UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2015
OR

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.)

One StarPoint
Stamford, CT 06902
(Address of principal executive offices, including zip code)

(203) 964-6000
(Registrants telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

CommonStock,parvalue$0.01pershare

NewYorkStockExchange

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.Yesx
Noo
IndicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13orSection15(d)oftheAct.Yeso
Nox
Note: CheckingtheboxabovewillnotrelieveanyregistrantrequiredtofilereportspursuanttoSection13or15(d)oftheExchangeActfromtheirobligationsunderthoseSections.
Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934duringthepreceding12months
(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthepast90days.Yesx
Noo
IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveDataFilerequiredtobesubmittedandposted
pursuant to Rule 405 of Regulation S-T ( 232.405 of this chapter) during the preceding 12 months (or for such shorter period than the registrant was required to submit and post such
files).Yesx
Noo
IndicatebycheckmarkifdisclosureofdelinquentfilerspursuanttoItem405ofRegulationS-K(229.405ofthischapter)isnotcontainedherein,andwillnotbecontained,tothebest
oftheregistrantsknowledge,indefinitiveproxyorinformationstatementsincorporatedbyreferenceinPartIIIofthisForm10-KoranyamendmenttothisForm10-K.o
Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,anon-acceleratedfilerorasmallerreportingcompany.Seedefinitionoflargeaccelerated
filer,acceleratedfilerandsmallerreportingcompanyinRule12b-2oftheExchangeAct.

Largeacceleratedfiler

Acceleratedfiler

Non-acceleratedfiler
o (Donotcheckifsmallerreportingcompany)
Smallerreportingcompany
o
Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchangeAct).Yeso
Nox
Asofthelastbusinessdayoftheregistrantsmostrecentlycompletedsecondfiscalquarter,June30,2015,theaggregatemarketvalueoftheregistrantsvotingandnon-votingcommon
equityheldbynon-affiliatesoftheregistrantcomputedbyreferencetotheclosingsalespriceasquotedontheNewYorkStockExchangewasapproximately$13.8billion.
AsofFebruary19,2016,theregistranthad168,759,931sharesofcommonstockoutstanding.
Documents Incorporated by Reference: None

TABLE OF CONTENTS

Page

PART I

Item1.
Item1A.
Item1B.
Item2.
Item3.
Item4.

Item5.
Item6.
Item7.
Item7A.
Item8.
Item9.
Item9A.
Item9B.

Item10.
Item11.
Item12.
Item13.
Item14.

Item15.

Forward-LookingStatements
Business
RiskFactors
UnresolvedStaffComments
Properties
LegalProceedings
MineSafetyDisclosures
PART II
MarketforRegistrantsCommonEquity,RelatedStockholderMattersandIssuerPurchasesofEquitySecurities
SelectedFinancialData
ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations
QuantitativeandQualitativeDisclosuresaboutMarketRisk
FinancialStatementsandSupplementaryData
ChangesInandDisagreementswithAccountantsonAccountingandFinancialDisclosure
ControlsandProcedures
OtherInformation
PART III
Directors,ExecutiveOfficersandCorporateGovernance
ExecutiveCompensation
SecurityOwnershipofCertainBeneficialOwnersandManagementandRelatedStockholderMatters
CertainRelationshipsandRelatedTransactionsandDirectorIndependence
PrincipalAccountingFeesandServices
PART IV
ExhibitsandFinancialStatementSchedules

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ThisAnnualReportisfiledbyStarwoodHotels&ResortsWorldwide,Inc.,aMarylandcorporation(theCorporation).Unlessthecontextotherwiserequires,
allreferencestowe,us,our,Starwood,ortheCompanyrefertotheCorporationandincludethoseentitiesownedorcontrolledbytheCorporation.
PART I
Forward-Looking Statements
This Annual Report contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995.Forward-lookingstatementsareanystatementsotherthanstatementsofhistoricalfact,includingstatementsregardingtheintent,belieforcurrentexpectations
ofStarwood,itsdirectorsoritsofficerswithrespecttothemattersdiscussedinthisAnnualReport.Insomecases,forward-lookingstatementscanbeidentifiedby
theuseofwordssuchasmay,will,expects,should,believes,plans,anticipates,estimates,predicts,potential,continue,orotherwordsof
similar meaning. Such forward-looking statements appear in several places in this Annual Report, including, without limitation, Item 1. Business and Item 7.
ManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperations.Allforward-lookingstatementsinvolverisksanduncertaintiesthatcould
causeactualresultstodiffermateriallyfromthosediscussedin,orimpliedby,theforward-lookingstatements.Factorsthatmightcausesuchadifferenceinclude,
butarenotlimitedto,generaleconomicconditions,ourfinancialandbusinessprospects,ourcapitalrequirements,ourfinancingprospects,ourrelationshipswith
associatesandlaborunions,ourabilitytoconsummatethePlannedReverseMorrisTrustTransaction(asdefinedbelow),ourabilitytoconsummatethePlanned
Marriott Merger (as defined below), or realize the anticipated benefits of such transactions and the other risks and uncertainties disclosed under Item 1A. Risk
Factors.Wecautionreadersthatanysuchstatementsarebasedoncurrentlyavailableoperational,financialandcompetitiveinformation,andtheyshouldnotplace
unduerelianceontheseforward-lookingstatements,whichreflectmanagementsopiniononlyasofthedateonwhichtheyweremade.Exceptasrequiredbylaw,
Starwoodundertakesnoobligationtopubliclyupdateorreviseanyforward-lookingstatementtoreflectcurrentorfutureeventsorcircumstances.
Item 1.

Business

General
We are one of the largest hotel and leisure companies in the world, with 1,297 properties providing approximately 370,000 rooms in approximately 100
countriesandapproximately188,000employeesunderourmanagementatourownedandmanagedproperties,vacationownershipresortsandcorporateoffices.We
conductourhotelandleisurebusinessbothdirectlyandthroughoursubsidiaries.WealsoownStarwoodVacationOwnership,Inc.,apremierproviderofworldclassvacationexperiencesthroughvilla-styleresortsandprivilegedaccesstoStarwoodbrands.
OnOctober27,2015,weenteredintodefinitiveagreementswithIntervalLeisureGroup,Inc.(ILG)pursuanttowhichourvacationownershipbusiness,tobe
heldbyVistanaSignatureExperiences,Inc.,ourwholly-ownedsubsidiary(Vistana),willbespun-offtoourstockholdersandimmediatelythereafterVistanawill
mergewithawholly-ownedsubsidiaryofILG(whichisreferredtointhisAnnualReportasthePlannedReverseMorrisTrustTransaction).PleaseseeNote27,
PlannedReverseMorrisTrustTransaction,oftheNotestoourFinancialStatementsforadditionalinformation.
OnNovember15,2015,weenteredintoadefinitiveagreementtocombinewithMarriottInternational,Inc.(Marriott)(whichisreferredtointhisAnnual
ReportasthePlannedMarriottMerger).PleaseseeNote28,PlannedMarriottMerger,oftheNotestoourFinancialStatementsforadditionalinformation.
TheStarwoodPreferredGuest(SPG)programisouraward-winningproprietaryfrequenttraveler,customerloyalty,andmulti-brandmarketingprogramthat
encouragesourmemberstoconcentratetheirstayswithinStarwoodstenbrandsandtotrynewhotelsintheStarwoodfamily,allowingmemberstoearnandredeem
pointsforroomstays,roomupgradesandairlineflights,withnoblackoutdates.Sinceitsintroductionin1999,theSPGprogramhasbeenoneofthemostinnovative
andrewardingloyaltyprograminthehospitalityindustry.In2015,SPGmemberspurchasedapproximately50%ofourroomnights.
Our revenue and earnings are derived primarily from hotel operations, which include management fees and other fees earned from hotels we manage
pursuanttomanagementcontracts,thereceiptoffranchisefeesandotherfeespursuanttofranchiseagreementsandtheoperationofourownedhotels.Weconsider
ourhotelsandresorts,includingvacationownershipresorts,generallytobepremierestablishmentswithrespecttodesirabilityoflocation,size,facilities,physical
condition,qualityandvarietyofservicesofferedinthemarketsinwhichtheyarelocated.Althoughobsolescenceattributabletoage,conditionoffacilitiesandstyle
mayadverselyaffectourhotelsandresorts,weandthethird-partyownersofthemanagedandfranchisedhotelsexpendsubstantialfundstorenovateandmaintain
our facilities in order to remain competitive. For further information see Item 7, Managements Discussion and Analysis of Financial Condition and Results of
OperationsLiquidityandCapitalResourcesinthisAnnualReport.
1

