10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2007
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from          to

Commission File Number: 1-7959

Starwood Hotels & Resorts Worldwide, Inc.

(Exact name of Registrant as specified in its charter)

Maryland

(State or other jurisdiction

of incorporation or organization)

52-1193298

(I.R.S. employer identification no.)

1111 Westchester Avenue

White Plains, NY 10604

(Address of principal executive

offices, including zip code)

(914) 640-8100

(Registrant’s telephone number,

including area code)

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 þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ     Accelerated filer o     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No þ

Indicate the number of shares outstanding of the issuer’s classes of common stock, as of the latest practicable date:

215,102,824 shares of common stock, par value $0.01 per share, outstanding as of April 30, 2007.

TABLE OF CONTENTS

			Page
PART I.
	Item 1.	Financial Statements		2
		Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006		3
		Consolidated Statements of Income for the Three Months Ended March 31, 2007 and 2006		4
		Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2007 and 2006		5
		Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006		6
		Notes to Consolidated Financial Statements		7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		29
	Item 4.	Controls and Procedures		30
PART II.
	Item 1.	Legal Proceedings		31
	Item 1A.	Risk Factors		31
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		31
	Item 6.	Exhibits		32
EX-10.3
EX-10.4
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I.  FINANCIAL INFORMATION

Item 1.   Financial Statements.

The following unaudited consolidated financial statements of Starwood Hotels & Resorts Worldwide, Inc. (the “Corporation”) are provided pursuant to the requirements of this Item. In the opinion of management, all adjustments necessary for fair presentation, consisting of normal recurring adjustments, have been included. The consolidated financial statements presented herein have been prepared in accordance with the accounting policies described in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006 filed on February 27, 2007. See the notes to consolidated financial statements for the basis of presentation. Certain reclassifications have been made to the prior years’ financial statements to conform to the current year presentation. The consolidated financial statements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this filing. Results for the three months ended March 31, 2007 are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 2007.

2

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except Share data)

	March 31,			December 31,
	2007			2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	183		$	183
Restricted cash		284			329
Accounts receivable, net of allowance for doubtful accounts of $55 and $49		600			593
Inventories		602			566
Prepaid expenses and other		152			139
Total current assets		1,821			1,810
Investments		463			436
Plant, property and equipment, net		3,783			3,831
Assets held for sale		2			2
Goodwill and intangible assets, net		2,287			2,302
Deferred tax assets		583			518
Other assets		389			381
	$	9,328		$	9,280
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings and current maturities of long-term debt	$	797		$	805
Accounts payable		179			179
Accrued expenses		973			955
Accrued salaries, wages and benefits		310			383
Accrued taxes and other		172			139
Total current liabilities		2,431			2,461
Long-term debt		1,809			1,827
Deferred income taxes		30			31
Other liabilities		1,928			1,928
		6,198			6,247
Minority interest		24			25
Commitments and contingencies
Stockholders’ equity:
Corporation common stock; $0.01 par value; authorized 1,050,000,000 shares; outstanding 214,991,493 and 213,484,439 shares at March 31, 2007 and December 31, 2006, respectively		2			2
Additional paid-in capital		2,244			2,286
Accumulated other comprehensive loss		(245	)		(228	)
Retained earnings		1,105			948
Total stockholders’ equity		3,106			3,008
	$	9,328		$	9,280

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

3

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per Share data)
(Unaudited)

	Three Months Ended
	March 31,
	2007			2006
Revenues
Owned, leased and consolidated joint venture hotels	$	559		$	822
Vacation ownership and residential sales and services		232			194
Management fees, franchise fees and other income		192			132
Other revenues from managed and franchised properties		448			293
		1,431			1,441
Costs and Expenses
Owned, leased and consolidated joint venture hotels		436			640
Vacation ownership and residential		179			165
Selling, general, administrative and other		116			106
Restructuring and other special (credits) charges, net		(2	)		9
Depreciation		67			68
Amortization		6			5
Other expenses from managed and franchised properties		448			293
		1,250			1,286
Operating income		181			155
Equity earnings and gains and losses from unconsolidated ventures, net		12			6
Interest expense, net of interest income of $7 and $6		(32	)		(97	)
Gain on asset dispositions and impairments, net		11			25
Income from continuing operations before taxes and minority equity		172			89
Income tax expense		(51	)		(14	)
Minority equity in net loss		2			2
Income from continuing operations		123			77
Discontinued operations:
Loss on dispositions, net of tax expense of $1 and $0		(1	)		—
Cumulative effect of accounting change, net of tax		—			(72	)
Net income	$	122		$	5
Earnings (Loss) Per Share — Basic
Continuing operations	$	0.58		$	0.35
Discontinued operations		—			—
Cumulative effect of accounting change		—			(0.33	)
Net income	$	0.58		$	0.02
Earnings (Loss) per Share — Diluted
Continuing operations	$	0.56		$	0.34
Discontinued operations		—			—
Cumulative effect of accounting change		—			(0.32	)
Net income	$	0.56		$	0.02
Weighted average number of Shares		211			215
Weighted average number of Shares assuming dilution		219			225
Distributions declared per Share	$	—		$	0.42

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

4

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Three Months Ended
	March 31,
	2007			2006
Net income	$	122		$	5
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments		(17	)		2
Unrealized holding gains		—			2
		(17	)		4
Comprehensive income	$	105		$	9

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

5

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

	Three Months Ended
	March 31,
	2007			2006
Operating Activities
Net income	$	122		$	5
Adjustments to net income:
Discontinued operations:
Loss on dispositions, net		1			—
Depreciation and amortization		73			73
Amortization of deferred gains		(20	)		(7	)
Gain on asset dispositions and impairments, net		(11	)		(25	)
Cumulative effect of accounting change		—			72
Stock-based compensation expense		25			23
Excess stock-based compensation tax benefit		(30	)		(26	)
Equity earnings, net of distributions		(9	)		(3	)
Other non-cash adjustments to net income		(4	)		(6	)
Decrease in restricted cash		47			12
Other changes in working capital		(49	)		(23	)
VOI notes receivable activity, net		(48	)		(65	)
Accrued and deferred income taxes and other		61			89
Cash from operating activities		158			119
Investing Activities
Purchases of plant, property and equipment		(63	)		(113	)
Proceeds from asset sales, net		39			268
Collection of notes receivable, net		12			46
Acquisitions, net of acquired cash		—			(1	)
Purchases of investments, net		(7	)		(6	)
Other, net		15			10
Cash from (used for) investing activities		(4	)		204
Financing Activities
Revolving credit facility and short-term borrowings, net		(27	)		1,105
Long-term debt repaid		(1	)		(1,020	)
Dividends and distributions paid		(90	)		(230	)
Proceeds from employee stock option exercises		104			149
Excess stock-based compensation tax benefit		30			26
Share repurchases		(165	)		(471	)
Other, net		(6	)		(20	)
Cash used for financing activities		(155	)		(461	)
Exchange rate effect on cash and cash equivalents		1			1
Decrease in cash and cash equivalents		—			(137	)
Cash and cash equivalents — beginning of period		183			897
Cash and cash equivalents — end of period	$	183		$	760
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	3		$	55
Income taxes, net of refunds	$	15		$	41

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

6

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED 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 “Corporation”). Unless the context otherwise requires, all references to the Corporation include those entities owned or controlled by the Corporation, which prior to April 10, 2006 included Starwood Hotels & Resorts (the “Trust”). All references to “Starwood” or the “Company” refer to the Corporation, the Trust and their respective subsidiaries, collectively through April 7, 2006.

Starwood is one of the world’s largest hotel and leisure companies. The Company’s principal business is hotels and leisure, which is comprised of a worldwide hospitality network of approximately 900 full-service hotels, vacation ownership resorts and residential developments primarily serving two markets: luxury and upscale. The principal operations of Starwood Vacation Ownership, Inc. (“SVO”) include the acquisition, development and operation of vacation ownership resorts; marketing and selling vacation ownership interests (“VOIs”) in the resorts; and providing financing to customers who purchase such interests.

The Trust was formed in 1969 and elected to be taxed as a real estate investment trust under the Internal Revenue Code. In 1980, the Trust formed the Corporation and made a distribution to the Trust’s shareholders of one share of common stock, par value $0.01 per share, of the Corporation (a “Corporation Share”) for each common share of beneficial interest, par value $0.01 per share, of the Trust (a “Trust Share”).

Pursuant to a reorganization in 1999, the Trust became a subsidiary of the Corporation, which indirectly held all outstanding shares of the new Class A shares of beneficial interest of the Trust (“Class A Shares”). In the 1999 reorganization, each Trust Share was converted into one share of the new non-voting Class B Shares of beneficial interest in the Trust (a “Class B Share”). Prior to the Host Transaction discussed below, the Corporation Shares and the Class B Shares traded together on a one-for-one basis, consisting of one Corporation Share and one Class B Share (the “Shares”).

On April 7, 2006, in connection with the transaction (the “Host Transaction”) with Host Hotels & Resorts, Inc. (“Host”) described below, the Shares were depaired and the Corporation Shares became transferable separately from the Class B Shares. As a result of the depairing, the Corporation Shares trade alone under the symbol “HOT” on the New York Stock Exchange (“NYSE”). As of April 10, 2006, neither Shares nor Class B Shares are listed or traded on the NYSE.

On April 10, 2006, in connection with the Host Transaction, certain subsidiaries of Host acquired the Trust and Sheraton Holding Corporation (“Sheraton Holding”) from the Corporation. As part of the Host Transaction, among other things, (i) a subsidiary of Host was merged with and into the Trust, with the Trust surviving as a subsidiary of Host, (ii) all the capital stock of Sheraton Holding was sold to Host and (iii) a subsidiary of Host was merged with and into SLT Realty Limited Partnership (the “Realty Partnership”) with the Realty Partnership surviving as a subsidiary of Host.

Note 2.   Recently Issued Accounting Standards

In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115.” This standard permits entities to choose to measure many financial instruments and certain other items at fair value and is effective for the first fiscal year beginning after November 15, 2007. The Company is currently evaluating the impact, if any, that SFAS No. 159 will have on the consolidated financial statements.

In November 2006, the Emerging Issues Task Force of the FASB (“EITF”) reached a consensus on EITF Issue No. 06-8, “Applicability of the Assessment of a Buyer’s Continuing Investment under FASB Statement No. 66, Accounting for Sales of Real Estate, for Sales of Condominiums” (“EITF 06-8”). EITF 06-8 states that the adequacy of the buyer’s initial and continuing investment under SFAS No. 66 should be assessed in determining

7

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

whether to recognize profit under the percentage-of-completion method on the sale of individual units in a condominium project. EITF 06-8 will be effective for annual reporting periods beginning after March 15, 2007. The cumulative effect of applying EITF 06-8, if any, is to be reported as an adjustment to the opening balance of retained earnings in the year of adoption. The Company is currently evaluating the impact, if any, that the adoption of EITF 06-8 will have on the consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R),” which requires plan sponsors of defined benefit pension and other postretirement benefit plans (collectively, “Benefit Plans”) to recognize the funded status of their Benefit Plans in the consolidated balance sheet, measure the fair value of plan assets and benefit obligations as of the date of the fiscal year-end statement of financial position, and provide additional disclosures. On December 31, 2006, the Company adopted the recognition and disclosure provisions of SFAS No. 158. The effect of adopting SFAS No. 158 on the Company’s financial condition at December 31, 2006 has been included in the accompanying consolidated financial statements. SFAS No. 158 has been applied prospectively and does not impact the Company’s prior year financial statements. The provisions of SFAS No. 158 regarding the change in the measurement date of Benefit Plans are not applicable as the Company currently uses a measurement date of December 31 for its pension plan.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which provides enhanced guidance for using fair value to measure assets and liabilities. SFAS No. 157 establishes a common definition of fair value, provides a framework for measuring fair value under accounting principles generally accepted in the United States and expands disclosure requirements about fair value measurements. SFAS No. 157 is effective for financial statements issued in fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the impact, if any, that the adoption of SFAS No. 157 will have on the consolidated financial statements.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). This interpretation, among other things, creates a two step approach for evaluating uncertain tax positions. Recognition (step one) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that more-likely-than-not will be realized upon settlement. Derecognition of a tax position that was previously recognized would occur when a company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. FIN 48 specifically prohibits the use of a valuation allowance as a substitute for derecognition of tax positions, and it has expanded disclosure requirements. The Company adopted FIN 48 on January 1, 2007 and recorded an increase of approximately $35 million as a cumulative effect adjustment to the beginning balance of retained earnings. See Note 14 for additional information.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140,” which amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS No. 156 changes SFAS No. 140 by requiring that Mortgage Servicing Rights (“MSRs”) be initially recognized at their fair value and by providing the option to either: (1) carry MSRs at fair value with changes in fair value recognized in earnings; or (2) continue recognizing periodic amortization expense and assess the MSRs for impairment as originally required by SFAS No. 140. This option may be applied by class of servicing asset or liability. The Company adopted SFAS No. 156 on January 1, 2007. As the Company’s servicing agreements are negotiated at arms-length based on market conditions, the Company has not recognized any servicing assets or liabilities. As such, SFAS No. 156 has no impact on the Company.

