Starwood 2010 Annual Report Download

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SHERATON
HOHHOT HOTEL,
CHINA
THE WESTIN
MUMBAI
GARDEN CITY,
INDIA 2011 proxy statement &
2010 annual report

Table of contents

  • Page 1
    SHERATON HOHHOT HOTEL, CHINA THE WESTIN MUMBAI GARDEN CITY, INDIA 2011 proxy statement & 2010 annual report

  • Page 2
    LE MERIDIEN CHAMBERS MINNEAPOLIS, UNITED STATES THE ST. REGIS LHASA RESORT, CHINA

  • Page 3
    ...experienced in 2010 has continued thus far into 2011. Our customers are telling us they plan to travel more in 2011. We're very pleased with our performance in 2010. Starwood gained share, grew faster than our competition, and converted higher revenue into higher profits. We added 72 hotels over the...

  • Page 4
    ... base of loyal guests will drive our success. After all, our business model boils down to owning the hearts and minds of our guests, and creating value for our owners. We work hard to keep our brands distinct and compelling, to meet the various travel needs of our customers around the world, and to...

  • Page 5
    2011 proxy statement & 2010 annual report starwood hotels & resorts Worldwide, Inc.

  • Page 6

  • Page 7
    ... year's Annual Meeting, you will be asked to (i) elect eleven Directors, (ii) ratify the appointment of Ernst & Young LLP as Starwood's independent registered public accounting firm for 2011, (iii) approve, on a nonbinding advisory basis, the compensation of the Company's named executive officers...

  • Page 8

  • Page 9
    ... & Young LLP as Starwood Hotels & Resorts Worldwide, Inc.'s (the "Company") independent registered public accounting firm for the fiscal year ending December 31, 2011. 3. To have a non-binding advisory vote on approval of the compensation of the Company's "Named Executive Officers," as described in...

  • Page 10

  • Page 11
    ... ...EXECUTIVE OFFICERS ...COMPENSATION DISCUSSION & ANALYSIS ...COMPENSATION COMMITTEE REPORT...SUMMARY COMPENSATION TABLE ...GRANTS OF PLAN-BASED AWARDS ...NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS SECTION ...OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END...

  • Page 12
    ... questions about the Annual Meeting, you should contact: Starwood Hotels & Resorts Worldwide, Inc. 1111 Westchester Avenue White Plains, New York 10604 Attention: Investor Relations Phone Number: 1-914-640-8100 If you would like additional copies of this proxy statement or the Annual Report, or if...

  • Page 13
    ... AVENUE WHITE PLAINS, NY 10604 PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 5, 2011 THE ANNUAL MEETING AND VOTING - QUESTIONS AND ANSWERS Why did I receive these materials? Starwood Hotels & Resorts Worldwide, Inc., a Maryland corporation (the "Company" or "Starwood"), has...

  • Page 14
    ..., • Held for you in an account with a broker, bank or other nominee, or • Credited to your account in the Company's Savings and Retirement Plan (the "Savings Plan"). On the Record Date there were 195,121,899 Shares outstanding and entitled to vote at the Annual Meeting and there were 14,951...

  • Page 15
    ... registered public accounting firm requires "FOR" votes from a majority of the votes cast on the matter at the Annual Meeting, either in person or represented by properly completed or authorized proxy. Brokers may vote uninstructed customer Shares on this matter. Abstentions will have no effect on...

  • Page 16
    ... invested in Shares, the proxy card will serve as a voting instruction for the trustee of the Savings Plan. You must return your proxy card to the transfer agent on or prior to 11:59 p.m. (Eastern Time) on April 29, 2011. If your proxy card is not received by the transfer agent by that date...

  • Page 17
    ... than one account. Please sign and return all proxy cards you receive to ensure that all Shares held by you are voted. How does the Board recommend that I vote? The Board recommends that you vote FOR each of its Director nominees, FOR ratification of the appointment of Ernst & Young as the Company...

  • Page 18
    ... members, and the Chief Executive Officer and President of the Company. Biographies of our Directors can be found in the Election of Directors section beginning on page 8. The Board has the following four standing committees: (1) Audit, (2) Capital, (3) Compensation and Option and (4) Corporate...

  • Page 19
    ... received a salary and other benefits for his services. As that service was more than three years ago, the Board determined that Mr. Duncan is an independent director. Yahoo! Inc., Buddy Media, The Huffington Post, Amazon.com, Inc., Burger King Holdings, Inc., The Gap, Inc., American Express Company...

  • Page 20
    ... Board of Directors, c/o the Corporate Secretary of the Company, 1111 Westchester Avenue, White Plains, New York 10604 or online at www.hotethics.com. You should specify in the communication that you are a stockholder or an interested party. If the correspondence contains complaints about Starwood...

  • Page 21
    ... of Starwood Hotels & Resorts, a real estate investment trust and former subsidiary of the Company (the "Trust"), since August 1995. The Corporate Governance and Nominating Committee considered these qualifications, his experience as Chief Executive Officer of other publicly traded companies, and...

  • Page 22
    ... Executive Officer of The Huffington Post, a news website, since June 2009. From 2000 to 2009, he was a Managing Partner of Softbank Capital, a technology venture capital firm. Mr. Hippeau served as Chairman and Chief Executive Officer of Ziff-Davis Inc., an integrated media and marketing company...

