stock-based compensation tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of deferred loan costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash portion of restructuring, goodwill impairment and other special charges (credits), net . . . . . . . . . . . . . . . . . . Non-cash foreign currency (gains) losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of deferred gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributions in excess (deficit) of equity earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of VOI notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss (gain) on asset dispositions and impairments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash portion of income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in working capital: Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securitized VOI notes receivable activity, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VOI notes receivable activity, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash (used for) from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investing Activities Purchases of plant, property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from asset sales, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issuance of notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Collection of notes receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions, net of acquired cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash (used for) from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financing Activities Revolving credit facility and short-term borrowings (repayments), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt repaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term securitized debt issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term securitized debt repaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Increase) decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from stock option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess stock-based compensation tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash (used for) from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exchange rate effect on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplemental Disclosures of Cash Flow Information Cash paid (received) during the period for: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-cash acquisition of Hotel Imperial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010 2009

$ 487 13 75 (22) 265 11 12 (87) 31 7 63 (27) (45) (14) (15) 78 (195) (45) 12 37 641 (385) 290 (10) 7 (28) (8) 4 (46) (176) 47 (650) 200 (162) (144) (99) 70 22 (39) (755) (9) (299) 753 $ 454

$ 475 (168) 72 (20) 285 13 (7) (39) (81) 55 3 39 16 9 (22) (110) 1 13 200 (29) 1 58 764 (227) 148 (1) 2 (18) (32) 49 8 (71) (114) 3 (9) 280 (224) (93) 141 20 (30) (26) (1) 666 87 $ 753

71 (76) 8 53 309 10 332 (6) (82) 72 30 (24) 91 (260) 46 63 (98) 10 (44) (50) 167 (51) 571 (196) 310 (4) 2 (5) 35 (26) 116 (102) 726 (1,681) (165) 2 227 (993) 4 (302) 389

87

$ 204 $ 56 $ 57

$ 244 $(171) $

$ $ $

214 12

The accompanying notes to financial statements are an integral part of the above statements. F-9

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Note 1. Basis of Presentation

The accompanying consolidated financial statements represent the consolidated financial position and consolidated results of operations of Starwood Hotels & Resorts Worldwide, Inc. and its subsidiaries (the Company). The Company is one of the worlds largest hotel and leisure companies. The Companys principal business is hotels and leisure, which is comprised of a worldwide hospitality network of 1,089 full-service hotels, vacation ownership resorts and residential developments primarily serving two markets: luxury and upscale. The principal operations of Starwood Vacation Ownership, Inc. (SVO) include the development and operation of vacation ownership resorts; and marketing, selling and financing vacation ownership interests (VOIs) in the resorts. The consolidated financial statements include assets, liabilities, revenues and expenses of the Company and all of its controlled subsidiaries and partnerships. In consolidating, all material intercompany transactions are eliminated. We have evaluated all subsequent events through the date the consolidated financial statements were filed. In accordance with the guidance for noncontrolling interests in Accounting Standards Codification (ASC) 810, Consolidation, references in this report to our earnings per share, net income, and shareholders equity attributable to Starwoods common shareholders do not include amounts attributable to noncontrolling interests. Note 2. Significant Accounting Policies

Cash and Cash Equivalents. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Restricted Cash. The majority of the Companys restricted cash relates to cash used as collateral to reduce fees on letters of credit. Restricted cash also consists of deposits received on sales of VOIs and residential properties that are held in escrow until a certificate of occupancy is obtained, the legal rescission period has expired and the deed of trust has been recorded in governmental property ownership records. At December 31, 2011 and 2010, the Company had short-term restricted cash balances of $232 million and $53 million, respectively. Inventories. Inventories are comprised principally of VOIs of $261 million and $307 million as of December 31, 2011 and 2010, respectively, residential inventory of $521 million and $462 million at December 31, 2011 and 2010, respectively, and hotel inventory. VOI and residential inventory is carried at the lower of cost or net realizable value and includes $37 million, $29 million and $31 million of capitalized interest incurred in 2011, 2010 and 2009, respectively. Hotel inventory includes operating supplies and food and beverage inventory items which are generally valued at the lower of FIFO cost (first-in, first-out) or market. Loan Loss Reserves. For the vacation ownership and residential segment, the Company records an estimate of expected uncollectibility on its VOI notes receivable as a reduction of revenue at the time it recognizes a timeshare sale. The Company holds large amounts of homogeneous VOI notes receivable and therefore assesses uncollectibility based on pools of receivables. In estimating loan loss reserves, the Company uses a technique referred to as static pool analysis, which tracks defaults for each years mortgage originations over the life of the respective notes and projects an estimated default rate. As of December 31, 2011, the average estimated default rate for the Companys pools of receivables was 9.9%. The primary credit quality indicator used by the Company to calculate the loan loss reserve for the vacation ownership notes is the origination of the notes by brand (Sheraton, Westin, and Other) as the Company believes there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired. In addition to quantitatively calculating the loan loss reserve based on its static pool analysis, the Company supplements the process by evaluating certain qualitative data, including the aging of the respective receivables, current default trends by brand and origination year, and the Fair Isaac Corporation (FICO) scores of the buyers. F-10

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Given the significance of the Companys respective pools of VOI notes receivable, a change in the projected default rate can have a significant impact to its loan loss reserve requirements, with a 0.1% change estimated to have an impact of approximately $4 million. The Company considers a VOI note receivable delinquent when it is more than 30 days outstanding. All delinquent loans are placed on nonaccrual status and the Company does not resume interest accrual until payment is made. Upon reaching 120 days outstanding, the loan is considered to be in default and the Company commences the repossession process. Uncollectible VOI notes receivable are charged off when title to the unit is returned to the Company. The Company generally does not modify vacation ownership notes that become delinquent or upon default. For the hotel segment, the Company measures the impairment of a loan based on the present value of expected future cash flows, discounted at the loans original effective interest rate, or the estimated fair value of the collateral. For impaired loans, the Company establishes a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows or the estimated fair value of the collateral. The Company applies the loan impairment policy individually to all loans in the portfolio and does not aggregate loans for the purpose of applying such policy. For loans that the Company has determined to be impaired, the Company recognizes interest income on a cash basis. Assets Held for Sale. The Company considers properties to be assets held for sale when management approves and commits to a formal plan to actively market a property or group of properties for sale and a signed sales contract and significant non-refundable deposit or contract break-up fee exist. Upon designation as an asset held for sale, the Company records the carrying value of each property or group of properties at the lower of its carrying value which includes allocable segment goodwill or its estimated fair value, less estimated costs to sell, and the Company stops recording depreciation expense. Any gain realized in connection with the sale of a property for which the Company has significant continuing involvement (such as through a long-term management agreement) is deferred and recognized over the initial term of the related agreement (See Note 12). The operations of the properties held for sale prior to the sale date, if material, are recorded in discontinued operations unless the Company will have continuing involvement (such as through a management or franchise agreement) after the sale. Investments. Investments in joint ventures are generally accounted for under the equity method of accounting when the Company has a 20% to 50% ownership interest or exercises significant influence over the venture. If the Companys interest exceeds 50% or, if the Company has the power to direct the economic activities of the entity and the obligation to absorb losses, the results of the joint venture are consolidated herein. All other investments are generally accounted for under the cost method. The fair market value of investments is based on the market prices for the last day of the period if the investment trades on quoted exchanges. For non-traded investments, fair value is estimated based on the underlying value of the investment, which is dependent on the performance of the investment as well as the volatility inherent in external markets for these types of investments. In assessing potential impairment for these investments, the Company will consider these factors as well as forecasted financial performance of its investment. If these forecasts are not met, the Company may have to record impairment charges. Plant, Property and Equipment. Plant, property and equipment, including capitalized interest of $5 million, $2 million and $2 million incurred in 2011, 2010 and 2009, respectively, applicable to major project expenditures are recorded at cost. The cost of improvements that extend the life of plant, property and equipment are capitalized. These capitalized costs may include structural improvements, equipment and fixtures. Costs for normal repairs and maintenance are expensed as incurred. Depreciation is recorded on a straight-line basis over the estimated useful economic lives of 15 to 40 years for buildings and improvements; 3 to 10 years for furniture, fixtures and equipment; 3 to 20 years for information technology software and equipment; and the lesser of the F-11

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS lease term or the economic useful life for leasehold improvements. Gains or losses on the sale or retirement of assets are included in income when the assets are retired or sold provided there is reasonable assurance of the collectability of the sales price and any future activities to be performed by the Company relating to the assets sold are insignificant. The Company evaluates the carrying value of its assets for impairment. For assets in use when the trigger events specified in ASC 360, Property Plant, and Equipment occur, the expected undiscounted future cash flows of the assets are compared to the net book value of the assets. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value is charged to current earnings. Fair value is based upon discounted cash flows of the assets at rates deemed reasonable for the type of asset and prevailing market conditions, comparative sales for similar assets, appraisals and, if appropriate, current estimated net sales proceeds from pending offers. Goodwill and Intangible Assets. Goodwill and intangible assets arise in connection with acquisitions, including the acquisition of management contracts. The Company does not amortize goodwill and intangible assets with indefinite lives. Intangible assets with finite lives are amortized on a straight-line basis over their respective useful lives. The Company reviews all goodwill and intangible assets for impairment annually, or upon the occurrence of a trigger event. Impairment charges, if any, are recognized in operating results. Frequent Guest Program. Starwood Preferred Guest (SPG) is the Companys frequent guest incentive marketing program. SPG members earn points based on spending at the Companys owned, managed and franchised hotels, as incentives to first-time buyers of VOIs and residences, and through participation in affiliated partners programs such as co-branded credit cards. Points can be redeemed at substantially all of the Companys owned, leased, managed and franchised hotels as well as through other redemption opportunities with third parties, such as conversion to airline miles. The Company charges its owned, managed and franchised hotels the cost of operating the SPG program, including the estimated cost of its future redemption obligation, based on a percentage of its SPG members qualified expenditures. The Companys management and franchise agreements require that the Company be reimbursed for the costs of operating the SPG program, including marketing, promotions and communications, and performing member services for the SPG members. As points are earned, the Company increases the SPG point liability for the amount of cash it receives from its managed and franchised hotels related to the future redemption obligation. For its owned hotels the Company records an expense for the amount of its future redemption obligation with the offset to the SPG point liability. When points are redeemed by the SPG members, the hotels recognize revenue and the SPG point liability is reduced. The Company, through the services of third-party actuarial analysts, determines the value of the future redemption obligation based on statistical formulas which project the timing of future point redemptions based on historical experience, including an estimate of the breakage for points that will never be redeemed, and an estimate of the points that will eventually be redeemed as well as the cost of reimbursing hotels and other thirdparties in respect of other redemption opportunities for point redemptions. The Company consolidates the assets and liabilities of the SPG program including the liability associated with the future redemption obligation which is included in other long-term liabilities and accrued expenses in the accompanying consolidated balance sheets. The total actuarially determined liability (see Note 17), as of December 31, 2011 and 2010, is $844 million and $753 million, respectively, of which $251 million and $225 million, respectively, is included in accrued expenses. Legal Contingencies. The Company is subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. ASC 450, Contingencies requires that an estimated loss from a loss contingency be accrued with a corresponding charge to income if it is probable that an asset has been impaired or F-12

