Starwood Announces Record Third Quarter 2000 Results

WHITE PLAINS, N.Y., Oct. 31 /PRNewswire/ — Starwood Hotels & Resorts
Worldwide, Inc. (NYSE: HOT) (Starwood or the Company) is one of the
leading hotel and leisure companies in the world with more than 725 properties
in 80 countries and 120,000 employees at its owned and managed properties.
With internationally renowned brands, Starwood is a fully integrated owner,
operator and franchiser of hotels and resorts including: St. Regis, The Luxury
Collection, Sheraton, Westin, Four Points and W brands, as well as Starwood
Vacation Ownership, Inc., one of the premier developers and operators of high
quality vacation interval ownership.

Third Quarter Ended September 30, 2000
For the third quarter of 2000, total revenues increased 16% to
$1.11 billion when compared to the same period in 1999. Earnings per diluted
share from continuing operations were $0.50 compared to pro forma comparable
earnings per diluted share from continuing operations of $0.38 in the
corresponding period in 1999. Excluding the unfavorable impact of the Euro
and the political unrest in Fiji (which has since ended), where two of the
Company's three owned hotels in Asia are located, earnings per diluted share
from continuing operations for the third quarter of 2000 would have been
$0.53. Income from continuing operations increased 39% to $103 million in the
third quarter of 2000 compared to pro forma comparable income from continuing
operations of $74 million in the same period of 1999. (See the attached
unaudited consolidated statements of operations for the three months ended
September 30, 2000 and 1999, and the notes thereto, for the basis of the 1999
pro forma comparable results.)

Nine Months Ended September 30, 2000
For the nine months ended September 30, 2000, total revenues increased 18%
to $3.27 billion when compared to the same period in 1999. Earnings per
diluted share from continuing operations were $1.32 compared to pro forma
comparable earnings per diluted share from continuing operations of $1.02 in
the corresponding period in 1999. Income from continuing operations was
approximately $270 million for the nine months ended September 30, 2000
compared to pro forma comparable income from continuing operations of
$199 million for the same period of 1999. (See the attached unaudited
consolidated statements of operations for the nine months ended
September 30, 2000 and 1999, and the notes thereto, for the basis of the 1999
pro forma comparable results.)