Ourhotelbusinessislargelyfocusedontheglobaloperationofhotelsandresortsprimarilyintheluxuryandupperupscalesegmentsofthelodgingindustry.
Weseektoacquiremanagementorfranchiserightswithrespectto,orinterestsin,propertiesinthesesegments.AtDecember31,2015,ourhotelbusinessincluded
1,282owned,managedorfranchisedhotelswithapproximately362,300rooms,comprising32hotelsthatweownorleaseorinwhichwehaveamajorityequity
interest,608hotelsmanagedbyusonbehalfofthird-partyowners(includingentitiesinwhichwehaveaminorityequityinterest)and642hotelsforwhichwe
receivefranchisefees.Additionally,ourvacationownershipandresidentialbusinessincluded15stand-alonevacationownershipresortsandresidentialpropertiesat
December31,2015.Allbrands(otherthantheFourPointsbySheraton,theAloftandElementbrands)representfull-servicepropertiesthatrangeinamenitiesfrom
luxuryhotelstomoremoderatelypricedhotels.OurFourPointsbySheraton,AloftandElementbrandsaremostlyselect-servicepropertiesthatcatertomorevalueorientedconsumers.
Our operations are in geographically diverse locations around the world. The following tables reflect our hotel and vacation ownership and residential
propertiesbytypeofrevenuesourceandgeographicalpresencebymajorgeographicareaasofDecember31,2015:

Number of
Properties

Managedandunconsolidatedjointventurehotels
Franchisedhotels
Ownedhotels(a)
Vacationownershipresortsandstand-aloneproperties
Totalproperties

608
642
32
15
1,297

Rooms

199,900
150,100
12,300
7,700
370,000

(a)

Includeswholly-owned,majorityownedandleasedhotels.
Number of
Properties

NorthAmerica
LatinAmerica(andMexicoandCaribbean)
Americas
Europe
AfricaandtheMiddleEast
Europe, Africa and the Middle East
GreaterChina
RestofAsia
Asia Pacific
Total properties

622
97
719
174
87
261
159
158
317
1,297

Rooms

186,200
20,900
207,100
40,200
24,400
64,600
57,300
41,000
98,300
370,000

Wemanageandoperateourhotelbusinessinthreeseparatehotelsegments:(i)theAmericas,(ii)Europe,AfricaandtheMiddleEast(EAME),and(iii)Asia
Pacific.Ourvacationownershipandresidentialbusinessisaseparatesegment.Note25totheconsolidatedfinancialstatementspresentsfurtherinformationabout
oursegments.
Foradiscussionofourrevenues,profits,assetsandreportablesegments,seeourconsolidatedfinancialstatementsofthisAnnualReport,includingthenotes
thereto.
TheCorporationwasincorporatedin1980underthelawsofMaryland.SheratonandWestin,Starwoodslargestbrands,havebeenservingguestsformore
than60years.
OurprincipalexecutiveofficesarelocatedatOneStarPoint,Stamford,Connecticut06902,andourtelephonenumberis(203)964-6000.
Hotel Business
Branded Hotel Management Business. Hotelandresortpropertiesareoftenownedbyentitiesthatdonotmanagehotelsorownabrandname.Hotelowners
typicallyenterintomanagementcontractswithhotelmanagementcompaniestooperatetheirhotels.Whenamanagementcompanydoesnotofferabrandaffiliation,
thehotelowneroftenchoosestopayseparatefranchisefeestosecurethebenefitsofbranding,includingmarketing,centralizedreservations,loyaltyprograms,and
othercentralizedservices,particularlyinthesalesandmarketingarea.Webelievethatcompanies,suchasStarwood,thatofferbothhotelmanagementservicesand
well-establishedglobalbrandnamesappealtohotelownersbyprovidingthefullrangeofmanagement,marketing,salesandreservationservices.
2

Managed Hotels . Wemanagehotelsworldwide,usuallyunderalong-termagreementwiththehotelowner(includingentitiesinwhichwehaveaminority

equityinterest).Ourresponsibilitiesunderhotelmanagementcontractstypicallyincludehiring,trainingandsupervisingthemanagersandemployeesthatoperate
thesefacilities.Foradditionalfees,weprovidecentralizedreservationservices,loyaltyprogramservicesandcoordinatenationalandinternationalsales,advertising,
marketing and other promotional services. W e prepare and implement annual budgets for the hotels we manage and allocate property-owner funds for periodic
maintenanceandrepairofbuildingsandfurnishings.Inadditiontoourownedandleasedhotels,atDecember31,2015,wemanaged608hotelswithapproximately
199,900roomsworldwide.
DuringtheyearendedDecember31,2015,wegeneratedmanagementfeesbygeographicareaasfollows:

NorthAmerica(a)
LatinAmerica(andMexicoandCaribbean)
Americas
Europe
AfricaandtheMiddleEast
Europe, Africa and the Middle East
GreaterChina
RestofAsia
Asia Pacific
Total

38%
4%
42%
12%
13%
25%
19%
14%
33%
100%

(a)

ManagementfeesgeneratedintheUnitedStateswere36%oftotalworldwidemanagementfees.

Management contracts typically provide for base fees tied to gross revenue and incentive fees tied to profits as well as fees for other services, including
centralized reservations, loyaltyprogram,nationalandinternational advertisingandsalesandmarketing.Inourexperience,ownersseekhotelmanagersthatcan
provide attractively priced base, incentive and marketing fees combined with demonstrated sales and marketing expertise and operations-focused management
designed to enhance profitability. Some of our management contracts permit the hotel owner to terminate the agreement when the hotel is sold or otherwise
transferredtoathirdparty,aswellasifwefailtomeetestablishedperformancecriteria.Inaddition,somehotelownersseekequity,debtorotherinvestmentsfrom
ustohelpfinancehotelrenovationsorconversionstoaStarwoodbrand,soastoaligntheinterestsoftheownerandStarwood.Ourabilityorwillingnesstomake
such investments may determine, in part, whether we will be offered, will accept or will retain a particular management contract. During the year ended
December31,2015,weopened48managedhotelswithapproximately10,500rooms,and12managedhotelswithapproximately2,400roomsexitedoursystem.In
addition, during 2015, we signed management agreements for 114 hotels with approximately 27,100 rooms, a small portion of which opened in 2015 and the
majorityofwhichwillopeninthefuture.
Brand Franchising and Licensing. WefranchiseourLuxuryCollection,TributePortfolio,Westin,LeMridien,Sheraton,FourPointsbySheraton,Aloft
andElementbrandsandgenerallyderivelicensingandotherfeesfromfranchiseesbasedonafixedpercentageofthefranchisedhotelsroomrevenue,aswellas
feesforotherservices,includingcentralizedreservations,loyaltyprogram,nationalandinternationaladvertisingandsalesandmarketing.Wealsoreviewcertain
plans for the location and design of franchised hotels to conform to our brand standards. At December 31, 2015, there were 642 franchised properties with
approximately150,100rooms.
DuringtheyearendedDecember31,2015,wegeneratedfranchisefeesbygeographicareaasfollows:

NorthAmerica(a)
LatinAmerica(andMexicoandCaribbean)
Americas
Europe
AfricaandtheMiddleEast
Europe, Africa and the Middle East
GreaterChina
RestofAsia
Asia Pacific
Total

(a)

FranchisefeesgeneratedintheUnitedStateswere75%oftotalworldwidefranchisefees.
3

82%
5%
87%
6%

6%
2%
5%
7%
100%

InadditiontothefranchisecontractsweretainedinconnectionwiththesaleofhotelsduringtheyearendedDecember31,2015,weopened57franchised
hotelswithapproximately11,000rooms,and18franchisedhotelswithapproximately3,800roomsexitedoursystem.Inaddition,during2015wesignedfranchise
agreementsfor106hotelswithapproximately18,400rooms,aportionofwhichopenedin2015andaportionofwhichwillopeninthefuture.
Owned, Leased and Consolidated Joint Venture Hotels. Historically,wederivedthemajorityofourrevenuesandoperatingincomefromourowned,leased
andconsolidatedjointventurehotelsandasignificantportionoftheseresultsweredrivenbythehotelsinNorthAmerica.However,in2006,weembarkeduponour
asset-lightstrategyanddecidedtosellasignificantnumberofourownedhotelportfolio.Themajorityofthesehotelsweresoldsubjecttolong-termmanagementor
franchisecontracts.
Totalrevenuesgeneratedfromourowned,leasedandconsolidatedjointventurehotelsworldwidefortheyearsendedDecember31,2015,2014and2013
were$1,293million,$1,541millionand$1,612million,respectively(totalrevenuesfromourowned,leasedandconsolidatedjointventurehotelsinNorthAmerica
were$722million,$776millionand$829millionfor2015,2014and2013,respectively).
DuringtheyearsendedDecember31,2015and2014,weearnedrevenuesatourownedandleasedhotelsbygeographicareaasfollows(1):