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a contingency is required if there is at least a reasonable possibility that a loss has been incurred. The Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact the Companys financial position or its results of operations. Fair Value of Financial Instruments. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value as follows; Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Derivative Financial Instruments. The Company periodically enters into interest rate swap agreements, based on market conditions, to manage interest rate exposure. The net settlements paid or received under these agreements are accrued consistent with the terms of the agreements and are recognized in interest expense over the term of the related debt. The Company enters into forward contracts to manage exposure to foreign currency fluctuations. All foreign currency hedging instruments have an inverse correlation to the hedged assets or liabilities. Changes in the fair value of the derivative instruments are classified in the same manner as the classification of the changes in the underlying assets or liabilities due to fluctuations in foreign currency exchange rates. These forward contracts do not qualify as hedges. The Company periodically enters into forward contracts to manage foreign exchange risk based on market conditions. The Company enters into forward contracts to hedge fluctuations in forecasted transactions based on foreign currencies that are billed in United States dollars. These forward contracts have been designated as cash flow hedges, and their change in fair value is recorded as a component of other comprehensive income. As a forecasted transaction occurs, the gain or loss is reclassified from other comprehensive income to management fees, franchise fees and other income. The Company does not enter into derivative financial instruments for trading or speculative purposes and monitors the financial stability and credit standing of its counterparties. Foreign Currency Translation. Balance sheet accounts are translated at the exchange rates in effect at each period end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The national currencies of foreign operations are generally the functional currencies. Gains and losses from foreign exchange and the effect of exchange rate changes on intercompany transactions of a longterm investment nature are generally included in other comprehensive income. Gains and losses from foreign exchange rate changes related to intercompany receivables and payables that are not of a long-term investment nature are reported currently in costs and expenses and amounted to a net loss of $12 million in 2011, a net gain of $39 million in 2010 and a net gain of $6 million in 2009. Income Taxes. The Company provides for income taxes in accordance with principles contained in ASC 740, Income Taxes. Under these principles, the Company recognizes the amount of income tax payable or F-13

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in its financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the new rate is enacted. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent the Company believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience and expectations of future taxable income by taxing jurisdiction, the carry-forward periods available to us for tax reporting purposes and tax attributes. The Company measures and recognizes the amount of tax benefit that should be recorded for financial statement purposes for uncertain tax positions taken or expected to be taken in a tax return. With respect to uncertain tax positions, the Company evaluates the recognized tax benefits for derecognition, classification, interest and penalties, interim period accounting and disclosure requirements. Judgment is required in assessing the future tax consequences of events that have been recognized in its financial statements or tax returns. Stock-Based Compensation. The Company calculates the fair value of share-based awards on the date of grant. Restricted stock awards are valued based on the share price. The Company has determined that a lattice valuation model would provide a better estimate of the fair value of options granted under its long-term incentive plans than a Black-Scholes model. The lattice valuation option pricing model requires the Company to estimate key assumptions such as expected life, volatility, risk-free interest rates and dividend yield to determine the fair value of share-based awards, based on both historical information and management decision regarding market factors and trends. The Company amortizes the share-based compensation expense over the period that the awards are expected to vest, net of estimated forfeitures. If the actual forfeitures differ from management estimates, additional adjustments to compensation expense are recorded. Please refer to Note 22, Stock-Based Compensation. Revenue Recognition. The Companys revenues are primarily derived from the following sources: (1) hotel and resort revenues at the Companys owned, leased and consolidated joint venture properties; (2) vacation ownership and residential revenues; (3) management and franchise revenues; (4) revenues from managed and franchised properties; and (5) other revenues which are ancillary to the Companys operations. Generally, revenues are recognized when the services have been rendered. Taxes collected from customers and submitted to taxing authorities are not recorded in revenue. The following is a description of the composition of revenues for the Company: Owned, Leased and Consolidated Joint Ventures Represents revenue primarily derived from hotel operations, including the rental of rooms and food and beverage sales, from owned, leased or consolidated joint venture hotels and resorts. Revenue is recognized when rooms are occupied and services have been rendered. Vacation Ownership and Residential The Company recognizes sales of vacation ownership interests when the buyer has demonstrated a sufficient level of initial and continuing investment, the period of cancellation with refund has expired and receivables are deemed collectible. For sales that do not qualify for full revenue recognition as the project has progressed beyond the preliminary stages but has not yet reached completion, all revenue and profit are initially deferred and recognized in earnings through the percentage-of-completion method. The Company has also entered into licensing agreements with thirdparty developers to offer consumers branded condominiums or residences. The fees from these arrangements are generally based on the gross sales revenue of the units sold. Residential fee revenue is recorded in the period that a purchase and sales agreement exists, delivery of services and obligations has F-14

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS occurred, the fee to the owner is deemed fixed and determinable and collectability of the fees is reasonably assured. Residential revenue on whole ownership units is generally recorded using the completed contract method, whereby revenue is recognized only when a sales contract is completed or substantially completed. During the performance period, costs and deposits are recorded on the balance sheet. Management and Franchise Fees Represents fees earned on hotels managed worldwide, usually under long-term contracts, franchise fees received in connection with the franchise of the Companys Sheraton, Westin, Four Points by Sheraton, Le Mridien, St. Regis, W, Luxury Collection, Aloft and Element brand names, termination fees and the amortization of deferred gains related to sold properties for which the Company has significant continuing involvement. Management fees are comprised of a base fee, which is generally based on a percentage of gross revenues, and an incentive fee, which is generally based on the propertys profitability. Base fee revenues are recognized when earned in accordance with the terms of the contract. For any time during the year, when the provisions of the management contracts allow receipt of incentive fees upon termination, incentive fees are recognized for the fees due and earned as if the contract was terminated at that date, exclusive of any termination fees due or payable. Franchise fees are generally based on a percentage of hotel room revenues and are recognized as the fees are earned and become due from the franchisee. Other Revenues from Managed and Franchised Properties These revenues represent reimbursements of costs incurred on behalf of managed hotel properties and franchisees. These costs relate primarily to payroll costs at managed properties where the Company is the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on the Companys operating income or net income. Insurance Retention. Through its captive insurance company, the Company provides insurance coverage for workers compensation, property and general liability claims arising at hotel properties owned or managed by the Company through policies written directly and through reinsurance arrangements. Estimated insurance claims payable represent expected settlement of outstanding claims and a provision for claims that have been incurred but not reported. These estimates are based on the Companys assessment of potential liability using an analysis of available information including pending claims, historical experience and current cost trends. The amount of the ultimate liability may vary from these estimates. Estimated costs of these self-insurance programs are accrued, based on the analysis of third-party actuaries. Costs Incurred to Sell VOIs. The Company capitalizes direct costs attributable to the sale of VOIs until the sales are recognized. Selling and marketing costs capitalized under this methodology were approximately $4 million and $3 million as of December 31, 2011 and 2010, respectively, and all such capitalized costs are included in prepaid expenses and other assets in the accompanying consolidated balance sheets. Costs eligible for capitalization follow the guidelines of ASC 978, Real Estate Time Sharing Activities. If a contract is cancelled, the Company charges the unrecoverable direct selling and marketing costs to expense and records forfeited deposits as income. VOI and Residential Inventory Costs. Real estate and development costs are valued at the lower of cost or net realizable value. Development costs include both hard and soft construction costs and together with real estate costs are allocated to VOIs and residential units on the relative sales value method. Interest, property taxes and certain other carrying costs incurred during the construction process are capitalized as incurred. Such costs associated with completed VOI and residential units are expensed as incurred. Advertising Costs. The Company enters into multi-media advertising campaigns, including television, radio, internet and print advertisements. Costs associated with these campaigns, including communication and production costs, are aggregated and expensed the first time that the advertising takes place. If it becomes F-15

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS apparent that the media campaign will not take place, all costs are expensed at that time. During the years ended December 31, 2011, 2010 and 2009, the Company incurred approximately $149 million, $132 million and $118 million of advertising expense, respectively, a significant portion of which was reimbursed by managed and franchised hotels. Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications. Certain reclassifications have been made to the prior years financial statements to conform to the current year presentation. Impact of Recently Issued Accounting Standards. Adopted Accounting Standards In September 2011, the Financial Accounting Standards Board (FASB) issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. This topic permits an entity to assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis to determine whether an additional impairment test is necessary. This topic is for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 with early adoption allowed. The Company early adopted this topic during the fourth quarter of 2011 in conjunction with its annual impairment testing (see Note 7). In September 2011, the FASB issued ASU No. 2011-09, Compensation-Retirement BenefitsMultiemployer Plans (Subtopic 715-80): Disclosures about an Employers Participation in a Multiemployer Plan. This subtopic addresses concerns from users of financial statements on the lack of transparency about an employers participation in a multiemployer pension plan. The disclosures also will indicate the financial health of all of the significant plans in which the employer participates and assist a financial statement user to access additional information that is available outside of the financial statements. The subtopic is effective for annual reporting periods ending after December 15, 2011. The Company adopted this topic as of December 31, 2011 (see Note 19). In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. This topic requires disclosures of financing receivables and allowance for credit losses on a disaggregated basis. The balance sheet related disclosures are required beginning at December 31, 2010 and the statements of income disclosures are required, beginning for the three months ended March 31, 2011. The Company adopted this topic on December 31, 2010 (see Note 10). In June 2009, the FASB issued ASU No. 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets (formerly Statement of Financial Accounting Standards (SFAS) No. 166), and ASU No. 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (formerly SFAS No. 167). ASU No. 2009-16 amended the accounting for transfers of financial assets. Under ASU No. 2009-16, the qualifying special purpose entities (QSPEs) used in the Companys securitization transactions are no longer exempt from consolidation. ASU No. 2009-17 prescribes an ongoing assessment of the Companys involvement in the activities of the QSPEs and the Companys rights or obligations to receive benefits or absorb losses of the trusts that could be potentially significant in order to determine whether those variable interest entities (VIEs) F-16

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS will be required to be consolidated in the Companys financial statements. In accordance with ASU No. 2009-17, the Company concluded it is the primary beneficiary of the QSPEs and accordingly, the Company began consolidating the QSPEs on January 1, 2010 (see Note 9). Using the carrying amounts of the assets and liabilities of the QSPEs as prescribed by ASU No. 2009-17 and any corresponding elimination of activity between the QSPEs and the Company resulting from the consolidation on January 1, 2010, the Company recorded a $417 million increase in total assets, a $444 million increase in total liabilities, a $26 million (net of tax) decrease in beginning retained earnings and a $1 million decrease to stockholders equity. The Company has additional VIEs whereby the Company was determined not to be the primary beneficiary (see Note 25). Beginning January 1, 2010, the Companys statements of income no longer reflect activity related to its Retained Interests, but instead reflects activity related to its securitized vacation ownership notes receivable and the corresponding securitized debt, including interest income, loan loss provisions, and interest expense. Interest income and loan loss provisions associated with the securitized vacation ownership notes receivable are included in the vacation ownership and residential sales and services line item. The cash flows from borrowings and repayments associated with the securitized vacation ownership debt are now presented as cash flows from financing activities. The Company does not expect to recognize gains or losses from future securitizations as a result of the adoption of this new guidance. While the year ended December 31, 2011 and 2010 have been accounted for under the new accounting standards, these years are not comparable to 2009 amounts, particularly with regards to vacation ownership and residential sales and services and interest expense. In October 2009, the FASB issued ASU 2009-13 which supersedes certain guidance in ASC 605-25, Revenue Recognition Multiple Element Arrangements. This topic requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. This topic is effective for annual reporting periods beginning after June 15, 2010. The Company adopted this topic on January 1, 2011 and it did not have a material impact on its consolidated financial statements. Note 3. Earnings (Losses) per Share

The following is a reconciliation of basic earnings (losses) per share to diluted earnings (losses) per share for income (losses) from continuing operations attributable to Starwoods common shareholders (in millions, except per share data):
Year Ended December 31, 2011 Earnings Shares Per Share Earnings 2010 Shares Per Share Earnings (Losses) 2009 Shares Per Share