  • Page 23
    ...on technology companies, business service companies and health care companies, since January 1998. From July 1985 to December 1997, he was in private medical practice. He is the former Chairman of the Board of the American Beacon Funds, a mutual fund company managed by AMR Investments, an investment...

  • Page 24
    ... to be paid to the Company's executive officers and other members of senior management and administers the Company's employee benefits plans, including the Company's 2004 Long-Term Incentive Compensation Plan. The Compensation Committee met six times during 2010. Corporate Governance and Nominating...

  • Page 25
    ... interest in executive compensation matters by investors and the general public. The Company has designed its executive compensation programs to attract, motivate, reward and retain the senior management talent required to achieve our corporate objectives and increase stockholder value. We believe...

  • Page 26
    ... Board values constructive dialog on executive compensation and other important governance topics with our stockholders. The Board believes an advisory vote every year will provide an effective way to obtain information on stockholder sentiment about our executive compensation program. Accordingly...

  • Page 27
    ...,203 Shares directly. (2) Based on information contained in a Schedule 13G, dated February 14, 2011 (the "Price Associates 13G"), filed by T. Rowe Price Associates, Inc. ("Price Associates") with the SEC, with respect to the Company, reporting beneficial ownership as of December 31, 2010. The Price...

  • Page 28
    ... executive officers and (iv) all directors and executive officers as a group, as of January 31, 2011. Beneficial ownership includes Shares a Director, nominee for Director or executive officer may acquire pursuant to stock options and other derivative securities that were exercisable at that date...

  • Page 29
    ... Executive Plan. The Executive Plan as it was approved by stockholders at the 2010 Annual Meeting did not limit the number of deferred restricted stock units that may be issued. In addition, 10,157,990 Shares remain available for issuance under our Employee Stock Purchase Plan, a stock purchase plan...

  • Page 30
    ... Vistana, Mr. Avril, a certified public accountant, spent five years with KPMG Peat Marwick. Mr. Avril is also a member of the board of directors of API Technologies Corp. Jeffrey M. Cava. Mr. Cava, 59, has been Executive Vice President and Chief Human Resources Officer since May 2008. Mr. Cava...

  • Page 31
    ...was a member of the Investment Banking Department of Salomon Brothers, based in both New York and London. II. COMPENSATION DISCUSSION AND ANALYSIS Introduction The Company's compensation programs are designed to align compensation with its business objectives and performance, enabling the Company to...

  • Page 32
    ... Executive Officer compensation is delivered in the form of equity, ensuring that long-term compensation is strongly tied to stockholder returns. • Achievement of Company Financial Objectives: A portion of Named Executive Officer compensation is tied directly to the Company's financial performance...

  • Page 33
    ... 2011, management held a special meeting to discuss and assess the risk profile of our compensation programs. The Chief Human Resources Officer, our Chief Administrative Officer and General Counsel, our Vice Chairman and Chief Financial Officer, the Company's external legal counsel for compensation...

  • Page 34
    ... financial and strategic performance goals. Total compensation for this group is evaluated against the peer group identified in this proxy statement. Evaluated on this basis, the Compensation Committee believes the actual cash and equity compensation delivered for the 2010 performance year...

  • Page 35
    ... program. The bonuses directly link the achievement of Company financial and strategic/ operational performance objectives to executive pay. Annual bonuses also provide a complementary balance to equity incentives (discussed below). Each Named Executive Officer has an annual opportunity to receive...

  • Page 36
    ... Officers under the Executive Plan consist of EBITDA and earnings per share targets, with each criteria accounting for half of the financial goal portion of the annual bonus. As the Compensation Committee generally sets target bonus award opportunities above the median among the Company's peer group...

  • Page 37
    ...the time the 2010 targets were established. Strategic/Operational Goals. The strategic/operational performance goals for Named Executive Officers under the Executive Plan consists of "Big 5" and leadership competency objectives that link individual contributions to execution of our business strategy...

  • Page 38
    ...hotels; • Maintained Starwood's position as a brand leader and innovator by improving market share across most Company brands and increasing membership in the Company's Preferred Guest Program; • Achieved increased employee satisfaction scores and introduced new initiatives to develop management...

  • Page 39
    ...of his overall annual bonus target. Mr. Turner's accomplishments for the 2010 performance year included the following: • Successfully managed the global development team to achieve agreements for 96 new hotels (approximately 22,200 new rooms) and 59 re-engagements or changes to ownership involving...

  • Page 40
    ...of stock options was the appropriate balance to maximize cost effectiveness and encourage equity ownership among our management. The number of shares of restricted stock was calculated by dividing 75% of the award value by the fair market value of the Company's stock on the grant date. The number of...

  • Page 41
    ...of business cyclicality while maintaining a direct tie to Share price. The Company seeks to enhance the link to stockholder performance by building a strong retention incentive into the equity program. Consequently, for 2010 grants, 100% of restricted stock unit awards vest on the fiscal year end of...

  • Page 42
    ...new change in control agreements with the Named Executive Officers at that time, which included Messrs. Prabhu and Siegel. In connection with the hiring of Mr. Turner in May 2008 as President, Global Development, and the promotion of Mr. Avril in September 2008 to President, Hotel Group, the Company...