2015
Revenues

UnitedStates
Europe
Americas(LatinAmerica&Canada)*
AsiaPacific
Total

43%
24%
27%
6%
100%

2014
Revenues

39%
27%
25%
9%
100%

(1)
*

Includestherevenuesofhotelssoldfortheperiodpriortotheirsale.
IncludesU.S.territories

DuringtheyearsendedDecember31,2015and2014,weinvestedapproximately$132millionand$166million,respectively,forcapitalexpendituresat
ownedhotels.
As discussed above, we have implemented a strategy of reducing our investment in owned real estate and increasing our focus on the management and
franchisebusiness.Since2006,wehavesold91hotelsrealizingcashproceedsofapproximately$7.8billioninnumeroustransactions,includingcashproceedsnet
ofclosingcostsofapproximately$767millionfromthesaleoffourhotelsduringtheyearendedDecember31,2015.
Asaresult,ourprimarybusinessobjectiveistomaximizeearningsandcashflowbyincreasingthenumberofourhotelmanagementcontractsandfranchise
agreements,anduntiltherecentplantospin-offourvacationownershipbusiness,sellingVOIs,andinvestinginrealestateassetswherethereisastrategicrationale
fordoingso,whichmayincludeselectivelyacquiringinterestsinadditionalassetsanddisposingofnon-corehotels(includinghotelswherethereturnoninvested
capital is not adequate) and trophy assets that may be sold at significant premiums. We plan to meet these objectives by leveraging our global system, broad
customerandownerbaseandotherresourcesandbytakingadvantageofourscaletoreducecosts.Theimplementationofourstrategyandfinancialplanningis
impactedbytheuncertaintyrelatingtogeopoliticalandeconomicenvironmentsaroundtheworldanditsconsequentimpactontravel.
4

Followingthesaleofasignificantnumberofourhotelsinthepastfewyears,asofDecember31,2015,weownorlease32hotelsasfollows(notincluding
vacationownershipproperties):

U.S. Hotels:

TheSt.Regis,SanFrancisco
TheSt.Regis,NewYork
WNewYorkTimesSquare
TheWestinPeachtreePlaza,Atlanta
TheWestinMauiResort&Spa,Kaanapali
SheratonKauaiResort
SheratonSteamboatResort
TheTremontChicagoHotelatMagnificentMile

SanFrancisco,CA
NewYork,NY
NewYork,NY
Atlanta,GA
Maui,HI
Koloa,HI
SteamboatSprings,CO
Chicago,IL

Osaka,Japan
Florence,Italy
BuenosAires,Argentina
Seville,Spain
Vienna,Austria
SanSebastian,Spain
Salzburg,Austria
Barcelona,Spain
London,UK
Cancun,Mexico
PuertoVallarta,Mexico
Nadi,Fiji
LosCabos,Mexico
Florence,Italy
Toronto,Canada
Montreal,Canada
MexicoCity,Mexico
BuenosAires,Argentina
RiodeJaneiro,Brazil
Toronto,Canada
Lima,Peru
Nadi,Fiji
Paris,France
Milan,Italy

International Hotels:

Location

Rooms

Location

TheSt.Regis,Osaka
TheSt.Regis,Florence
ParkTower,BuenosAires
HotelAlfonsoXIII,Seville
HotelImperial,Vienna
HotelMariaCristina,SanSebastian
HotelGoldenerHirsch,Salzburg
WBarcelona
WLondonLeicesterSquare
TheWestinResort&Spa,Cancun
TheWestinResort&Spa,PuertoVallarta
TheWestinDenarauIslandResort
TheWestinResort&Spa,LosCabos
TheWestinExcelsior,Florence
SheratonCentreTorontoHotel
LeCentreSheratonMontrealHotel
SheratonMariaIsabelHotel&Towers
SheratonBuenosAiresHotel&ConventionCenter
SheratonRioHotel&Resort
SheratonGatewayHotelinTorontoInternationalAirport
SheratonLimaHotel&ConventionCenter
SheratonFijiResort
SheratonParisAirportHotel&ConferenceCentre
SheratonDianaMajesticHotel,Milan

260
238
509
1,073
759
394
261
135

Rooms

160
99
180
151
138
136
70
473
192
379
280
246
243
171
1,372
825
755
740
538
474
431
297
252
106

Vacation Ownership and Residential Business

Wederiverevenuesandearningsfromthedevelopment,ownershipandoperationofvacationownershipresorts,marketingandsellingvacationownership
interests (VOIs) in the resorts and providing financing to customers who purchase such interests. Generally, these resorts are marketed under our brand names.
Additionally,ourrevenuesandearningsarederivedfromthedevelopment,marketingandsellingofresidentialunitsatmixedusehotelprojectsownedbyusaswell
asfeesearnedfromthemarketingandsellingofresidentialunitsatmixedusehotelprojectsunderourbrandsdevelopedbythird-partyowners.
Wedevelop,ownandoperatevacationownershipresorts,marketandselltheVOIsintheresortsand,inmanycases,providefinancingtocustomerswho
purchasesuchownershipinterests.OwnersofVOIscantradetheirownershipinterestforstaysatotherStarwoodvacationownershipresorts,orforstaysatcertain
vacationownershipresortsnototherwisesponsoredbyStarwoodthroughanexchangecompany,aswellasforhotelstaysatStarwoodproperties.Fromtimetotime,
wesecuritizethereceivablesgeneratedfromoursaleofVOIs.
Wehavealsoenteredintoarrangementswithseveralthird-partyownersformixedusehotelprojectsthatincludearesidentialcomponent.Wehaveentered
into licensing agreements for the use of certain of our brands to allow the owners to offer branded residences to prospective purchasers. In consideration, we
typicallyreceivealicensingfeeequaltoapercentageofthegrosssalesrevenueoftheunitssold.
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Inlate2011,wecompletedthedevelopmentofawholly-ownedresidentialprojectattheSt.RegisBalHarbourResortinMiami,FL(BalHarbour).During
theyearendedDecember31,2014,weclosedsalesofthelastfourunitsandthisprojectisnowsoldout.
At December 31, 2015, we had 22 owned vacation ownership resorts in the United States, Mexico and the Bahamas, consisting of 14 stand-alone, seven
mixed-useandoneunconsolidatedjointventure.AtDecember31,2015,wewereactivelysellingVOIsat19sitesinourportfolio,whichincludesWestinNanea
OceanVillasthatwasnotyetinoperation.
During2015and2014,weinvestedapproximately$159millionand$84million,respectively,forvacationownershipandresidentialcapitalexpenditures,
includingconstructionattheWestinNaneaOceanVillasinMaui,Hawaii,theWestinSt.JohninSt.John,U.S.VirginIslandsandtheWestinDesertWillowinPalm
Desert,CA.
Our Brands
Through our brands, we are well represented in major markets around the world. The following table reflects our hotel properties, by brand, as of
December31,2015:

(a)

Excludes three independent hotels, and 14 stand-alone and one unconsolidated joint venture vacation ownership properties totaling 8,100 rooms. Also
excludes our ownership interest in Design Hotels, AG, pursuant to which in 2015 we announced an expanded partnership in which a subset of their
independenthotelswithdesignaestheticsdistinctfromour10brandsparticipateaspartnerhotelsintheSPGprogramandareavailableforbookingthrough
ourwebsitesandcallcenters.
Ourbrandnamesincludethefollowing:

St. Regis (luxury full-service hotels, resorts and residences) is for connoisseurs whodesire 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 worlds most desired destinations,
importantemergingmarketsandyettobediscoveredparadises,andtheytypicallyhaveindividualdesigncharacteristicstocapturethedistinctivepersonalityofeach
location.
The Luxury Collection (luxuryfull-servicehotelsandresorts)isagroupofuniquehotelsandresortsofferingexceptionalservicetoaneliteclientele.From
legendary palaces and remote retreats to timeless modern classics, these remarkable hotels and resorts enable the most discerning traveler to collect a world of
unique,authenticandenrichingexperiencesindigenoustoeachdestinationthatcapturethesenseofbothluxuryandplace.Theyaredistinguishedbymagnificent
decor,spectacularsettingsandimpeccableservice.
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W (luxury and upper upscale full-service hotels and residences) is where iconic design and cutting-edge lifestyle set the stage for exclusive and
extraordinaryexperiences.Eachhotelisuniquelyinspiredbyitsdestination,whereinnovativedesignconvergeswithlocalinfluencestocreateenergizingspacesfor
guests to play or work by day or mix and mingle by night. Guests are invited into dynamic environments that combine entertainment, vibrant lounges, modern
guestrooms,andinnovativecocktailcultureandcuisine.Thebeatsperminuteincreaseasthedaytransitionstonight,amplifyingthesceneineveryWLivingRoom
forgueststosocializeandseeandbeseen.WHotelsWorldwide,aglobaldesignpowerhousebroughttolifethroughWHappenings,exclusivepartnershipsandthe
signatureWhatever/Wheneverservicephilosophythatgrantsitsguestsandlocalcommunityaccesstowhatsnewandnext.
Westin (luxury and upper upscale full-service hotels, resorts and residences) provides innovative programs and instinctive services designed with our
guestswell-beinginmind.Indulgeinadeliciouslywholesomemenu,includingexclusiveSuperFoodsRx dishes.EnergizeinthefitnessstudiowiththeindustryleadingWestinWORKOUT .Revive intheHeavenly Bathwhereluxurioustouchescreateaspa-like experience.Andofcourse,experience trulyrestorative
sleepintheworld-renownedHeavenly Bedanoasisoflushsheets,down,andpatentedpillow-topmattress.Whetheranepiccitycenterlocationorarefreshing
resortdestination,Westinensuresguestsleavefeelingbetterthanwhentheyarrived.Westin.ForABetterYou.
Le Mridien (luxury and upper upscale full-service hotels, resorts and residences) is a Paris-born global hotel brand, currently represented by 103
propertiesin37countriesworldwide.LeMridienaimstotargetthecreativeandcurious-mindedtraveler:anaudienceeagertoexperiencesomethingnewinevery
destinationanddiscoverthingswithanewperspective.Acuratedapproachtowardsculture,thearts,andcuisineunlocksthedestinationforLeMridienguestsin
specialandinspiringways.SignaturetotheexperienceisLeMridienHubthebrandsuniquelobbyconceptwhereacafinspiredatmosphereandhighimpact
art,music,andfood&beverageexperiencessetthesceneforgueststosocializeandexchangeideasinacuratedenvironment,andourUnlockArtprogramoffering
freeaccesstolocalculturalinstitutions.LeMridienismorethanahotel,itsyourkeytounlockinguniquedestinationsaroundtheglobe.
Sheraton (luxuryandupperupscalefull-servicehotels,resortsandresidences)makestraveleasierandmoreintuitive,soguestscanexperiencemore.With
morethan440propertiesacross75countriesandastrongglobalpipeline,Sheratoncontinuestoestablishitselfastheglobalhospitalitybrandofchoice.Signature
elementsincludeSheratonClub,offeringasuperiorguestexperiencethroughexclusivelounges,personalizedserviceandenhancedguestroomfeatures;innovative
food&beverageshowcasingculinarytalentandlocalcuisine;meetings&eventsfeaturingflexibledesign,smarttechnologyandintuitivemeetingplannertools;the
SheratonSignatureSleepExperience,designedtoeliminatepressurepointsandalleviatethestressoftravel;andSheratonGrand,adesignationrecognizinghotels
andresortswithdistinguisheddesign,superiorserviceandexemplaryguestexperiencesiniconicdestinations.
Four Points (select-servicehotels)delightsthesmarttravelerwithwhatisneededontheroadforgreatercomfortandproductivity.Allatthehonestvalue
ourguestsdeserve,withperkstheydontexpect.Ourguestsstarttheirdayfeelingenergizedandfinishuprelaxed,bykickingbackwithoneofourBest Brews (local
craftbeer,coffee).FourPointsisBest For Business.
Aloft (select-service hotels)openeditsfirst hotelin2008andhasrapidly expandedto104properties in17countries bytheendof2015.Designedfor
globaltravelerswholoveopenspaces,openthinkingandopenexpression,Aloftiswheretravelcreatespossibilities.Anaffordablealternativeforthetech-savvyand
confidentlysocial,Aloftcaterstotheglobaltraveler.WithavibrantsocialsceneatWXYZbar,modernauthenticdesignthroughoutandtechnologythatkeepsup
withthenextgentraveler,Aloftis:Different. By Design.
Element (extendedstayhotels)firstopenedin2008,providingamodern,upscaleandintuitivelydesignedhotelexperiencethatallowstravelersaplaceto
thrive.Whetherstoppingbyforafewdaysorsettlinginforafewweeks,Elementhotelsprovesthattimeawayfromhomedoesntmeantimeawayfromlife.All
Elementhotelspursuethird-partysustainablecertifications,furtheringthegreenfromthegroundupsensibilityofthebrand.Extended Stay Reimagined.
Tribute Portfolio TM (independent hotelsindistinctlocations) ournewestbrand,givesguestsaccess toexceptional independenthotelsaroundtheworld.
Fromboutiqueresortstocompellinghotelsinchoiceurbanlocations,TributePortfoliohotelsofferinspiredstyleandsuperiorservice.
Competition
The hotel and timeshare industries are highly competitive. Competition is generally based on quality and consistency of room, restaurant and meeting
facilitiesandservices,attractivenessoflocations,availabilityofaglobaldistributionsystem,price,theabilitytoearnandredeemloyaltyprogrampointsandother
factors.Webelievethatwecompetefavorablyintheseareas.
7

Our properties primarily c ompete with other hotels and resorts in their geographic markets, including facilities owned by local companies and facilities
owned by national and international chains. Our principal competitors include other hotel operating companies, national and inter national hotel brands, and
ownershipcompanies(includinghotelRealEstateInvestmentTrusts).Whilesomeofourcompetitorsareprivatemanagementfirms,severalarelargenationaland
internationalchainsthatownandoperatetheirownhotels,aswellasmanagehotelsforthird-partyownersandsellVOIs,underavarietyofbrandsthatcompete
directlywithourbrands.
Intellectual Property
Weoperateinahighlycompetitiveindustryandourintellectualproperty,includingbrands,logos,trademarks,servicemarks,andtradedress,isanimportant
componentofourbusiness.Thesuccessofourbusinessdepends,inpart,ontheincreasedrecognitionofourbrandsandourabilitytofurtherdevelopourbrands
globallythroughtheuseofourintellectualproperty.Tothatend,weapplytoregisterandrenewourintellectualproperty,enforceourrightsagainsttheunauthorized
useofourintellectual property bythird parties, andotherwise protect ourintellectual property throughstrategies andinjurisdictions wherewereasonably deem
appropriate.
Environmental Matters
Wearesubjecttocertainrequirements andpotentialliabilities undervariousforeignandU.S.federal,stateandlocalenvironmentallaws,ordinancesand
regulations(EnvironmentalLaws).Undersuchlaws,wecouldbeheldliableforthecostsofremovingorcleaninguphazardousortoxicsubstancesat,on,under,or
in our currently or formerly owned or operated properties. Such laws may impose liability without regard to whether the owner or operator knew of, or was
responsiblefor,thepresenceofsuchhazardousortoxicsubstances.Thepresenceofhazardousortoxicsubstancesmayadverselyaffecttheownersabilitytosellor
rentsuchrealpropertyortoborrowusingsuchrealpropertyascollateral.Personswhoarrangeforthedisposalortreatmentofhazardousortoxicwastesmaybe
liableforthecostsofremovalorremediationofsuchwastesatthetreatment,storageordisposalfacility,regardlessofwhethersuchfacilityisownedoroperatedby
suchperson.WeusecertainsubstancesandgeneratecertainwastesthatmaybedeemedhazardousortoxicunderapplicableEnvironmentalLaws,andwefromtime
to time have incurred, and in the future may incur, costs related to cleaning up contamination resulting from historic uses of certain of our current or former
properties or our treatment, storage or disposal of wastes at facilities owned by others. Other Environmental Laws govern occupational exposure to asbestoscontainingmaterials(ACMs)andrequireabatementorremovalofcertainACMs(limitedquantitiesofwhicharepresentinvariousbuildingmaterialssuchassprayoninsulation,floorcoverings,ceilingcoverings,tiles,decorativetreatments andpipinglocatedatcertainofourhotels)intheeventofdamageordemolition,or
certainrenovationsorremodeling.EnvironmentalLawsalsoregulatepolychlorinatedbiphenyls(PCBs),whichmaybepresentinelectricalequipment.Anumberof
ourhotelshaveundergroundstoragetanks(USTs)andequipmentcontainingchlorofluorocarbons(CFCs);theoperationandsubsequentremovalorupgradingof
certainUSTsandtheuseofequipmentcontainingCFCsalsoareregulatedbyEnvironmentalLaws.Inconnectionwithourownership,operationandmanagementof
ourproperties,wecouldbeheldliableforcostsofremedialorotheractionwithrespecttoPCBs,USTsorCFCs.
U.S. Congress and some U.S. states are considering or have undertaken actions to regulate and reduce greenhouse gas emissions and/or other natural
resources.Neworrevisedlawsandregulationsornewinterpretationsofexistinglawsandregulations,suchasthoserelatedtoclimatechange,supplychainand
water risk, could affect the operation of our hotels and/or result in significant additional expense and operating restrictions. The cost impact of such legislation,
regulation,ornewinterpretationswoulddependuponthespecificrequirementsenactedandcannotbedeterminedatthistime.
Environmental Laws are not the only source of environmental liability. Under common law, owners and operators of real property may face liability for
personal injury or property damage because of various environmental conditions such as alleged exposure to hazardous or toxic substances (including, but not
limitedto,ACMs,PCBsandCFCs),poorindoorairquality,radonorpoordrinkingwaterquality.
Althoughwehaveincurredandexpecttoincurremediationandvariousenvironmental-relatedcostsduringtheordinarycourseofoperations,management
doesnotanticipatethatsuchcostswillhaveamaterialadverseeffectonouroperationsorfinancialcondition.
Seasonality and Diversification
Thehotelindustryisseasonalinnature;however,theperiodsduringwhichourpropertiesexperiencehigherrevenuesvaryfrompropertytopropertyand
dependprincipallyuponlocation.Generally,ourrevenuesandoperatingincomehavebeenlowerinthefirstquarterthaninthesecond,thirdorfourthquarters.
8