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

$502

189

$2.65

$310

183

$1.70

$ (1)

180

$0.00

$502

195

$2.57

$310

190

$1.63

$ (1)

180

$0.00

Approximately 1 million shares, 5 million shares and 12 million shares were excluded from the computation of diluted shares in 2011, 2010 and 2009, respectively, as their impact would have been anti-dilutive. F-17

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Note 4. Significant Acquisitions

During the year ended December 31, 2011, the Company executed a transaction with its former partner in a joint venture that owned three luxury hotels in Austria. In connection with the transaction, the Company acquired substantially the entire interest in two of the hotels in exchange for its interest in the third hotel and a cash payment, by the Company, of approximately $27 million. The Company previously held a 47.4% ownership interest in the hotels. In accordance with ASC 805, Business Combinations, the Company accounted for this transaction as a step acquisition, remeasured its previously held investment to fair value and recorded the approximately $50 million difference between fair value and its carrying value to the gain (loss) on asset dispositions and impairments, net, line item. The fair values of the assets and liabilities acquired have been recorded in the Companys consolidated balance sheet, including the resulting goodwill of approximately $26 million. The Company entered into a long-term management contract for the hotel in which it exchanged its minority ownership interest and recorded a deferred gain of approximately $30 million in connection with this exchange. During the year ended December 31, 2010, the Company paid approximately $23 million to acquire a controlling interest in a joint venture in which it had previously held a non-controlling interest. The primary business of the joint venture is to develop, license and manage restaurant concepts. The acquisition took place after one of the Companys former partners exercised its right to put its interest to the Company in accordance with the terms of the joint venture agreement. In accordance with ASC 805, Business Combinations, the Company accounted for this transaction as a step acquisition, remeasured its previously held investment to fair value and recorded the approximately $5 million difference between fair value and its carrying value to the gain (loss) on asset dispositions and impairments, net, line item. The fair values of the assets and liabilities acquired were recorded in Starwoods consolidated balance sheet, including the resulting goodwill of approximately $26 million. The results of operations going forward from the acquisition date have been included in the Companys consolidated statements of income. Note 5. Asset Dispositions and Impairments

During the year ended December 31, 2011, the Company sold two wholly-owned hotels for cash proceeds of approximately $237 million. These hotels were sold subject to long-term management agreements, and the Company recorded deferred gains of approximately $66 million relating to the sales. Also during the year ended December 31, 2011 the Company sold its interest in a consolidated joint venture for cash proceeds of approximately $44 million, with the buyer assuming $57 million of the Companys debt (see Note 15). The Company recognized a pretax loss of $18 million in discontinued operations as a result of the sale (see Note 18). Additionally, during the year ended December 31, 2011, the Company recorded an impairment charge of $31 million to write-off its noncontrolling interest in a joint venture that owns a hotel in Tokyo, Japan, a $16 million loss due to the impairment of fixed assets that were written down in connection with significant renovations and related asset retirements at two properties and losses relating to the impairment of six hotels whose carrying value exceeded their fair value. These amounts were partially offset by a $50 million gain as a result of remeasuring the fair value of its previously held noncontrolling interest in two hotels in which it obtained a controlling interest (see Note 4). During the year ended December 31, 2010, the Company recorded a net loss on dispositions of approximately $39 million, primarily related to a $53 million loss on the sale of one wholly-owned hotel subject to a long-term management contract, a $4 million impairment of fixed assets that are being retired in connection with a significant renovation of a wholly-owned hotel, and a $2 million impairment on one hotel whose carrying value exceeded its fair value. These charges were partially offset by a gain of $14 million from insurance proceeds received for a claim at a wholly-owned hotel that suffered damage from a storm in 2008, a $5 million F-18

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS gain as a result of an acquisition of a controlling interest in a joint venture in which we previously held a non-controlling interest (see Note 4) and a $4 million gain from the sale of non-hotel assets. During the year ended December 31, 2009, the Company recorded impairment charges of $41 million relating to the impairment of six hotels. Also during 2009, as a result of market conditions at the time and the impact on the timeshare industry, the Company reviewed the fair value of its economic interests in securitized VOI notes receivable and concluded these interests were impaired. The fair value of the Companys investment in these retained interests was determined by estimating the net present value of the expected future cash flows, based on expected default and prepayment rates resulting in an impairment charge of $22 million. Additionally, the Company recorded losses of $18 million, primarily related to impairments of hotel management contracts, certain technology-related fixed assets and an investment in which the Company holds a minority interest. During the years ended December 31, 2011, 2010 and 2009, the Company reviewed the recoverability of its carrying values of its owned hotels and determined that certain hotels were impaired, as discussed above. The fair values of the hotels were estimated by using discounted cash flows, comparative sales for similar assets and recent letters of intent to sell certain assets. Impairment charges included above totaling $7 million, $2 million and $41 million, relating to six, one and six hotels, were recorded in the years ended December 31, 2011, 2010 and 2009, respectively. These assets are reported in the hotels operating segment. Note 6. Plant, Property and Equipment
December 31, 2011 2010

Plant, property and equipment consisted of the following (in millions):

Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .

614 3,066 1,859 244

600 3,300 1,901 170

5,783 (2,513) $ 3,270

5,971 (2,648) $ 3,323

The above balances include unamortized capitalized computer software costs of $155 million and $132 million at December 31, 2011 and 2010 respectively. Amortization of capitalized computer software costs was $32 million, $36 million and $36 million for the years ended December 31, 2011, 2010 and 2009, respectively.

F-19

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Note 7. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the years ended December 31, 2011 and 2010 is as follows (in millions):
Hotel Segment Vacation Ownership Segment Total

Balance at January 1, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . Asset dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at January 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . Asset dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,332 26 (8) (10) 8 $1,348 $1,348 26 (11) (33) (1) $1,329

$151 $151 $151 $151

$1,483 26 (8) (10) 8 $1,499 $1,499 26 (11) (33) (1) $1,480

In 2011, the Company early adopted ASU 2011-08 (the Topic) to consider impairment for its two reporting units, hotel and vacation ownership. The Topic allows companies to perform a qualitative assessment of goodwill, to determine if the two-step goodwill impairment test is necessary. The determination depends on whether it is more likely than not that the fair value of a reporting unit is greater than the carrying amount. The Company concluded that the two-step goodwill impairment test is not required for either the hotel or vacation ownership reporting unit. The vacation ownership reporting unit results reflected a 30%, or $237 million, excess of fair value over book value in step 1 of the 2010 impairment test. The Company considered the fact that the 2011 results for the vacation ownership business exceeded expectations and evaluated other factors, such as discount rates and market rates of return for the business, all of which indicate an excess of fair value over book value. Based on this evaluation of internal and external qualitative factors, the Company concluded the two-step goodwill impairment test is not required for the vacation ownership reporting unit. The Company considered similar factors for the hotel business. In the hotel reporting unit, results reflected a 135%, or $8.6 billion, excess of fair value over book value in step one of the 2010 impairment test. The internal and external factors affecting this business indicate that the fair value of the hotel reporting unit continues to significantly exceed its carrying value and therefore, the Company concluded the two-step goodwill impairment test is not required for the hotel reporting unit. Prior to the adoption of the Topic in 2011, the Company performed its annual goodwill impairment test as of October 31, 2010 for its hotel and vacation ownership reporting units and determined that there was no impairment of its goodwill. The fair value was calculated using a discounted cash flow model, in which the underlying cash flows were derived from managements current financial projections. The two key assumptions used in the fair value calculation are the discount rate and the capitalization rate in the terminal period, which were 10% and 2%, respectively.

F-20

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Intangible assets consisted of the following (in millions):
December 31, 2011 2010

Trademarks and trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management and franchise agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 313 412 16 741 (164) $ 577

$ 309 377 78 764 (196) $ 568

The intangible assets related to management and franchise agreements have finite lives, and accordingly, the Company recorded amortization expense of $29 million, $33 million, and $35 million, respectively, during the years ended December 31, 2011, 2010 and 2009. The other intangible assets noted above have indefinite lives. Amortization expense relating to intangible assets with finite lives for each of the years ended December 31, is expected to be as follows (in millions): 2012 2013 2014 2015 2016 Note 8. ......................................................................... ......................................................................... ......................................................................... ......................................................................... ......................................................................... Other Assets
December 31, 2011 2010

$29 $29 $29 $28 $28

Other assets include the following (in millions):

VOI notes receivable, net of allowance of $46 and $69 . . . . . . . . . . . . . . . . . . . . . . . . . Prepaids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . See Note 10 for discussion relating to VOI notes receivable. Note 9. Transfers of Financial Assets

$ 93 104 158 $355

$132 88 161 $381

As discussed in Note 2, the Company adopted ASU 2009-16 and ASU 2009 -17 on January 1, 2010. As a result, the Company concluded it has variable interests in the entities associated with its five outstanding securitization transactions. As these securitizations consist of similar, homogenous loans, they have been aggregated for disclosure purposes. The Company applied the variable interest model and determined it is the primary beneficiary of these VIEs. In making this determination, the Company evaluated the activities that significantly impact the economics of the VIEs, including the management of the securitized notes receivable and any related non-performing loans. The Company also evaluated its retention of the residual economic interests in the related VIEs. The Company is the servicer of the securitized mortgage receivables. The Company also has the F-21

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS option, subject to certain limitations, to repurchase or replace VOI notes receivable, that are in default, at their outstanding principal amounts. Such activity totaled $31 million and $38 million during 2011 and 2010, respectively. The Company has been able to resell the VOIs underlying the VOI notes repurchased or replaced under these provisions without incurring significant losses. The Company holds the risk of potential loss (or gain) as the last to be paid out by proceeds of the VIEs under the terms of the agreements. As such, the Company holds both the power to direct the activities of the VIEs and obligation to absorb the losses (or benefits) from the VIEs. The securitization agreements are without recourse to the Company, except for breaches of representations and warranties. Based on the right of the Company to fund defaults at its option, subject to certain limitations, it intends to do so until the debt is extinguished to maintain the credit rating of the underlying notes. Upon transfer of vacation ownership notes receivable to the VIEs, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the VIE creditors. The VIEs utilize trusts which have ownership of cash balances that also have restrictions, the amounts of which are reported in restricted cash. The Companys interests in trust assets are subordinate to the interests of third-party investors and, as such, may not be realized by the Company if needed to absorb deficiencies in cash flows that are allocated to the investors in the trusts debt (see Note 16). The Company is contractually obligated to receive the excess cash flows (spread between the collections on the notes and third party obligations defined in the securitization agreements) from the VIEs. Such activity totaled $44 million and $43 million during 2011 and 2010, respectively, and is classified in cash and cash equivalents. During the year ended December 31, 2011, the Company completed the 2011 securitization of approximately $210 million of vacation ownership notes receivable. The securitization transaction did not qualify as a sale for accounting purposes and, accordingly, no gain or loss was recognized. Of the $210 million securitized in the 2011-A transaction, $200 million was previously unsecuritized and approximately $10 million had previously been securitized in the 2003 securitization which was terminated in connection with the 2011 securitization. The 2003 securitization was terminated, including pay-down of all outstanding principal and interest due. The net cash proceeds from the securitization, after termination of the 2003 securitization and associated deal costs, were approximately $177 million. During the year ended December 31, 2010, the Company completed the 2010 securitization of approximately $300 million of vacation ownership notes receivable. The securitization transaction did not qualify as a sale for accounting purposes and, accordingly, no gain or loss was recognized. Approximately $93 million of proceeds from this transaction were used to terminate the securitization completed in June 2009 by repaying the outstanding principal and interest on the securitized debt. In connection with the termination, a charge of $5 million was recorded to interest expense, relating to the settlement of a balance guarantee interest rate swap and the write-off of deferred financing costs. The net cash proceeds from the securitization after termination of the 2009 securitization and associated deal costs were approximately $180 million. See Note 10 for disclosures and amounts related to the securitized vacation ownership notes receivable consolidated on the Companys balance sheets as of December 31, 2011 and 2010. Prior to the adoption of ASU 2009-16 and 2009-17, the Company completed securitizations of its VOI notes receivables, which qualified for sales treatment. Retained Interests cash flows were limited to the cash available from the related VOI notes receivable, after servicing and other related fees, absorbing 100% of any credit losses on the related VOI notes receivable and QSPE fixed rate interest expense. The Companys replacement of the defaulted VOI notes receivable under the securitization agreements with new VOI notes receivable resulted in net gains of approximately $3 million during 2009, which are included in vacation ownership and residential sales and services in the Companys consolidated statements of income. F-22