In December 2004, the FASB issued SFAS No. 123(R), which requires all share-based payments, including grants of employee stock options, to be recognized in the income statement based on their fair value. Proforma disclosure is no longer an alternative. In accordance with the transition rules, the Company adopted SFAS No. 123(R) effective January 1, 2006 under the modified prospective method. The Company recorded

8

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$9 million and $12 million of stock option expense in the three months ended March 31, 2007 and 2006, respectively, net of the estimated impact of reimbursements from third parties.

In December 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions.” SFAS No. 152 amends SFAS No. 66, “Accounting for the Sales of Real Estate,” and SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects,” in association with the issuance of American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 04-2, “Accounting for Real Estate Time-Sharing Transactions.” These statements were issued to address the diversity in practice caused by a lack of guidance specific to real estate time-sharing transactions. Among other things, the new standard addresses the treatment of sales incentives provided by a seller to a buyer to consummate a transaction, the calculation of accounting for uncollectible notes receivable, the recognition of changes in inventory cost estimates, recovery or repossession of VOIs, selling and marketing costs, associations and upgrade and reload transactions. The new standard also requires a change in the classification of the provision for loan losses for VOI notes receivable from an expense to a reduction in revenue.

In accordance with SFAS No. 66, as amended by SFAS No. 152, the Company recognizes sales when the period of cancellation with refund has expired, receivables are deemed collectible and the buyer has demonstrated a sufficient level of initial and continuing involvement. 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 associated direct expenses are initially deferred and recognized in earnings through the percentage-of-completion method.

The Company adopted SFAS No. 152 on January 1, 2006 and recorded a charge of $72 million, net of a $44 million tax benefit, in cumulative effect of accounting change in the three months ended March 31, 2006. In the fourth quarter of 2006, the Company revised its tax benefit related to the cumulative effect of accounting change to $46 million, resulting in a net charge of $70 million for the full year 2006.

Note 3.   Earnings Per Share

The following is a reconciliation of basic earnings per Share to diluted earnings per Share for income from continuing operations (in millions, except per Share data):

	Three Months Ended March 31,
	2007						2006
	Earnings		Shares		Per Share		Earnings		Shares		Per Share
Basic earnings from continuing operations	$	123		211	$	0.58	$	77		215	$	0.35
Effect of dilutive securities:
Employee options and restricted stock awards		—		8				—		7
Convertible debt		—		—				—		2
Exchangeable preferred shares		—		—				—		1
Diluted earnings from continuing operations	$	123		219	$	0.56	$	77		225	$	0.34

Approximately 278,000 Shares and 2,723,000 Shares were excluded from the computation of diluted Shares for the three months ended March 31, 2007 and 2006, respectively, as their impact would have been anti-dilutive.

On March 15, 2006, the Company completed the redemption of the remaining 25,000 shares of Class B Exchangeable Preferred Shares (“Class B EPS”) for approximately $1 million. For the period prior to the redemption date, approximately 20,000 shares of Class B EPS are included in the computation of basic Shares for the three months ended March 31, 2006.

9

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In April 2006, the Company completed the redemption of the remaining 562,000 shares of Class A Exchangeable Preferred Shares (“Class A EPS”). These shares are included in the computation of basic Shares for the three months ended March 31, 2006.

Prior to June 5, 2006, the Company had contingently convertible debt, the terms of which allowed for the Company to redeem such instruments in cash or Shares. The Company, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings per Share,” utilized the if-converted method to calculate dilution once certain trigger events were met. One of the trigger events for the Company’s contingently convertible debt was met during the first quarter of 2006 when the closing sale price per Share was $60 or more for a specified length of time. On May 5, 2006, the Company gave notice of its intention to redeem the convertible debt on June 5, 2006. Under the terms of the convertible indenture, prior to this redemption date, the note holders had the right to convert their notes into Shares at the stated conversion rate. Under the terms of the indenture, the Company settled conversions by paying the principal portion of the notes in cash and the excess amount of the conversion spread in Corporation Shares. For the three months ended March 31, 2006, approximately 2 million Shares were included in the computation of diluted Shares.

In connection with the Host Transaction, Starwood’s shareholders received 0.6122 Host shares and $0.503 in cash for each of their Class B Shares. Holders of Starwood employee stock options did not receive this consideration while the market price of our publicly traded 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 Company’s options immediately before and after the Host Transaction, in accordance with the stock option agreements, 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 Company’s stock price immediately before and after the transaction. As a result of this adjustment, the diluted stock options increased by approximately 1 million Corporation Shares effective as of the closing of the Host Transaction. In accordance with SFAS No. 123(R), “Share-Based Payment, a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation,” discussed below, this adjustment did not result in any incremental fair value, and as such, no additional compensation cost was recognized. Furthermore, in order to preserve the value of the contingently convertible debt discussed above, the Company modified the conversion rate of the contingently convertible debt in accordance with the indenture.

Note 4.   Restricted Cash

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 products under construction are held in escrow during the period prior to obtaining a certificate of occupancy. These payments and the deposits collected from sales during the rescission period are the primary components of the Company’s restricted cash balances in its consolidated balance sheets.

Note 5.   Acquisitions

During the first quarter of 2007, the Company entered into a joint venture that acquired the Sheraton Grande Tokyo Bay Hotel. This hotel has been managed by Starwood since its opening and will continue to be operated by Starwood under a long-term management agreement with the joint venture. The Company invested approximately $19 million in this venture in exchange for a 25.1% ownership interest.

Note 6.   Dispositions

In the first quarter of 2007, the Company sold one hotel for approximately $41 million in cash. The Company recorded a gain of approximately $12 million associated with this sale. This gain was offset in part by approximately $1 million of impairment losses, net related to investments in unconsolidated joint ventures.

10

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In the first quarter of 2006, the Company sold five hotels for approximately $268 million in cash. The Company recorded a net gain of approximately $30 million associated with these sales. This net gain was partially offset by a $5 million adjustment to reduce the gain on the sale of a hotel consummated in 2004 as certain contingencies associated with that sale became probable in the quarter.

The hotels sold in the first quarters of 2007 and 2006 were encumbered by long-term franchise contracts and, therefore, their operations prior to the sale date are not classified as discontinued operations.

Subsequent to March 31, 2007, the Company entered into a definitive agreement to sell one hotel with a carrying value of approximately $26 million for $19 million in cash and received a significant non-refundable deposit from the buyer. The sale is expected to be completed in the second quarter of 2007.

Note 7.   Assets Held for Sale

In October 2006, Starwood closed on the sale of land near the Montreal Airport to a developer who plans to build two Starwood branded hotels on the site. The purchase agreement contains a provision that may allow, but not obligate, Starwood to repurchase the land for the purchase price it received less a non-refundable amount if the hotels are not built. As a result of this provision, Starwood has not treated this transaction as a sale. In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company classified this asset as held for sale at March 31, 2007 and December 31, 2006.

Note 8.  Other Assets

Other assets include the following (in millions):

	March 31,		December 31,
	2007		2006
VOI notes receivable, net	$	271	$	242
Other notes receivable, net		36		51
Deposits and other		82		88
	$	389	$	381

Note 9.   Notes Receivable Securitizations and Sales

From time to time, the Company securitizes or sells, without recourse, its fixed rate VOI notes receivable. To accomplish these securitizations, the Company transfers a pool of VOI notes receivable to special purpose entities (together with the special purpose entities in the next sentence, the “SPEs”) and the SPEs transfer the VOI notes receivable to qualifying special purpose entities (“QSPEs”), as defined in SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities — a Replacement of FASB Statement No. 125.” To accomplish these sales, the Company transfers a pool of VOI notes receivable to SPEs and the SPEs transfer the VOI notes receivable to a third party purchaser. The Company continues to service the securitized and sold VOI notes receivable pursuant to servicing agreements negotiated on an arms-length basis based on market conditions; accordingly, the Company has not recognized any servicing assets or liabilities. All of the Company’s VOI notes receivable securitizations and sales to date have qualified to be, and have been, accounted for as sales in accordance with SFAS No. 140.

With respect to those transactions still outstanding at March 31, 2007, the Company retains economic interests (the “Retained Interests”) in securitized VOI notes receivables through SPE ownership of QSPE beneficial interests. The Retained Interests, which are comprised of subordinated interests and interest only strips in the related VOI notes receivable, provide credit enhancement to the third-party purchasers of the related QSPE beneficial interests. Retained Interests cash flows are limited to the cash available from the related VOI notes receivable, after servicing fees, absorbing 100% of any credit losses on the related VOI notes receivable and QSPE fixed rate interest expense.

11

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

With respect to those transactions still outstanding at March 31, 2007, the Retained Interests are classified and accounted for as “available-for-sale” securities in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and SFAS No. 140.

The Company’s securitization agreements provide the Company with the option, subject to certain limitations, to repurchase defaulted VOI notes receivable at their outstanding principal amounts. Such repurchases totaled $5 million and $3 million during the three months ended March 31, 2007 and 2006, respectively. The Company has been able to resell the VOIs underlying the VOI notes repurchased under these provisions without incurring significant losses. As allowed under the related agreements, the Company replaced the defaulted VOI notes receivable under the securitization agreements with new VOI notes receivable, resulting in an insignificant amount of net gains in the three months ended March 31, 2007 and 2006.

At March 31, 2007, the aggregate outstanding principal balance of VOI notes receivable that have been securitized or sold was $338 million. The principal amounts of those VOI notes receivables that were more than 90 days delinquent at March 31, 2007 was approximately $4 million.

Gross credit losses for all VOI notes receivable were $5 million and $4 million during the three months ended March 31, 2007 and 2006, respectively.

The Company received aggregate cash proceeds of $9 million from the Retained Interests during each of the three months ended March 31, 2007 and 2006 and aggregate servicing fees of $1 million related to these VOI notes receivable during each of the three months ended March 31, 2007 and 2006.

At the time of each VOI notes receivable sale and at the end of each financial reporting period, the Company estimates the fair value of its Retained Interests using a discounted cash flow model. All assumptions used in the models are reviewed and updated, if necessary, based on current trends and historical experience.

As of March 31, 2007, the Company completed a sensitivity analysis on the net present value of the Retained Interests to measure the change in value associated with independent changes in individual key variables. The methodology applied unfavorable changes for the key variables of expected prepayment rates, discount rates and expected gross credit losses. The aggregate net present value and carrying value of Retained Interests at March 31, 2007 was approximately $48 million. The decreases in value of the Retained Interests that would result from various independent changes in key variables are shown in the chart that follows (dollar amounts are in millions). These factors may not move independently of each other.

Annual prepayment rate:
100 basis points-dollars	$	0.4
100 basis points-percentage		0.9	%
200 basis points-dollars	$	0.8
200 basis points-percentage		1.7	%
Discount rate:
100 basis points-dollars	$	1.0
100 basis points-percentage		2.2	%
200 basis points-dollars	$	2.0
200 basis points-percentage		4.3	%
Gross annual rate of credit losses:
100 basis points-dollars	$	7.5
100 basis points-percentage		16.2	%
200 basis points-dollars	$	14.8
200 basis points-percentage		31.9	%

12

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 10.   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 March 31, 2007 and December 31, 2006, the Company had total deferred gains of $1.248 billion and $1.258 billion, respectively, included in accrued expenses and other liabilities in the Company’s consolidated balance sheets. Amortization of deferred gains is included in management fees, franchise fees and other income in the Company’s consolidated statements of income and totaled approximately $20 million and $7 million in the three months ended March 31, 2007 and 2006, respectively. The increase in the amortization of deferred gains in 2007 is primarily due to deferred gains in connection with the Host Transaction, which was consummated in the second quarter of 2006.