Comparability of Owned Hotel Results

Wecontinuallyupdateandrenovateourowned,leasedandconsolidatedjointventurehotels.Whileundergoingrenovation,thesehotelsaregenerallynot
operatingatfullcapacityand,assuch,theserenovationscannegativelyimpactourownedhotelrevenuesandoperatingincome.Otherevents,suchastheoccurrence
ofnaturaldisasters,maycauseafullorpartialclosureorsaleofahotel,andsucheventscannegativelyimpactourrevenuesandoperatingincome.Finally,aswe
pursueourstrategyofreducingourinvestmentinownedrealestateassets,thesaleofsuchassetscansignificantlyreduceourrevenuesandoperatingincomefrom
owned,leasedandconsolidatedjointventurehotels.
Employees
AtDecember31,2015,approximately188,000peoplewereemployedatourcorporateoffices,ownedandmanagedhotelsandvacationownershipresorts,of
whichapproximately27%wereemployedintheUnitedStates.AtDecember31,2015,approximately24%oftheU.S.-basedemployeeswerecoveredbyvarious
collectivebargainingagreementsproviding,generally,forbasicpayrates,workinghours,otherconditionsofemploymentandorderlysettlementoflabordisputes.
Generally,laborrelationshavebeenmaintainedinanormalandsatisfactorymanner,andmanagementbelievesthatouremployeerelationsaresatisfactory.
Where You Can Find More Information
WefileanannualreportonaForm10-K,quarterlyreportsonForm10-Q,currentreportsonForm8-Kand,ifnecessary,amendmentstothosereports,a
proxystatement andother information withthe Securities andExchange Commission (SEC).OurSECfilings are available tothepublic overtheinternet atthe
SECswebsiteathttp://www.sec.gov. OurSECfilingsarealsoavailableonourwebsiteathttp://www.starwoodhotels.com/corporate/investor_relations.html assoon
asreasonablypracticableaftertheyarefiledwithorfurnishedtotheSEC.YoumayalsoreadandcopyanydocumentwefilewiththeSECatitspublicreference
roomlocatedat100FStreet,NE,inWashington,D.C.20549onofficialbusinessdaysduringthehoursof10a.m.to3p.m.PleasecalltheSECat(800)SEC-0330
forfurtherinformation.OurfilingswiththeSECarealsoavailableattheNewYorkStockExchange.Formoreinformationonobtainingcopiesofourpublicfilings
at the New York Stock Exchange, you should call (212) 656-5060. You may also obtain a copy of our filings free of charge by calling Investor Relations at
(203)351-3500.
Item 1A.

Risk Factors

Risks Relating to Pending Transactions

We Will Be Subject to Various Uncertainties and Contractual Restrictions, Including the Risk of Litigation, While the Planned Marriott Merger is
Pending that May Cause Disruption and May Make it More Difficult to Maintain Relationships with Employees, Hotel Owners, Hotel Franchisees, Suppliers or
Customers. Uncertainty about the impact of the Planned Marriott Merger on employees, hotel owners, hotel franchisees, suppliers and customers may have an
adverse effect on us. Although we intend to take steps designed to reduce any adverse effects, these uncertainties may impair our ability to attract, retain and
motivatekeypersonneluntilthePlannedMarriottMergeriscompleted,andcouldcausecustomers,suppliersandothersthatdealwithustoseektochangeexisting
businessrelationshipswithus.ForamoredetaileddescriptionofthePlannedMarriottMerger,seeNote28.
EmployeeretentionandrecruitmentmaybechallengingbeforethecompletionofthePlannedMarriottMerger,asemployeesandprospectiveemployeesmay
experienceuncertaintyabouttheirfutureroleswiththecombinedcompany.If,despiteourretentionandrecruitingefforts,keyemployeesdepartorprospectivekey
employeesfailtoacceptemploymentwithusbecauseofissuesrelatingtotheuncertaintyanddifficultyofintegrationoradesirenottoremainwiththecombined
company,ourfinancialresultscouldbeadverselyaffected.
ThepursuitofthePlannedMarriottMergerandthepreparationfortheintegrationmayplaceasignificantburdenonmanagementandinternalresources.The
diversion of managements attention away from day-to-day business concerns and any difficulties encountered in the transition and integration process could
adverselyaffectourfinancialresults.
In addition, the merger agreement restricts us, without Marriotts consent, from making certain acquisitions and taking other specified actions until the
PlannedMarriottMergerclosesorthemergeragreementterminates.Theserestrictionsmaypreventusfrompursuingotherwiseattractivebusinessopportunitiesand
makingotherchangestoourbusinessbeforecompletionofthePlannedMarriottMergerorterminationofthemergeragreement.
Between November 18, 2015 and December 18, 2015, seven lawsuits challenging the Planned Marriott Merger were filed on behalf of purported
stockholdersofusintheCircuitCourtforBaltimoreCity,Maryland,captionedSmukler v. Marriott International, Inc., et al. ,CaseNo.24-C-15-005744;Standen v.
Starwood Hotels & Resorts Worldwide, Inc., et al. ,CaseNo.24-C-15-006019;Joshua G. Kohnstamm Trust v. Starwood Hotels & Resorts Worldwide, Inc., et al. ,
CaseNo.24-C-15-006783;Himstreet v. Aron, et
9

