STARWOOD REPORTS SECOND QUARTER 2001 EPS OF $0.55

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1 CONTACT: Dan Gibson (914) FOR IMMEDIATE RELEASE July 26, 2001 STARWOOD REPORTS SECOND QUARTER 2001 EPS OF $0.55 WHITE PLAINS, NY, JULY 26, 2001 Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) ( Starwood or the Company ) today reported results for the second quarter of Second Quarter Financial Highlights Total Company EBITDA reached $401 million benefiting from strong cost containment initiatives. Total Company EBITDA margin for the second quarter declined approximately 50 basis points to 36.1%. Excluding the investment spending for Six Sigma, total Company EBITDA margins increased approximately 20 basis points to 36.8%. REVPAR for Same-Store Owned Hotels in Europe increased 7.6% excluding the unfavorable effect of foreign currency translation. Further, excluding United Kingdom hotels where reports of foot-and-mouth disease have negatively impacted travel, REVPAR increased 10.4% and EBITDA at Comparable Owned Hotels increased 17.3%. Starwood branded hotel marketshare in North America increased 190 basis points versus the competitive set through May REVPAR for Worldwide Same-Store Owned Westin Hotels decreased 1.3% as ADR increased 1.2% while occupancy declined 190 basis points to 75.1%. REVPAR for Worldwide Same-Store Owned St. Regis/Luxury Collection Hotels, excluding the unfavorable effect of foreign currency translation and the New York St. Regis, increased 8.2% as ADR increased 11.4%. 1

2 Second Quarter Ended June 30, 2001 EPS was $0.55 in the second quarter of 2001 compared to EPS of $0.56 in the corresponding period in Total revenues were down 2.8% to $1.110 billion compared to the same period in 2000, despite the negative impact of the slowing North American economy, the disposition of several hotels, the effective closure of two hotels in Chicago for renovation and repositioning to W hotels, the political and economic crisis in Latin America, the closure of one hotel in Fiji and the unfavorable impact of foreign currency translation. The Company expects that both of the Chicago hotels will contribute to stronger revenue growth in the second half of Operating income for the second quarter of 2001 was $254 million compared to $285 million in the same period of 2000 due in part to increased non-cash charges for depreciation. Income from continuing operations was $113 million in the second quarter of 2001 compared to $114 million in the same period of 2000 benefiting from reduced interest expense, resulting from a reduction in interest rates and the completion of certain financing transactions and a reduction in the Company s effective tax rate. The results for the quarter include approximately $7.5 million of implementation costs associated with the Company s Six Sigma initiative offset by a pre-tax gain of approximately $7.9 million, resulting from cost containment efforts which led to the termination of a pension plan. Six Sigma financial benefits are expected to be a net positive by early fourth quarter Six Months Ended June 30, 2001 For the six months ended June 30, 2001, total revenues were $2.124 billion compared to $2.138 billion in the same period in 2000 and EPS was $0.85 compared to EPS of $0.82 in the corresponding period in Income from continuing operations increased to $175 million in the six months ended June 30, 2001 compared to $167 million in the same period of Comments from the CEO The speed and depth of the slowdown of the world's economies has been faster and deeper than we, like most others, had expected, said Barry S. Sternlicht, Chairman and CEO. Still, in these extremely difficult business conditions, we are generally pleased with our second quarter performance. Despite the severe economic slowdown in North America, continued weakness in the Euro, economic and currency weakness in Latin America, unrest in the Middle East and other macro issues, we remain a very profitable company generating very strong cash flows that nearly matched those posted in last year s robust environment. While we have slowed certain capital expenditures, particularly in the interval ownership area, and carefully managed controllable costs, we have consciously continued our sizable investment spending in Six Sigma training, the completion of three new W Hotels and the rollout of our new yield management system - all of which are designed to help ensure that we continue the growth trends we posted in 1999 and 2000 as soon as economic conditions permit. We have just begun to realize 2