Operating Results
At the Company's owned, leased and consolidated joint venture hotels,
excluding ten hotels sold since July 1, 1999 and three hotels without
comparable prior year results (Comparable Owned Hotels), revenues for the
third quarter of 2000 increased 8% to $900 million from $831 million in 1999
and EBITDA increased 15% to $302 million from $263 million in 1999. EBITDA at
the Company's Comparable Owned Hotels in North America increased 23% to
$214 million in the third quarter of 2000 when compared to the same period in
1999. International results were unfavorably impacted by continued weakness
in the Euro, economic conditions in Latin America and the political unrest in
Fiji.
For the third quarter of 2000, revenue per available room (REVPAR) at
owned hotels worldwide, excluding hotels under significant renovation or for
which comparable results are not available (Same-Store Owned Hotels),
increased 10.5% when compared to the same period in 1999 as a result of an
increase in average daily rate (ADR) of 6.9% and an increase in occupancy
rate of 240 basis points. ADR and occupancy rate increases in the third
quarter of 2000 were strongest at the Same-Store Owned Hotels in North America
where ADR increased 9.3% to $149 and occupancy increased 330 basis points to
77.7%, resulting in a 14.2% increase in REVPAR when compared to the same
period in 1999. The Sheraton Same-Store Owned Hotels in North America
experienced strong occupancy gains, up 340 basis points, resulting in a 12.7%
REVPAR increase. Occupancy rates at the Westin Same-Store Owned Hotels in
North America increased 460 basis points, resulting in a 12.5% increase in
REVPAR. REVPAR at the St. Regis/Luxury Collection Same-Store Owned Hotels in
North America increased 19.1%; REVPAR at W Same-Store Owned Hotels in North
America increased 37.7%, while the Same-Store owned portfolio in North
America, operating under independent and other brands but typically managed by
Starwood, increased 9.1%. The increase in North America for the Company's
proprietary brands was primarily a result of previous and current investment
spending for asset renovations and repositionings, the Starwood Preferred
Guest Program and sales force realignment, as well as the bi-coastal
concentration of the owned portfolio, particularly in Boston, New York, San
Francisco and Los Angeles. In Europe, Same-Store Owned Hotel REVPAR increased
more than 15% excluding the unfavorable effect of foreign currency
translation.
EBITDA margins at Comparable Owned Hotels worldwide increased 180 basis
points to 33.5%. In North America, EBITDA margins at Comparable Owned Hotels
increased 280 basis points to 32.4%. Internationally, despite weak economic
conditions, EBITDA margins remained at 36.7%.
During the third quarter of 2000, the Company added 14 management and
franchise contracts with approximately 3,300 rooms. The Company is in various
stages of negotiation to add management and franchise agreements with
approximately 30,000 rooms including ten hotels with more than 500 rooms each.
Starwood Vacation Ownership, Inc. operates 12 vacation ownership resorts
and is currently selling vacation ownership interest (VOI) inventory at
10 resorts located in Orlando, Florida; Myrtle Beach, South Carolina;
Scottsdale, Arizona; Avon, Colorado; St. John, U.S. Virgin Islands; Paradise
Island, The Bahamas; St. Augustine, Florida; and Port St. Lucie, Florida. New
build projects are currently underway at the Harborside Resort at Atlantis on
Paradise Island in The Bahamas; Sheraton's Mountain Vista in Avon, Colorado;
Sheraton's Vistana Villages in Orlando, Florida; and Westin Vacation Club
Mission Hills in Rancho Mirage, California. Additional VOI projects
capitalizing on current Starwood locations are targeted in markets such as
Phoenix and Hawaii.

Dispositions
The Company continues its efforts to sell non-strategic assets around the
world, closing approximately $310 million of such sales to date in 2000 and
will continue to review its portfolio for disposition candidates. In the
two years since the acquisition of ITT, the Company has completed non-core
asset dispositions with aggregate proceeds exceeding $7.1 billion.

Financing
On September 30, 2000, the Company had total debt of approximately
$5.5 billion and cash of approximately $242 million. As of September 30,
2000, the Company had availability under its revolving credit facility in
excess of $1.0 billion. During the third quarter, Standard & Poor's upgraded
the Company's corporate credit rating to investment grade. Other than
$700 million of outstanding ITT Bonds maturing in November 2000 and the Euro
loan discussed below, Starwood has no significant debt maturing until 2003,
and the weighted average maturity of the Company's debt portfolio exceeds
five years. At the end of the third quarter of 2000, the Company's debt was
approximately 71% fixed and 29% floating. On July 25, 2000, the Company
entered into a one-year, Euro 270 million loan (approximately $252 million) at
an initial average interest rate of Euribor + 112.5 basis points. The
proceeds from this loan were used to further pay down the Company's revolving
credit facility.
During the third quarter of 2000, the Company invested approximately
$134 million in capital improvements at owned hotel assets and for new
construction of timeshare inventory. The Company continued its aggressive
renovation program on its largest brand, Sheraton, and is on target to reach
its goal of having more than 60% of its North American owned Sheraton rooms
renovated by the end of 2000. Also, during the third quarter of 2000, the
Company declared a quarterly dividend of $0.1725 per share, representing a 15%
increase over the prior year. Pursuant to the 1998 Board-approved share
repurchase program (the Share Repurchase Program), to date in 2000, the
Company has repurchased 2,525,600 shares at a total cost of approximately
$70 million. Under the Share Repurchase Program, the Company has $230 million
remaining authorization to repurchase shares. At September 30, 2000, Starwood
had approximately 203 million shares outstanding (including partnership units
and exchangeable preferred shares).