  • Page 43
    ... incentive awards, and the value of option and restricted stock/restricted stock unit awards. When establishing target compensation levels for 2010, the Compensation Committee reviewed peer group data on payments to named executive officers as reported in proxy statements available as of February...

  • Page 44
    ... fair market value of our common stock on a particular date is determined as the average of the high and low trading prices of a Share on the NYSE on that date. Timing of Equity Grants. The Compensation Committee generally makes annual equity compensation grants to Named Executive Officers following...

  • Page 45
    III. COMPENSATION COMMITTEE REPORT The Compensation and Option Committee of the Board of Directors of Starwood Hotels & Resorts Worldwide, Inc. (the "Company") has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on ...

  • Page 46
    ... salary actually earned during the fiscal year listed. (2) Represents the grant date fair value for restricted stock and restricted stock unit awards granted during the year computed in accordance with ASC 718. For additional information, refer to Note 23 of the Company's financial statements filed...

  • Page 47
    ...: annual physical examinations, Company contributions to the Company's tax-qualified 401(k) plan, dividends on restricted stock, life insurance premiums, legal fees paid by the Company, spousal accompaniment while on business travel, and tax and financial planning services. SEC rules further...

  • Page 48
    ... high and low price of Shares on the grant date. For stock options, fair value is calculated in accordance with ASC 718 using a lattice valuation model. For additional information, refer to Note 23 of the Company's financial statements filed with the SEC as part of the Form 10-K for the year ended...

  • Page 49
    ... Officers received an award in March 2011 relating to his 2010 performance. The table below sets forth for each Named Executive Officer his salary, target award as both a percentage of salary and a dollar amount, actual award, the portion of the award that is deferred into restricted stock units...

  • Page 50
    ...unvested stock options, unvested restricted stock and unvested restricted stock units. Each equity grant is shown separately for each Named Executive Officer. The market value of the stock awards is based on the closing price of a Share on December 31, 2010, which was $60.78. Option awards Number of...

  • Page 51
    ... the sale of 33 hotels to Host Hotels & Resorts, Inc. (or "Host"), Company stockholders received 0.6122 Host shares and $0.503 in cash for each of their Class B Shares. Holders of Company employee stock options and restricted stock did not receive this consideration while the market price of Shares...

  • Page 52
    stock units. The table also discloses the value realized by the Named Executive Officer for each such event, calculated prior to the deduction of any applicable withholding taxes and brokerage commissions. Option Awards Number of Shares Acquired on Value Realized Exercise on Exercise ($) (#) Stock ...

  • Page 53
    ... life insurance. Name of Investment Fund 1-Year Annualized Rate of Return (as of 2/28/11) NVIT Money Market - Class V ...PIMCO VIT Total Return - Admin Shares ...Fidelity VIP High Income - Service Class ...NVIT Inv Dest Moderate - Class 2 ...T. Rowe Price Equity Income - Class II...Dreyfus Stock...

  • Page 54
    ... achievement, at the target level, of the individual and corporate performance goals established with respect to such award; • immediate vesting of stock options and restricted stock held by the executive under any stock option or incentive plan maintained by the Company; • outplacement services...

  • Page 55
    ..., payable at the maximum level of performance; • immediate vesting of stock options and restricted stock held under any stock option or incentive plan maintained by the Company; • a lump sum payment of his nonqualified deferred compensation paid in accordance with Section 409A distribution rules...

  • Page 56
    ...480,729 (1) Includes values for holdings of restricted stock and restricted stock units. Includes vested but deferred restricted stock units in accordance with the Executive Plan. (2) Includes vested stock options. Vested stock options could be subject to loss by the Named Executive Officers in the...

  • Page 57
    ... on the fair market value of a Share using the average of the high and low price of the Company's stock on December 31 of the year prior to grant. A Non-Employee Director may elect to receive up to one-half of the annual fee in cash and to defer (at an annual interest rate of LIBOR plus 11⁄2% for...

  • Page 58
    ...expire eight years after the grant date. The restricted stock units awarded pursuant to the annual grant generally vest upon the earlier of (i) the third anniversary of the grant date and (ii) the date such person ceases to be a Director of the Company. D. Starwood Preferred Guest Program Points and...

  • Page 59
    ... the grant date fair value for restricted stock and unit awards granted during the year computed in accordance with ASC 718. For additional information, refer to Note 23 of the Company's financial statements filed with the SEC as part of the Form 10-K for the year ended December 31, 2010. These...

  • Page 60
    ... one meeting per year, attendance by spouses. In addition, in 2010 Non-Employee Directors received 750,000 SPG Points valued at $11,250. Non-Employee Directors receive interest on deferred dividends. Pursuant to SEC rules, perquisites and personal benefits are not reported for any Director for whom...

  • Page 61
    ... on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the financial statements referred to above be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. Audit Committee of the Board of Directors Clayton C. Daley...

  • Page 62
    ... the last five years) of the Company's independent registered public accounting firm into any position (i) as a manager or higher, (ii) in its accounting or tax departments, (iii) where the hire would have direct involvement in providing information for use in its financial reporting systems, or (iv...

  • Page 63
    ... or in person using the services of a number of regular employees of the Company at nominal cost. The Company will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for expenses incurred in sending proxy materials to beneficial owners of Shares. The Company has engaged...