3 the potential for even better control of costs and, more importantly, significantly increased revenue-generating opportunities through our roll-out of Six Sigma. Recognizing the relative valuation of our company, we are also carefully examining all structural alternatives that could enhance shareholder value. Included in this strategic review is the consummation of the sale of all or substantially all of the CIGA portfolio as well as accelerating the strategic review of our ownership of assets around the world. We are encouraged that the major weaknesses in our domestic portfolio today are in New York and San Francisco, two cities that are terrific long-term real estate investment markets, and that overall new hotel supply growth continues to decelerate as already difficult financing markets tighten further. Concluding, Mr. Sternlicht said, While we are cautiously optimistic that the economy and our sector could rebound in the fourth quarter, we are not running our business that way. With the recovery, our investments behind Starwood Preferred Guest, W Hotels, Westin's "Heavenly" branded products, renovations and repositionings, yield management, expansion of our interval ownership business and Six Sigma have positioned Starwood to lead the sector in earnings and cash flow growth. Operating Results At the Company s Comparable Owned Hotels, revenues for the second quarter of 2001 decreased to $895 million from $957 million in 2000 and EBITDA decreased to $309 million from $341 million in Operating results at Comparable Owned Hotels in North America declined in the second quarter of 2001 when compared to 2000, reflecting the impact of lower REVPAR primarily attributable to lower business transient demand. EBITDA at the Company s Comparable Owned Hotels in Europe increased 6.3% to $62 million in the second quarter of 2001 when compared to the same period in 2000 (a 14.0% increase excluding the unfavorable effects of foreign exchange). For the second quarter of 2001, revenue per available room ( REVPAR ) at Same-Store Owned Hotels decreased 6.8% when compared to the same period in 2000 as a result of a decline in occupancy rates of 500 basis points to 69.9%, while average daily rate ( ADR ) remained in-line with the prior year. REVPAR at Same-Store Owned Hotels in North America decreased 7.4% to $ when compared to the same period in 2000 as a result of a decrease in occupancy rates of 570 basis points to 70.6%, while ADR increased slightly to $ The Company s results in North America were negatively impacted by the significant drop in industry-wide lodging demand, particularly in New York, where the Company has seven owned hotels with approximately 3,900 rooms. Excluding owned hotels in New York and two hotels under significant renovation in Chicago, REVPAR at Same-Store Owned Hotels in North America decreased 4.2% in the second quarter of 2001 when compared to the same period in REVPAR at Westin Same-Store Owned Hotels in North America decreased 1.6% as a result of a decrease in occupancy rates of 230 basis points and an increase in ADR of 1.5%. In Europe, Same-Store Owned Hotel REVPAR increased 7.6%, excluding the unfavorable effect of foreign currency translation, primarily as a result of strong gains at owned hotels 3

4 in Spain and Italy. Results in Europe were negatively impacted by the unfavorable effect of foreign currency translation as well as the drop in demand in the United Kingdom due primarily to concerns related to reports of foot-and-mouth disease. Excluding the unfavorable effect of foreign currency translation and excluding owned hotels in the United Kingdom, REVPAR at Same-Store Owned Hotels in Europe increased 10.4%. (See attached tables for detailed REVPAR analysis.) EBITDA margins at Comparable Owned Hotels worldwide decreased 100 basis points to 34.6% in the second quarter of 2001 when compared to the same period in In North America, EBITDA margins at Comparable Owned Hotels decreased 170 basis points to 33.4% in the second quarter of 2001 when compared to the same period in Excluding the effectively closed hotels in Chicago, North America EBITDA margins decreased 120 basis points period to period. Internationally, despite weak economic, political and/or currency conditions, EBITDA margins at Comparable Owned Hotels increased 70 basis points to 37.9% in the second quarter of 2001 when compared to the same period in 2000 (EBITDA margins at Comparable Owned Hotels in Europe increased 170 basis points to 38.0% in the second quarter of 2001 when compared to the same period in 2000). Excluding the unfavorable effect of foreign currency translation and U.K. hotels, EBITDA margins at Comparable Owned Hotels in Europe increased 230 basis points. During the second quarter of 2001, the Company added 14 management and franchise contracts with approximately 4,000 rooms, including the 1,060 room Westin Diplomat in Hollywood Florida which is scheduled to open January During the first half of 2001 the Company added 30 management and franchise contracts with approximately 6,800 rooms. The Company is currently selling vacation ownership interest ( VOI ) inventory at nine resorts and engaged in pre-opening sales at two others. Three new build projects are currently underway including Sheraton s Mountain Vista in Avon, Colorado; Westin Mission Hills Resort Villas in Rancho Mirage, California (both in pre-opening sales); and Westin Ka anapali Ocean Resort Villas in Maui, Hawaii. All three new build projects are expected to post meaningful revenue and EBITDA beginning in the latter part of 2001 and into Acquisitions and Dispositions In April 2001, the Company completed the acquisition of the remaining 50% interest in the 1,377-room Sheraton Centre Toronto for approximately CDN $75 million (approximately USD $48 million or the equivalent of approximately $70,000 per key). Starwood owned 50% of this property before completion of this acquisition. The purchase price represented a trailing twelve-month EBITDA of less than five times. The Company also acquired a 44% interest in the Sheraton Royal Orchid Hotel in Thailand for approximately $27 million or the equivalent of approximately $80,000 per key. The Company is continuing to pursue the sale of its CIGA portfolio which includes such world renowned assets as the Hotel Gritti Palace and Hotel Danieli in Venice, the 4