Comments from the CEO
Despite several international economic and political challenges including
the continued decline of the Euro, social unrest in Fiji and the difficult
operating environment in Latin America, North America Division REVPAR, EBITDA
and EBITDA margin expansion resulted in the Company having its best quarter
ever, and leading the industry in REVPAR growth for the fourth quarter in a
row, said Barry S. Sternlicht, Chairman and CEO. Looking to 2001, we are
optimistic that we will achieve continued industry leadership in REVPAR,
EBITDA, and EPS growth. The ongoing repositioning and renovation program for
our owned portfolio, the success of marketing innovations like the Heavenly
Bed for Westin, the growing strength of the industry's number one rated
frequent guest program Starwood Preferred Guest, the financial success of W
Hotels, the primarily bi-coastal location of our owned North America
portfolio, and the addition of new interval ownership inventory prepare
Starwood for continued growth. Additionally, 2001 will see the roll-out and
implementation of our state-of-the-art yield management system, enhanced
training programs and important internet initiatives.
In 2001 our EBITDA and EPS growth should be enhanced by investments made
in 2000 including the expansion of the Westin Turnberry Resort in Scotland, a
full year of operations at the St. Regis Rome, the newly renovated Sheratons
in the Boston area, the two new New Orleans W Hotels as well as a full year of
the W Los Angeles. EBITDA growth should also be driven by renovations at the
Sheraton Bal Harbour, the Phoenician, Westin Peachtree Plaza, Westin Maui and
Sheraton Harbor Island San Diego. In addition we currently anticipate a
better than 30% increase in sales year over year in our vacation ownership
business.
Concluding, Mr. Sternlicht said: We consider our global diversification,
including our ownership of trophy international assets, a competitive
advantage that this year, given the decline of the Euro and Latin American
economic conditions, has adversely impacted our growth rate. A turnaround in
the Euro would not only directly benefit the translation of our European
earnings, but likely increase European travel to our important domestic east
coast markets. Improvements in Latin America would rapidly translate into
increased earnings given our high operating margins in the region. Looking
into the future, we are also encouraged by declining industry supply trends
and the difficult financing markets as our growth is not materially dependent
on unit growth.

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

Full Year 2000
* The Company is currently comfortable with EPS consensus estimates of
$1.92, a growth rate of 25%, for the full year. EBITDA is currently
expected to reach approximately $1.55 billion.
* Strength in North America should continue to offset weakness in the
Euro and other international challenges including recent unrest in the
Middle East.

Full Year 2001
* Full year 2001 North American REVPAR growth is expected to be in excess
of 6%. Worldwide REVPAR growth is expected to be in excess of 5%.
* Full year 2001 EBITDA is expected to be approximately $1.7 billion.
* Owned hotel EBITDA margins are expected to improve at or above the
Company's 100 basis point annual target.
* The Company is currently comfortable with consensus EPS estimates for
2001 of $2.22 which represents a 16% growth in EPS over expected 2000
EPS.
* The Company produces substantial free cash flow. The Company has
completed a multiyear capital plan and divided these expenditures into
growth and maintenance expenditures. The Company considers the growth
expenditures as discretionary. In general, growth capital has been
allocated for sliver equity investments, ongoing major conversions of
independent properties to one of the Company's proprietary brands
(e.g. W Hotels)or new projects yielding, on average, a projected better
than 15% after-tax internal rate of return on invested capital. In
addition, the Company will continue to invest to expand its interval
ownership business which it believes enhances customer and brand
loyalty. Interval ownership projects, on average, are expected to
achieve better than 20% after-tax internal rate of return on invested
capital. Despite the increased depreciation from capital expenditures
the Company is optimistic that given its significant cash flow, it can
continue to grow and achieve its 15% per year EPS growth goal. Should
market conditions warrant, the discretionary growth expenditures
discussed above may be used from time to time to repurchase the
Company's stock.