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS In June 2009, the Company securitized approximately $181 million of VOI notes receivable (the 2009-A Securitization) resulting in cash proceeds of approximately $125 million. The Company retained $44 million of interests in the QSPE, which included $43 million of notes the Company effectively owned after the transfer and $1 million related to the interest only strip. The related loss on the 2009-A Securitization of $2 million was included in vacation ownership and residential sales and services in the Companys consolidated statements of income. In December 2009, the Company securitized approximately $200 million of VOI notes receivable (the 2009-B Securitization) resulting in cash proceeds of approximately $166 million. The Company retained $31 million of interests in the QSPE, which included $22 million of notes the Company effectively owned after the transfer and $9 million related to the interest only strip. The related gain on the 2009-B Securitization of $19 million is included in vacation ownership and residential sales and services in the Companys consolidated statements of income. In December 2009, the Company entered into an amendment with the third-party beneficial interest owner regarding the notes issued in the 2009-A Securitization (the 2009-A Amendment). The amendment to the terms included a reduction of the coupon rate and an increase in the effective advance rate. As the increase in the advance rate produced additional cash proceeds of $9 million, this resulted effectively in additional loans sold to the QSPE from the original over collateralization. The related gain on the 2009-A Amendment of $4 million was included in vacation ownership and residential sales and services in the Companys consolidated statements of income. Note 10. Notes Receivable

Notes receivable (net of reserves) related to the Companys vacation ownership loans consist of the following (in millions):
December 31, 2011 2010

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

$510 113 623 (64) (20) $539

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

The current and long-term maturities of unsecuritized VOI notes receivable are included in accounts receivable and other assets, respectively, in the Companys consolidated balance sheets. The Company records interest income associated with VOI notes in its vacation ownership and residential sale and services line item in its consolidated statements of income. Interest income related to the Companys VOI notes receivable was as follows (in millions):
Year Ended December 31, 2011 2010 2009

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

$64 21 $85

$66 21 $87

$ 48 $48

F-23

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The following tables present future maturities of gross VOI notes receivable (in millions) and interest rates:
Securitized Unsecuritized Total

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . Weighted Average Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . Range of interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73 77 79 78 283 590 12.84% 5 to 17%

29 14 12 14 100 169 11.89% 5 to 17%

102 91 91 92 383 759 12.58%

5 to 17%

For the vacation ownership and residential segment, the Company records an estimate of expected uncollectibility on its VOI notes receivable as a reduction of revenue at the time it recognizes profit on a timeshare sale. The Company holds large amounts of homogeneous VOI notes receivable and therefore assesses uncollectibility based on pools of receivables. In estimating loss reserves, the Company uses a technique referred to as static pool analysis, which tracks uncollectible notes for each years sales over the life of the respective notes and projects an estimated default rate that is used in the determination of its loan loss reserve requirements. As of December 31, 2011, the average estimated default rate for the Companys pools of receivables was 9.9%. The activity and balances for the Companys loan loss reserve are as follows (in millions):
Securitized Unsecuritized Total

Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adoption of ASU No. 2009-17 . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 14 77 (9) 82 2 (4) $80

$ 91 64 (61) 94 32 (52) (4) 9 79 27 (54) 4 $ 56

$ 91 64 (61) 94 46 (52) 73 161 29 (54) $136

The primary credit quality indicator used by the Company to calculate the loan loss reserve for the vacation ownership notes is the origination of the notes by brand (Sheraton, Westin, and Other) as the Company believes there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership property they have acquired. In addition to quantitatively calculating the loan loss reserve based on its static pool analysis, the Company supplements the process by evaluating certain qualitative data, including the aging of the respective receivables, current default trends by brand and origination year, and the FICO scores of the buyers. F-24

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Given the significance of the Companys respective pools of VOI notes receivable, a change in the projected default rate can have a significant impact to its loan loss reserve requirements, with a 0.1% change estimated to have an impact of approximately $4 million. The Company considers a VOI note receivable delinquent when it is more than 30 days outstanding. All delinquent loans are placed on nonaccrual status and the Company does not resume interest accrual until payment is made. Upon reaching 120 days outstanding, the loan is considered to be in default and the Company commences the repossession process. Uncollectible VOI notes receivable are charged off when title to the unit is returned to the Company. The Company generally does not modify vacation ownership notes that become delinquent or upon default. Past due balances of VOI notes receivable by credit quality indicators are as follows (in millions):
30-59 Days Past Due 60-89 Days Past Due >90 Days Past Due Total Past Due Current Total Receivables

As of December 31, 2011: Sheraton . . . . . . . . . . . . . . . . . . . . . . . Westin . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5 3 1 $ 9

$3 2 1 $6 $4 3 1 $8

$26 17 4 $47 $30 33 4 $67

$34 22 6 $62 $40 41 6 $87

$321 345 31 $697 $314 342 37 $693

$355 367 37 $759 $354 383 43 $780

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

$ 6 5 1 $12

Note 11.

Fair Value

The following table presents the Companys fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2011 (in millions):
Level 1 Level 2 Level 3 Total

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

$ $

$12 3 $15

$ $

$12 3 $15

The forward contracts are over the counter contracts that do not trade on a public exchange. The fair values of the contracts are based on inputs such as foreign currency spot rates and forward points that are readily available on public markets, and as such, are classified as Level 2. The Company considered both its credit risk, as well as its counterparties credit risk in determining fair value and no adjustment was made as it was deemed insignificant based on the short duration of the contracts and the Companys rate of short-term debt. The interest rate swaps are valued using an income approach. Expected future cash flows are converted to a present value amount based on market expectations of the yield curve on floating interest rates, which is readily available on public markets. F-25

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Note 12. Deferred Gains

The Company defers gains realized in connection with the sale of a property for which the Company continues to manage the property through a long-term management agreement and recognizes the gains over the initial term of the related agreement. As of December 31, 2011 and 2010, the Company had total deferred gains of $1.018 billion and $1.011 billion, respectively, included in accrued expenses and other liabilities in the Companys consolidated balance sheets. Amortization of deferred gains is included in management fees, franchise fees and other income in the Companys consolidated statements of income and totaled approximately $87 million, $81 million and $82 million in 2011, 2010 and 2009, respectively. Note 13. Restructuring, Goodwill Impairment and Other Special Charges (Credits), Net

Restructuring, Goodwill Impairment and Other Special Charges (Credits) by operating segment are as follows (in millions):
Year Ended December 31, 2011 2010 2009

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

$70 (2) $68

$(74) (1) $(75)

$ 21 358 $379

During the year ended December 31, 2011, the Company recorded a charge of $70 million related to an unfavorable decision in a lawsuit (see Note 25) and a credit of $2 million to adjust previously recorded reserves to the amounts the Company now expects to pay. During the year ended December 31, 2010, the Company received cash proceeds of $75 million in connection with the favorable settlement of a lawsuit. The Company recorded this settlement, net of the reimbursement of legal costs incurred in connection with the litigation, as a credit to restructuring, goodwill impairment, and other special charges (credits) line item. Additionally, the Company recorded a credit of $8 million as a liability associated with an acquisition in 1998 that was no longer deemed necessary (see Note 25). During the year ended December 31, 2009, the Company completed a comprehensive review of its vacation ownership business. The Company decided not to develop certain vacation ownership sites and future phases of certain existing projects. As a result of these decisions, the Company recorded a primarily non-cash impairment charge of $255 million. The impairment included a charge of approximately $148 million primarily related to land held for development; a charge of $64 million for the reduction in inventory values at four properties; the write-off of fixed assets of $21 million; facility exit costs of $15 million and $7 million in other costs. Additionally, as a result of this decision and the economic climate at that time, the Company recorded a $90 million non-cash charge for the impairment of goodwill in the vacation ownership reporting unit. Additionally, in 2009, the Company recorded restructuring and other special charges of $34 million, primarily related to severance charges and costs to close vacation ownership sales galleries, associated with its ongoing initiative of rationalizing its cost structure. In determining the fair value associated with the impairment charges the Company primarily used the income and market approaches. Under the income approach, fair value was determined based on estimated future cash flows taking into consideration items such as operating margins and the sales pace of vacation ownership intervals, discounted using a rate commensurate with the inherent risk of the project. Under the market approach, fair value was determined with the comparable sales of similar assets and appraisals. F-26

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The Company had remaining restructuring accruals of $89 million as of December 31, 2011, primarily recorded in accrued expenses. Note 14. Income Taxes
Year Ended December 31, 2011 2010 2009

Income tax data from continuing operations of the Company is as follows (in millions):

Pretax income U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 165 260 $ 425

$ 85 250 $335

$ (76) (220) $(296)

Provision (benefit) for income tax Current: U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(215) (21) 88 (148)

$ (61) 18 43 22 (7) 12 27 $ 27

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

Deferred: U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62 (11) 22 73 $ (75)

No provision has been made for U.S. taxes payable on undistributed foreign earnings amounting to approximately $2.3 billion as of December 31, 2011 since these amounts are permanently reinvested. If such earnings were repatriated, additional tax expense may result, although the calculation of such additional taxes is not practicable. Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities plus carryforward items. The composition of net deferred tax balances were as follows (in millions):
December 31, 2011 2010

Current deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current deferred tax liabilities (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Included in the Accrued taxes and other line item in the consolidated balance sheets. F-27

$278 639 (7) (46) $864

$315 664 (4) (24) $951

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The tax effect of the temporary differences and carryforward items that give rise to deferred taxes were as follows (in millions):
December 31, 2011 2010

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

$ (23) (11) 118 350 133 9 201 61 257 (6) 1,089 (225) $ 864

$ (17) 177 140 346 (4) 85 181 79 406 (45) 1,348 (397) $ 951

At December 31, 2011, the Company had federal net operating losses, which have varying expiration dates extending through 2031, of approximately $15 million. The Company also had federal general business credits of approximately $21million, which have varying expiration dates extending through 2030. The Company expects to realize substantially all of the tax benefit associated with these attributes. At December 31, 2011, the Company had state net operating losses, which have varying expiration dates extending through 2028, of approximately $1.6 billion. The Company also had state tax credit carryforwards of $21 million which are indefinite or will fully expire by 2026. The Company has established a valuation allowance against the majority of these attributes as it is unlikely that the tax benefit of these attributes will be realized prior to expiration. At December 31, 2011 the Company had foreign net operating losses and capital losses, which are indefinite or have varying expiration dates extending through 2020, of approximately $283 million and $22 million, respectively. The Company also had tax credit carryforwards of approximately $13 million in foreign jurisdictions. The tax credit carryforwards available in foreign jurisdictions are indefinite or will fully expire by 2020. The Company has established a valuation allowance against the majority of these attributes as it is unlikely that the tax benefit of these attributes will be realized prior to expiration.