5 St. Regis Grand and Westin Excelsior in Rome, the Grand Hotel and Westin Excelsior in Florence, the Principe di Savoia in Milan and Westin Palace in Madrid, among others. The Company has spent considerable time determining the optimal strategy for maximizing sale proceeds of this extraordinary portfolio and, early in the second quarter, retained investment bank support to market for sale all or a portion of the portfolio. The Company expects to receive some or all of the proceeds from the sale of certain CIGA assets within the next nine months. The Company plans to retain long-term management contracts to keep these important destinations accessible to its customer base. The Company continues to review its portfolio for disposition candidates. Capital Early in the year the Company moved aggressively to reduce its discretionary capital expenditures. During the second quarter of 2001, the Company invested approximately $122 million for capital, primarily at owned hotel assets and VOI construction. Most of this investment spend included the ongoing repositioning of the Midland Hotel to the W Chicago City Center (390 rooms), which is now open, conversion of the Days Inn Chicago to the W Chicago Lakeshore (556 rooms, opening early fall), development of the W New York-Times Square (511 rooms, opening early fourth quarter) as well as the development of The St. Regis Museum Tower in San Francisco (269 rooms and 102 condominiums). Financing On June 30, 2001, the Company had total debt of $5.529 billion and cash and cash equivalents of $221 million. In May 2001, the Company completed a $100 million add-on financing to its credit facility. Also in May 2001, the Company sold two separate series of zero-coupon convertible senior notes due 2021 for gross proceeds of approximately $500 million. The proceeds were used to repay a portion of its increasing rate notes ( IRNs ) that currently bear interest at LIBOR plus 275 basis points. As a result of the paydown of a portion of the IRNs, the Company recorded an extraordinary loss of $6 million (net of tax) on the early extinguishment of this debt. At the end of the second quarter of 2001, the Company s debt was approximately 67% fixed rate and 33% floating rate and its weighted average maturity was just under five years. The Company elected to retain its floating rate debt position as a natural hedge against the anticipated economic softness in North America. As of June 30, 2001, the Company had availability under its revolving credit facility of approximately $537 million and the Company s debt had a weighted average interest rate of 6.12%. During the second quarter, the Company repurchased 200,000 shares at a total cost of approximately $6.6 million. At June 30, 2001, Starwood had approximately 203 million shares outstanding (including partnership units and exchangeable preferred shares). In May 2001, Starwood Hotels & Resorts (the Trust ) declared a second quarter dividend of $0.20 per share ($0.80 annual rate), representing a 16% increase over the prior year quarterly dividend. 5

6 Future Performance All comments in the following paragraphs and the comments in this release above are deemed to be forward-looking statements. These statements reflect expectations of the Company s performance given its current base of assets and its current understanding of external economic and political environments. Actual results may differ materially. The Company will continue to aggressively manage costs. Due to the continued weakness of the U.S. economy, full year 2001 North America Same-Store REVPAR is now expected to decline 2% to 3%. Full year Worldwide Same-Store REVPAR is now also expected to decline 2% to 3%. Full year 2001 EBITDA is expected to be approximately $1.550 billion and EPS is expected to be approximately $1.96 or in line with 2000 s record results. Given the continued weak economic environment and unfavorable foreign currency fluctuations, the Company believes there is a greater chance of reporting EPS lower than $1.96 than there is of exceeding it. Starwood Hotels & Resorts Worldwide, Inc. will be conducting a conference call to discuss the second quarter financial results at 10:30 a.m. (EDT) today. The conference call will be available through simultaneous webcast in the Investor Relations/Press Releases section of the Company s website at A replay of the conference call will also be available from 1:30 p.m. (EDT) today through 8:00 p.m. (EDT) August 2, 2001 on both the Company s website and via telephone replay at (access code: ). All references to EPS reflect earnings per diluted share from continuing operations. All references to Comparable Owned Hotels reflect the Company s owned, leased and consolidated joint venture hotels, excluding hotels sold during 2000 and 2001 and hotels without comparable prior year results. All references to EBITDA at Comparable Owned Hotels further exclude implementation costs associated with Six Sigma. All references to Same-Store Owned Hotels reflect the Company s owned, leased and consolidated joint venture hotels, excluding hotels under significant renovation or for which comparable results are not available. Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with more than 725 properties in 80 countries and 120,000 employees at its owned and managed properties. With internationally renowned brands, Starwood is a fully integrated owner, operator and franchiser of hotels and resorts including: St. Regis, The Luxury Collection, Sheraton, Westin, Four Points by Sheraton and W brands, as well as Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership. 6