  • Page 64
    ...Investor Relations, Starwood Hotels & Resorts Worldwide, Inc., 1111 Westchester Avenue, White Plains, NY 10604 or by calling (914) 640-8100. You may also obtain a copy of the proxy statement and annual report from the investor relations page on the Company's website (www.starwoodhotels.com/corporate...

  • Page 65
    ...by the Company of its right to do so at any time in the future. You should address your proposals or nominations to the Corporate Secretary, Starwood Hotels & Resorts Worldwide, Inc., 1111 Westchester Avenue, White Plains, New York 10604. By Order of the Board of Directors STARWOOD HOTELS & RESORTS...

  • Page 66
    ... first exit - Lenox Road. • Turn right and follow signs for Peachtree Road South. • Turn right on Peachtree Road. • Continue one mile and turn right on West Paces Ferry Road. • The St. Regis Atlanta is two blocks on the left. From East • Travel on Interstate 20 West to Interstate 85 North...

  • Page 67
    ...Directors and executive officers) computed by reference to the closing sales price as quoted on the New York Stock Exchange was $7,823,279,076. As of February 11, 2011, the Corporation had outstanding 192,165,807 shares of common stock. For information concerning ownership of Shares, see the Company...

  • Page 68
    ... III Directors, Executive Officers and Corporate Governance ...Executive Compensation...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions and Director Independence ...Principal Accountant Fees and Services...

  • Page 69
    ... hotels, resorts and residences) are for connoisseurs who desire the finest expressions of luxury. They provide flawless and bespoke service to high-end leisure and business travelers. St. Regis hotels are located in the ultimate locations within the world's most desired destinations, important...

  • Page 70
    ... location or refreshing resort destination, Westin ensures guests are well rested, well nourished and well cared for. Le Méridien» (luxury and upscale full-service hotels, resorts and residences) is a European-inspired brand with a French accent. Each of its hotels, whether city, airport or resort...

  • Page 71
    ... around the world and its consequent impact on travel. The Corporation was incorporated in 1980 under the laws of Maryland. Sheraton Hotels & Resorts and Westin Hotels & Resorts, Starwood's largest brands, have been serving guests for more than 60 years. Starwood Vacation Ownership (and its...

  • Page 72
    ... executive offices are located at 1111 Westchester Avenue, White Plains, New York 10604, and our telephone number is (914) 640-8100. For discussion of our revenues, profits, assets and geographical segments, see the notes to financial statements of this Annual Report. For additional information...

  • Page 73
    ... and managed hotels and vacation ownership resorts, of which approximately 26% were employed in the United States. At December 31, 2010, approximately 34% of the U.S.-based employees were covered by various collective bargaining agreements providing, generally, for basic pay rates, working hours...

  • Page 74
    ...their ability to fund amounts required under development, management and franchise agreements and in most cases our recourse is limited to the equity value said party has in the property; • the financial condition of the airline industry and the impact on air travel; and • regulation or taxation...

  • Page 75
    ... and corporate events, could impact our financial results. Our Revenues, Profits, or Market Share Could Be Harmed If We Are Unable to Compete Effectively. The hotel, vacation ownership and residential industries are highly competitive. Our properties compete for customers with other hotel and resort...

  • Page 76
    ... assure you that any development project, including sites held for development of vacation ownership resorts, will in fact be developed, and, if developed, the time period or the budget of such development may be greater than initially contemplated and the actual number of units or rooms constructed...

  • Page 77
    ... budgeted costs and timeframes. Further, there can be no assurance that we will achieve the benefits that may have been anticipated from any new technology or system. Significant Owners of Our Properties May Concentrate Risks. There is a concentration of ownership of hotels operated under our brands...

  • Page 78
    ...enacted and cannot be determined at this time. Risks Relating to Operations in Syria During fiscal 2010, Starwood subsidiaries generated approximately $2 million of revenue from management and other fees from hotels located in Syria, a country that the United States has identified as a state sponsor...

  • Page 79
    ... and Capital Resources - Cash Used for Financing Activities in this Annual Report. Volatility in the Credit Markets Will Continue to Adversely Impact Our Ability to Sell the Loans That Our Vacation Ownership Business Generates. Our vacation ownership business provides financing to purchasers of...

  • Page 80
    ... benefits from these new brands will be realized. Investing Through Partnerships or Joint Ventures Decreases Our Ability to Manage Risk In addition to acquiring or developing hotels and resorts or acquiring companies that complement our business directly, we have from time to time invested...

  • Page 81
    ... other highly qualified personnel. Competition for such personnel is intense. In the past several years, we have experienced significant changes in our senior management, including executive officers (see Item 10. "Directors, Executive Officers and Corporate Governance" of this Annual Report). There...

  • Page 82
    ... Element brands are select service properties that cater to more value oriented consumers. The following table reflects our hotel and vacation ownership properties, by brand, as of December 31, 2010: Hotels, VOI and Residential(a) Properties Rooms St. Regis and Luxury Collection ...W...Westin ...Le...

  • Page 83
    ... chooses to pay separate franchise fees to secure the benefits of brand marketing, centralized reservations and other centralized administrative functions, particularly in the sales and marketing area. Management believes that companies, such as Starwood, that offer both hotel management services...