F-28

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS A reconciliation of the tax provision of the Company at the U.S. statutory rate to the provision for income tax as reported is as follows (in millions):
Year Ended December 31, 2011 2010 2009

Tax provision at U.S. statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. state and local income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax on repatriation of foreign earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign tax rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax on capital gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in asset basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nondeductible goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax on asset dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for income tax (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 149 (19) 25 (64) 334 (130) 9 8 (25) (60) (304) 2 $ (75)

$117 (2) (19) (70) 99 3 23 (42) 1 (99) 16 $ 27

$(104) (3) (45) (25) (120) 39 9 1 (32) (13) $(293)

The foreign tax rate differential benefit primarily relates to the Companys operations in Luxembourg and Singapore. In 2011, the Company completed transactions that involved certain domestic and foreign subsidiaries. These transactions generated capital gains, increased the tax basis in subsidiaries including U.S. partnerships and resulted in the inclusion of foreign earnings for U.S. tax purposes. The capital gains were largely reduced by the utilization of capital losses. Due to the uncertainty regarding the Companys ability to generate capital gain income, the deferred tax asset associated with these capital losses was offset by a full valuation allowance prior to these transactions. During 2009, the Company entered into an Italian tax incentive program through which the tax basis of its Italian owned hotels was adjusted resulting in a $120 million tax benefit. During 2011, the IRS closed its audit with respect to tax years 2004 through 2006 resulting in a $25 million tax benefit primarily related to the reversal of tax and interest reserves. During 2010, the IRS closed its audit with respect to tax years 1998 through 2003 and the Company recognized a $42 million tax benefit in continuing operations primarily associated with the refund of interest on taxes previously paid. Also in 2010, as a result of the 1998 through 2003 audit closure, the Company recognized a $134 million tax benefit in discontinued operations primarily related to the portion of the tax no longer due. As of December 31, 2011, the Company had approximately $153 million of total unrecognized tax benefits, of which $42 million would affect its effective tax rate if recognized. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in millions):
Year Ended December 31, 2011 2010 2009

Beginning of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions based on tax positions related to the current year . . . . . . . . . . Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . Settlements with tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reductions for tax positions in prior years . . . . . . . . . . . . . . . . . . . . . . . Reductions due to the lapse of applicable statutes of limitations . . . . . . End of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-29

$ 510 24 36 (407) (6) (4) $ 153

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

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

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS It is reasonably possible that approximately $25 million of the Companys unrecognized tax benefits as of December 31, 2011 will reverse within the next twelve months. The Company recognizes interest and penalties related to unrecognized tax benefits through income tax expense. The Company had $74 million and $92 million accrued for the payment of interest as of December 31, 2011 and December 31, 2010, respectively. The Company did not have any reserves for penalties as of December 31, 2011 and 2010. The Company is subject to taxation in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. As of December 31, 2011, the Company is no longer subject to examination by U.S. federal taxing authorities for years prior to 2007 and to examination by any U.S. state taxing authority prior to 1998. All subsequent periods remain eligible for examination. In the significant foreign jurisdictions in which the Company operates, the Company is no longer subject to examination by the relevant taxing authorities for any years prior to 2001. Note 15. Debt
December 31, 2011 2010

Long-term debt and short-term borrowings consisted of the following (in millions):

Senior Credit Facility: Revolving Credit Facility, maturing 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 7.875%, settled 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 6.25%, maturing 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 7.875%, maturing 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 7.375%, maturing 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 6.75%, maturing 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senior Notes, interest at 7.15%, maturing 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgages and other, interest rates ranging from 1.00% to 9.00%, various maturities . . . . . . . . Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

500 497 450 400 245 105 2,197 (3)

609 504 490 450 400 245 159 2,857 (9)

$2,194

$2,848

F-30

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Aggregate debt maturities for each of the years ended December 31 are as follows (in millions): 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3 505 502 455 39 693

$2,197 The Company maintains lines of credit under which bank loans and other short-term debt are drawn. In addition, smaller credit lines are maintained by the Companys foreign subsidiaries. The Company had approximately $1.5 billion of available borrowing capacity under its domestic and foreign lines of credit as of December 31, 2011. The short-term borrowings under these lines of credit at December 31, 2011 and 2010 were de minimus. The Company is subject to certain restrictive debt covenants under its short-term borrowing and long-term debt obligations including defined financial covenants, limitations on incurring additional debt, ability to pay dividends, escrow account funding requirements for debt service, capital expenditures, tax payments and insurance premiums, among other restrictions. The Company was in compliance with all of the short-term and long-term debt covenants at December 31, 2011. During the year ended December 31, 2011, the Company entered into a credit agreement which provided a loan of approximately $38 million, which is due in 2016, and is secured by one of its owned hotels. Proceeds from this loan were used to pay off an existing credit agreement that was due in 2012. During the year ended December 31, 2011, the Company redeemed all of the outstanding 7.875% Senior Notes due 2012, which had a principal amount of approximately $605 million. In connection with this transaction, the Company terminated two interest rate swaps related to the 7.875% Senior Notes, which had notional amounts totaling $200 million (see Note 23). As a result of the early redemption of the 7.875% Senior Notes, the Company recorded a net charge of approximately $16 million in interest expense, net of interest income line item in its statement of income, representing the tender premiums, swap settlements and other related redemption costs. During the year ended December 31, 2011, the Company sold its interest in a consolidated joint venture which resulted in the buyer assuming approximately $57 million of the Companys mortgage debt. During the year ended December 31, 2011, the Company entered into two interest rate swaps with a total notional amount of $100 million, whereby the Company pays floating and receives fixed interest rates (see Note 23). On April 20, 2010, the Company entered into a $1.5 billion senior credit facility. The facility matures on November 15, 2013 and replaces the previous $1.875 billion revolving credit agreement, which would have matured on February 11, 2011. The new facility includes an accordion feature under which the Company may increase the revolving loan commitment by up to $375 million subject to certain conditions and bank commitments. The multi-currency facility enhances the Companys financial flexibility and is expected to be used for general corporate purposes. The Company had no borrowings under the senior credit facility and $171 million of letters of credit outstanding as of December 31, 2011. F-31

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Note 16. Securitized Vacation Ownership Debt

Long-term and short-term securitized vacation ownership debt consisted of the following (in millions):
December 31, 2011 2010

2003 securitization, interest rates ranging from 3.95% to 6.96%, settled 2011 . . . . . . 2005 securitization, interest rates ranging from 5.25% to 6.29%, maturing 2018 . . . . 2006 securitization, interest rates ranging from 5.28% to 5.85%, maturing 2018 . . . . 2009 securitizations, interest rate at 5.81%, maturing 2016 . . . . . . . . . . . . . . . . . . . . 2010 securitization, interest rates ranging from 3.65% to 4.75%, maturing 2021 . . . . 2011 securitization, interest rates ranging from 3.67% to 4.82%, maturing 2026 . . . . Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 37 27 92 190 186 532 (130) $ 402

$ 17 55 39 128 255 494 (127) $ 367

During the years ended December 31, 2011 and 2010, interest expense associated with securitized vacation ownership debt was $22 million and $27 million, respectively. Note 17. Other Liabilities

Other liabilities consisted of the following (in millions):

December 31, 2011 2010

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

$ 933 724 17 74 47 176 $1,971

$ 930 702 23 61 46 124 $1,886

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

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS required to pledge certain receivables as collateral for the remaining balance of the liability. As of December 31, 2011, a liability of $72 million related to the Amendment is recorded in other liabilities. Note 18. Discontinued Operations

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

Year Ended December 31, 2011 2010 2009

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

$(13) $

$168 $ (1)

$76 $ (2)

During the year ended December 31, 2011, the Company recorded a loss of $13 million, including an $18 million pretax loss from the sale of its interest in a consolidated joint venture, offset by a $10 million income tax benefit on the sale. Additionally, the Company recorded a $5 million charge related to interest on an uncertain tax position associated with a disposition in a prior year. During the year ended December 31, 2010, the Company recorded a tax benefit of $134 million related to the final settlement with the IRS regarding the World Directories disposition (see Note 14) and a pretax gain of approximately $3 million ($36 million after tax) related to the sale of one wholly-owned hotel for $78 million. The tax benefit was related to the realization of a high tax basis in this hotel that was generated through a previous transaction. For the year ended December 31, 2009, the $76 million (net of tax) gain on dispositions includes the gains from the sale of the Companys Bliss spa business, other non-core assets and three hotels. The operations from the Bliss spa business, and the revenues and expenses from one hotel, which was in the process of being sold and was later sold in 2010, are included in discontinued operations, resulting in a loss of $2 million, net of tax. Note 19. Employee Benefit Plan

During the year ended December 31, 2011, the Company recorded net actuarial losses of $20 million (net of tax) related to various employee benefit plans. These losses were recorded in other comprehensive income. The amortization of the net actuarial loss, a component of other comprehensive income, for the year ended December 31, 2011 was $1 million (net of tax). Included in accumulated other comprehensive (loss) income at December 31, 2011 are unrecognized net actuarial losses of $85 million ($75 million, net of tax) that have not yet been recognized in net periodic pension cost. The actuarial loss included in accumulated other comprehensive (loss) income that is expected to be recognized in net periodic pension cost during the year ended December 31, 2012 is $2 million ($2 million, net of tax). Defined Benefit and Postretirement Benefit Plans. The Company and its subsidiaries sponsor or previously sponsored numerous funded and unfunded domestic and international pension plans. All defined benefit plans covering U.S. employees are frozen. Certain plans covering non-U.S. employees remain active. The Company also sponsors the Starwood Hotels & Resorts Worldwide, Inc. Retiree Welfare Program. This plan provides health care and life insurance benefits for certain eligible retired employees. The Company has prefunded a portion of the life insurance obligations through trust funds where such prefunding can be accomplished on a tax effective basis. The Company also funds this program on a pay-as-you-go basis. F-33

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The following table sets forth the benefit obligation, fair value of plan assets, the funded status and the accumulated benefit obligation of the Companys defined benefit pension and postretirement benefit plans at December 31 (in millions):
Domestic Pension Benefits 2011 2010 Foreign Pension Benefits 2011 2010 Postretirement Benefits 2011 2010

Change in Benefit Obligation Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of foreign exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plan participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in Plan Assets Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . Actual return on plan assets, net of expenses . . . . . . . . . . . . . . . . . . Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plan participant contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of foreign exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . .

$ 19 $ 17 $183 $178 $ 20 $ 19 1 1 10 10 1 1 1 2 18 5 1 2 (1) (3) 1 1 (1) (1) (5) (7) (3) (3) 1 $ 20 $ 19 $206 $183 $ 20 $ 20

$ $ $176 $159 $ 1 $ 1 12 14 1 1 8 13 1 2 1 1 (1) (3) (1) (1) (5) (7) (3) (3) $ $ $190 $176 $ $ 1

Unfunded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(20) $(19) $ (16) $ (7) $(20) $(19) Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Plans with Accumulated Benefit Obligations in Excess of Plan Assets Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20 $ 19 $205 $182 n/a n/a

$ 20 $ 20 $

$ 19 $140 $ 19 $140 $ $105

$121 $121 $ 97

n/a n/a n/a

n/a n/a n/a

The net underfunded status of the plans at December 31, 2011 was $56 million, of which $72 million is recorded in other liabilities, $3 million is recorded in accrued expenses and $19 million is recorded in other assets in the accompanying balance sheet. All domestic pension plans are frozen plans, whereby employees do not accrue additional benefits. Therefore, at December 31, 2011 and 2010, the projected benefit obligation is equal to the accumulated benefit obligation.