Note 11.   Restructuring and Other Special (Credits) Charges

The Company had remaining accruals related to restructuring charges of $9 million and $11 million, respectively, at March 31, 2007 and December 31, 2006, of which $6 million is included in other liabilities in the accompanying consolidated balance sheets for both periods. The following table summarizes the activity in the restructuring accruals in 2007 (in millions):

	December 31,		Expenses		Cash			Reversal of		March 31,
	2006		Accrued		Payments			Accruals		2007
Retained reserves established by Sheraton Holding prior to its merger with the Company in 1998	$	8	$	—	$	—		$	—	$	8
Severance costs related to a corporate restructuring which began in 2005		3		—		(2	)		—		1
Total	$	11	$	—	$	(2	)	$	—	$	9

In the three months ended March 31, 2007, the Company recorded net restructuring and other special credits of approximately $2 million primarily related to the refund of premium payments related to the termination of a retired executive officer’s life insurance policy that were previously recorded as a restructuring charge in conjunction with the acquisition of Sheraton Holding (formerly ITT Corporation) in 1998.

In the three months ended March 31, 2006, the Company recorded net restructuring and other special charges of approximately $9 million primarily related to transition costs associated with the purchase of the Le Méridien brand in November 2005.

Note 12.   Derivative Financial Instruments

The Company enters into interest rate swap agreements to manage interest expense. The Company’s objective is to manage the impact of interest rates on the results of operations, cash flows and the market value of the Company’s debt. At March 31, 2007, the Company has two interest rate swap agreements with an aggregate notional amount of $300 million under which the Company pays floating rates and receives fixed rates of interest (“Fair Value Swaps”). The Fair Value Swaps hedge the change in fair value of certain fixed rate debt related to fluctuations in interest rates and mature in 2012. The Fair Value Swaps modify the Company’s interest rate exposure by effectively converting debt with a fixed rate to a floating rate. The fair value of the Fair Value Swaps was a liability of approximately $19 million at March 31, 2007 and is included in other liabilities in the Company’s consolidated balance sheet.

13

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The counterparties to the Company’s derivative financial instruments are major financial institutions. The Company does not expect its derivative financial instruments to significantly impact earnings in the next twelve months.

Note 13.   Pension and Postretirement Benefit Plans

The following table presents the components of net periodic benefit cost for the three months ended March 31, 2007 and 2006 (in millions):

	Three Months Ended March 31,
	2007								2006
			Foreign								Foreign
	Pension		Pension			Postretirement			Pension		Pension			Postretirement
	Benefits		Benefits			Benefits			Benefits		Benefits			Benefits
Service cost	$	—	$	1.0		$	—		$	—	$	1.1		$	—
Interest cost		0.2		2.7			0.3			0.2		2.3			0.3
Expected return on plan assets		—		(2.6	)		(0.1	)		—		(2.3	)		(0.2	)
Actuarial loss (gain)		—		0.5			(0.1	)		—		0.8			—
Net period benefit cost		0.2		1.6			0.1			0.2		1.9			0.1
Settlement and curtailment gain		—		—			—			—		(2.5	)		—
Net periodic benefit cost (income) after settlements and curtailments	$	0.2	$	1.6		$	0.1		$	0.2	$	(0.6	)	$	0.1

During the three months ended March 31, 2007 and 2006, the Company contributed approximately $2 million and $7 million, respectively, to its foreign pension plans. For the remainder of 2007, the Company expects to contribute approximately $1 million to domestic pension plans, $9 million to foreign pension plans and $2 million to postretirement benefit plans.

Note 14.   Income Taxes

On January 1, 2007, the Company adopted the provisions of FIN 48. As a result of the implementation of FIN 48, the Company recognized a $35 million cumulative effect adjustment to the beginning balance of retained earnings in the period. Including the cumulative effect adjustment, the Company had approximately $465 million of total unrecognized tax benefits at the beginning of the period, of which $157 million would affect our effective tax rate if recognized. We do not expect any significant increases or decreases to the amount of unrecognized tax benefits within 12 months of March 31, 2007.

The Company recognizes interest and penalties related to unrecognized tax benefits through income tax expense. The Company had $17 million accrued for the payment of interest and no accrued penalties as of January 1, 2007.

The Company is subject to taxation in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. As of March 31, 2007, the Company is no longer subject to examination by U.S. federal taxing authorities for years prior to 2004 and to examination by any U.S. state taxing authority prior to 1998. All subsequent periods remain eligible for examination. In the significant foreign jurisdictions in which we operate, we are no longer subject to examination by the relevant taxing authorities for any years prior to 2002.

Note 15.   Stockholders’ Equity

Share Issuances and Repurchases.  During the three months ended March 31, 2007, the Company issued approximately 3.1 million Corporation Shares as a result of stock option exercises. Also during the first quarter, the Company repurchased approximately 3.2 million Corporation Shares at a total cost of approximately $209 million.

14

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of March 31, 2007, approximately $171 million remained available under the Company’s share repurchase authorization. In April 2007, the Board of Directors of the Company approved an additional $1 billion of repurchases.

Limited Partnership Units.  During 1998, 6.3 million shares of Class A EPS, 5.5 million shares of Class B EPS and approximately 800,000 limited partnership units of the SLT Realty Limited Partnership (the “Realty Partnership”) and SLC Operating Limited Partnership (the “Operating Partnership”) were issued by the Trust and the Corporation in connection with the acquisition of Westin Hotels & Resorts Worldwide, Inc. and certain of its affiliates. Prior to 2007, the Company redeemed all of the outstanding Class A EPS, Class B EPS and Realty Partnership units.

The Operating Partnership units are convertible into Shares at the unit holder’s option, provided that the Company has the option to settle conversion requests in cash or Shares. At March 31, 2007, there were approximately 179,000 Operating Partnership units outstanding.

Note 16.   Stock-Based Compensation

In accordance with the Company’s 2004 Long-Term Incentive Compensation Plan, during the first quarter of 2007, the Company completed its annual grant of stock options, restricted stock and restricted stock units to executive officers and certain employees. The Company granted approximately 379,000 stock options that had a weighted average grant date fair value of $20.54 per option. The weighted average exercise price of these options was $65.15. In addition, the Company granted approximately 2,094,000 of restricted stock and restricted stock units that had a weighted average grant date fair value of $65.13 per share or unit.

During the three months ended March 31, 2007 and 2006, the Company recorded stock-based employee compensation expense of $17 million and $15 million, net of related tax effects of $8 million and $8 million, respectively, including the estimated impact of reimbursements from third parties.

As of March 31, 2007, there was approximately $47 million of unrecognized compensation cost, net of estimated forfeitures, related to nonvested options, which is expected to be recognized over a weighted-average period of 1.25 years on a straight-line basis for grants made in 2006 and 2007. An accelerated recognition method was utilized for grants made prior to January 1, 2006.

As of March 31, 2007, there was approximately $189 million of unrecognized compensation cost, net of estimated forfeitures, related to restricted stock and restricted stock units, which is expected to be recognized over a weighted-average period of 1.95 years on a straight-line basis for restricted stock grants outstanding at March 31, 2007.

Note 17.   Business Segment 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 Company’s proprietary brand names including St. Regis^®, The Luxury Collection^®, Sheraton^®, Westin^®, W^®, Le Méridien^® and Four Points^® by Sheraton 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 and the sale of residential units.

The performance of the hotels and vacation ownership and residential segments is evaluated primarily on operating profit before corporate selling, general and administrative expense, interest, gains on the sale of real estate, restructuring and other special (credits) charges, and income taxes. The Company does not allocate these items to its segments.

15

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents revenues, operating income, capital expenditures and assets for the Company’s reportable segments (in millions):

	Three Months Ended
	March 31,
	2007			2006
Revenues:
Hotel	$	1,170		$	1,221
Vacation ownership and residential		261			220
Total	$	1,431		$	1,441
Operating income:
Hotel	$	171		$	187
Vacation ownership and residential		48			26
Total segment operating income		219			213
Selling, general, administrative and other		(40	)		(49	)
Restructuring and other special credits (charges), net		2			(9	)
Operating income		181			155
Equity earnings and gains and losses from unconsolidated ventures, net:
Hotel		7			2
Vacation ownership and residential		5			4
Interest expense, net		(32	)		(97	)
Gain on asset dispositions and impairments, net		11			25
Income from continuing operations before taxes and minority equity	$	172		$	89
Capital expenditures:
Hotel	$	30		$	78
Vacation ownership and residential		19			24
Corporate		14			11
Total	$	63		$	113

	March 31,		December 31,
	2007		2006
Assets:
Hotel(a)	$	6,815	$	6,877
Vacation ownership and residential(b)		1,738		1,698
Corporate(c)		775		705
Total	$	9,328	$	9,280

(a)	Includes $336 million and $314 million of investments in unconsolidated joint ventures at March 31, 2007 and December 31, 2006, respectively.
(b)	Includes $51 million and $43 million of investments in unconsolidated joint ventures at March 31, 2007 and December 31, 2006, respectively.
(c)	Includes $27 million and $26 million of investments in unconsolidated joint ventures at March 31, 2007 and December 31, 2006, respectively.

16

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 18.   Commitments and Contingencies

Variable Interest Entities.  Of the over 780 hotels that the Company manages or franchises for third party owners, the Company has identified approximately 25 hotels that it has a variable interest in. For those ventures in which the Company holds a variable interest, the Company determined that it was not the primary beneficiary and such variable interest entities (“VIEs”) should not be consolidated in the Company’s financial statements. The Company’s outstanding loan balances exposed to losses as a result of its involvement in VIEs totaled $7 million and $14 million at March 31, 2007 and December 31, 2006, respectively. Equity investments and other types of investments related to VIEs totaled $10 million and $49 million, respectively, at March 31, 2007 and $18 million and $64 million, respectively, at December 31, 2006.

Guaranteed Loans and Commitments.  In limited cases, the Company has made loans to owners of or partners in hotel or resort ventures for which the Company has a management or franchise agreement. Loans outstanding under this program totaled $51 million at March 31, 2007. The Company evaluates these loans for impairment, and at March 31, 2007, believes these loans are collectible. Unfunded loan commitments aggregating $69 million were outstanding at March 31, 2007, of which $1 million are expected to be funded in 2007 and $51 million are expected to be funded in total. These loans typically are secured by pledges of project ownership interests and/or mortgages on the projects. The Company also has $109 million of equity and other potential contributions associated with managed or joint venture properties, $27 million of which is expected to be funded in 2007.

During 2004, the Company entered into a long-term management contract to manage the Westin Boston, Seaport Hotel in Boston, Massachusetts, which opened in June 2006. In connection with this project, the Company agreed to provide up to $28 million in mezzanine loans and other investments (all of which was funded). In January 2007 this hotel was sold and the senior debt was repaid in full. In connection with this sale the $28 million in mezzanine loans and other investments, together with accrued interest, was repaid in full. In accordance with the management agreement, the sale of the hotel also resulted in the payment of a fee to the Company of approximately $18 million, which is included in management fees, franchise fees and other income in the consolidated statement of income in 2007. The Company continues to manage this hotel subject to the pre-existing management agreement.

Surety bonds issued on behalf of the Company as of March 31, 2007 totaled $96 million, the majority of which were required by state or local governments relating to our vacation ownership operations and by our 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 obliged to fund shortfalls in performance levels through the issuance of loans. As of March 31, 2007, excluding the Le Méridien management agreement mentioned below, the Company had five management contracts with performance guarantees with possible cash outlays of up to $70 million, $50 million of which, if required, would be funded over several years and would be largely offset by management fees received under these contracts. 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 these performance guarantees in 2007. In connection with the acquisition of the Le Méridien brand in November 2005, the Company assumed the obligation to guarantee certain performance levels at one Le Méridien managed hotel for the periods 2007 through 2013. This guarantee is uncapped. However, the Company has estimated its exposure under this guarantee and does not anticipate that payments made under the guarantee will be significant in any single year. The estimated fair value of this guarantee of $6 million is reflected in other liabilities in the accompanying consolidated balance sheets at March 31, 2007 and December 31, 2006, respectively. The Company does not anticipate losing a significant number of management or franchise contracts in 2007.