  • Page 84
    ...long-term management or franchise contracts. To date, where we have sold hotels, we have not provided seller financing or other financial assistance to buyers. Total revenues generated from our owned, leased and consolidated joint venture hotels worldwide for the years ending December 31, 2010, 2009...

  • Page 85
    ... W New York - Times Square W Chicago Lakeshore W Los Angeles Westwood W Chicago City Center W New Orleans W New Orleans, French Quarter W Atlanta The Westin Maui Resort & Spa The Westin Peachtree Plaza, Atlanta The Westin Gaslamp San Diego The Westin San Francisco Airport The Westin St. John Resort...

  • Page 86
    ... Hotels: St. Regis Grand Hotel, Rome St. Regis Osaka Grand Hotel Hotel Gritti Palace Park Tower Hotel Alfonso XIII Hotel Imperial Hotel Bristol, Vienna Hotel Goldener Hirsch Hotel Maria Cristina W Barcelona The Westin Excelsior, Rome The Westin Resort & Spa, Los Cabos The Westin Resort & Spa...

  • Page 87
    ..., GA, Westin Gaslamp in San Diego, CA, The Phoenician in Scottsdale, AZ, and the Manhattan Hotel at Times Square in New York, NY. The following table summarizes REVPAR, ADR and occupancy for our Same-Store Systemwide Hotels on a year-to-year basis for the years ended December 31, 2010 and 2009...

  • Page 88
    ... equal to a percentage of the gross sales revenue of the units sold. The licensing arrangement generally terminates upon the earlier of sell-out of the units or a specified length of time. At December 31, 2010, we had 23 residential and vacation ownership resorts and sites in our portfolio with 17...

  • Page 89
    ... Matters and Issuer Purchases of Equity Securities Market Information The Corporation Shares are traded on the New York Stock Exchange (the "NYSE") under the symbol "HOT". The following table sets forth the quarterly range of the high and low sale prices of the Corporation Shares for the fiscal...

  • Page 90
    ... on the Corporation Shares (and Shares until April 7, 2006) against the cumulative total return on the S&P 500 and the S&P 500 Hotel Index (the "S&P 500 Hotel") for the five fiscal years beginning December 31, 2005 and ending December 31, 2010. The graph assumes that the value of the investments was...

  • Page 91
    ...with the information set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes thereto appearing elsewhere in this Annual Report and incorporated herein by reference. 2010 Year Ended December 31...

  • Page 92
    ... 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. • Revenues from Managed and Franchised Properties - These revenues represent reimbursements of costs...

  • Page 93
    ... our frequent guest incentive marketing program. SPG members earn points based on spending at our owned, managed and franchised hotels, as incentives to first-time buyers of VOIs and residences, and through participation in affiliated partners' programs such as co-branded credit cards. Points can be...

  • Page 94
    ... the unit is returned to us. We generally do not modify vacation ownership notes that become delinquent or upon default. For the hotel segment, we measure the impairment of a loan based on the present value of expected future cash flows, discounted at the loan's original effective interest rate, or...

  • Page 95
    ... of room rates. As corporate profits have continued to rise, our business from the business travelers, which accounts for the majority of our revenues, is leading the recovery. In addition, the supply side growth has been lower than recent years which has led us to achieve upper single digit to low...

  • Page 96
    ...costs incurred with no added margin, these revenues and corresponding expenses have no effect on our operating income and our net income. Year Ended December 31, 2010 Year Ended December 31, 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Selling, General, Administrative...

  • Page 97
    .... These charges related to severance charges and costs to close vacation ownership sales galleries. Year Ended December 31, 2010 Year Ended December 31, 2009 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Depreciation and Amortization ... $285 $309 $(24) 7.8% The...

  • Page 98
    ... vacation ownership mortgage receivables, a $13 million impairment of an investment in a hotel management contract that has been cancelled, a $5 million impairment of certain technology-related fixed assets and a $4 million loss on the sale of a wholly-owned hotel. Year Ended December 31, 2010 Year...

  • Page 99
    .../ (Decrease) from Prior Year Percentage Change from Prior Year Owned, Leased and Consolidated Joint Venture Hotels ...Management Fees, Franchise Fees and Other Income ...Vacation Ownership and Residential ...Other Revenues from Managed and Franchise Properties ...Total Revenues ... $1,584 658 523...

  • Page 100
    ...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, 2009 Year Ended December 31, 2008 Increase/ (Decrease) from Prior Year Percentage Change from Prior Year Selling, General, Administrative...

  • Page 101
    ... reduction in vacation ownership intervals, following an in-depth review of the business. These decreases were partially offset by the reduction in selling, general, administrative and other costs as a result of our activity value analysis costs savings project and other cost savings initiatives and...

  • Page 102
    ... primarily from management and franchise revenues, operating income from our owned hotels and sales of VOIs and residential units. Other sources of cash are distributions from joint ventures, servicing financial assets and interest income. These are the principal sources of cash used to fund our...

  • Page 103
    ... Hotels ...$106 Corporate and information technology ...42 Subtotal ...Vacation Ownership and Residential Capital Expenditures : Net capital expenditures for inventory (excluding St. Regis Bal Harbour) ...Capital expenditures for inventory - St. Regis Bal Harbour ...Subtotal ...Development Capital...