CIGA Subsidiary
In addition to owned interests in assets in European cities including
London, Paris, Rome and Brussels the Company owns interests in an
extraordinary collection of properties in Europe commonly referred to as the
CIGA portfolio. These 25 hotels include such world renowned assets as the
Gritti Palace and Danieli in Venice, the St. Regis Grand and Westin Excelsior
in Rome, the Grand and Excelsior in Florence, the Principe di Savoia in Milan,
the Westin Palace in Madrid, the Imperia in Vienna, and four hotels in
Sardinia's Costa Smeralda including the world famous Cala di Volpe and
Pitrizza assets. Included in the Sardinia assets is more than 6,000 acres of
land including several miles of beachfront property. This land is currently
in various stages of the entitlement process that has been proceeding for
several years. The EBITDA of CIGA is expected to exceed $120 million with no
value for the land. In general, the CIGA assets face little new build
competition as they typically are located in prime locations in dense urban
markets.
The Company would expect a sale of CIGA to be significantly accretive to
earnings per share as management would expect a double digit EBITDA multiple
sale price. However, the current position of the Euro and the significant
increase in value expected from entitling the Sardinia land may make the
timing of an immediate sale not optimal. Nonetheless, the Company expects to
market the portfolio for sale, encumbered by our management agreements, in
whole or in part in 2001. There can be no assurance such a sale can be
consummated on terms the Company deems acceptable.

(Note: This release contains certain statements that may be deemed
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements are not guarantees of future performance and
involve risks and uncertainties that could cause actual results to differ
materially from historical results or those anticipated at the time the
forward-looking statements are made, including, without limitation, risks and
uncertainties associated with the following: the continued ability of Starwood
Hotels & Resorts (the Trust) to qualify for taxation as a REIT; Starwood's
ability to attract and retain personnel; completion, terms and timing of
future acquisitions and dispositions; the availability of capital for
acquisitions and for renovations; execution of hotel renovation and expansion
programs; the ability to maintain existing management, franchise or
representation agreements and to obtain new agreements on favorable terms;
competition within the lodging industry and from emerging technologies; the
cyclicality of the real estate business and the hotel business; foreign
exchange fluctuations and exchange control restrictions; general real estate
and national and international economic conditions; political and financial
conditions and uncertainties in countries in which Starwood owns property or
operates; and the other risks and uncertainties set forth in the annual,
quarterly and current reports and proxy statements of the Trust and Starwood.
Starwood undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future
events or otherwise.)

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

Three Months Ended Nine Months Ended
September 30, September 30,
2000(a) 1999 (b) 2000 (a) 1999 (b)
Revenues
$ 926 $ 855 Owned, leased and consolidated $2,740 $2,496
joint venture hotels
188 103 Other hotel and leisure (c) 533 285
1,114 958 3,273 2,781
Costs and Expenses
616 587 Owned, leased and consolidated 1,834 1,709
joint venture hotels
97 37 Selling, general, administrative 312 116
and other (d)
127 117 Depreciation and amortization 373 353
840 741 2,519 2,178
274 217 754 603
(109) (92) Interest expense, net of interest (332) (272)
income of $5 and $3 for the three
months ended September 30 and $14
and $9 for the nine months ended
September 30
(2) — Loss on sales of real estate and — —
investments, net
163 125 422 331
(54) (44) Income tax expense (145) (121)
(6) (7) Minority equity in net income (7) (11)
103 $ 74 Income from continuing operations 270 $ 199
Discontinued operations:
— Net loss from operations, —
net of tax benefit of $0
— Net gain on dispositions, 5
net of tax of $0 and $2
— Extraordinary item, net of tax (3)
$ 103 Net income $ 272

Earnings Per Share – Basic
$ 0.51 $ 0.39 Continuing operations $ 1.36 $ 1.05
— Discontinued operations 0.02
— Extraordinary item (0.01)
$ 0.51 Net income $ 1.37