al. ,CaseNo.24-C-15-006855;Christner v. Starwood Hote ls & Resorts Worldwide, Inc., et al. ,CaseNo.24-C-15-006959;French v. Starwood Hotels & Resorts
Worldwide, Inc., et al., CaseNo.24-C-15-006962;andDaftary v. Aron, et al. ,CaseNo.24-C-15-006988.Mr.SmuklerandMr.Standen(thelatterjoinedbyJoshua
G.KohnstammTrustandMessrs.Christner,FrenchandDaftary)filedamendedcomplaintsonJanuary8,2016andJanuary11,2016,respectively.Thecomplaints
namesomecombinationofourdirectors,us,SolarMergerSub1,Inc.,awhollyowneddirectsubsidiaryofStarwood(Holdco),SolarMergerSub2,Inc.,awholly
owned direct subsidiary of Holdco, Marriott,Mars Merger Sub, Inc., a wholly owned direct subsidiary of Marriott (Marriott Corporate Merger Sub), and Mars
Merger Sub, LLC, a wholly owned dire ct subsidiary of Marriott (Marriott LLC Merger Sub) , and others, as defendants. On January 29, 2016, the court
consolidated thesevenactions. OnFebruary11,2016,pursuanttoastipulation filed bytheparties, thecourtissuedanorderdismissing,withoutprejudice,all
claimsandallcountsagainstMarriott,MarriottCorporateMergerSubandMarriottLLCMergerSub.OnFebruary16,2016,thecourtissuedanorderdismissing
thederivativeclaimsoftheplaintiffsintheChristner andFrench actionsagainstallremainingdefendantswithoutprejudiceanddismissingallremainingclaims
againstallremainingdefendantswithprejudice.Anadverserulinginanypossibleappealoftherecentdismissalsoranyfutureactionsmaypreventordelaythe
PlannedMarriottMergerfrombeingcompleted.Ourboardofdirectorshasalsoreceiveddemandlettersfromtwopurportedstockholdersallegingthatourboardof
directors breached its fiduciary duties in connection with its approval of the Planned Marriott Merger and demanding that our board of directors conduct an
investigationandtakeotheractions.Similarlawsuitsmaybefiledandsimilardemandlettersmaybereceivedbyus,ourboardofdirectors,MarriottandMarriotts
boardsofdirectorsinthefuture.
OneoftheconditionstotheclosingofthePlannedMarriottMergeristheabsenceofanyjudgment,order,laworotherlegalrestraintbyacourtorother
governmentalentityofcompetentjurisdictionthatpreventstheconsummationofthePlannedMarriottMerger.Accordingly,ifanyoftheplaintiffsissuccessfulin
obtaining an injunction prohibiting the consummation of the Planned Marriott Merger, then such injunction may prevent the Planned Marriott Merger from
becomingeffective,ordelayitsbecomingeffectivewithintheexpectedtimeframe.
Failure to Complete the Planned Marriott Merger Could Negatively Impact Our Stock Price and Our Future Business and Financial Results. Ifthe
PlannedMarriottMergerisnotcompleted,ourongoingbusinessmaybeadverselyaffected,andwemaybesubjecttoseveralrisks,includingthefollowing:

beingrequiredtopayaterminationfeeundercertaincircumstancesasprovidedinthemergeragreement;

havingtopaycertaincostsrelatingtothePlannedMarriottMerger,suchaslegal,accounting,financialadvisorandotherfeesandexpenses;

our stock price could decline to the extent that the current market price reflects a market assumption that the Planned Marriott Merger will be
completed;and

havinghadthefocusofourmanagementonthePlannedMarriottMergerinsteadofonpursuingotheropportunitiesthatcouldhavebeenbeneficialto
us.

If the Planned Marriott Merger is not completed, we cannot assure you that these risks will not materialize and will not materially adversely affect our
business,financialresultsandstockprice.
The Merger Agreement Contains Provisions that Could Discourage a Potential Competing Acquirer of Us. The merger agreement contains no shop
provisionsthat,subject tolimited exceptions, restrict ourability tosolicit, initiate,orknowinglyencourageandfacilitate competingthird-party proposalsforthe
acquisitionofourstockorassets.Inaddition,beforeourboardofdirectorswithdraws,qualifiesormodifiesitsrecommendationonthePlannedMarriottMergeror
terminatesthemergeragreementtoenterintoathird-partyacquisitionproposal,MarriottgenerallyhasanopportunitytooffertomodifythetermsofthePlanned
MarriottMerger.Insomecircumstances,uponterminationofthemergeragreement,wewillberequiredtopayaterminationfee.
Theseprovisionscoulddiscourageapotentialthird-partyacquirerthatmighthaveaninterestinacquiringallorasignificantportionofusfromconsidering
or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be
receivedorrealizedinthePlannedMarriottMerger,ormightotherwiseresultinapotentialthird-partyacquirerproposingtopayalowerpricetoourstockholders
thanitmightotherwisehaveproposedtopaybecauseoftheaddedexpenseoftheterminationfeethatmaybecomepayableincertaincircumstances.
Ifthemergeragreementisterminatedandwedecidetoseekanotherbusinesscombination,wemaynotbeabletonegotiateorconsummateatransactionwith
anotherpartyontermscomparableto,orbetterthan,thetermsofthemergeragreement.
Our Ability to Complete the Planned Marriott Merger is Subject to Certain Closing Conditions and the Receipt of Consents and Approvals from
Government Entities Which May Impose Conditions That Could Adversely Affect Us or Cause the Planned Marriott Merger to be Abandoned. Themerger
agreementcontainscertainclosingconditions,including,amongothers:
10

theapprovalbytheholdersofamajorityofallouroutstandingsharesofthetransactionscontemplatedbythemergeragreement;

theapprovalbytheholdersofamajorityofthevotescastataspecialmeetingcalledbyMarriottinfavorofaproposaltoissuesharesofMarriott
commonstocktoourstockholderspursuanttothemergeragreement;

theabsenceofanyjudgment,order,laworotherlegalrestraintbyacourtorothergovernmentalentityofcompetentjurisdictionthatpreventsthe
consummationofthePlannedMarriottMerger;

theapprovalforlistingbyNASDAQofthesharesofMarriottcommonstockissuableinthePlannedMarriottMerger;and

the completion of the spin-off of our vacation ownership business or, if the Planned Reverse Morris Trust Transaction is not consummated, the
completionofanotherspin-off,split-offoranalogousdistributionofourvacationownershipbusinessorthesaleofourvacationownershipbusiness
byus. ForamoredetaileddescriptionofthePlannedReverseMorrisTrustTransaction,seeNote27.

Wecannotassureyouthatthevariousclosingconditionswillbesatisfied,orthatanyrequiredconditionswillnotmateriallyadverselyaffectthecombined
companyfollowingthePlannedMarriottMergerorwillnotresultintheabandonmentordelayofthePlannedMarriottMerger.Forinstance,theconsummationof
thedispositionofourvacationownershipbusinessmaybedelayedornotoccur,whichmaycausethePlannedMarriottMergertobedelayedorabandoned,orsuch
dispositionmayoccurontermslessfavorabletousandourstockholdersthanthetermsofthePlannedReverseMorrisTrustTransaction.
In addition, before the Planned Marriott Merger may be completed, various approvals and declarations of non-objection must be obtained from certain
regulatoryandgovernmentalauthorities.Theseregulatoryandgovernmentalentitiesmayimposeconditionsonthegrantingofsuchapprovals.Suchconditionsand
the process of obtaining regulatory approvals could have the effect of delaying completion of the Planned Marriott Merger or of imposing additional costs or
limitationsonthecombinedcompanyfollowingthecompletionofthePlannedMarriottMerger.Theregulatoryapprovalsmaynotbereceivedatall,maynotbe
receivedinatimelyfashion,ormaycontainconditionsonthecompletionofthePlannedMarriottMerger.Inaddition,therespectiveobligationsofusandMarriott
tocompletethePlannedMarriottMergerareconditionedonthereceiptofcertainregulatoryapprovalsorwaiverbytheotherpartyofsuchcondition.
Any Delay in Completing the Planned Marriott Merger May Reduce or Eliminate the Benefits That We Expect to Achieve. ThePlannedMarriottMerger
is subject to a number of conditions beyond our control that may prevent, delay or otherwise materially adversely affect the completion of the Planned Marriott
Merger.Wecannotpredictwhetherandwhentheseconditionswillbesatisfied.AnydelayincompletingthePlannedMarriottMergercouldcausethecombined
company not to realize some or all of the synergies that we and Marriott expect to achieve if the Planned Marriott Merger is successfully completed within the
expectedtimeframe.
The Proposed Separation of Our Vacation Ownership Business and Subsequent Merger May Not Be Consummated As or When Planned or At All, or
Could Cause Unanticipated Issues. Theproposedseparationofourvacationownershipbusiness,distributionofthesharesofVistanacommonstocktoStarwood
stockholders ona pro rata basis and subsequent merger ofVistana with a wholly-owned subsidiary of ILGmaynot be consummated ascurrently contemplated,
includingasatransactionthatistax-freetoStarwoodstockholders,maynotbeconsummatedatall,ormayencounterdelaysorotherroadblocksthatwedonot
currently anticipate, including delays in obtaining necessary regulatory approvals. In addition, the transactions could create issues with our vacation ownership
businesspriortotheconsummationoftheseparation,distributionandsubsequentmergerwithILGswholly-ownedsubsidiary,orourotherbusinesses,thatwedo
notcurrentlycontemplate.Planningandexecutingtheproposedseparation,distributionandsubsequentmergerwillrequiresignificanttime,effort,andexpense,and
may divert managements attention from other aspects of our business operations, and any delays in completion of the proposed separation, distribution and
subsequentmergermayincreasetheamountoftime,effort,andexpensethatwedevotetothetransactions,whichcouldadverselyaffectouroperations.
Disruptionsineithergeneralmarketconditionsorinthelodgingortimesharebusiness,inparticular,couldaffectourabilitytocompletethetransactionsat
all,ortocompletethetransactionsonthetermscurrentlyanticipated.Theproposedseparation,distributionandsubsequentmergerarealsosubjecttocustomary
closingconditions,includingapprovalbyILGstockholders.
Inaddition,ifwecompletetheproposedseparation,distributionandsubsequentmerger,theactualimpactonourbusinessandfinancialresultsmaydiffer
materiallyfromthatwhichweanticipate.Specifically,theproposedtransactionscouldadverselyaffectourrelationshipswithourcustomersoremployees(including
thoseofthevacationownershipbusiness)ordisruptouroperations.ILGcouldalsofaceunanticipatedproblemsinintegratingourvacationownershipbusiness,and
thusourstockholdersmaynotachievetheanticipatedbenefitsofthetransactions.
Furthermore,completingtheseparationofourvacationownershipbusiness,distributionofthesharesofVistanacommonstocktoStarwoodstockholderson
a pro rata basis and subsequent merger of Vistana with ILGs wholly-owned subsidiary, or an analogous separation or distribution of the vacation ownership
business from Starwood or a sale of the vacation ownership business, is a closing condition to the Planned Marriott Merger. If we are unable to complete the
separation,distributionandsubsequentmergeroracomparabletransaction,wemaybeunabletocompletethePlannedMarriottMerger.
11