  • Page 104
    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 ...

  • Page 105
    ... with securitized vacation ownership receivables, our net debt was $2.535 billion at December 31, 2010. Our Facilities are used to fund general corporate cash needs. As of December 31, 2010, we have availability of over $1.4 billion under the Facilities. We have reviewed the financial covenants...

  • Page 106
    ... contracts to hedge forecasted transactions for management and franchise fee revenues earned in foreign currencies. The aggregate dollar equivalent of the notional amounts was approximately $37 million, and they expire in 2011. • Forward foreign exchange contracts to manage the foreign currency...

  • Page 107
    ...excluding average exchange rates): Expected Maturity or Transaction Date At December 31, 2011 2012 2013 2014 2015 Total at December 31, 2010 Total Fair Value at December 31, 2010 Thereafter Liabilities Fixed rate ...Average interest rate ...Floating rate ...Average interest rate ...Forward Foreign...

  • Page 108
    ... that, as of December 31, 2010, the Company's internal control over financial reporting is effective. Management has engaged Ernst & Young LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, to attest to the...

  • Page 109
    ... related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2010 of the Company and our report dated February 17, 2011, expressed an unqualified opinion thereon. /s/ New York, New York February 17, 2011 Ernst...

  • Page 110
    ...to Financial Statements and Schedule following the signature pages hereof. 3. Exhibits:* * This list of exhibits has been revised to reflect amendments to the Company's Form 10-K Annual Report for the year ended December 31, 2010 filed with the Securities and Exchange Commission on February 18, 2011...

  • Page 111
    ... Merger Sub, L.P., Starwood Hotels & Resorts Worldwide, Inc., Starwood Hotels & Resorts, Sheraton Holding Corporation and SLT Realty Limited Partnership (the "Merger Agreement") (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on November 14...

  • Page 112
    ... Company's Current Report on Form 8-K filed with the SEC on April 22, 2010). Starwood Hotels & Resorts Worldwide, Inc. 1999 Long-Term Incentive Compensation Plan (the "1999 LTIP") (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended...

  • Page 113
    ... Deferred Compensation Plan, effective as of January 22, 2008 (incorporate by reference to Exhibit 10.35 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2007).* Form of Indemnification Agreement between the Company and each of its Directors and executive officers...

  • Page 114
    ... 18 of the United States Code - Chief Financial Officer.+ The following materials from the Company's Annual Report on Form 10-K for the period ended December 31, 2010, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of...

  • Page 115
    ...duly authorized. STARWOOD HOTELS & RESORTS WORLDWIDE, INC. By: /s/ FRITS VAN PAASSCHEN Frits van Paasschen Chief Executive Officer and Director Date: February 17, 2011 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on...

  • Page 116
    Signature Title Date /s/ STEPHEN R. QUAZZO Stephen R. Quazzo /s/ THOMAS O. RYDER Thomas O. Ryder /s/ KNEELAND C. YOUNGBLOOD Kneeland C. Youngblood Director February 17, 2011 Director February 17, 2011 Director February 17, 2011 48

  • Page 117
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. INDEX TO FINANCIAL STATEMENTS AND SCHEDULE Page Report of Independent Registered Public Accounting Firm...Consolidated Balance Sheets as of December 31, 2010 and 2009 ...Consolidated Statements of Income for the Years Ended December 31, 2010, 2009 and 2008 ...

  • Page 118
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of Starwood Hotels & Resorts Worldwide, Inc. We have audited the accompanying consolidated balance sheets of Starwood Hotels & Resorts Worldwide, Inc. (the "Company") as of December 31, 2010 and 2009, and...

  • Page 119
    .... CONSOLIDATED BALANCE SHEETS December 31, 2010 2009 (In millions, except share data) ASSETS Current assets: Cash and cash equivalents ...Restricted cash ...Accounts receivable, net of allowance for doubtful accounts of $45 and $54 ...Inventories ...Securitized vacation ownership notes receivable...

  • Page 120
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, 2010 2009 2008 (In millions, except per share data) Revenues Owned, leased and consolidated joint venture hotels ...Vacation ownership and residential sales and services ...Management fees, franchise...

  • Page 121
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, 2010 2009 2008 (In millions) Net income ...$475 Other comprehensive income (loss), net of taxes: Foreign currency translation adjustments ...4 Less: Recognition of accumulated foreign ...

  • Page 122
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. CONSOLIDATED STATEMENTS OF EQUITY Equity Attributable to Starwood Stockholders Accumulated Other Comprehensive (Loss) Income(2) (In millions) Equity Attributable to Noncontrolling Interests Shares Shares Amount Additional Paid-in Capital(1) Retained ...

  • Page 123
    ...equity earnings ...Gain on sale of VOI notes receivable ...Loss (gain) on asset dispositions and impairments, net ...Non-cash portion of income tax expense (benefit) ...Changes in working capital: Restricted cash ...Accounts receivable ...Inventories ...Prepaid expenses and other ...Accounts payable...

  • Page 124
    ...-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...

  • Page 125
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) aging of the respective receivables, current default trends by brand and origination year, and the Fair Isaac Corporation ("FICO") scores of the buyers. Given the significance of the Company's respective pools of ...