17

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In connection with the purchase of the Le Méridien brand in November 2005, the Company was indemnified for certain of Le Méridien’s historical liabilities by the entity that bought Le Méridien’s 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 to Host in 2006, the Company agreed to indemnify Host for certain pre-disposition 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.  Starwood Asia Pacific Management Pte Ltd and Starwood Hotels and Resorts Worldwide, Inc. are Defendants in Suit No. 961 of 2002/ C commenced by Asia Hotel Investments Ltd (“AHIL”) in the High Court of Singapore. In connection with its interest in the acquisition of a majority stake in a hotel in Bangkok, Thailand, AHIL considered Starwood as a potential operator of the hotel and the parties signed a Confidentiality and Non-Circumvention Agreement (the “AHIL Agreement”) in December of 2001. The AHIL Agreement placed certain restrictions on Starwood’s dealings as they related to the hotel. AHIL proved unsuccessful in its acquisition attempt and Starwood was contacted by the successful bidder to manage the hotel as a Westin and a management contract was signed. AHIL is alleging that the new owner of the majority stake could not have completed the acquisition of that stake without an agreement by Starwood to operate the hotel as a Westin and that Starwood’s agreement to do so was in violation of the AHIL Agreement.

AHIL brought suit in the trial court in Singapore and claimed loss of profits of approximately US$54 million. However, at the time of the trial AHIL reduced its claim to one of loss of chance and asked the court to assess damages. Starwood vigorously objected to such claims and put forth a two-fold defense claiming:

(a)  that no breach had been committed; and

(b)  that even if a breach had been committed, it was merely technical, that is as AHIL was unsuccessful in acquiring the majority stake in the hotel, AHIL’s loss, if any, was not caused by Starwood, but by its own inability to consummate the acquisition.

The trial judge agreed with Starwood that the breach was merely technical and awarded AHIL nominal damages of ten Singapore dollars.

AHIL appealed its case to the Court of Appeal (which is the highest court in the Singapore judicial system) and in a majority decision of 2-1 (with the Chief Justice strongly dissenting), AHIL’s appeal was allowed. The majority ruled that the matter should be sent for assessment of damages for the court to ascertain what chance AHIL had to acquire the majority stake in the hotel, and place a value on that chance.

In April 2007, the Singapore High Court rendered a judgment in AHIL’s favor and awarded damages in the amount of approximately $4.3 million inclusive of interest. The Company funded the amount awarded in an escrow account pending the resolution of any appeals. The Company is determining whether to appeal.

From time to time in the course of general business activities, the Company becomes involved in legal disputes and proceedings. The Company does not expect the resolution of these matters to have a material adverse affect on the financial position or on the results of operations and cash flows of the Company, except as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 incorporated herein by reference. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Company’s future results of operations or cash flows in a particular period.

18

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This report includes “forward-looking” statements, as that term is defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions or strategies regarding the future. In some cases, forward-looking 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. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, general economic conditions, our financial and business prospects, our capital requirements, our financing prospects, our relationships with associates and labor unions, and those disclosed as risks in other reports filed by us with the Securities and Exchange Commission, including those described in Part I of our most recently filed Annual Report on Form 10-K. 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 management’s opinion only as of the date on which they were made. Except as required by law, we disclaim any obligation to review or update these forward-looking statements to reflect events or circumstances as they occur.

RESULTS OF OPERATIONS

Management’s 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 us 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, we evaluate our 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.

We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions and conditions.

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) management and franchise revenues; (3) vacation ownership and residential 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. Revenue per available room

19

(“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.

•  Management and Franchise Revenues — Represents fees earned on hotels managed worldwide, usually under long-term contracts, franchise fees received in connection with the franchise of our Sheraton, Westin, Four Points by Sheraton, Le Méridien, St. Regis, W and Luxury Collection brand names, termination fees and the amortization of deferred gains related to sold properties for which we have significant continuing involvement, offset by payments by us under performance and other guarantees. 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 property’s 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.

•  Vacation Ownership and Residential — We recognize revenue from Vacation Ownership Interests (“VOIs”) sales and financings and the sales of residential units which are typically a component of mixed use projects that include a hotel. Such revenues are impacted by the state of the global economies and, in particular, the U.S. economy, as well as interest rate and other economic conditions affecting the lending market. Revenue is generally recognized upon the buyer’s demonstration of a sufficient level of initial and continuing involvement. 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.

•  Revenues From Managed and Franchised Properties — These revenues represent reimbursements of costs incurred on behalf of managed hotel properties and franchisees. These costs relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our operating income or our net income.

Frequent Guest Program.  Starwood Preferred Guest (“SPG”) is our frequent guest incentive marketing program. SPG members earn points based on spending at our properties, as incentives to first time buyers of VOIs and residences and through participation in affiliated programs. Points can be redeemed at substantially all of our owned, leased, managed and franchised properties as well as through other redemption opportunities with third parties, such as conversion to airline miles. Properties are charged based on hotel guests’ qualifying expenditures. Revenue is recognized by participating hotels and resorts when points are redeemed for hotel stays.

We, through the services of third-party actuarial analysts, determine the fair value of the future redemption obligation based on statistical formulas which project the timing of future point redemption 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. Actual expenditures for SPG may differ from the actuarially determined liability. The total actuarially determined liability as of March 31, 2007 and December 31, 2006 is $432 million and $409 million, respectively. A 10% reduction in the “breakage” of points would result in an estimated increase of $63 million to the liability at March 31, 2007.

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

20

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, 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.

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 properties 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. Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies,” requires that 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 SFAS No. 109, “Accounting for Income Taxes.” The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. As discussed in Note 14, on January 1, 2007, we adopted the provisions of FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of SFAS No. 109, which prescribes a recognition threshold and measurement attribute to determine the amount of tax benefit that should be recognized in the financial statements for a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, interim period accounting and disclosure requirements of uncertain tax positions. 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 three months ended March 31, 2007 and 2006.

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, since January 1, 2006, we have sold 46 wholly owned hotels which has substantially reduced our revenues and operating income from owned, leased and consolidated joint venture hotels. The majority of these hotels were sold subject to long-term management or franchise contracts. Total revenues generated from our owned, leased and consolidated joint venture hotels worldwide for the three months ending March 31, 2007 and 2006 were $559 million and $822 million, respectively (total revenues from our owned, leased and consolidated joint venture hotels in North America were $390 million and $620 million for same periods, respectively). The following represents our top ten markets in the United States by metropolitan area as a percentage of our total owned, leased

21

and consolidated joint venture revenues for the three months ended March 31, 2007 (with comparable data for 2006):

Top Ten Metropolitan Areas in the United States as a % of Total
Owned Revenues for the Three Months Ended March 31, 2007
with Comparable Data for the Same Period in 2006⁽¹⁾

Metropolitan Area	2007 Revenues			2006 Revenues
New York, NY		18.5	%		18.5	%
Phoenix, AZ		13.8	%		7.7	%
San Francisco, CA		8.7	%		4.6	%
Maui, HI		7.8	%		4.4	%
Atlanta, GA		6.9	%		6.1	%
Houston, TX		4.9	%		3.9	%
Miami, FL		4.7	%		3.5	%
Chicago, IL		4.1	%		2.5	%
Boston, MA		3.9	%		7.9	%
Poconos, PA		3.8	%		2.4	%

The following represents our top ten international markets as a percentage of our total owned, leased and consolidated joint venture revenues for the three months ended March 31, 2007 (with comparable data for 2006):

Top Ten International Markets as a % of Total
Owned Revenues for the Three Months Ended March 31, 2007
with Comparable Data for the Same Period in 2006⁽¹⁾

International Market	2007 Revenues			2006 Revenues
Canada		18.0	%		11.5	%
Mexico		16.6	%		13.7	%
Italy		13.4	%		19.3	%
Australia		11.2	%		7.7	%
United Kingdom		6.6	%		8.0	%
Argentina		5.8	%		4.4	%
Austria		5.2	%		4.1	%
Spain		4.5	%		8.5	%
Caribbean		4.4	%		5.9	%
Belgium		3.2	%		2.5	%

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

An indicator of the performance of our owned, leased and consolidated joint venture hotels is 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.

22

Three Months Ended March 31, 2007 Compared with Three Months Ended March 31, 2006

Continuing Operations

Revenues.  Total revenues, including other revenues from managed and franchised properties, were $1.431 billion, a decrease of $10 million when compared to 2006 levels. Revenues reflect a 32.0% decrease in revenues from our owned, leased and consolidated joint venture hotels to $559 million for the three months ended March 31, 2007 when compared to $822 million in the corresponding period of 2006, a 45.5% increase in management fees, franchise fees and other income to $192 million for the three months ended March 31, 2007 when compared to $132 million in the corresponding period of 2006, a 19.6% increase in vacation ownership and residential revenues to $232 million for the three months ended March 31, 2007 when compared to $194 million in the corresponding period of 2006, and an increase of $155 million in other revenues from managed and franchised properties to $448 million for the three months ended March 31, 2007 when compared to $293 million in the corresponding period of 2006.

The decrease in revenues from owned, leased and consolidated joint venture hotels of $263 million was primarily due to lost revenues from 45 wholly owned hotels sold or closed during 2006. These hotels had revenues of $295 million in the three months ended March 31, 2006. The decrease in revenues from sold hotels was partially offset by improved results at our remaining owned, leased and consolidated joint venture hotels. Revenues at our Same-Store Owned Hotels (75 hotels for the three months ended March 31, 2007 and 2006, excluding 46 hotels sold and 8 hotels undergoing significant repositionings or without comparable results in 2007 and 2006) increased 7.6%, or $34 million, to $485 million for the three months ended March 31, 2007 when compared to $451 million in the same period of 2006 due primarily to an increase in REVPAR. REVPAR at our Same-Store Owned Hotels increased 8.1% to $134.73 for the three months ended March 31, 2007 when compared to the corresponding 2006 period. The increase in REVPAR at these Same-Store Owned Hotels was attributed to increases in occupancy rates to 67.7% in the three months ended March 31, 2007 when compared to 66.5% in the same period in 2006, and a 6.3% increase in ADR to $199.15 for the three months ended March 31, 2007 compared to $187.38 for the corresponding 2006 period. REVPAR at Same-Store Owned Hotels in North America increased 6.4% for the three months ended March 31, 2007 when compared to the same period of 2006. REVPAR growth was particularly strong at our owned hotels in Toronto, Canada, Kauai, Hawaii, Philadelphia, Pennsylvania and San Francisco, California. REVPAR at our international Same-Store Owned Hotels increased by 11.8% for the three months ended March 31, 2007 when compared to the same period of 2006. REVPAR for Same-Store Owned Hotels internationally increased 6.5% excluding the favorable effects of foreign currency translation.

The increase in management fees, franchise fees and other income of $60 million was primarily a result of a $45 million increase in management and franchise revenue to $147 million for the three months ended March 31, 2007 due to the addition of new managed and franchised hotels. The increase included approximately $14 million of management and franchise fees from the 33 hotels sold to Host in the second quarter of 2006, as well as approximately $12 million of revenues from the amortization of the deferred gain associated with the Host Transaction. Other income increased $15 million and includes $18 million of income earned in the first quarter of 2007 from our carried interest in a managed hotel that was sold in January 2007. These increases were partially offset by lost fees from contracts that were terminated in the last 12 months.

The increase in vacation ownership and residential sales and services of $38 million was primarily due to the revenue recognition from ongoing projects under construction in Hawaii which are being accounted for under percentage of completion accounting. This increase was offset, in part, by a decrease in residential sales as the first quarter of 2007 included $4 million of revenues primarily from the sale of residential units at the St. Regis in New York and the first quarter of 2006 included $39 million in revenues from the sale of residential units at the St. Regis Museum Tower in San Francisco which sold out in 2006.

Originated contract sales of VOI inventory, which represents vacation ownership revenues before adjustments for percentage of completion accounting and rescission, decreased 8.9% in the three months ended March 31, 2007 when compared to the same period in 2006, primarily due to a decline in fractional sales. In the first quarter of 2007, originated fractional sales at the St. Regis Residence Club in New York were $8 million while originated fractional sales in the first quarter of 2006 at both the New York project and the St. Regis Residence Club in Aspen, which sold out in 2006, totaled $22 million.