Risks Relating to Our Business and Industry

We Are Subject to the Business, Financial and Operating Risks Common to the Hotel Business and Vacation Ownership and Residential Business, Any
of Which Could Reduce Our Revenues and Limit Opportunities for Growth. Business,financialandoperatingriskscommontothehotelbusinessandvacation
ownershipandresidentialbusinessinclude:

significantcompetitionfromhospitalityprovidersinallpartsoftheworld;

thecostsandadministrativeburdensassociatedwithcomplyingwithapplicablelawsandregulationsintheU.S.andinalloftheothercountriesin
whichweoperate;

delaysinorcancellationsofplannedorfuturedevelopmentorrefurbishmentprojects;

changes in desirability of geographic regions of the hotels or timeshare resorts in our business, geographic concentration of our operations and
customers(includingcertainconcentrationinnewandemergingmarkets),andshortagesofdesirablelocationsfordevelopment;

decreasesinthedemandfortransientrooms,vacationownershipinterests,residentialproductsandrelatedlodgingservices,includingareductionin
businesstravelasaresultofalternativestoin-personmeetings(includingvirtualmeetingshostedonlineoroverprivateteleconferencingnetworks)or
duetogeneraleconomicconditions;

decreasedcorporateorgovernmentaltravel-relatedbudgetsandspending,aswellascancellations,deferralsorrenegotiationsofgroupbusinesssuch
asindustryconventions;

negativepublicperceptionofcorporatetravel-relatedactivities;

statements,actions,orinterventionsbygovernmentalofficialsrelatedtotravel,meetingsorotheraspectsofhotelbusinessandoperations;

theincreasinginfluenceandrelianceontechnologyfordistributionchannelsandtheimpactofinternetintermediariesandothernewindustryentrants
onsupply,pricingandthevalueofourbrands;

health,safetyandenvironmentallaws,rulesandregulationsandothergovernmentalandregulatoryaction;

changesinoperatingcostsincluding,butnotlimitedto,energy,water,laborcosts(includingtheimpactoflaborshortagesandunionization),food
costs,workerscompensationandhealth-carerelatedcosts,insuranceandunanticipatedcostssuchasactsofnatureandtheirconsequences;

disputeswithownersofpropertieswhichmayleadtotheterminationofourmanagementorfranchiseagreementsorresultinlitigation;

theavailabilityandcostofcapitaltoallowusandhotelownersandfranchiseestofundconstructionandrenovations;

thefinancialconditionofthird-partyowners,developers,franchiseesandjointventurepartners;and

cyclicalover-buildinginthehotelbusinessandresidentialandvacationownershipbusiness.

Macroeconomic and Other Factors Beyond Our Control Can Adversely Affect and Reduce Demand For Our Products and Services. Macroeconomicand
otherfactorsbeyondourcontrolthatcouldadverselyaffectandreducedemandforourproductsandservicesinclude,butarenotlimitedto:

changesingeneraleconomicconditions,includinglowconsumerconfidence,unemploymentlevelsandtheseverityanddurationofdownturnsinthe
UnitedStates,Europe,Asiaandelsewhereacrosstheworld;

war,politicalconditionsandcivilunrest,terroristactivitiesorthreatsandheightenedtravelsecuritymeasuresinstitutedinresponsethereto;

natural or man-made disasters, such as earthquakes, tsunamis, tornadoes, hurricanes, typhoons, floods, drought, volcanic eruptions, oil spills and
nuclearincidents;

conditions which negatively shape public perception of travel, including travel-related accidents and travelers fears of exposures to contagious
diseases;

thefinancialconditionoftheairline,automotiveandothertransportation-relatedindustries;

thephysicalrisksofclimatechangeand/oravailabilityandqualityofnaturalresources,suchasasecureandeconomicalsupplyofwaterorenergyin
somelocations;and

fluctuationsinforeignexchangeratesorstockmarketsofglobaleconomiesparticularlyinmarketsinwhichweoperate.
12