  • Page 126
    ...Company's frequent guest incentive marketing program. SPG members earn points based on spending at the Company's owned, managed and franchised hotels, as incentives to first-time buyers of VOIs and residences, and through participation in affiliated partners' programs such as co-branded credit cards...

  • Page 127
    ... valuation option pricing model requires the Company to estimate key assumptions such as expected life, volatility, risk-free interest rates and dividend yield to determine the fair value of share-based awards, based on both historical information and management judgment regarding market factors...

  • Page 128
    ... and Franchise Revenues - Represents fees earned on hotels managed worldwide, usually under long-term contracts, franchise fees received in connection with the franchise of the Company's Sheraton, Westin, Four Points by Sheraton, Le Méridien, St. Regis, W, Luxury Collection, Aloft and Element brand...

  • Page 129
    ..., respectively, a significant portion of which was reimbursed by managed and franchised hotels. Retained Interests. The Company periodically sells notes receivable originated by its vacation ownership business in connection with the sale of VOIs. The Company, prior to the adoption of ASU 2009-17...

  • Page 130
    ... fair value of financial instruments for annual and interim reporting periods of publicly traded companies and is effective in reporting periods ending after June 15, 2009. On June 30, 2009, the Company adopted this topic, which did not have a material impact on its consolidated financial statements...

  • Page 131
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) Company adopted this topic on December 31, 2009 and incorporated it into its Employee Benefit Plan disclosure (see Note 20). In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments ...

  • Page 132
    ..., during the year ended December 31, 2010, the Company received insurance proceeds related to an owned hotel that was damaged by a tornado, resulting in a gain of approximately $14 million. These gains were partially offset by impairment charges of $7 million related to a vacation ownership property...

  • Page 133
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) hotels, were recorded in the years ended December 31, 2010, 2009 and 2008, respectively. These assets are reported in the hotels operating segment. During 2009 and 2008, as a result of market conditions at the time...

  • Page 134
    ... Balance at December 31, 2010 ... The Company performed its annual goodwill impairment test as of October 31, 2010 for its hotel and vacation ownership reporting units and determined that there was no impairment of its goodwill. The vacation ownership reporting unit's fair value at October 31, 2010...

  • Page 135
    ... flows of the reporting units taking into account assumptions such as REVPAR, operating margins and sales pace of vacation ownership units and discounting these cash flows using a discount rate commensurate with the risk inherent in the calculations. Under the market approach, the fair value of the...

  • Page 136
    ... cash and cash equivalents when received. During the year ended December 31, 2010, the Company completed the securitization of approximately $300 million of vacation ownership notes receivable. The securitization transaction did not qualify as a sale for accounting purposes and, accordingly, no gain...

  • Page 137
    ...included in vacation ownership and residential sales and services in the Company's consolidated statements of income. Although the notes effectively owned after the transfers were measured at fair value on the transfer date, they required prospective accounting treatment as the notes receivable were...

  • Page 138
    ... balance sheets. The Company records interest income associated with VOI notes in its vacation ownership and residential sale and services line item in its consolidated statements of income. Interest income related to the Company's VOI notes receivable was as follows (in millions): Year Ended...

  • Page 139
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) For the vacation ownership and residential segment, the Company records an estimate of expected uncollectibility on its VOI notes receivable as a reduction of revenue at the time it recognizes profit on a timeshare...

  • Page 140
    ... contracts that do not trade on a public exchange. The fair values of the contracts are based on inputs such as foreign currency spot rates and forward points that are readily available on public markets, and as such, are classified as Level 2. The Company considered both its credit risk, as well as...

  • Page 141
    ...) by operating segment are as follows (in millions): Year Ended December 31, 2010 2009 2008 Segment Hotel ...Vacation Ownership & Residential ...Total ... $(74) (1) $(75) $ 21 358 $379 $ 41 100 $141 During the year ended December 31, 2010, the Company received cash proceeds of $75 million in...

  • Page 142
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) discounted using a rate commensurate with the inherent risk of the project. Under the market approach, fair value was determined with the comparable sales of similar assets and appraisals. The Company had remaining...

  • Page 143
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. Deferred tax assets (liabilities) include the following (in millions): December 31, 2010 ...

  • Page 144
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) A reconciliation of the tax provision of the Company at the U.S. statutory rate to the provision for income tax as reported is as follows (in millions): Year Ended December 31, 2010 2009 2008 Tax provision at U.S....

  • Page 145
    ...million, $9 million and $0 million, for the years ended December 31, 2010, 2009, and 2008, respectively, primarily associated with interest due on existing uncertain tax positions. When the Company sells a wholly-owned hotel subject to a long-term management contract, the pretax gain is deferred and...

  • Page 146
    ..., escrow account funding requirements for debt service, capital expenditures, tax payments and insurance premiums, among other restrictions. The Company was in compliance with all of the short-term and long-term debt covenants at December 31, 2010. On April 20, 2010, the Company entered into a new...

  • Page 147
    ... credit facility and for general purposes. Interest on the 7.875% Notes is payable semiannually on April 15 and October 15. The Company may redeem all or a portion of the 7.875% Notes at any time at the Company's option at a discount rate of Treasury plus 50 basis points. The 7.875% Notes will rank...