7 (Note: This release contains certain statements that may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated at the time the forward-looking statements are made, including, without limitation, risks and uncertainties associated with the following: the continued ability of the Trust to qualify for taxation as a REIT; Starwood s ability to attract and retain personnel; identification, completion, terms and timing of future acquisitions and dispositions; the availability and terms of capital for acquisitions and for renovations; execution of hotel renovation and expansion programs; the ability to maintain existing management, franchise or representation agreements and to obtain new agreements on favorable terms; competition within the lodging and leisure industry; the cyclicality of the real estate business and the hotel and leisure business; foreign exchange fluctuations and exchange control restrictions; general real estate and national and international economic conditions; political and financial conditions and uncertainties in countries in which Starwood owns or operates properties; changes in current laws, rules or regulations of governmental or other regulatory bodies; and the other risks and uncertainties set forth in the annual, quarterly and current reports and proxy statements of the Trust and Starwood filed with the Securities and Exchange Commission. Starwood undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.) 7

8 UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per Share data) Three Months Ended June 30, Six Months Ended June 30, Revenues $ 930 $ 971 Owned, leased and consolidated joint venture hotels... $ 1,795 $ 1, Other hotel and leisure (a) ,110 1,142 2,124 2,138 Costs and Expenses Owned, leased and consolidated joint venture hotels... 1,214 1, Selling, general, administrative and other (b) Restructuring and other special credits... (1) Depreciation Amortization ,677 1, Operating income (92) (108) Interest expense, net of interest income... (192) (213) 1 1 Gain on sales of real estate and investments, net (48) (62) Income tax expense... (79) (91) (2) (2) Minority equity in net income... (2) (1) Income from continuing operations Discontinued operations: 5 Gain on dispositions, net of tax... 5 (6) Extraordinary item, net of tax... (6) (3) $ 107 $ 119 Net income... $ 169 $ 169 Earnings Per Share Basic $ 0.57 $ 0.58 Continuing operations... $ 0.88 $ Discontinued operations (0.03) Extraordinary item... (0.03) (0.01) $ 0.54 $ 0.60 Net income... $ 0.85 $ 0.86 Earnings Per Share Diluted $ 0.55 $ 0.56 Continuing operations... $ 0.85 $ Discontinued operations (0.03) Extraordinary item... (0.03) (0.01) $ 0.52 $ 0.58 Net income... $ 0.82 $ Weighted average number of Shares Weighted average number of Shares assuming dilution Reconciliation of Operating Income to EBITDA (c) $ 254 $ 285 Operating income... $ 447 $ Depreciation (d) Amortization Interest expense of unconsolidated joint ventures Interest income Restructuring and other special credits... (1) $ 401 $ 418 EBITDA... $ 736 $ 735 8

9 (a) Other hotel and leisure revenues include management and franchise fees earned from third party hotel owners, the Company s interest in unconsolidated joint ventures and the sale and financing of VOIs. (b) (c) (d) Selling, general, administrative and other expenses includes the cost of sales of VOIs and other costs of timeshare operations. EBITDA is defined as income before interest expense, income tax expense and depreciation and amortization. Non-recurring items and gains and losses from sales of real estate and investments are also excluded from EBITDA as these items do not impact operating results on a recurring basis. Management considers EBITDA to be one measure of the cash flows from operations of the Company before debt service that provides a relevant basis for comparison, and EBITDA is presented to assist investors in analyzing the performance of the Company. This information should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States, nor should it be considered as an indicator of the overall financial performance of the Company. The Company s calculation of EBITDA may be different from the calculation used by other companies and, therefore, comparability may be limited. Includes depreciation expense of unconsolidated joint ventures. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. UNAUDITED CONSOLIDATED BALANCE SHEET INFORMATION (In millions) June 30, 2001 Total assets... $ 12,713 Cash and cash equivalents... $ 221 Total debt... $ 5,529 Shares outstanding (a) (a) Shares outstanding include partnership units and exchangeable preferred shares. 9