Earnings Per Share – Diluted
$ 0.50 $ 0.38 Continuing operations $ 1.32 $ 1.02
— Discontinued operations 0.02
— Extraordinary item (0.01)
$ 0.50 Net income $ 1.33
198 186 Weighted average number of Shares 196 186
207 195 Weighted average number of Shares 205 196
assuming dilution

(a) Represents historical results of Starwood for the three and
nine months ended September 30, 2000. The Desert Inn is presented as
a discontinued operation and was sold on June 23, 2000. In accordance
with generally accepted accounting principles, for the nine months
ended September 30, 2000, $6 million of interest expense was allocated
to discontinued operations through the date of the sale on
$165 million of allocated debt.
(b) Represents pro forma comparable results of Starwood assuming the
dispositions of the gaming segment and other non-core businesses had
occurred at the beginning of the period, certain benefit savings as a
result of the ITT Merger of $0 and $7 million (pretax) for the
three and nine months ended September 30, 1999, respectively, and the
exclusion of the following unusual items: (i) a $0 and $15 million
pretax charge to miscellaneous expense in the three and nine months
ended September 30, 1999, respectively; (ii) restructuring and other
special credits of $50 million (pretax) in the nine months ended
September 30, 1999 attributable to the reversal of certain
restructuring charges as a result of the resolution of certain
employment related contingencies, net of restructuring and other
special charges of $9 million (pretax) primarily related to the
rationalization of one of the Company's technical centers and a tax
benefit of $37 million attributable to the resolution of certain
employment related contingencies; (iii) a $936 million deferred tax
charge related to the Reorganization for the nine months ended
September 30, 1999; and (iv)pretax gains/(losses) on sales of real
estate and investments totaling $(8) million and $22 million in the
three and nine months ended September 30, 1999, respectively.
Including the effects of these unusual items, income (loss) from
continuing operations and diluted earnings (loss) per Share from
continuing operations for the three and nine months ended
September 30, 1999 was $44 million and $(739) million and $0.23 and
$(3.98) per diluted Share, respectively.
(c) Other hotel and leisure revenue includes management and franchise fees
earned from third party hotel owners, the Company's interest in
unconsolidated joint ventures and the sale and financing of VOIs.
(d) Selling, general, administrative and other expenses includes the cost
of sales of VOIs and other costs of timeshare operations.

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
UNAUDITED BALANCE SHEET INFORMATION
(In millions)

September 30,
2000

Total assets $12,576
Cash and cash equivalents $ 242
Total debt $ 5,517
Shares outstanding (a) 203

(a) Shares outstanding include partnership units and exchangeable
preferred shares.

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Hotel Results – Same Store (a)
For the Three Months Ended September 30, 2000

WORLDWIDE NORTH AMERICA
2000 1999 Var. 2000 1999 Var.

OWNED HOTELS 155 Hotels 111 Hotels

REVPAR ($) 118.37 107.14 10.5% 115.66 101.26 14.2%
ADR ($) 157.21 147.06 6.9% 148.83 136.12 9.3%
OCCUPANCY (%) 75.3% 72.9% 2.4 77.7% 74.4% 3.3

SHERATON 63 40
REVPAR ($) 104.73 96.53 8.5% 111.05 98.54 12.7%
ADR ($) 141.33 133.51 5.9% 142.03 131.79 7.8%
OCCUPANCY (%) 74.1% 72.3% 1.8 78.2% 74.8% 3.4

WESTIN 35 23
REVPAR ($) 117.23 107.68 8.9% 108.77 96.70 12.5%
ADR ($) 152.40 147.57 3.3% 139.11 131.43 5.8%
OCCUPANCY (%) 76.9% 73.0% 3.9 78.2% 73.6% 4.6

LUXURY COLLECTION 13 4
REVPAR ($) 258.37 236.61 9.2% 259.68 217.95 19.1%
ADR ($) 376.21 372.44 1.0% 377.56 369.00 2.3%
OCCUPANCY (%) 68.7% 63.5% 5.2 68.8% 59.1% 9.7