F-34

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The following table presents the components of net periodic benefit cost for the years ended December 31 (in millions):
Domestic Pension Benefits 2011 2010 2009 2011 Foreign Pension Benefits 2010 2009 2011 Postretirement Benefits 2010 2009

Service cost . . . . . . . . . . . . . . . . . . . . . . . . . $ Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . 1 Expected return on plan assets . . . . . . . . . . Amortization of net actuarial loss . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Settlement and curtailment (gain) loss . . . . Net periodic benefit cost . . . . . . . . . . . . . . . $ 1

$ 1 $ 1

$ 1 $ 1

$ 10 (12) 1 1 $

$ 10 (10) 1 $ 1

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

$ 1 $ 1

$ 1 $ 1

$ 1 $ 1

For measurement purposes, a 9% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2012, gradually decreasing to 5% in 2020. A one-percentage point change in assumed health care cost trend rates would have approximately a $0.9 million effect on the postretirement obligation and a nominal impact on the total of service and interest cost components of net periodic benefit cost. The majority of participants in the Foreign Pension Plans are employees of managed hotels, for which the Company is reimbursed for costs related to their benefits. The impact of these reimbursements is not reflected above. The weighted average assumptions used to determine benefit obligations at December 31 were as follows:
Domestic Pension Benefits 2011 2010 Foreign Pension Benefits 2011 2010 Postretirement Benefits 2011 2010

Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.25% 5.00% 4.68% 5.34% 4.00% 4.75% n/a n/a 3.26% 3.64% n/a n/a

The weighted average assumptions used to determine net periodic benefit cost for the years ended December 31 were as follows:
Domestic Pension Benefits 2011 2010 2009 2011 Foreign Pension Benefits 2010 2009 2011 Postretirement Benefits 2010 2009

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

5.00% 5.51% 5.99% 5.34% 5.93% 6.19% 4.75% 5.50% 6.00% n/a n/a n/a 3.64% 3.50% 3.93% n/a n/a n/a n/a n/a n/a 6.52% 6.56% 6.25% 7.10% 7.10% 7.50%

The Companys investment objectives are to minimize the volatility of the value of the assets and to ensure the assets are sufficient to pay plan benefits. The target asset allocation is 62% debt securities and 38% equity securities. A number of factors were considered in the determination of the expected return on plan assets. These factors included current and expected allocation of plan assets, the investment strategy, historical rates of return and Company and investment expert expectations for investment performance over approximately a ten year period.

F-35

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The following table presents the Companys fair value hierarchy of the plan assets measured at fair value on a recurring basis as of December 31, 2011 (in millions):
Level 1 Level 2 Level 3 Total

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

$55 $55

$ 5 67 63 $135

$ $

$ 55 5 67 63 $190

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

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

$44 $44

$ 5 72 56 $133

$ $

$ 44 5 72 56 $177

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

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017-2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

$ 7 $ 8 $ 9 $ 9 $10 $56

$2 $2 $2 $2 $1 $6

The Company expects to contribute $12 million to the plans during 2012. A significant portion of the contributions relate to the Foreign Pension Plans, which the Company is reimbursed. Defined Contribution Plans. The Company and its subsidiaries sponsor various defined contribution plans, including the Starwood Hotels & Resorts Worldwide, Inc. Savings and Retirement Plan, which is a 401(k) plan. The plan allows participation by employees on U.S. payroll who are at least age 21. Each participant may contribute on a pretax basis between 1% and 50% of his or her eligible compensation to the plan subject to certain maximum limits. Eligible employees are automatically enrolled after 90 days (unless they opt out). A company-paid matching contribution is provided to participants who have completed at least one year of F-36

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS service. The amount of expense for matching contributions totaled $15 million in 2011, $13 million in 2010, and $15 million in 2009. The plan includes as an investment choice, the Companys publicly traded common stock. The balances held in the Companys stock were $67 million and $87 million at December 31, 2011 and 2010, respectively. Multi-Employer Pension Plans. Certain employees are covered by union sponsored multi-employer pension plans pursuant to agreements between the Company and various unions. The Companys participation in these plans is outlined in the table below (in millions):
Pension Fund EIN/ Pension Plan Number Pension Protection Act Zone Status 2011 2010 Contributions 2011 2010 2009

New York Hotel Trades Council and Hotel Association of New York City, Inc. Pension Fund . . . . . . . . . . . . . . . . . . . . . . Other Funds . . . . . . . . . . . . . . . . . . . . . . . . . Total Contributions . . . . . . . . . . . . . . . . . . . (a) As of January 1, 2011 (b) As of January 1, 2010

13-1764242/001

Yellow (a)

Yellow (b)

$4 5 $9

$4 5 $9

$5 4 $9

Eligible employees at the Companys owned hotels in New York City participate in the New York Hotel Trades Council and Hotel Association of New York City, Inc. Pension Fund. The Company contributions are based on a percentage of all union employee wages as dictated by the collective bargaining agreement that expires on June 30, 2012. The Companys contributions did not exceed 5% of the total contributions to the pension fund in 2011, 2010 or 2009. The pension fund has implemented a funding improvement plan and the Company has not paid a surcharge. Multi-Employer Health Plans. Certain employees are covered by union sponsored multi-employer health plans pursuant to agreements between the Company and various unions. The plan benefits can include medical, dental and life insurance for eligible participants and retirees. The Company contributions to these plans, which were charged to expense during 2011, 2010 and 2009, was approximately $26 million, $27 million and $29 million, respectively. Note 20. Leases and Rentals

The Company leases certain equipment for the hotels operations under various lease agreements. The leases extend for varying periods through 2016 and generally are for a fixed amount each month. In addition, several of the Companys hotels are subject to leases of land or building facilities from third parties, which extend for varying periods through 2096 and generally contain fixed and variable components. The variable components of leases of land or building facilities are primarily based on the operating profit or revenues of the related hotels. The Companys minimum future rents at December 31, 2011 payable under non-cancelable operating leases with third parties are as follows (in millions): 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-37 $ 84 89 88 86 84 1,024

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Rent expense under non-cancelable operating leases consisted of the following (in millions):
Year Ended December 31, 2011 2010 2009

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

$104 9 (4) $109

$90 6 (5) $91

$89 2 (3) $88

Note 21.

Stockholders Equity

Share Repurchases. In December 2011, the Companys Board of Directors authorized a share repurchase program of $250 million. During the years ended December 31, 2011 and 2010, the Company did not repurchase any Company common shares. As of December 31, 2011, $250 million of repurchase capacity remained available under this program. Note 22. Stock-Based Compensation

In 2004, the Company adopted the 2004 Long-Term Incentive Compensation Plan (2004 LTIP), which superseded the 2002 Long-Term Incentive Compensation Plan (2002 LTIP) and provides the terms of equity award grants to directors, officers, employees, consultants and advisors. Although no additional awards will be granted under the 2002 LTIP, the Companys 1999 Long-Term Incentive Compensation Plan or the Companys 1995 Share Option Plan, the provisions under each of the previous plans will continue to govern awards that have been granted and remain outstanding under those plans. The aggregate award pool for non-qualified or incentive stock options, performance shares, restricted stock and units or any combination of the foregoing which are available to be granted under the 2004 LTIP at December 31, 2011 was approximately 56 million. Compensation expense, net of reimbursements during 2011, 2010 and 2009 was approximately $75 million, $72 million and $53 million, respectively, resulting in tax benefits of $29 million, $28 million and $21 million, respectively. As of December 31, 2011, there was approximately $76 million of unrecognized compensation cost, net of estimated forfeitures, including the impact of reimbursement from third parties, which is expected to be recognized over a weighted-average period of 1.5 years on a straight-line basis. The Company utilizes the Lattice model to calculate the fair value option grants. Weighted average assumptions used to determine the fair value of option grants were as follows:
Year Ended December 31,
2011 2010 2009

Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Volatility: Near term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yield curve: 6 month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-38

0.75% 36.0% 44.0% 6 yrs. 0.18% 0.25% 1.18% 2.13% 3.42%

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

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

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The dividend yield is estimated based on the current expected annualized dividend payment and the average expected price of the Companys common shares during the same periods. The estimated volatility is based on a combination of historical share price volatility as well as implied volatility based on market analysis. The historical share price volatility was measured over an 8-year period, which is equal to the contractual term of the options. The weighted average volatility for 2011 grants was 39%. The expected life represents the period that the Companys stock-based awards are expected to be outstanding and was determined based on an actuarial calculation using historical experience, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The yield curve (risk-free interest rate) is based on the implied zero-coupon yield from the U.S. Treasury yield curve over the expected term of the option. The following table summarizes the Companys stock option activity during 2011:
Options (In Millions) Weighted Average Exercise Price Per Share

Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited, Canceled or Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercisable at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.7 0.3 (2.3) 6.7 3.6

$29.72 61.28 31.01 $30.70 $39.53

The weighted-average fair value per option for options granted during 2011, 2010 and 2009 was $21.84, $14.73, and $4.69, respectively, and the service period is typically four years. The total intrinsic value of options exercised during 2011, 2010 and 2009 was approximately $62 million, $115 million and $1 million, respectively, resulting in tax benefits of approximately $23 million, $44 million and $0.3 million, respectively. The aggregate intrinsic value of outstanding options as of December 31, 2011 was $128 million. The aggregate intrinsic value of exercisable options as of December 31, 2011 was $39 million. The weighted-average contractual life was 4.1 years for outstanding options and 3.0 years for exercisable option as of December 31, 2011. The Company recognizes compensation expense, equal to the fair market value of the stock on the date of grant for restricted stock and unit grants, over the service period. The weighted-average fair value per restricted stock or unit granted during 2011, 2010 and 2009 was $60.77, $37.33 and $11.15, respectively. The service period is typically three or four years except in the case of restricted stock and units issued in lieu of a portion of an annual cash bonus where the restriction period is typically in equal installments over a two year period, or in equal installments on the first, second and third fiscal year ends following grant date with distribution on the third fiscal year end. The fair value of restricted stock and units for which the restrictions lapsed during 2011, 2010 and 2009 was approximately $154 million, $62 million and $33 million, respectively.

F-39

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The following table summarizes the Companys restricted stock and units activity during 2011:
Number of Restricted Stock and Units (In Millions) Weighted Average Grant Date Value Per Share

Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lapse of restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forfeited or Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outstanding at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . 2002 Employee Stock Purchase Plan

8.5 1.3 (2.7) (0.2) 6.9

$28.11 60.77 42.71 27.24 $29.54

In April 2002, the Board of Directors adopted (and in May 2002 the shareholders approved) the Companys 2002 Employee Stock Purchase Plan (the ESPP) to provide employees of the Company with an opportunity to purchase shares through payroll deductions and reserved 11,988,793 shares for issuance under the ESPP. The ESPP commenced in October 2002. All full-time employees who have completed 30 days of continuous service and who are employed by the Company on U.S. payrolls are eligible to participate in the ESPP. Eligible employees may contribute up to 20% of their total cash compensation to the ESPP. Amounts withheld are applied at the end of every three-month accumulation period to purchase shares. The value of the shares (determined as of the beginning of the offering period) that may be purchased by any participant in a calendar year is limited to $25,000. The purchase price to employees is equal to 95% of the fair market value of shares at the end of each period. Participants may withdraw their contributions at any time before shares are purchased. Approximately 110,000 shares were issued under the ESPP during the year ended December 31, 2011 at purchase prices ranging from $42.33 to $58.05. Approximately 117,000 shares were issued under the ESPP during the year ended December 31, 2010 at purchase prices ranging from $36.77 to $54.00. Note 23. Derivative Financial Instruments