  • Page 148
    ...existing co-branded credit card agreement ("Amendment") with American Express and extended the term of its co-branding agreement to June 15, 2015. In connection with the Amendment in July 2009, the Company received $250 million in cash toward the purchase of future SPG points by American Express. In...

  • Page 149
    ... Company also sponsors the Starwood Hotels & Resorts Worldwide, Inc. Retiree Welfare Program. This plan provides health care and life insurance benefits for certain eligible retired employees. The Company has prefunded a portion of the health care and life insurance obligations through trust funds...

  • Page 150
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) The following table sets forth the benefit obligation, fair value of plan assets, the funded status and the accumulated benefit obligation of the Company's defined benefit pension and postretirement benefit plans ...

  • Page 151
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) The following table presents the components of net periodic benefit cost and the impact of the plan curtailments and settlements for the years ended December 31, 2010, 2009 and 2008 (in millions): Domestic Pension ...

  • Page 152
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) The following table presents the Company's fair value hierarchy of the plan assets measured at fair value on a recurring basis as of December 31, 2010 (in millions): Level 1 Level 2 Level 3 Total Assets: Mutual ...

  • Page 153
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) Multi-Employer Pension Plans. Certain employees are covered by union sponsored multi-employer pension plans. Pursuant to agreements between the Company and various unions, contributions of $9 million in 2010, 2009 ...

  • Page 154
    ...volatility based on market analysis. The historical share price volatility was measured over an 8-year period, which is equal to the contractual term of the options. The weighted average volatility for 2010 grants was 40%. The expected life represents the period that the Company's stock-based awards...

  • Page 155
    .... The weighted-average contractual life was 4.50 years for outstanding options and 2.67 years for exercisable option as of December 31, 2010. The Company recognizes compensation expense equal to the fair market value of the stock on the date of grant for restricted stock and unit grants over the...

  • Page 156
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) Note 24. Derivative Financial Instruments The Company, based on market conditions, enters into forward contracts to manage foreign exchange risk. The Company enters into forward contracts to hedge forecasted ...

  • Page 157
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) December 31, 2010 Balance Sheet Location December 31, 2009 Balance Sheet Location Fair Value Fair Value Derivatives not designated as hedging instruments Asset Derivatives Forward contracts ...Prepaid and other ...

  • Page 158
    ... receivable is estimated based on terms of the instrument and current market conditions. These financial instrument assets are recorded in the other assets line item in the Company's consolidated balance sheet. The Company estimates the fair value of its publicly traded debt based on the bid prices...

  • Page 159
    ... equity investments of $11 million associated with one VIE and a loan balance of $5 million associated with one VIE. 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...

  • Page 160
    ...to the results of a competitive set of hotels, and have exclusions for force majeure and acts of war and terrorism. The Company does not anticipate any significant funding under performance guarantees or losing a significant number of management or franchise contracts in 2011. In connection with the...

  • Page 161
    ... 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...

  • Page 162
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) The following table presents revenues, operating income, assets and capital expenditures for the Company's reportable segments (in millions): 2010 2009 2008 Revenues: Hotel ...$4,383 Vacation ownership and ...

  • Page 163
    ... amounts above consist of vacation ownership inventory and investments in management contracts and hotel joint ventures. The following table presents revenues and long-lived assets by geographical region (in millions): 2010 Revenues 2009 2008 Long-Lived Assets 2010 2009 United States ...Italy...All...

  • Page 164
    STARWOOD HOTELS & RESORTS WORLDWIDE, INC. NOTES TO FINANCIAL STATEMENTS - (Continued) Note 28. Quarterly Results (Unaudited) March 31 Three Months Ended June 30 September 30 December 31 (In millions, except per share data) Year 2010 Revenues ...Costs and expenses ...Income from continuing ...

  • Page 165
    ... II STARWOOD HOTELS & RESORTS WORLDWIDE, INC. VALUATION AND QUALIFYING ACCOUNTS (In millions) Additions (Deductions) Charged to/reversed Charged from to/from Other Payments/ Expenses Accounts(a) Other Balance January 1, Balance December 31, 2010 Trade receivables - allowance for doubtful accounts...

  • Page 166
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  • Page 167
    ...Trust Company 59 Maiden Lane, New York, New York 10038 800 350 6202, www.amstock.com forM 10-k and other Investor InforMatIon A copy of the Annual Report of Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") or Form 10-K filed with the Securities and Exchange Commission may be obtained online at...

  • Page 168
    ... is starwood hotels & resorts' largest hotel market outside of the united states, and 1 in3 new starwood hotels will debut there four& five-star footprint in emerging markets, including china, India, the Middle east and africa largest 2010 neW openInGs The St. Regis Bahia Beach Resort, Puerto...

  • Page 169
    Starwood Hotels & Resorts is the world's most hotel company global 350 hotels in the pipeline- 84% of them outside of the United States with 85,000 new rooms planned, Starwood Hotels & Resorts is poised to grow nearly 30% in the coming years Sheraton Miami Airport Hotel & Executive Meeting ...

  • Page 170
    ALOFT ABU DHABI, UNITED ARAB EMIRATES W RETREAT KOH SAMUI, THAILAND TAMBO DEL INKA RESORT & SPA, VALLE SAGRADO, PERU