10 Hotel Results - Same Store (1) For the Three Months Ending June 30, 2001 WORLDWIDE NORTH AMERICA INTERNATIONAL (2) Var Var Var. 156 Hotels 111 Hotels 45 Hotels OWNED HOTELS REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 69.9% 74.9% % 76.3% % 70.7% -3.1 SHERATON WESTIN REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 67.9% 74.0% % 76.8% % 68.3% REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 75.1% 77.0% % 76.8% % 77.6% LUXURY COLLECTION REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 70.9% 74.1% % 76.7% % 71.3% 0.9 W OTHER 9 9 REVPAR ($) % % ADR ($) % % OCCUPANCY (%) 71.1% 76.8% % 76.8% REVPAR ($) % % ADR ($) % % OCCUPANCY (%) 66.0% 73.9% % 73.9% -7.9 (1) Hotel Results exclude 3 hotels under significant renovation or without comparable results, 5 hotels without prior year results and 7 hotels sold during 2000 and (2) See next page for breakdown by division. Page 1

11 Hotel Results - Same Store (1) For the Three Months Ending June 30, 2001 EUROPE LATIN AMERICA ASIA PACIFIC Var Var Var. 30 Hotels 13 Hotels 2 Hotels OWNED HOTELS REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 74.2% 75.8% % 64.0% % 70.1% -6.2 SHERATON WESTIN REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 73.5% 74.8% % 62.7% % 70.1% REVPAR ($) % % ADR ($) % % OCCUPANCY (%) 76.9% 81.0% % 69.8% LUXURY COLLECTION REVPAR ($) % ADR ($) % OCCUPANCY (%) 72.2% 71.3% 0.9 (1) Hotel Results exclude 3 hotels under significant renovation or without comparable results, 5 hotels without prior year results and 7 hotels sold during 2000 and Page 2

12 Hotel Results - Comparable (1) For the Three Months Ending June 30, 2001 UNAUDITED ($ thousands) WORLDWIDE NORTH AMERICA INTERNATIONAL (2) Var Var Var. 159 Hotels 112 Hotels 47 Hotels OWNED HOTELS TOTAL REVENUE 894, , % 661, , % 232, , % TOTAL EBITDA 309, , % 221, , % 88,213 90, % MARGIN % 34.6% 35.6% % 35.1% % 37.2% 0.7 SHERATON WESTIN REVENUE 355, , % 246, , % 109, , % EBITDA 122, , % 85,713 99, % 36,385 43, % MARGIN % 34.3% 36.5% % 37.1% % 35.2% REVENUE 256, , % 181, , % 74,591 72, % EBITDA 91,143 90, % 59,799 61, % 31,344 28, % MARGIN % 35.6% 34.9% % 33.0% % 39.8% LUXURY COLLECTION REVENUE 128, , % 79,229 86, % 49,170 47, % EBITDA 45,640 47, % 25,156 28, % 20,484 18, % MARGIN % 35.5% 35.3% % 33.5% % 38.6% 3.1 W OTHER 9 9 REVENUE 63,256 68, % 63,256 68, % EBITDA 21,916 23, % 21,916 23, % MARGIN % 34.6% 34.2% % 34.2% REVENUE 91, , % 91, , % EBITDA 28,593 37, % 28,593 37, % MARGIN % 31.4% 35.6% % 35.6% -4.2 (1) Hotel Results exclude 5 hotels without prior year results, 7 hotels sold during 2000 and 2001 and Six Sigma implementation costs of $4,807 in (2) See next page for breakdown by division. Page 3