W 8 8
REVPAR ($) 173.35 125.85 37.7% 173.35 125.85 37.7%
ADR ($) 224.82 171.82 30.8% 224.82 171.82 30.8%
OCCUPANCY (%) 77.1% 73.2% 3.9 77.1% 73.2% 3.9

OTHER 36 36
REVPAR ($) 99.95 91.64 9.1% 99.95 91.64 9.1%
ADR ($) 129.05 119.40 8.1% 129.05 119.40 8.1%
OCCUPANCY (%) 77.5% 76.8% 0.7 77.5% 76.8% 0.7

INTERNATIONAL (b)
2000 1999 Var.

44 Hotels

OWNED HOTELS
REVPAR ($) 127.03 126.00 0.8%
ADR ($) 187.95 185.54 1.3%
OCCUPANCY (%) 67.6% 67.9% -0.3

SHERATON 23
REVPAR ($) 91.94 92.47 -0.6%
ADR ($) 139.64 137.38 1.6%
OCCUPANCY (%) 65.8% 67.3% -1.5

WESTIN 12
REVPAR ($) 150.51 151.23 -0.5%
ADR ($) 209.15 214.30 -2.4%
OCCUPANCY (%) 72.0% 70.6% 1.4

LUXURY COLLECTION 9
REVPAR ($) 257.56 248.24 3.8%
ADR ($) 375.38 374.35 0.3%
OCCUPANCY (%) 68.6% 66.3% 2.3

(a) Hotel Results exclude 6 hotels under significant renovation or without
comparable results, 3 hotels without prior year results and hotels
sold during 1999 and 2000.
(b) See next page for breakdown by division.

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Hotel Results – Same Store (a)
For the Three Months Ended September 30, 2000

EUROPE LATIN AMERICA
2000 1999 Var. 2000 1999 Var.

OWNED HOTELS 29 Hotels 14 Hotels
REVPAR ($) 172.06 168.05 2.4% 70.23 74.50 -5.7%
ADR ($) 231.22 231.69 -0.2% 120.89 122.51 -1.3%
OCCUPANCY (%) 74.4% 72.5% 1.9 58.1% 60.8% -2.7

SHERATON 12 10
REVPAR ($) 113.47 111.39 1.9% 69.82 73.91 -5.5%
ADR ($) 152.75 151.81 0.6% 120.96 121.74 -0.6%
OCCUPANCY (%) 74.3% 73.4% 0.9 57.7% 60.7% -3.0

WESTIN 9 3
REVPAR ($) 191.02 189.47 0.8% 61.74 68.68 -10.1%
ADR ($) 249.71 257.88 -3.2% 99.53 106.79 -6.8%
OCCUPANCY (%) 76.5% 73.5% 3.0 62.0% 64.3% -2.3

LUXURY COLLECTION 8 1
REVPAR ($) 284.08 274.03 3.7% 107.25 105.17 2.0%
ADR ($) 395.39 395.87 -0.1% 213.28 209.65 1.7%
OCCUPANCY (%) 71.8% 69.2% 2.6 50.3% 50.2% 0.1

ASIA PACIFIC
2000 1999 Var.

OWNED HOTELS 1 Hotel
REVPAR ($) 128.33 118.65 8.2%
ADR ($) 168.79 147.40 14.5%
OCCUPANCY (%) 76.0% 80.5% -4.5

SHERATON 1
REVPAR ($) 128.33 118.65 8.2%
ADR ($) 168.79 147.40 14.5%
OCCUPANCY (%) 76.0% 80.5% -4.5

(a) Hotel Results exclude 6 hotels under significant renovation or without
comparable results, 3 hotels without prior year results and hotels
sold during 1999 and 2000.

SOURCE Starwood Hotels & Resorts Worldwide, Inc.