23

Other revenues and expenses from managed and franchised properties increased to $448 million from $293 million for the three months ended March 31, 2007 and 2006, respectively, primarily due to an increase in the number of our managed and franchised hotels. These revenues represent reimbursements of costs incurred on behalf of managed hotel properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements were made based upon the costs incurred with no added margin, these revenues and corresponding expenses had no effect on our operating income and our net income.

Selling, General, Administrative and Other.  Selling, general, administrative and other expenses, which includes costs and expenses from our Bliss spas and from the sale of Bliss products, was $116 million in the three months ended March 31, 2007 when compared to $106 million in the same period in 2006. The increase was primarily due to investments in our global development capability and costs associated with the launch of our new brands, aloft and Element, as well as the addition of the Le Méridien business.

Restructuring and Other Special (Credits) Charges, Net.  During the three months ended March 31, 2007, we recorded $2 million in net restructuring and other special credits primarily related to the refund of premium payments related to the termination of a retired executive officer’s life insurance policy that were previously recorded as a restructuring charge in conjunction with the acquisition of Sheraton Holding Corporation (formerly ITT Corporation) in 1998.

During the three months ended March 31, 2006, we recorded $9 million in restructuring and other special charges primarily related to transition costs associated with the acquisition of the Le Méridien brand and the related management and franchise business in November 2005.

Depreciation and Amortization.  Depreciation expense decreased $1 million to $67 million during the three months ended March 31, 2007 compared to $68 million in the corresponding period of 2006. We sold or closed 45 wholly owned hotels during 2006. However, the majority of these hotels were classified as held for sale as of December 31, 2005 and consequently, no depreciation was recognized for either the three months ended March 31, 2007 or 2006 for those hotels. The slight decrease in depreciation expense is due to the hotels sold in 2006 that were not classified as held for sale during the first quarter of 2006 offset, in part, by additional depreciation expense resulting from capital expenditures at our owned, leased and consolidated joint venture hotels over the past 12 months.

Amortization expense increased to $6 million in the three months ended March 31, 2007 compared to $5 million in the corresponding period of 2006.

Operating Income.  Operating income increased 16.8% or $26 million to $181 million for the three months ended March 31, 2007 when compared to $155 million in the same period in 2006, primarily due to the increase in management fees, franchise fees and other income and vacation ownership and residential sales and services discussed above.

Equity Earnings and Gains and Losses from Unconsolidated Ventures, Net.  Equity earnings and gains and losses from unconsolidated joint ventures increased to $12 million for the three months ended March 31, 2007 from $6 million in the same period of 2006 primarily due to the impairment of an investment that was recorded in the first quarter of 2006 and improved results for certain unconsolidated joint ventures partially offset by the lost equity earnings from the sale of hotels in unconsolidated joint ventures in 2006.

Net Interest Expense.  Net interest expense decreased to $32 million for the three months ended March 31, 2007 as compared to $97 million in the same period of 2006, primarily due to $37 million of expenses recorded in the first quarter of 2006 related to the early extinguishment of debt in connection with two transactions whereby we defeased and were released from certain debt obligations that allowed us to sell certain hotels that previously served as collateral for such debt. The decrease was also due to interest savings from the reduction of our debt with proceeds from the asset sales discussed earlier and was offset in part by increased interest rates. Our weighted average interest rate was 6.92% at March 31, 2007 versus 6.09% at March 31, 2006.

Gain on Asset Dispositions and Impairments, Net.  During the first quarter of 2007, we recorded a net gain of approximately $11 million primarily related to the gain on the sale of one hotel which was sold subject to a franchise agreement.

24

During the first quarter of 2006, we recorded a net gain of approximately $30 million primarily related to the sale of five hotels, offset in part by a $5 million adjustment to reduce the gain on the sale of a hotel consummated in 2004 as certain contingencies associated with that sale became probable in the quarter.

Income Tax Expense.  We recorded income tax expense from continuing operations of $51 million for the three months ended March 31, 2007 compared to an expense of $14 million in the corresponding period of 2006. The effective income tax rate for continuing operations for the first quarter of 2007 was 29.8% compared to 15.8% in the corresponding quarter of 2006, primarily due to the absence, in 2007, of tax benefits associated with the Trust prior to its acquisition by Host in the second quarter of 2006 and an increase in pre-tax income in 2007. Our effective income tax rate is determined by the level and composition of pre-tax income subject to varying foreign, state and local taxes and other items.

Discontinued Operations

For the three months ended March 31, 2007, the loss on disposition represented a $1 million tax assessment associated with the disposition of our gaming business in 1999.

Cumulative Effect of Accounting Change, Net of Tax

On January 1, 2006, we adopted SFAS No. 152 and in the three months ended March 31, 2006, we recorded a charge of $72 million, net of a $44 million tax benefit, in cumulative effect of accounting change.

Seasonality and Diversification

The hotel and leisure industry is seasonal in nature; however, the periods during which our properties experience higher hotel revenue activities vary from property to property and depend principally upon location. Our revenues historically have generally been lower in the first quarter than in the second, third or fourth quarters.

Same-Store Owned Hotels Results

We continually update and renovate our owned, leased and consolidated joint venture hotels and include these hotels in our Same-Store Owned Hotel results. We also undertake major repositionings of hotels. While undergoing major repositionings, hotels are generally not operating at full capacity and, as such, these repositionings can negatively impact our hotel revenues and are not included in Same-Store Hotel results. We may continue to reposition our owned, leased and consolidated joint venture hotels as we pursue our brand and quality strategies. In addition, several owned hotels are located in regions which are seasonal and therefore, these hotels do not operate at full capacity throughout the year.

25

The following table summarizes REVPAR⁽¹⁾, ADR and occupancy for our Same-Store Owned Hotels for the three months ended March 31, 2007 and 2006. The results for the three months ended March 31, 2007 and 2006 represent results for 75 owned, leased and consolidated joint venture hotels (excluding 46 hotels sold and 8 hotels undergoing significant repositionings or without comparable results in 2007 and 2006).

	Three Months
	Ended March 31,
	2007			2006			Variance
Worldwide (75 hotels with approximately 25,000 rooms)
REVPAR	$	134.73		$	124.64			8.1	%
ADR	$	199.15		$	187.38			6.3	%
Occupancy		67.7	%		66.5	%		1.2
North America (44 hotels with approximately 17,000 rooms)
REVPAR	$	135.20		$	127.08			6.4	%
ADR	$	198.74		$	191.18			4.0	%
Occupancy		68.0	%		66.5	%		1.5
International (31 hotels with approximately 8,000 rooms)
REVPAR	$	133.75		$	119.59			11.8	%
ADR	$	200.01		$	179.55			11.4	%
Occupancy		66.9	%		66.6	%		0.3

(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.

LIQUIDITY AND CAPITAL RESOURCES

Cash From Operating Activities

Cash flow from operating activities is generated primarily from operating income from our owned hotels, sales of VOIs and residential units and management and franchise revenues. It is the principal source of cash used to fund our operating expenses, interest payments on debt, capital expenditures, dividend payments and share repurchases. We believe that 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, dividend payments and share repurchases in the foreseeable future.

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 products under construction are held in escrow during the period prior to obtaining a certificate of occupancy. These payments and the deposits collected from sales during the rescission period are the primary components of our restricted cash balances in our consolidated balance sheets.

We have announced our preliminary intention to redevelop the Sheraton Bal Harbour Beach Resort (“Bal Harbour”). The plans call for demolishing the current hotel and rebuilding a St. Regis Hotel along with branded residences and fractional units. The net book value of the property, plant and equipment used in the current operations of Bal Harbour, excluding land at a cost of $19 million, was $48 million at March 31, 2007. Although the development costs, plans and timing have not yet been finalized, it is reasonably possible that the carrying value or useful life of these assets will be reduced in the event that we proceed with this redevelopment.

Cash Used for Investing Activities

In limited cases, we have made loans to owners of or partners in hotel or resort ventures for which we have a management or franchise agreement. Loans outstanding under this program totaled $51 million at March 31, 2007. We evaluate these loans for impairment, and at March 31, 2007, believe these loans are collectible. Unfunded loan

26

commitments aggregating $69 million were outstanding at March 31, 2007, of which $1 million are expected to be funded in 2007 and $51 million are expected to be funded in total. These loans typically are secured by pledges of project ownership interests and/or mortgages on the projects. We also have $109 million of equity and other potential contributions associated with managed or joint venture properties, $27 million of which is expected to be funded in 2007.

During 2004, we entered into a long-term management contract to manage the Westin Boston, Seaport Hotel in Boston, Massachusetts, which opened in June 2006. In connection with this project, we agreed to provide up to $28 million in mezzanine loans and other investments (all of which was funded). In January 2007, this hotel was sold and the senior debt was repaid in full. In connection with this sale, the $28 million in mezzanine loans and other investments, together with accrued interest, was repaid in full. In accordance with the management agreement, the sale of the hotel also resulted in the payment of a fee to us of approximately $18 million, which is included in management fees, franchise fees and other income in the consolidated statement of income in 2007. We continue to manage this hotel subject to the pre-existing management agreement.

Surety bonds issued on our behalf as of March 31, 2007 totaled $96 million, the majority of which were required by state or local governments relating to our vacation ownership operations and by our insurers to secure large deductible insurance programs.

To secure management contracts, we may provide performance guarantees to third-party owners. Most of these performance guarantees allow us to terminate the contract rather than fund shortfalls if certain performance levels are not met. In limited cases, we are obliged to fund shortfalls in performance levels through the issuance of loans. As of March 31, 2007, excluding the Le Méridien management agreement mentioned below, we had five management contracts with performance guarantees with possible cash outlays of up to $70 million, $50 million of which, if required, would be funded over several years and would be largely offset by management fees received under these contracts. 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. We do not anticipate any significant funding under these performance guarantees in 2007. In connection with the acquisition of the Le Méridien brand in November 2005, we assumed the obligation to guarantee certain performance levels at one Le Méridien managed hotel for the periods 2007 through 2013. This guarantee is uncapped. However, we have estimated our exposure under this guarantee and do not anticipate that payments made under the guarantee will be significant in any single year. The estimated fair value of this guarantee of $6 million is reflected in other liabilities in the accompanying consolidated balance sheets at March 31, 2007 and December 31, 2006. We do not anticipate losing a significant number of management or franchise contracts in 2007.

In connection with the purchase of the Le Méridien brand in November 2005, we were indemnified for certain of Le Méridien’s historical liabilities by the entity that bought Le Méridien’s owned and leased hotel portfolio. The indemnity is limited to the financial resources of that entity. However, at this time, we believe that it is unlikely that we will have to fund any of these liabilities.

In connection with the sale of 33 hotels to Host in 2006, we agreed to indemnify Host for certain pre-disposition liabilities, including operations and tax liabilities. At this time, we believe that we will not have to make any material payments under such indemnities.

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) through our credit facilities described below, through the net proceeds from dispositions, through the assumption of debt, through the issuance of additional equity or debt securities and from cash generated from operations. Additionally, as previously discussed, we have announced our preliminary intentions to redevelop Bal Harbour. Although development costs, plans and timing have not been finalized, this project will require significant funding from us over the next two to three years.

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

27

significant premiums. We are focused on enhancing real estate returns and monetizing investments. In the first quarter of 2007 we sold one hotel for proceeds of approximately $41 million in cash. There can be no assurance, however, that we will be able to complete future dispositions on commercially reasonable terms or at all.

Cash Used for Financing Activities

The following is a summary of our debt portfolio (including capital leases) as of March 31, 2007:

	Amount
	Outstanding at			Interest Rate at			Average
	March 31, 2007(a)			March 31, 2007			Maturity
	(Dollars in millions)						(In years)
Floating Rate Debt
Senior Credit Facility:
Revolving Credit Facility	$	416			5.69	%		3.9
Mortgages and Other		129			7.36	%		1.8
Interest Rate Swaps		300			9.59	%
Total/Average	$	845			7.33	%		3.4
Fixed Rate Debt
Senior Notes	$	1,929	(b)		6.85	%		4.1
Mortgages and Other		132			7.52	%		10.6
Interest Rate Swaps		(300	)		7.88	%
Total/Average	$	1,761			6.73	%		4.5
Total Debt
Total Debt and Average Terms	$	2,606			6.92	%		4.3

(a)	Excludes approximately $558 million of our share of unconsolidated joint venture debt, all of which is non-recourse.
(b)	Includes approximately $(18) million at March 31, 2007 of fair value adjustments related to existing and terminated fixed-to-floating interest rate swaps for the Senior Notes.