13 Hotel Results - Comparable (1) For the Three Months Ending June 30, 2001 UNAUDITED ($ thousands) EUROPE LATIN AMERICA ASIA PACIFIC Var Var Var. 30 Hotels 14 Hotels 3 Hotels OWNED HOTELS TOTAL REVENUE 163, , % 59,853 67, % 10,020 14, % TOTAL EBITDA 61,947 58, % 24,126 28, % 2,140 4, % MARGIN % 38.0% 36.3% % 41.3% % 27.6% -6.2 SHERATON WESTIN REVENUE 54,597 55, % 44,548 53, % 10,020 14, % EBITDA 16,576 16, % 17,669 22, % 2,140 4, % MARGIN % 30.4% 30.4% % 42.3% % 27.6% REVENUE 59,286 57, % 15,305 14, % EBITDA 24,887 23, % 6,457 5, % MARGIN % 42.0% 40.2% % 37.9% LUXURY COLLECTION REVENUE 49,170 47, % EBITDA 20,484 18, % MARGIN % 41.7% 38.6% 3.1 (1) Hotel Results exclude 5 hotels without prior year results, 7 hotels sold during 2000 and 2001 and Six Sigma implementation costs of $4,807 in Page 4

14 Hotel Results - Same Store (1) For the Six Months Ending June 30, 2001 WORLDWIDE NORTH AMERICA INTERNATIONAL (2) Var Var Var. 155 Hotels 110 Hotels 45 Hotels OWNED HOTELS REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 68.2% 71.1% % 72.1% % 67.9% -1.7 SHERATON WESTIN REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 66.1% 69.3% % 70.7% % 66.4% REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 74.2% 74.6% % 75.0% % 72.9% LUXURY COLLECTION REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 70.9% 72.6% % 77.2% % 67.0% 1.9 W OTHER 9 9 REVPAR ($) % % ADR ($) % % OCCUPANCY (%) 70.1% 74.5% % 74.5% REVPAR ($) % % ADR ($) % % OCCUPANCY (%) 62.2% 68.9% % 68.9% -6.7 (1) Hotel Results exclude 3 hotels under significant renovation or without comparable results, 6 hotels without prior year results and 9 hotels sold during 2000 and (2) See next page for breakdown by division. Page 5

15 Hotel Results - Same Store (1) For the Six Months Ending June 30, 2001 EUROPE LATIN AMERICA ASIA PACIFIC Var Var Var. 30 Hotels 13 Hotels 2 Hotels OWNED HOTELS REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 68.9% 69.3% % 65.2% % 73.2% -4.3 SHERATON WESTIN REVPAR ($) % % % ADR ($) % % % OCCUPANCY (%) 68.8% 68.9% % 63.1% % 73.2% REVPAR ($) % % ADR ($) % % OCCUPANCY (%) 69.0% 71.7% % 75.6% LUXURY COLLECTION REVPAR ($) % ADR ($) % OCCUPANCY (%) 68.9% 67.0% 1.9 (1) Hotel Results exclude 3 hotels under significant renovation or without comparable results, 6 hotels without prior year results and 9 hotels sold during 2000 and Page 6

16 Hotel Results - Comparable (1) For the Six Months Ending June 30, 2001 UNAUDITED ($ thousands) WORLDWIDE NORTH AMERICA INTERNATIONAL (2) Var Var Var. 158 Hotels 111 Hotels 47 Hotels OWNED HOTELS TOTAL REVENUE 1,740,445 1,789, % 1,318,297 1,352, % 422, , % TOTAL EBITDA 581, , % 436, , % 145, , % MARGIN % 33.4% 33.1% % 33.0% % 33.4% 1.0 SHERATON WESTIN REVENUE 682, , % 469, , % 213, , % EBITDA 222, , % 153, , % 69,690 77, % MARGIN % 32.7% 33.0% % 33.1% % 33.0% REVENUE 510, , % 378, , % 131, , % EBITDA 177, , % 128, , % 49,325 46, % MARGIN % 34.8% 33.5% % 32.6% % 36.0% LUXURY COLLECTION REVENUE 252, , % 174, , % 77,760 72, % EBITDA 90,072 86, % 63,718 64, % 26,354 22, % MARGIN % 35.6% 34.2% % 35.8% % 30.2% 3.7 W OTHER 9 9 REVENUE 126, , % 126, , % EBITDA 43,806 42, % 43,806 42, % MARGIN % 34.7% 33.0% % 33.0% REVENUE 168, , % 168, , % EBITDA 47,276 58, % 47,276 58, % MARGIN % 28.0% 31.3% % 31.3% -3.3 (1) Hotel Results exclude 6 hotels without prior year results, 9 hotels sold during 2000 and 2001 and Six Sigma implementation costs of $6,717 in (2) See next page for breakdown by division. Page 7

