Starwood 2008 Annual Report Download - page 99

branding business. The increase in residential fees for the year ended December 31, 2008 to $49 million when
compared to $18 million in 2007 was primarily related to fees earned from the St. Regis Singapore Residences,
which opened during the year and a nonrefundable license fee received in connection with another residential
project.
Other revenues and expenses from managed and franchised properties increased 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 and vacation ownership properties and franchisees and relate primarily to payroll costs at
managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred
with no added margin, these revenues and corresponding expenses have no effect on our operating income and our
net income.
Year Ended
December 31,
2008
Year Ended
December 31,
2007
Increase/
(Decrease)
from Prior
Year
Percentage
Change
from Prior
Year
Selling, General, Administrative and Other . . $477 $508 $(31) (6.1)%
The decrease in selling, general, administrative and other expenses was primarily a result of our focus on
reducing our cost structure in light of the declining business conditions in this current economic climate. Beginning
in the middle of 2008, we began an activity value analysis project to review our cost structure across a majority of
our corporate departments and divisional headquarters. We have completed the first two phases of that program
which has resulted in the majority of these cost savings and additional phases are expected to be completed in early
2009.
Year Ended
December 31,
2008
Year Ended
December 31,
2007
Increase/
(Decrease)
from Prior
Year
Percentage
Change
from Prior
Year
Restructuring and Other Special Charges, Net . . $141 $53 $88 n/a
During the year ended December 31, 2008, we recorded restructuring and other special charges of $141 mil-
lion, including $62 million of severance and related charges associated with our ongoing initiative of rationalizing
our cost structure in light of the current economic climate. We also recorded impairment charges of approximately
$79 million primarily related to the decision not to develop two vacation ownership projects as a result of the current
economic climate and its impact on business conditions in the timeshare industry (see Note 13 of the consolidated
financial statements).
During the year ended December 31, 2007, we recorded $53 million in net restructuring and other special
charges primarily related to accelerated depreciation of property, plant and equipment at the Sheraton Bal Harbour
in Florida (“Bal Harbour”) and demolition costs associated with our redevelopment of that hotel. Bal Harbour was
closed for business on July 1, 2007, and the majority of its employees were terminated. The hotel was demolished
and we are in the process of building a St. Regis hotel along with branded residences and fractional units.
Year Ended
December 31,
2008
Year Ended
December 31,
2007
Increase/
(Decrease)
from Prior
Year
Percentage
Change
from Prior
Year
Depreciation and Amortization ........... $323 $306 $17 5.6%
The increase in depreciation expense was due to an increase in capital spending on our owned hotels partially
offset by the impact of hotels sold or held for sale. The increase in amortization expense was primarily due to the
write-off, through amortization expense, of an investment in a management contract during 2008.
Year Ended
December 31,
2008
Year Ended
December 31,
2007
Increase/
(Decrease)
from Prior
Year
Percentage
Change
from Prior
Year
Operating Income ..................... $619 $858 $(239) (27.9)%
The decrease in operating income was primarily due to the decrease in vacation ownership sales and services as
well as the decrease in revenues from owned, leased and consolidated joint venture hotels discussed above.
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