Fiscal 2007 Developments.  On April 27, 2007 we amended our Revolving Credit Facility to both reduce pricing and increase commitments by $450 million, to a total of $2.250 billion. Of this amount, $375 million will mature on April 27, 2008, and the remaining $1.875 billion will mature in February 2011. On May 1, 2007 we borrowed on our Revolving Credit Facility to finance the redemption of $700 million of the 7.375% Senior Notes. Available borrowings under the Revolving Credit Facility as of May 1, 2007 following the bond redemption were approximately $947 million.

Other.  At March 31, 2007, we had approximately $797 million of our outstanding debt maturing in the next twelve months, of which $700 million was repaid on May 1, 2007 as described above. Based upon the current level of operations, management believes that our cash flow from operations and asset sales, together with our significant cash balances (approximately $472 million at March 31, 2007, including $289 million of short-term and long-term restricted cash), available borrowings under the Revolving Credit Facility (approximately $1.237 billion at March 31, 2007, prior to the credit facility amendment discussed above), available borrowing capacity from international revolving lines of credit (approximately $141 million at March 31, 2007), and capacity for additional borrowings will be adequate to meet anticipated requirements for scheduled maturities, dividends, working capital, capital expenditures, marketing and advertising program expenditures, other discretionary investments, interest and scheduled principal payments for the foreseeable future. However, there can be no assurance that we will be able to refinance our indebtedness as it becomes due and, if refinanced, on favorable terms. In addition, there can be no assurance that our continuing business 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.

28

We maintain non-U.S.-dollar-denominated debt, which provides a hedge of our international net assets and operations but also exposes our debt balance to fluctuations in foreign currency exchange rates. During the three months ending March 31, 2007, the effect of changes in foreign currency exchange rates was a net increase in debt of approximately $3 million. Our debt balance is also affected by changes in interest rates as a result of our interest rate swap agreements under which we pay floating rates and receive fixed rates of interest (the “Fair Value Swaps”). The fair market value of the Fair Value Swaps is recorded as an asset or liability and as the Fair Value Swaps are deemed to be effective, an adjustment is recorded against the corresponding debt. At March 31, 2007, our debt included a decrease of approximately $18 million related to the unamortized gains on terminated Fair Value Swaps and the fair market value of current Fair Value Swap liabilities. At December 31, 2006 our debt included a decrease of approximately $17 million related to the unamortized gains on terminated Fair Value Swaps and the fair market value of current Fair Value Swap liabilities.

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, reduce capital expenditures, refinance all or a portion of our existing debt or obtain additional financing. 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 outstanding as of March 31, 2007 (in millions):

			Due in Less		Due in		Due in		Due After
	Total		Than 1 Year		1-3 Years		3-5 Years		5 Years
Debt	$	2,604	$	797	$	45	$	428	$	1,334
Capital lease obligations(1)		2		—		—		—		2
Operating lease obligations		1,056		70		148		124		714
Unconditional purchase obligations(2)		163		56		66		37		4
Other long-term obligations		4		—		—		3		1
Total contractual obligations	$	3,829	$	923	$	259	$	592	$	2,055

(1)	Excludes sublease income of $2 million.
(2)	Included in these balances are commitments that may be satisfied by our managed and franchised properties.

We had the following commercial commitments outstanding as of March 31, 2007 (in millions):

			Amount of Commitment Expiration Per Period
			Less Than						After
	Total		1 Year		1-3 Years		3-5 Years		5 Years
Standby letters of credit	$	147	$	147	$	—	$	—	$	—

We repurchased 3.2 million Corporation Shares for an average price of $64.32 per share in the open market during the three months ended March 31, 2007.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk.

There were no material changes to the information provided in Item 7A in our Annual Report on Form 10-K regarding our market risk.

29

Item 4.   Controls and Procedures.

Our management conducted an evaluation, under the supervision and with the participation of our principal executive and principal financial officers of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on this evaluation, our principal executive and principal financial officers concluded our disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be included in our SEC reports. There has been no change in our internal control over financial reporting (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended) 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.

30

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings.

We are involved in various claims and lawsuits arising in the ordinary course of business, none of which, in the opinion of management, is expected to have a material adverse effect on our consolidated financial position or results of operations.

Item 1A.   Risk Factors.

The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, filed with the Securities and Exchange Commission, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. At March 31, 2007, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2006.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

We repurchased the following Corporation Shares during the three months ended March 31, 2007:

							Maximum Number (or
							Approximate Dollar
	Total				Total Number of Shares		Value) of Shares that
	Number of		Average		Purchased as Part of		May Yet Be Purchased
	Shares		Price Paid		Publicly Announced		Under the Plans or
Period	Purchased		for Share		Plans or Programs		Programs (in millions)
January		24,400	$	59.90		24,400	$	379
February		158,600	$	64.87		158,600	$	368
March		3,063,900	$	64.33		3,063,900	$	171
Total		3,246,900	$	64.32		3,246,900

In April 2007, the Board of Directors of the Company approved an additional $1 billion of repurchases under our existing Share repurchase authorization.

31

Item 6.   Exhibits.

10	.1	Third Amendment dated as of April 27, 2007, to the Credit Agreement, dated as of February 10, 2006, among Starwood Hotels & Resorts Worldwide, Inc., Starwood Hotels & Resorts, 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. and Societe Generale, as Syndication Agents, Bank of America, N.A. and Calyon New York Branch, as Co-Documentation Agents, Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Banc of America Securities LLC, as Lead Arrangers and Book Running Managers, The Bank of Nova Scotia, Citicorp North America, Inc., and the Royal Bank of Scotland PLC, as Senior Managing Agents and Nizvho Corporate Bank, Ltd. as Managing Agent (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 30, 2007).
10	.2	Agreement and General Release, dated as of March 31, 2007, between the Company and Steven J. Heyer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 2, 2007).
10	.3	Agreement and General Release, dated as of March 16, 2007, between the Company and Javier Benito.(1)
10	.4	Form of Restricted Stock Unit Agreement between the Company and Bruce W. Duncan.(1)
31	.1	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Executive Officer(1)
31	.2	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Financial Officer(1)
32	.1	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Executive Officer(1)
32	.2	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Financial Officer(1)

(1) Filed herewith.

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.

By:  /s/  Bruce W. Duncan

Bruce W. Duncan

Chairman, Chief Executive Officer and Director

By:  /s/  Alan M. Schnaid

Alan M. Schnaid

Senior Vice President, Corporate Controller and Principal Accounting Officer

Date: May 4, 2007

33

INDEX TO EXHIBITS

10	.1	Third Amendment dated as of April 27, 2007, to the Credit Agreement, dated as of February 10, 2006, among Starwood Hotels & Resorts Worldwide, Inc., Starwood Hotels & Resorts, 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. and Societe Generale, as Syndication Agents, Bank of America, N.A. and Calyon New York Branch, as Co-Documentation Agents, Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Banc of America Securities LLC, as Lead Arrangers and Book Running Managers, The Bank of Nova Scotia, Citicorp North America, Inc., and the Royal Bank of Scotland PLC, as Senior Managing Agents and Nizvho Corporate Bank, Ltd. as Managing Agent (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 30, 2007).
10	.2	Agreement and General Release, dated as of March 31, 2007, between the Company and Steven J. Heyer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 2, 2007).
10	.3	Agreement and General Release, dated as of March 16, 2007, between the Company and Javier Benito.(1)
10	.4	Form of Restricted Stock Unit Agreement between the Company and Bruce W. Duncan.(1)
31	.1	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Executive Officer(1)
31	.2	Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 — Chief Financial Officer(1)
32	.1	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Executive Officer(1)
32	.2	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Financial Officer(1)

(1) Filed herewith.

EX-10.3

Exhibit 10.3

SEPARATION AGREEMENT AND MUTUAL GENERAL RELEASE OF CLAIMS

          Javier E. Benito (hereinafter referred to as “Employee”) and Starwood Hotels & Resorts Worldwide, Inc. (hereinafter referred to as the “Company”) agree as follows:

          ONE: Termination of Employment.

Employee acknowledges that his employment with the Company will end upon his resignation, which he hereby tenders as a result of a reduction in his role and which will be effective April 1, 2007 (hereinafter referred to as the “Termination Date”). After the Termination Date, Employee will perform no further duties, functions or services for the Company or any of its affiliates, nor will he be entitled to any further compensation and/or benefits except as described herein.

From and after the date hereof (the “Effective Date”) through the Termination Date (the “Transition Period”), Employee will remain employed with the Company and work with Steven J. Heyer and such other senior executives of the Company designated by Mr. Heyer, on an as needed basis to transition responsibilities and information. During the Transition Period, Employee shall continue to receive his annual salary of $468,000 semi monthly, less applicable deductions, paid out in regular payroll periods and the Company shall continue to pay for Employees health insurance coverage, minus Employee’s normal contributions and options and restricted stock granted under the Company’s Long Term Incentive Plans shall continue to vest according to their original vesting schedule. Following the Termination Date, Employee shall be eligible for continued insurance coverage under COBRA. Notwithstanding the foregoing, during the Transition Period, Employee will not be eligible to receive any further equity grants (restricted stock or options) from the Company.

Without limiting the effect of any other provision of this Agreement, if at any time prior to the Termination Date, Employee’s employment is terminated “for cause” or if Employee voluntarily resigns, all payments and other benefits under this Agreement shall cease immediately and Employee shall not be entitled to any further payment and/or benefits under this Agreement, including, but not limited to the severance payments and benefits described in Paragraph TWO below. If Employee is terminated for cause or voluntarily resigns his employment, the date that Employee’s employment is terminated for cause or he voluntarily resigns shall be deemed the Termination Date. For purposes of this Agreement, “cause,” shall mean (i) any material breach by Employee of any of the duties, responsibilities or obligations of his employment or any of the policies or practices of the Company; (ii) Employee’s willful failure or refusal to properly perform (as determined by Company in its reasonable discretion and judgment), or the habitual neglect of, the duties, responsibilities or obligations of his employment, or to properly perform or follow (as determined by Company in its reasonable discretion and judgment) any lawful order or direction by the Company; (iii) any acts or omissions by Employee that constitute (as determined by Company in its reasonable discretion and judgment) fraud, dishonesty, breach of duty of loyalty, breach of trust, gross negligence, civil or criminal illegality, or any other misconduct or behavior that could subject to civil or criminal liability or otherwise adversely and

1

materially affect the business, interests or reputation of the Company or any of its affiliates. For the purposes of the acts described in items (i) through (iii) of this paragraph, such determinations shall be made by the Company in its reasonable discretion and judgment.

          TWO: Benefits.

Provided that (i) Employee executes this Agreement; (ii) his employment is not terminated for cause prior to April 1, 2007; (iii) he does not voluntarily resign prior to April 1, 2007, and (iv) that within twenty-one (21) days after the Termination Date, Employee shall have executed and delivered to the Company a General Release and Waiver (“Release”) in the form annexed hereto as Appendix B; and (v) Employee does not revoke either this Agreement or the Release, and in consideration for Employee’s agreements and covenants including the release of claims set forth in this Agreement and as full and complete and final satisfaction of any and all claims which Employee had, has or may have against the Company, the Company agrees that within 21 days after the Termination Date and subject to the conditions to payment set forth herein, it will (i) pay Employee an amount equal to 12 months of his base salary in a lump sum of $468,000, less applicable withholdings; (ii) pay Employee an additional amount in a lump sum equal to $122,850 (such amount equal to Employee’s target bonus for the 2006 performance year of $351,000 (representing 75% of Employee’s base salary of $468,000) less the $228,150 previously paid to Employee on March 1, 2007), less applicable withholdings; (iii) make COBRA premium payments on Employee’s behalf, minus Employee’s normal contributions, for a period of 12 months should Employee choose to continue coverage under the Company’s applicable plans after the Termination Date; and (iv) accelerate the vesting of 50% of Employee’s then unvested restricted stock and options (on a tranche by tranche basis) as of the Termination Date, as more fully set forth on Appendix A attached hereto. In addition, Employee shall be entitled to receive a payout for accrued and unused vacation time as of the Termination Date in accordance with the Company’s policies.