17 Hotel Results - Comparable (1) For the Six Months Ending June 30, 2001 UNAUDITED ($ thousands) EUROPE LATIN AMERICA ASIA PACIFIC Var Var Var. 30 Hotels 14 Hotels 3 Hotels OWNED HOTELS TOTAL REVENUE 272, , % 128, , % 20,619 31, % TOTAL EBITDA 84,433 76, % 55,937 60, % 4,999 9, % MARGIN % 31.0% 29.0% % 42.5% % 29.6% -5.4 SHERATON WESTIN REVENUE 98,499 97, % 94, , % 20,619 31, % EBITDA 25,955 24, % 38,736 43, % 4,999 9, % MARGIN % 26.4% 25.5% % 40.9% % 29.6% REVENUE 96,286 92, % 34,875 35, % EBITDA 32,124 29, % 17,201 17, % MARGIN % 33.4% 31.6% % 47.4% LUXURY COLLECTION REVENUE 77,760 72, % EBITDA 26,354 22, % MARGIN % 33.9% 30.2% 3.7 (1) Hotel Results exclude 6 hotels without prior year results, 9 hotels sold during 2000 and 2001 and Six Sigma implementation costs of $6,717 in Page 8

18 Debt Portfolio Summary As of June 30, 2001 UNAUDITED (in millions) Debt Avg Maturity Interest Terms Balance % of Portfolio Interest Rate (in years) Floating Rate Debt: Five-year term loan LIBOR $ % 4.49% 1.3 Term loan add-on LIBOR % 5.11% 1.7 Revolving credit facility LIBOR % 4.49% 1.7 Senior credit facility 1,800 33% 4.63% 1.5 Senior secured notes facility - Tranche II loans LIBOR % 6.61% 1.7 Mortgages and other Various % 6.05% 1.9 Interest rate swaps (1,048) -19% 4.61% Total Floating 1,804 33% 5.63% 1.6 Fixed Rate Debt: Sheraton Holding public debt 1,296 23% 7.08% 9.7 Convertible debt - Series A & B (1) 501 9% 2.35% 2.4 Mortgages and other % 7.34% 9.8 Interest rate swaps 1,048 19% 6.55% Total Fixed 3,725 67% 6.36% 8.4 Total Debt $ 5, % 6.12% 4.9 Maturity <1 Year $ Years 3, Years 589 >5 Years 1,313 Total $ 5,529 (1) Maturity date reflects the earlier of the first put date or the maturity date of the credit facility which would be used to refinance the amount put to the Company. Page 9

19 Hotels under Renovation and/or without Comparable Results For the Three Months Ended June 30, 2001 Properties under Significant Renovation during the 2nd Quarter 2001 Property Days Inn Lake Shore Drive Location Chicago, IL Other Properties without Comparable Results Property Sheraton Royal Denarau Resort Hotel Goldener Hirsch Hotel Bristol, A Westin Hotel Hotel Imperial Sheraton Macuto Resort Four Points Sydney Hotel Location Nadi, Fiji Salzburg, Austria Vienna, Austria Vienna, Austria La Guaira, Venezuela Sydney, Australia Page 10

20 Other Company Information As of and for the Three Months Ended June 30, 2001 UNAUDITED (in millions except share and per share amounts) Selected Balance Sheet and Cash Flow Items: Cash and cash equivalents $ 221 Second quarter dividend per share $ 0.20 Capital expenditures $ 110 Debt level $ 5,529 Shares Repurchased (avg. price $33.02/sh (1) ) 200,000 (1) Excludes commissions paid. Page 11

21 Summary of Portfolio by Properties & Rooms As of June 30, 2001 PROPERTIES Sheraton Westin Lux. Col./ St. Regis Four Points W Other Total Owned, leased & consolidated JVs Unconsolidated joint ventures Equity interest properties Managed (third-party owned) Franchised, represented & referral Total ROOMS Sheraton Westin Lux. Col./ St. Regis Four Points W Other Total Owned, leased & consolidated JVs 27,294 13,927 3,729 1,894 3,325 6,445 56,614 Unconsolidated joint ventures 10,983 3, ,877 Equity interest properties 38,277 17,690 4,400 2,222 3,325 6,577 72,491 Managed (third-party owned) 45,109 20,402 4,540 3, ,410 Franchised, represented & referral 46,423 8,680 2,043 19, ,383 Total 129,809 46,772 10,983 25,760 3,921 8, ,284 Page 12