The Company, based on market conditions, enters into forward contracts to manage foreign exchange risk. The Company enters into forward contracts to hedge forecasted transactions based in certain foreign currencies, including the Euro, Canadian Dollar and Yen. These forward contracts have been designated and qualify as cash flow hedges, and their change in fair value is recorded as a component of other comprehensive income and reclassified into earnings in the same period or periods in which the forecasted transaction occurs. To qualify as a hedge, the Company needs to formally document, designate and assess the effectiveness of the transactions that receive hedge accounting. The notional dollar amount of the outstanding Euro forward contracts at December 31, 2011 are $34 million, with average exchange rates of 1.4, with terms of primarily less than one year. The Yen forward contracts expired during 2011. The Company reviews the effectiveness of its hedging instruments on a quarterly basis and records any ineffectiveness into earnings. The Company discontinues hedge accounting for any hedge that is no longer evaluated to be highly effective. From time to time, the Company may choose to de-designate portions of hedges when changes in estimates of forecasted transactions occur. Each of these hedges was highly effective in offsetting fluctuations in foreign currencies. The Company also enters into forward contracts to manage foreign exchange risk on intercompany loans that are not deemed permanently invested. These forward contracts are not designated as hedges, and their change in fair value is recorded in the Companys consolidated statements of income during each reporting period. F-40

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The Company enters into interest rate swap agreements to manage interest expense. The Companys objective is to manage the impact of interest rates on the results of operations, cash flows and the market value of the Companys debt. At December 31, 2011, the Company had six interest rate swap agreements with an aggregate notional amount of $400 million under which the Company pays floating rates and receives fixed rates of interest (Fair Value Swaps). The Fair Value Swaps hedge the change in fair value of certain fixed rate debt related to fluctuations in interest rates and mature in 2013 and 2014. The Fair Value Swaps modify the Companys interest rate exposure by effectively converting debt with a fixed rate to a floating rate. These interest rate swaps have been designated and qualify as fair value hedges. During the fourth quarter of 2011, the Company terminated its 2012 interest rate swap agreements, resulting in a gain of approximately $2 million, through interest expense. The counterparties to the Companys derivative financial instruments are major financial institutions. The Company evaluates the bond ratings of the financial institutions and believes that credit risk is at an acceptable level. The following tables summarize the fair value of the Companys derivative instruments, the effect of derivative instruments on its Consolidated Statements of Comprehensive Income, the amounts reclassified from Other comprehensive income and the effect on the Consolidated Statements of Income during the year.

Fair Value of Derivative Instruments (in millions)

December 31, 2011 Balance Sheet Location Fair Value December 31, 2010 Balance Sheet Location Fair Value

Derivatives designated as hedging instruments Asset Derivatives Forward contracts . . . . . Interest rate swaps . . . . . Total assets . . . . . . . .

Prepaid and other current assets Other assets

$ 3 12 $15

Prepaid and other current assets Other assets

$ 16 $16

December 31, 2011 Balance Sheet Location

Fair Value

December 31, 2010 Balance Sheet Location

Fair Value

Derivatives not designated as hedging instruments Asset Derivatives Forward contracts . . . . . Total assets . . . . . . . . Liability Derivatives Forward contracts . . . . . Total liabilities . . . . . .

Prepaid and other current assets

$ $

Prepaid and other current assets

$ $

Accrued expenses

$ $ F-41

Accrued expenses

$ 9 $ 9

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Consolidated Statements of Income and Comprehensive Income For the Years Ended December 31, 2011 and 2010 (in millions) Balance at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mark-to-market loss (gain) on forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reclassification of gain (loss) from OCI to management fees, franchise fees, and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mark-to-market loss (gain) on forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reclassification of gain (loss) from OCI to management fees, franchise fees, and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 (1) $ $ (1) (2) $ (3)

Derivatives Not Designated as Hedging Instruments

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

Amount of Gain or (Loss) Recognized in Income on Derivative Year Ended December 31, 2011 2010 2009

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

Interest expense, net

$5 $5

$(45) $(45)

$(15) $(15)

F-42

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Note 24. Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Companys financial instruments (in millions):
December 31, 2011 Carrying Fair Amount Value December 31, 2010 Carrying Fair Amount Value

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

2 93 446 26

2 109 551 26

10 132 408 19

10 153 492 19

$ 567 $2,194 402 $2,596 $ $

$ 688 $2,442 412 $2,854 $ 171 21 $ 192

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

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

The Company believes the carrying values of its financial instruments related to current assets and liabilities approximate fair value. The Company records its derivative assets and liabilities at fair value. See Note 11 for recorded amounts and the method and assumption used to estimate fair value. The carrying value of the Companys restricted cash approximates its fair value. The Company estimates the fair value of its VOI notes receivable and securitized VOI notes receivable using assumptions related to current securitization market transactions. The amount is then compared to a discounted expected future cash flow model using a discount rate commensurate with the risk of the underlying notes, primarily determined by the credit worthiness of the borrowers based on their FICO scores. The results of these two methods are then evaluated to conclude on the estimated fair value. The fair value of other notes receivable is estimated based on terms of the instrument and current market conditions. These financial instrument assets are recorded in the other assets line item in the Companys consolidated balance sheet. The Company estimates the fair value of its publicly traded debt based on the bid prices in the public debt markets. The carrying amount of its floating rate debt is a reasonable basis of fair value due to the variable nature of the interest rates. The Companys non-public, securitized debt, and fixed rate debt fair value is determined based upon discounted cash flows for the debt rates deemed reasonable for the type of debt, prevailing market conditions and the length to maturity for the debt. Other long-term liabilities represent a financial guarantee that the Company expects to fund. The carrying value of this liability approximates its fair value based on expected funding amount under the guarantee.

F-43

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The fair values of the Companys letters of credit and surety bonds are estimated to be the same as the contract values based on the nature of the fee arrangements with the issuing financial institutions. Note 25. Commitments and Contingencies
Due in Less Than 1 Year Due in 1-3 Years Due in 3-5 Years Due After 5 Years

The Company had the following contractual obligations outstanding as of December 31, 2011 (in millions):
Total

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

$174 1 $175

$66 1 $67

$93 $93

$15 $15

$ $

(a) Included in these balances are commitments that may be reimbursed or satisfied by the Companys managed and franchised properties. The Company had the following commercial commitments outstanding as of December 31, 2011 (in millions):
Amount of Commitment Expiration Per Period Less Than After 1 Year 1-3 Years 3-5 Years 5 Years

Total

Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . .

$171

$168

$3

Variable Interest Entities. The Company has evaluated hotels in which it has a variable interest, which is generally in the form of investments, loans, guarantees, or equity. The Company determines if it is the primary beneficiary of the hotel by primarily considering the qualitative factors. Qualitative factors include evaluating if the Company has the power to control the VIE and has the obligation to absorb the losses and rights to receive the benefits of the VIE, that could potentially be significant to the VIE. The Company has determined it is not the primary beneficiary of these VIEs and therefore these entities are not consolidated in the Companys financial statements. See Note 9 for the VIEs in which the Company is deemed the primary beneficiary and has consolidated the entities. The 18 VIEs associated with the Companys variable interests represents entities that own hotels for which the Company has entered into management or franchise agreements with the hotel owners. The Company is paid a fee primarily based on financial metrics of the hotel. The hotels are financed by the owners, generally in the form of working capital, equity, and debt. At December 31, 2011, the Company has approximately $83 million of investments and a loan balance of $9 million associated with 16 VIEs. As the Company is not obligated to fund future cash contributions under these agreements, the maximum loss equals the carrying value. In addition, the Company has not contributed amounts to the VIEs in excess of their contractual obligations. Additionally, the Company has approximately $5 million of investments and certain performance guarantees associated with two VIEs. During the year ended December 31, 2011 and 2010, respectively, the Company recorded a $1 million and $3 million charge to selling, general and administrative expenses, relating to one of these VIEs, for a performance guarantee relating to a hotel managed by the Company. The maximum remaining funding exposure of this guarantee is $1 million. The Companys remaining performance guarantees have possible cash outlays of up to $63 million, $62 million of which, if required, would be funded over several years and would be largely offset by management fees received under these contracts. Guaranteed Loans and Commitments. In limited cases, the Company has made loans to owners of or partners in hotel or resort ventures for which the Company has a management or franchise agreement. Loans F-44

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS outstanding under this program totaled $13 million at December 31, 2011. The Company evaluates these loans for impairment, and at December 31, 2011, believes these loans are collectible. Unfunded loan commitments aggregating $19 million were outstanding at December 31, 2011, none of which is expected to be funded in the future. These loans typically are secured by pledges of project ownership interests and/or mortgages on the projects. The Company also has $94 million of equity and other potential contributions associated with managed or joint venture properties, $48 million of which is expected to be funded in 2012. Surety bonds issued on behalf of the Company at December 31, 2011 totaled $21 million, the majority of which were required by state or local governments relating to the Companys vacation ownership operations and by its insurers to secure large deductible insurance programs. To secure management contracts, the Company may provide performance guarantees to third-party owners. Most of these performance guarantees allow the Company to terminate the contract rather than fund shortfalls if certain performance levels are not met. In limited cases, the Company is obligated to fund shortfalls in performance levels through the issuance of loans. Many of the performance tests are multi-year tests, are tied to the results of a competitive set of hotels, and have exclusions for force majeure and acts of war and terrorism. The Company does not anticipate any significant funding under performance guarantees or losing a significant number of management or franchise contracts in 2012. In connection with the acquisition of the Le Mridien brand in November 2005, the Company assumed the obligation to guarantee certain performance levels at one Le Mridien managed hotel for the periods 2007 through 2014. During the year ended December 31, 2010, the Company reached an agreement with the owner of this property to fully release the Company of its performance guarantee obligation in return for a payment of approximately $1 million to the owner. Additionally, in connection with this settlement, the term of the management contract was extended by five years. As a result of this settlement, the Company recorded a credit to selling, general, administrative and other expenses of approximately $8 million for the difference between the carrying amount of the guarantee liability and the cash payment of $1 million. In connection with the purchase of the Le Mridien brand in November 2005, the Company was indemnified for certain of Le Mridiens historical liabilities by the entity that bought Le Mridiens owned and leased hotel portfolio. The indemnity is limited to the financial resources of that entity. However, at this time, the Company believes that it is unlikely that it will have to fund any of these liabilities. In connection with the sale of 33 hotels in 2006, the Company agreed to indemnify the buyer for certain liabilities, including operations and tax liabilities. At this time, the Company believes that it will not have to make any material payments under such indemnities. Litigation. The Company is involved in various legal matters that have arisen in the normal course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be determined, the Company does not expect that the resolution of all legal matters will have a material adverse effect on its consolidated results of operations, financial position or cash flow. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Companys future results of operations or cash flows in a particular period. In August 2009, Sheraton Operating Corporation (Sheraton) filed a lawsuit as plaintiff in the Supreme Court of the State of New York (the Court) against Castillo Grand LLC (Castillo) asserting claims arising out of a dispute over a hotel development contract. Two earlier lawsuits arising out of the same hotel development contract filed by Castillo against Sheraton in federal court had been dismissed for lack of subject matter jurisdiction. Castillo filed counterclaims in the state court action alleging, among other things, that Sheratons breach of contract resulted in design changes and construction delays. The matter was tried to the Court and, on November 18, 2011, the Court issued its Post Trial Decision ruling in favor of Castillo on some F-45