Subject to the terms herein, Employee will remain an active employee during the Transition Period. Notwithstanding the foregoing, during the Transition Period, Employee will not be eligible to participate and expressly and knowingly waives any right to participate in any employee benefit plans (except health and life insurance plans) within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) or any other plan, policy or arrangement of the Company, including, but not limited to, any plan, policy or arrangement relating to bonuses, profit sharing, compensation, pension, severance, deferred compensation, fringe benefits, insurance, welfare, post-retirement, stock purchases, disability, accidents, sick time, vacation pay, termination, unemployment, executive compensation, incentives, commissions or sales arrangements, change in control, and other plan, agreement, policy, or arrangement (whether written or unwritten), such as the Annual Incentive Plan; the Long Term Incentive Plan; and the Employee Stock Purchase Plan; nor will he be eligible to receive any incentives, bonuses, further option or stock grants under such plans.

Employee will not be entitled to any of the severance payments or benefits set forth in Paragraph TWO or any other consideration under this Agreement until at least seven (7) business days after the later of all of the following: (i) receipt by the Company of this Agreement signed by Employee; (ii) receipt by the Company on or about the Termination Date of the Release annexed

2

hereto as Appendix B signed by Employee; (iii) expiration of the revocation period set forth in numbered Paragraph EIGHT, without Employee revoking this Agreement; and (iv) expiration of the revocation period set forth in the Release annexed hereto as Exhibit B signed by Employee, without Employee revoking such Release.

          THREE: Mutual General Release.

In exchange for the agreement to provide the severance pay and other benefits and arrangements provided for in this Agreement, Employee understands that he is waiving any and all claims Employee may have against the Company and its affiliates and subsidiaries and its and their officers, directors, employees, agents, shareholders, employee benefit programs, administrators, insurers, attorneys and successors and assigns (collectively “Releasees”), from any and all claims, actions, suits, damages, complaints and grievances the Employee, his attorneys, heirs, dependents, beneficiaries, executors, administrators, successors, and assigns, may have related to the Employee’s employment with the Company or the termination of that employment. This includes a release of any rights or claims the Employee may have under the Age Discrimination in Employment Act, which prohibits discrimination in employment based on age; Title VII of the Civil Rights Act of 1964, as amended, and the Civil Rights Act of 1991, which prohibit discrimination in employment based on race, color, national origin, ancestry, religion or sex; the Pregnancy Discrimination Act, which prohibits discrimination based on pregnancy; the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; the Civil Rights Acts of 1866 and 1871, as amended, which protect against certain discrimination and violations of individuals’ civil rights; the Americans with Disabilities Act, which prohibits discrimination on the basis of physical or mental disability; the Employee Retirement Income Security Act (ERISA), which regulates certain conduct and practices relating to employee benefit and health plans; the Family and Medical Leave Act, which provides time off to employees for certain family and medical events and prohibits discrimination relating to such leaves of absence; the Immigration Reform and Control Act, which prohibits discrimination based upon an individual’s national origin citizenship status and/or work authorization documents; the New York State Executive Law, the New York City Administrative Code, and the New York State Constitution; or any other federal, state or local laws or regulations prohibiting employment discrimination or regulating employment or termination of employment. This also includes a release by the Employee of any claims for wrongful discharge and any other common law claims. This release applies to all claims through the date of execution of this Agreement and covers both claims that the Employee knows about and those he may not know about but excludes (i) any claim by Employee to enforce the terms of this Agreement; and (ii) any claim to enforce Employee’s indemnification rights; and (iii) any claims related to actions or omissions occurring after the execution of this Agreement.

In consideration of Employee’s agreements hereunder, the Company, on its own behalf and on behalf of its current and former affiliates or related companies, subsidiaries, branches and divisions, and the successors and assigns of all of the foregoing (collectively, the “Company Releasor”) hereby releases Employee and Employee’s heirs, executors, administrators, successors and assigns from or in connection with any and all actions, claims or demands, known or unknown and of any nature whatsoever and which Company Releasor ever had, now has or hereafter can, shall or may have as of the date hereof relating to Employee’s employment with

3

the Company, except that this Release shall not apply to (i) any obligation of Employee pursuant to this Agreement and the Non-Solicitation, Confidentiality and Intellectual Property Agreement dated March 24, 2005 (the “Confidentiality Agreement”); (ii) any act by Employee during his employment that would constitute fraud or embezzlement; or (iii) any actions, claims or demands related to actions or omissions occurring after the date hereof.

          FOUR: Acknowledgment of Full Payment.

Employee acknowledges that the payments and arrangements specified in Paragraph TWO above represent sufficient consideration for Employee’s release of claims and the other covenants contained in this Agreement. Employee expressly acknowledges that the severance pay provided for in this Agreement exceeds, supersedes and extinguishes any amount, if any, to which Employee may be entitled under any employment agreement, verbal or written, as well as any employment or personnel policies, procedures or handbooks including but not limited to severance plans, policies or precedent utilized by the Company or any other legal obligation which the Company may have to Employee. Employee further acknowledges that in the absence of this Agreement, Employee would not be entitled to, among other things, all of the payments and benefits specified in paragraph TWO above. Other than Employee’s accrued but unused vacation pay for which Employee will be compensated and Employee’s 401k plan benefits, Employee also acknowledges that the Company has paid all sums owed to him as a result of his employment with the Company and/or the termination of that employment and that, other than as provided in this Agreement, Employee is not entitled to, among other things, any further pay, benefits or severance.

Employee and the Company acknowledge and agree that to the extent that Employee currently holds stock options and restricted stock, that this information is accurately set forth on Appendix A hereto, Employee has no other rights that relate to the securities of the Company or any of its affiliates or subsidiaries and that other than as set forth herein such equity will expire in accordance with the applicable long-term incentive plan and/or stock option agreements and/or restricted stock agreements. Other than the fact that Employee’s employment was terminated on the Termination Date and other than as detailed expressly in Paragraph TWO herein, nothing in this Agreement shall be construed to alter, amend or modify the terms and conditions governing any restricted stock, stock options or similar rights, and any rights pertaining thereto, granted to Employee prior to the Termination Date.

          FIVE: Termination of All Existing Agreements.

Except as otherwise expressly provided herein and other than agreements relating to confidentiality, non-solicitation, non-disclosure and non-competition, including, without limitation, the Confidentiality Agreement, all rights and obligations of the Company and Employee under any employment agreement Employee may have had with the Company, and any other agreement, arrangement, obligation or understanding between the Company and the Employee are hereby cancelled and terminated as of the Termination Date without liability of any party thereunder.

4

          SIX: Non-Admission of Liability.

The parties have entered into this Agreement to effect a mutually acceptable termination of Employee’s employment with the Company. Neither the Company nor the Employee believes nor admits that either or both of them have done anything wrong.

          SEVEN: Period for Review and Consideration of Agreement.

Employee understands that he has been given a period of 21 calendar days to review and consider this Agreement. Employee further understands that he may take as much or as little of this 21-day period of time to consider this Agreement as he wishes, before signing this Agreement.

          EIGHT: Revocation Period and Payment of Benefits.

This Agreement will not become effective or binding on the parties until seven (7) days after it is signed, during which time Employee may revoke this Agreement if he desires. Any revocation must be in writing and directed to Chief Administrative Officer and General Counsel, 1111 Westchester Avenue, White Plains, NY 10604.

          NINE: Encouragement to Consult with Attorney.

Employee is encouraged to consult with an attorney before signing this Agreement. Employee understands that whether to do so is his decision.

          TEN: Binding Agreement.

This Agreement shall be binding upon and inure to the benefit of the parties, as well as their heirs, administrators, representatives, agents, executors, successors and assigns.

          ELEVEN: Arbitration.

Any controversy, dispute or claim arising out of or related to this Agreement or its enforceability shall be finally settled by final and binding arbitration conducted by a single arbitrator selected by the parties in accordance with the Employment Rules of the American Arbitration Association.

          TWELVE: Confidentiality.

Employee represents and agrees that he will keep the terms and dollar amount contained in this Agreement confidential, and that he will not disclose any information concerning this Agreement to any third person, including, but not limited to any past or present employee of the Company, except as may be required by law. Nothing herein shall preclude Employee from disclosing the terms of this Agreement to his spouse or to his accountant, legal counsel, insurer or tax advisors; provided that his spouse and such accountant, legal counsel, insurer or tax advisors are advised of and agree to be bound by the provisions of this Paragraph. Employee acknowledges that he

5

will be responsible for any violation of the terms of this Paragraph TWELVE by any of those persons. The Company represents and agrees that it will keep the terms and dollar amount contained in this Agreement confidential, and that it will not disclose any information concerning this Agreement to any third person; provided that the Company may disclose the terms of this Agreement (i) to its directors, officers and employees who need to know such information in the course of their duties and (ii) as may be required under the applicable law, United States securities laws, the rules and regulations of the Securities and Exchange Commission or in a proceeding before a court, arbitrator or administrative agency, including a national securities exchange.

          THIRTEEN: Confidential Information.

As a senior executive officer of the Company, Employee acknowledges that he has had access to Confidential Information (as hereinafter defined) of the Company through the Termination Date. Without limiting Employee’s continuing legal obligations pursuant to the Confidentiality Agreement, in recognition of Employee’s legal obligations and the consideration set forth in this Agreement, Employee agrees not to disclose, communicate or divulge to, or use for the direct or indirect benefit of, any person (including Employee), firm, association or other entity (other than the Company or its affiliates) any Confidential Information.

“Confidential Information” includes, but is not limited to, customer lists, customer financial information, vendor lists, joint venture lists, actual, contemplated and potential development projects, opportunities and partners, development strategies, brand marketing and other brand strategies, information relating to any current, past or prospective management agreement or joint venture, design plans and strategies, personnel information, labor and personnel strategies, databases, computer programs and software, frameworks, designs, models, blueprints, marketing programs and plans, sales, financial, design, training and technical information and plans, sales data and contacts, business methods, business policies, procedures, techniques, research or development projects or results, trade secrets (which includes the Company’s customer and prospective customer lists), pricing policies, financial records, or other financial, commercial, business or technical information relating to the Company or any of its subsidiaries.

Employee hereby represents and agrees that on or before the Termination Date: (i) Employee has returned or will return to the Company, and has not retained or will not retain originals or any copies of all documents, records or materials of any kind, whether written or electronically created or stored, which contain, relate to or refer to any Confidential Information (“Confidential Materials”); and (ii) Employee has not disclosed and will not disclose any Confidential Information or Confidential Materials to any person or entity without the express written authorization of an authorized officer of the Company.

In the event that Employee receives a subpoena or any other written or oral request for disclosure or release of any Confidential Information, Confidential Materials or any other information concerning the Company or its subsidiaries, or its or their current or former employees, officers, directors, shareholders or agents, Employee shall, within two (2) business days of the service or receipt of such subpoena or other request notify the Company in writing directed to Chief Administrative Officer and General Counsel, Starwood Hotels & Resorts Worldwide, Inc., 1111 Westchester Avenue, White Plains, New York 10604 and provide the Company with a copy of

6

any subpoena or other written request, or disclose the nature of the request for information, if oral.

          FOURTEEN: Noninterference.

During the period commencing on the Termination Date and ending on the first anniversary of the Termination Date, Employee solely with respect to matters of which he is aware on or before the Termination Date, shall not take or omit to take any action or actions which are intended to or actually cause or encourage any person or prospective entity with which the Company intends to enter into a business relationship or transaction (or any agent or affiliate thereof) to fail to enter into the contemplated business relationship or complete the contemplated transaction. Without limiting the generality of the foregoing, Employee agrees not to pursue on his behalf or on behalf of any other person or entity or otherwise interfere with the Company’s pursuit of any pending or contemplated deal, merger or acquisition of which he was aware on or before the Termination Date.

          FIFTEEN: Non-Disparagement.

Employee agrees not to engage in any act or say, publish or disseminate anything (either directly or by or through another person) that is intended, or may reasonably be expected, to harm the reputation, business or operations of the Company, its customers, its employees, officers, directors or shareholders prior to or after the Termination Date. The Company agrees that it will not make any statements that are intended, or would reasonably be expected, to disparage or defame Employee.

          SIXTEEN: Future Cooperation.