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS claims and counterclaims and in favor of Sheraton on others. Overall, the decision is unfavorable to Sheraton. Judgment has not as yet been entered, pending the Courts consideration of post-trial applications for the award of attorneys fees and expenses. As a result of this decision, the Company recorded a reserve for this matter resulting in a pretax charge of $70 million. The legal decision is not final and Starwood intends to appeal. Collective Bargaining Agreements. At December 31, 2011, approximately 25% of the Companys U.S.based employees were covered by various collective bargaining agreements, providing, generally, for basic pay rates, working hours, other conditions of employment and orderly settlement of labor disputes. Generally, labor relations have been maintained in a normal and satisfactory manner, and management believes that the Companys employee relations are satisfactory. Environmental Matters. The Company is subject to certain requirements and potential liabilities under various federal, state and local environmental laws, ordinances and regulations. Such laws often impose liability without regard to whether the current or previous owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Although the Company has incurred and expects to incur remediation and other environmental costs during the ordinary course of operations, management anticipates that such costs will not have a material adverse effect on the operations or financial condition of the Company. Captive Insurance Company. Estimated insurance claims payable at December 31, 2011 and 2010 were $70 million and $72 million, respectively. At December 31, 2011 and 2010, standby letters of credit amounting to $60 million and $64 million, respectively, had been issued to provide collateral for the estimated claims. The letters of credit are guaranteed by the Company. ITT Industries. In 1995, the former ITT Corporation, renamed ITT Industries, Inc. (ITT Industries), distributed to its stockholders all of the outstanding shares of common stock of ITT Corporation, then a wholly owned subsidiary of ITT Industries (the Distribution). In connection with this Distribution, ITT Corporation, which was then named ITT Destinations, Inc., changed its name to ITT Corporation. Subsequent to the acquisition of ITT Corporation in 1998, the Company changed the name of ITT Corporation to Sheraton Holding Corporation. For purposes of governing certain of the ongoing relationships between the Company and ITT Industries after the Distribution and spin-off of ITT Corporation and to provide for an orderly transition, the Company and ITT Industries have entered into various agreements including a spin-off agreement, Employee Benefits Services and Liability Agreement, Tax Allocation Agreement and Intellectual Property Transfer and License Agreements. The Company may be liable to or due reimbursement from ITT Industries relating to the resolution of certain pre-spin-off matters under these agreements. Based on available information, management does not believe that these matters would have a material impact on the Companys consolidated results of operations, financial position or cash flows. During the year ended December 31, 2010, the Company reversed a liability related to the 1998 acquisition (see Note 13). Note 26. Business Segment and Geographical Information

The Company has two operating segments: hotels and vacation ownership and residential. The hotel segment generally represents a worldwide network of owned, leased and consolidated joint venture hotels and resorts operated primarily under the Companys proprietary brand names including St. Regis, The Luxury Collection, Sheraton, Westin, W, Le Mridien, Four Points by Sheraton, Aloft and Element as well as hotels and resorts which are managed or franchised under these brand names in exchange for fees. The vacation ownership and residential segment includes the development, ownership and operation of vacation ownership resorts, marketing and selling VOIs, providing financing to customers who purchase such interests, licensing fees from branded condominiums and residences and the sale of residential units. F-46

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS The performance of the hotels and vacation ownership and residential segments is evaluated primarily on operating profit before corporate selling, general and administrative expense, interest expense, net of interest income, losses on asset dispositions and impairments, restructuring and other special charges (credits) and income tax benefit (expense). The Company does not allocate these items to its segments. The following table presents revenues, operating income, assets and capital expenditures for the Companys reportable segments (in millions):
2011 2010 2009

Revenues: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,756 $4,383 $4,022 Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 868 688 674 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total segment operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general, administrative and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restructuring, goodwill impairment and other special charges, net . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity earnings and gains and losses from unconsolidated ventures, net: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on asset dispositions and impairments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations before taxes and noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,624 $ 694 160 854 (156) (68) 630 8 3 (216) $ 425 $ 191 22 52 $ 265 $5,071 $ 571 105 676 (151) 75 600 8 2 (236) (39) $ 335 $ 207 27 51 $ 285 $4,696 $ 471 73 544 (139) (379) 26 (5) 1 (227) (91) $ (296) $ 229 27 53 $ 309

F-47

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS

2011 2010 2009

Capital expenditures: Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership and residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets: Hotel (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vacation ownership and residential (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 283 70 124 $ 477 $6,162 2,207 1,191 $9,560

$ 184 151 42 $ 377 $6,440 2,139 1,197 $9,776

$171 145 27 $343

(a) Includes $385 million, $227 million, and $196 million of property, plant, and equipment expenditures as of December 31, 2011, 2010, and 2009, respectively. Additional expenditures included in the amounts above consist of vacation ownership inventory and investments in management contracts. (b) Includes $229 million and $294 million of investments in unconsolidated joint ventures at December 31, 2011 and 2010, respectively. (c) Includes $30 million and $27 million of investments in unconsolidated joint ventures at December 31, 2011 and 2010, respectively. The following table presents revenues and long-lived assets by geographical region (in millions):
2011 Revenues 2010 2009 Long-Lived Assets 2011 2010

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

$3,561 2,063 $5,624

$3,312 1,759 $5,071

$3,387 1,309 $4,696

$2,023 1,506 $3,529

$2,186 1,449 $3,635

There were no individual international countries which comprised over 10% of the total revenues of the Company for the years ended December 2011, 2010 or 2009, or 10% of the total long-lived assets of the Company as of December 31, 2011 or 2010.

F-48

STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS Note 27. Quarterly Results (Unaudited)
March 31 Three Months Ended June 30 September 30 December 31 (In millions, except per share data) Year

2011 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . Net (income) loss from continuing operations attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations attributable to Starwoods common shareholders . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income attributable to Starwood . . . . . . . . . . . . . . . . . . . . . . Earnings per share: (a) Basic Income (loss) from continuing operations . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted Income (loss) from continuing operations . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010 Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations . . . . . . . . . . . . . . . . . Net (income) loss from continuing operations attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) from continuing operations attributable to Starwoods common shareholders . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income attributable to Starwood . . . . . . . . . . . . . . . . . . . . . . Earnings per share: (a) Basic Income (loss) from continuing operations . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted Income (loss) from continuing operations . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,295 $1,175 $ 27 $ $ $ $ 2 29 (1) 28

$1,426 $1,249 $ 150 $

$1,372 $1,210 $ 165 $

$1,531 $1,360 $ 158 $

$5,624 $4,994 $ 500 $ 2

$ 150 $ (19) $ 131

$ 165 $ (2) $ 163

$ 158 $ 9 $ 167

$ 502 $ (13) $ 489

$ 0.16 $ (0.01) $ 0.15 $ 0.15 $ (0.01) $ 0.14 $1,187 $1,102 $ 28 $ $ $ $ 2 30 30

$ 0.79 $ (0.10) $ 0.69 $ 0.77 $ (0.09) $ 0.68 $1,289 $1,152 $ 79 $

$ 0.88 $ (0.01) $ 0.87 $ 0.85 $ (0.01) $ 0.84 $1,255 $1,133 $ (5) $ $ $ $ (5) (1) (6)

$ 0.82 $ 0.05 $ 0.87 $ 0.80 $ 0.05 $ 0.85 $1,340 $1,084 $ 206 $

$ 2.65 $ (0.07) $ 2.58 $ 2.57 $ (0.06) $ 2.51 $5,071 $4,471 $ 308 $ 2

$ 79 $ 35 $ 114

$ 206 $ 133 $ 339

$ 310 $ 167 $ 477

$ 0.16 $ $ 0.16 $ 0.16 $ $ 0.16

$ 0.44 $ 0.19 $ 0.63 $ 0.42 $ 0.19 $ 0.61

$ (0.03) $ 0.00 $ (0.03) $ (0.03) $ 0.00 $ (0.03)

$ 1.13 $ 0.72 $ 1.85 $ 1.08 $ 0.70 $ 1.78

$ 1.70 $ 0.91 $ 2.61 $ 1.63 $ 0.88 $ 2.51

(a) Amounts presented are attributable to Starwoods common shareholders. F-49

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

Balance January 1,

Balance December 31,

2011 Trade receivables allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes receivable allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserves included in accrued and other liabilities: Restructuring and other special charges . . . . . . . 2010 Trade receivables allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes receivable allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserves included in accrued and other liabilities: Restructuring and other special charges . . . . . . . 2009 Trade receivables allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes receivable allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserves included in accrued and other liabilities: Restructuring and other special charges . . . . . . . (a) Charged to/from other accounts:

$ 32 $202 $ 29 $ 33 $139 $ 34 $ 31 $135 $ 41

(1)

$ (7) $(55) $ (1) $(13) $(51) $ 62 $(10) $(60) $(54)

$ 29 $175 $ 89 $ 32 $202 $ 29 $ 33 $139 $ 34

$ 28 $ 68 $ 15 $ 36 $ (75) $ 7

$ $ $ (7) (3)

$ 78 $ $ $ 8 5 (1)

$ 65 $379

$(332)

Description of Charged to/from Other Accounts

2011 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total charged to/from other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impact of ASU No. 2009-17 (see Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total charged to/from other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009 Plant, property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total charged to/from other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1

$ $ $

(1) (7) (8)

(3) 8 78 $ 83 $(178) (90) (61) (5) 2 4 $(328)

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

2012 PROXY STATEMENT & 2011 ANNUAL REPORT
CORPORATE HEADQUARTERS
Starwood Hotels & Resorts Worldwide, Inc. One StarPoint Stamford, Connecticut 06902 203 964 6000 www.starwoodhotels.com

FORM 10-K AND OTHER INVESTOR INFORMATION

A copy of the Annual Report of Starwood Hotels & Resorts Worldwide, Inc. (Starwood) or Form 10-K filed with the Securities and Exchange Commission may be obtained through the following channels:

INVESTOR RELATIONS
Starwood Hotels & Resorts Worldwide, Inc. One StarPoint Stamford, Connecticut 06902 203 351 3500 ir@starwoodhotels.com

REQUEST ELECTRONIC COPY

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Note: This Annual Report contains forward-looking statements within the meaning of federal securities regulations. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties and other factors that may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. Further results, performance and achievements may be affected by general economic conditions including the timing and robustness of a recovery from the current global economic downturn, the impact of war and terrorist activity, business and financing conditions, foreign exchange fluctuations, cyclicality of the real estate, including the sale of residential units, and the hotel and vacation ownership businesses, operating risks associated with the sale of residential units, hotel and vacation ownership businesses, relationships with associates, customers and property owners, the impact of the Internet reservation channels, our reliance on technology, domestic and international political and geopolitical conditions, competition, governmental and regulatory actions (including the impact of changes in US and foreign tax laws and their interpretation), travelers fears of exposure to contagious diseases, risk associated with the level of our indebtedness, risk associated with potential acquisitions and dispositions and other circumstances and uncertainties. These risks and uncertainties are presented in detail in our filings with the Securities and Exchange Commission. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that results will not materially differ. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 2012 Starwood Hotels & Resorts Worldwide, Inc. All Rights Reserved. Aloft, Element, Four Points, Le Mridien, Sheraton, St. Regis, The Luxury Collection, W, Westin and their logos are the trademarks of Starwood Hotels & Resorts Worldwide, Inc., or its affiliates.

PICTURED FROM TOP LEFT

THE ST. REGIS BANGKOK, THAILAND // THE CHATWAL, NEW YORK CITY, A LUXURY COLLECTION HOTEL, UNITED STATES // W RETREAT & SPA BALI SEMINYAK, INDONESIA // LE MERIDIEN KOH SAMUI RESORT & SPA, THAILAND // THE WESTIN ABU DHABI GOLF RESORT & SPA, UNITED ARAB EMIRATES // SHERATON SEOUL D CUBE CITY HOTEL, SOUTH KOREA // ALOFT JACKSONVILLE TAPESTRY PARK, UNITED STATES // ELEMENT LAS VEGAS SUMMERLIN, UNITED STATES // FOUR POINTS BY SHERATON BARCELONA DIAGONAL, SPAIN

PICTURED ON FRONT COVER

W TAIPEI, TAIWAN