After the Termination Date, Employee will comply with reasonable requests from any Releasee for assistance and/or information in connection with any matters and/or issues relating to or encompassed within the duties and responsibilities of Employee’s employment, including without limitation, consulting with any of the employees and/or attorneys of any Releasee with respect to, and/or appearing as a witness in, any dispute, controversy, action or proceeding of any kind. Employee agrees to appear as a witness in any proceeding of any kind and to make himself available in advance for reasonable preparation upon the request of the Company with reasonable advance notification without the need for the Company to issue a subpoena. In connection with any of Employee’s cooperation efforts mandated by this Paragraph SIXTEEN, Employee shall be entitled to receive an agreed hourly or per diem amount (or reimbursement of lost wages as the case may be) and reimbursement of reasonable travel and other out of pocket expenses provided that those expenses are submitted pursuant to and are in conformance with the then applicable Company policy relating to expense reimbursement.

          SEVENTEEN: Non-Solicitation

Without waiving or limiting the obligations under the Confidentiality Agreement, during the 24-month period commencing on the Termination Date, Employee agrees that he will not, without the prior written consent of the Company, directly or indirectly, solicit or attempt to solicit for

7

employment with or on behalf of any corporation, partnership, joint venture or other business entity, any person who is, or at any time during the six-month period preceding the solicitation of such person was, a management-level employee of the Company (including, without limitation, for this purpose any employee at director level or above and any General Manager of any hotel owned (in whole or in part) or managed by the Company). In the event that the terms of this Paragraph SEVENTEEN conflict with the non-solicitation obligations under the Confidentiality Agreement, the terms of this Paragraph shall govern. The non-solicitation provisions in this Paragraph do not prohibit (i) advertising directed at the general public and not targeted at Company employees; or (ii) Employee from serving as a reference upon request.

          EIGHTEEN: Injunctive Relief

Employee acknowledges and agrees that Paragraphs THIRTEEN, FOURTEEN, FIFTEEN and SEVENTEEN hereof relate to special, unique and extraordinary matters and that a violation of any of the terms of such Paragraphs will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, Employee agrees that the Company shall be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) in a court of law restraining Employee from committing any violation of the covenants and obligations contained in Paragraphs THIRTEEN, FOURTEEN, FIFTEEN and SEVENTEEN. These remedies are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity.

          NINETEEN: Return of Company Property.

Employee represents that within 1 week after the Termination Date, he will return to the Company all Company property in his possession or over which he has retained control such as printers, scanners and accessories, disks, keys, cell phones, credit cards, access cards, Company records, documents and files and all copies and recordings thereof. To the extent Employee subsequently discovers Company property in his possession or within his control, he shall immediately return such property and all copies, recordings or duplicates thereof to the Company.

          TWENTY: Severability.

If any portion of this Agreement is declared unlawful or unenforceable, the remaining parts will remain enforceable.

          TWENTY-ONE: Public Announcement

Each of Employee and the Company is required to request and receive approval from the other party the content of any voluntary statements, whether oral or written, to be made by Employee or the Company, as the case may be, to any third party or parties regarding Employee’s separation from employment with the Company, including, without limitation, any press release or other statements to the press, except that this Paragraph TWENTY-ONE shall not apply to any statements required to be made by reason of applicable law, the United States securities laws, the rules and regulations of the Securities and Exchange Commission or in a proceeding before a court,

8

arbitrator or administrative agency, including a national securities exchange, applicable to the relevant party. Each of Employee and the Company hereby covenants and agrees not to make any public statements (either directly or by or through another person) to any third party, including, without limitation, to any representative of any news organization, which are inconsistent in any material respect with the aforementioned agreed upon statements to the public.

          TWENTY-TWO: Entire Agreement.

This Agreement, including Appendix A and Appendix B, is the entire agreement between Employee and the Company regarding the subjects addressed in this document and this Agreement supersedes any other agreements between the parties, other than agreements relating to confidentiality, non-disclosure, non-solicitation and non-competition, including without limitation, the Confidentiality Agreement. The Company has made no promises to Employee other than those in this Agreement.

EMPLOYEE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT, UNDERSTANDS IT, HAS TAKEN SUFFICIENT TIME TO CONSIDER IT AND IS VOLUNTARILY ENTERING INTO IT.

EMPLOYEE UNDERSTANDS THAT THIS AGREEMENT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AND A RESTRICTION ON RELEASE OF CONFIDENTIAL INFORMATION.

JAVIER E. BENITO
Signed:	/s/ Javier E. Benito
Dated:	March 16, 2007
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
By:	/s/ Kenneth S. Siegel
	Name:	Kenneth S. Siegel
	Title:	Chief Administrative Officer and General Counsel
Dated: March 16, 2007

9

EX-10.4

Exhibit 10.4

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
RESTRICTED STOCK UNIT AWARD AGREEMENT

BRUCE DUNCAN

(                    ) GRANT PURSUANT TO THE
2004 LONG-TERM INCENTIVE COMPENSATION PLAN)

          Pursuant to the provisions of the Starwood Hotels & Resorts Worldwide, Inc. 2004 Long-Term Incentive Compensation Plan (the “Plan”), Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the “Company”), has granted to the individual (the “Participant”) named in the award notification (the “Award Notification”) as of the date set forth in the Award Notification (the “Grant Date”), a Restricted Stock Unit Award (the “Award”), upon and subject to the restrictions, terms and conditions set forth in the Plan and below. Capitalized terms not defined herein shall have the meanings specified in the Plan.

1. Award Subject to Acceptance of Agreement. The Award shall be void unless the Participant accepts this Agreement by executing the Award Notification in the space provided and returning it to the Company within 90 days of the Grant Date.

2. Rights as a Stockholder. (a) Voting. During the Restriction Period (as defined in Section 3), the Participant shall not possess the right to vote the Company’s Shares in respect of the Restricted Stock Units.

          (b) Dividends and Other Distributions. If any dividends are paid or other distributions are made on the Company’s Shares prior to the conversion of the Restricted Stock Units into Company Shares, the equivalent of such dividends and other distributions shall be paid to the Participant by the Company with respect to the Restricted Stock Units (whether or not vested) as promptly as practicable following payment of such dividends or distributions on the Company Shares (but in all cases not after the later of (i) the end of the year in which the dividend or distribution is paid, or (ii) the 15^th day of the third month following payment of the dividend or distribution). If the Restricted Stock Units are forfeited for any reason, Participant will forfeit automatically any such rights related to dividends and other distributions on Company Shares that are payable on or after the forfeiture date of the Restricted Stock Units.

3. Restriction Period and Vesting. The Award shall vest on the earlier of (a) June 30, 2009 and (b) the date that Participant ceases to be a director of the Company for any reason. Restricted Stock Units that have vested shall be converted into Company Shares and paid to the Participant during the first calendar quarter following the earlier of (a) ten years from the date of grant or (b) the year in which the Participant ceases to be a director of the Company for any reason (provided that the Participant is not otherwise an employee of the Company). The period of time from the Grant Date until the Award is payable in Company Shares to the Participant is referred to as the “Restriction Period”.

Chairman’s Restricted Stock Unit Grant

4. Additional Terms and Conditions.

4.1. Nontransferability of Award. The Restricted Stock Units may not be transferred by the Participant other than by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company. Except as permitted by the foregoing, the Restricted Stock Units may not be sold, transferred, assigned, pledged, hypothecated, voluntarily encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, voluntarily encumber or otherwise dispose of the Restricted Stock Units, the Restricted Stock Units and all rights hereunder shall immediately become null and void.

4.2. Required Tax Payments and Withholding Shares. As a condition precedent to the delivery of any Shares at the expiration of the Restriction Period, the Participant shall pay to the Company all applicable federal, state, local or other taxes, domestic or foreign, if any (the “Required Tax Payments”). Unless other arrangements are made with the consent of the Company, all Required Tax Payments will be satisfied by the Company withholding Shares otherwise to be delivered to the Participant, having a Fair Market Value on the date the tax is to be determined, sufficient to make the Required Tax Payments. The Company shall withhold the whole number of shares sufficient to make the Required Tax Payments and shall make a cash payment to the Participant for the difference between the Fair Market Value of the Shares and the Required Tax Payment.

4.3. Compliance with Applicable Laws. If the listing, registration or qualification of the Restricted Stock Units or the Shares representing such units upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary in connection with the vesting or delivery of the Restricted Stock Units and Shares representing such units hereunder, the Restricted Stock Units and the Shares representing such units shall not vest or be delivered, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent or approval. As a further condition precedent to the delivery of any Restricted Stock Units and Shares representing such units upon the expiration of the Restriction Period, the Participant shall comply with all regulations and requirements of any applicable regulatory authority and shall execute any documents that the Company shall in its sole discretion deem necessary or advisable.

4.4. Delivery of Certificates. Upon the expiration of the Restriction Period and payment of the Required Tax Payments, unless the Company otherwise agrees, the Company shall cause its designated broker to credit an account for Participant with the appropriate number of Shares. The Company shall pay all original issue or transfer taxes and all fees and expenses incident to such delivery.

4.5. Agreement Subject to the Plan. This Agreement is subject to the provisions of the Plan and shall be interpreted in accordance with the Plan. The Participant acknowledges receipt of a copy of the Plan.

Chairman’s Restricted Stock Unit Grant

2

5. Miscellaneous Provisions.

5.1. Meaning of Certain Terms. References in this Agreement to sections of the Code shall be deemed to refer to any successor section of the Code or any successor internal revenue law.

5.2. Successors. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall, upon the death of the Participant, acquire any rights hereunder in accordance with this Agreement or the Plan.

5.3. Notices. All notices, requests or other communications provided for in this Agreement shall be made, if to the Company, to the Company or its designated representative at corporate headquarters in White Plains, New York, Attention: Human Resources, and if to the Participant, to the address set forth for the Participant on the records of the Company or to the Participant’s e-mail or other electronic address with the Company. All notices, requests or other communications provided for in this Agreement shall be made in writing by (a) personal delivery, (b) facsimile with confirmation of receipt, (c) e-mail or other electronic transmission to the Participant, (d) mailing in the United States mails, or (e) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, confirmation of receipt of facsimile transmission, one day after sending an e-mail or other electronic transmission to the Participant, or receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company.

5.4. Section 409A. This Agreement shall be interpreted and applied so that Participant’s Award will not violate Code Section 409A. Toward this end, this Agreement shall be interpreted and applied as if it contained any other provision that it is required to contain to achieve compliance with Code Section 409A in the least restrictive manner possible. Any provision in this Agreement that violates any requirement of Code Section 409A shall be void to the extent necessary to permit Code Section 409A compliance with the minimum possible impact on the value of the Award under this Agreement.

5.5. Governing Law. This Agreement, the Award and all determinations made and actions taken pursuant hereto and thereto, to the extent not otherwise governed by the laws of the United States, shall be construed in accordance with and governed by the laws of the State of Maryland without giving effect to conflicts of laws principles.

5.6. Personal Data. By accepting the Award, Participant has voluntarily consented to the collection, use, processing and transfer of personal data about Participant, including Participant’s name, home address and telephone number, date of birth, social security number or other employee identification number, salary, nationality, job title, details of the Award for the purpose of managing and administering the Plan (“Data”). Company and/or its Subsidiaries will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of Participant’s participation in the Plan, and Company and/or any of its Subsidiaries may each further transfer Data to any third parties assisting Company in the implementation, administration and management of the Plan.

Chairman’s Restricted Stock Unit Grant

3

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

 

By:  

Chairman’s Restricted Stock Unit Grant

4

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Bruce W. Duncan, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Starwood Hotels & Resorts Worldwide, Inc.;
2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2007

/s/ Bruce W. Duncan

Bruce W. Duncan

Chairman of the Board and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, Vasant Prabhu, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Starwood Hotels & Resorts Worldwide, Inc.;
2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions);

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2007

/s/ Vasant Prabhu

Vasant Prabhu

Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

          I, Bruce W. Duncan, the Chairman of the Board and Chief Executive Officer of Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), certify , pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that (i) the accompanying Form 10-Q of Starwood for the quarter ended March 31, 2007 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Starwood.

/s/ Bruce W. Duncan  

Bruce W. Duncan 

Chairman of the Board and Chief Executive Officer
Starwood Hotels & Resorts Worldwide, Inc. 

May 4, 2007 

EX-32.2

Exhibit 32.2

Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code

          I, Vasant Prabhu, the Chief Financial Officer of Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), certify , pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that (i) the accompanying Form 10-Q of Starwood for the quarter ended March 31, 2007 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Starwood.

/s/ Vasant Prabhu  

Vasant Prabhu 

Chief Financial Officer
Starwood Hotels & Resorts Worldwide, Inc. 

May 4, 2007