If We Are Unable to Maintain Existing Management and Franchise Agreements or Obtain New Agreements on as Favorable Terms, Our Operating
Results May Be Adversely Affected. Weareimpactedbyourrelationshipswithhotelownersandfranchisees.Ourhotelmanagementandfranchisecontractsare
typicallylong-termarrangementsbutmostallowthehotelownertoterminatetheagreementincertaincircumstances.Withrespecttomanagementagreements,such
instancesmayincludeourfailuretomeetcertainfinancialorperformancecriteria,thebankruptcyofthehotelownerand,incertaincases,thesaleoftheproperty.A
significant loss of agreements due to premature terminations could adversely aff ect our operating results. In addition, the terms of our hotel management and
franchiseagreements canbeimpactedbycontracttermsofferedbyourdirectorindirectcompetitors,amongotherthings.Wecannotassureyouthatanyofour
currentarrangementswillcontinueorthatwewillbeabletoenterintofuturecollaborations,renewagreements,orenterintonewagreementsinthefutureonterms
thatareasfavorabletousasthosethatexisttoday.
Macroeconomicandotherfactorsoutsideofourcontrolcouldalsohaveasignificantnegativeimpactonthefinancialconditionandviabilityofourhotel
propertyowners.Additionally,thenatureofresponsibilitiesunderthesemanagementandfranchisearrangementsmaygiverisetodisagreementswiththeproperty
owners. The resolution ofany disputes with property owners couldbe very expensive for us, even ifthe outcome is ultimately decided inour favor. We cannot
predicttheoutcomeofanyarbitrationorlitigation,theeffectofanynegativejudgmentagainstusortheamountofanysettlementthatwemayenterintowithany
thirdparty.Anadverseresultinanyoftheseproceedingscouldmateriallyadverselyaffectourresultsofoperations.Furthermore,specifictoourindustry,some
courts have applied principles of agency law and related fiduciary standards to managers of third-party hotel properties, which means that property owners may
asserttherighttoterminateagreementsevenwheretheagreementsdonotexpresslyprovidefortermination.Intheeventofanysuchtermination,wemayneedto
enforceourrighttodamagesforbreachofcontractandrelatedclaimsandincursignificantlegalfeesandexpenses.Anydamagesweultimatelycollectcouldbeless
thantheprojectedvalueofthefeesandotheramountswewouldhaveotherwisecollectedunderthemanagementagreement.Consequently,ouroperatingresults
wouldbeadverselyaffectedifwecouldnotmaintainexistingmanagementorfranchiseagreementsorobtainnewagreementsonasfavorabletermsastheexisting
agreements.
The Global Economy Generally May Continue to Impact Our Financial Results and Growth. Consumerdemandforourservicesiscloselylinkedtothe
performanceofthegeneraleconomyandspecificperformanceofthelodgingindustryandissensitivetobusinessandpersonaldiscretionaryspendinglevels.Weak
economicconditionsinEurope,LatinAmerica,Chinaandotherpartsoftheworld,potentialdisruptionsintheU.S.economy,politicalinstability,civiloreconomic
strife,terroristorotherwar-likeactivity,andchangesingovernmentpoliciesinsomeareasthroughouttheworld,andtheuncertaintyoverhowlonganyofthese
conditions will continue, could have a negative impact on the hotel business and vacation ownership and residential business by decreasing the revenues and
profitabilityofourownedproperties,limitingtheamountoffeerevenuesweareabletogeneratefromourmanagedandfranchisedproperties,andreducingoverall
demandfortimeshareintervals.Substantialincreasesintravelcostscouldalsoreducedemandforourhotelroomsandintervalandfractionaltimeshareproducts.
Accordingly, our financial results may be impacted by such economic conditions and both our future financial results and growth could be harmed if economic
conditions worsen. In certain cases, we have entered into third-party hotel management contracts which contain performance guarantees specifying that certain
operatingmetricswillbeachieved.Asaresultofaglobaleconomicdownturn,wemaynotmeettherequisiteperformancelevels,andwemaybeforcedtoloanor
contributemoniestofundtheshortfallofperformancelevelsorterminatethemanagementcontract.Foramoredetaileddescriptionofourperformanceguarantees,
seeNote24oftheconsolidatedfinancialstatements.
Our Revenues, Profits, or Market Share Could Be Harmed If We Are Unable to Compete Effectively. The hotel, vacation ownership and residential
industriesarehighlycompetitive.Ourpropertiescompeteforcustomerswithotherhotelandresortproperties,rangingfromnationalandinternationalhotelbrands
toindependent, local andregional hoteloperators, and,withrespect toourvacation ownership resorts andresidential projects, withownersreselling their VOIs,
includingfractionalownership,orapartments.Wealsocompetewithothervacationoptionssuchascruises,aswellasalternativelodgingarrangementsinwhich
residential properties in locations throughout the world are marketed, reserved and rented in a manner consistent with hotels. Furthermore, new or existing
competitionthatusesabusinessmodelthatisdifferentfromourbusinessmodelmaychallengeourabilitytoremaincompetitive.Wecompetebasedonanumberof
factors, including quality andconsistency of rooms, restaurant andmeeting facilities andservices, attractiveness of locations, availability of aglobal distribution
system, the ability to earn and redeem loyalty program points, and consumer facing technology platforms and services. Some of our competitors may have
substantially greater marketing and financial resources than we do, and if we are unable to successfully compete in these areas, our operating results could be
adverselyaffected.
Moreover,ourpresentgrowthstrategyfordevelopmentofadditionalhotelsentailsenteringintoandmaintainingvariousmanagementagreements,franchise
agreements, and leases with property owners. We compete with other hotel companies for this business primarily on the basis of fees, contract terms, brand
recognition,andreputation.Inconnectionwithenteringintotheseagreements,wemayberequiredtomakeinvestmentsin,orguaranteetheobligationsof,third
parties or guarantee minimum income to third parties. The terms of our management agreements, franchise agreements, and leases for each of our hotels are
influencedbycontracttermsofferedbyourcompetitors,amongotherthings.Wecannotassureyouthatanyofourcurrentarrangementswillcontinueorthatwe
willbeabletoenterintofuturecollaborations,renewagreements,orenterintonewagreementsinthefutureontermsthatareasfavorabletousasthosethatexist
today.
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Degradation in the Quality or Reputation of Our Brands Could Adversely Affect Our Financial Results and Growth. For our owned, managed and
franchisedpropertiestoremainattractiveandcompetitive,thepropertyownersandwehavetospendmoneyperiodicallytokeepthepropertieswellmaintained,
modernizedandrefurbished.Thiscreatesanongoingneedforcash.Third-partypropertyownersmaybeunabletoaccesscapitalorunwillingtospendavailable
capitalwhennecessary,evenifrequiredbythetermsofourmanagementorfranchiseagreements.Totheextentthatpropertyownersandwecannotfundexpend
ituresfromcashgeneratedbyoperations,fundsmustbeborrowedorotherwiseobtained.Failuretomaketheinvestmentsnecessarytomaintainorimprovesuch
properties,actinaccordancewithapplicable brandstandardsorprojectaconsistentbrandimage couldadverselyaffectthequality andreputationofourbrands.
Moreover,third-partyownersorfranchiseesmaybeunwillingorunabletoincurthecostofcomplyingwithbrandstandardsfornewandexistingbrandsassuch
brandsmayevolvefromtimetotime.Ifthereputationorperceivedqualityofourbrandsdeclines,ourmarketshare,reputation,business,financialconditionor
resultsofoperationscouldbeaffected.
External Perception of Our Hotels Could Harm Our Brands and Reputation As Well As Reduce Our Revenues and Lower Our Profits. Ourbrandsand
ourreputationareamongourmostimportantassets.Ourabilitytoattractdevelopmentpartnersandfranchiseesandtoattractandretainguestsdepends,inpart,upon
theexternalperceptionsofStarwoodandourtenbrands,thequalityofourhotelsandservicesandourcorporateandmanagementintegrity.Thereisarisktoour
brands and our reputation if we fail to act responsibly or comply with regulatory requirements in a number of areas, such as safety and security, sustainability,
responsibletourism,environmentalmanagement,humanrightsandsupportforlocalcommunities.Theconsiderableincreaseintheuseofsocialmediaoverrecent
yearshasgreatlyexpandedthepotentialscopeandscale,andincreasedtherapidityofthedisseminationofthenegativepublicitythatcouldbegeneratedbyanysuch
adverseincidentorfailure.Anadverseincidentinvolvingourassociatesorourguests,orinrespectofourthird-partyvendorsorownersandtheindustry,andany
media coverage resulting therefrom, may harm our brands and reputation, cause a loss of consumer confidence in Starwood, our brands or the industry, and
negativelyimpactourresultsoroperations.
Any Failure to Protect our Intellectual Property Could Have a Negative Impact on the Value of Our Brands and Adversely Affect Our Business. We
believeourintellectualpropertyisanimportantcomponentofourbusiness.Werelyontrademarklawstoprotectourproprietaryrights.Thesuccessofourbusiness
depends in part upon our continued ability to use our trademarks to increase brand awareness and further develop our brand in both domestic and international
markets. From time to time, we apply to have certain trademarks registered and there is no guarantee that such trademark registrations will be granted. Further,
monitoringtheunauthorizeduseofourintellectualpropertyisdifficult.Litigationandsimilarproceedingshavebeenandmaycontinuetobenecessarytoenforce
ourintellectualpropertyrightsortodeterminethevalidityandscopeoftheproprietaryrightsofothers.Actionsofthistypecouldresultinsubstantialcostsand
diversionofresources,mayresultincounterclaimsorotherclaimsagainstusandcouldsignificantlyharmourresultsofoperations.Inaddition,thelawsofsome
foreigncountriesdonotprotectourproprietaryrightstothesameextentasdothelawsoftheUnitedStates.Wecannotassureyouthatallofthestepswehavetaken
to protect our trademarks in the United States and foreign countries will be sufficient to prevent imitation of our trademarks by others. The unauthorized
reproductionofourtrademarkscoulddiminishthevalueofourbrandanditsmarketacceptance,competitiveadvantagesorgoodwill,whichcouldadverselyaffect
ourbusiness.Thirdpartiesmayalsomakeclaimsagainstusforinfringingtheirintellectualproperty,includingpatent,copyright,industrialdesign,trademarksor
similarrightsthatcouldresultincausingustochangeourpropertydesignsorotherbrandingandresultinsubstantialcostsanddiversionofresources.
Our Dependence On Lodging Development Exposes Us to Timing, Budgeting and Other Risks. Weparticipateinthedevelopmentoflodgingproperties,as
suitable opportunities arise, taking into consideration the general economic climate. In addition, the owners and developers of new-build hotel and mixed use
propertiesthatwehaveenteredintomanagementorfranchiseagreementswitharesubjecttothesesameriskswhichmayimpacttheamountandtimingoffeeswe
hadexpectedtocollectfromthoseproperties.Newlodgingprojectdevelopmenthasanumberofrisks,includingrisksassociatedwith:

constructiondelaysorcostoverrunsthatmayincreaseprojectcosts;

receiptofzoning,occupancyandotherrequiredgovernmentalpermitsandauthorizations;

developmentcostsincurredforprojectsthatarenotpursuedtocompletion;

so-calledactsofGodsuchasearthquakes,hurricanes,floodsorfiresthatcouldadverselyimpactaproject;

defectsindesignorconstructionthatmayresultinadditionalcoststoremedyorrequirealloraportionofapropertytobeclosedduringtheperiod
requiredtorectifythesituation;

abilitytoraisecapital;

fundingthatisdependentuponthepre-leasing,sell-outorcompletionofmixed-useprojectcomponentsotherthanthehotel;and

governmentalrestrictionsonthenatureorsizeofaprojectortimingofcompletion.
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Wecannotassureyouthatanydevelopmentproject,includingsitesheldfordevelopmentofvacationownershipresorts,willinfactbedeveloped,and,if
developed,thetimeperiodorthebudgetofsuchdevelopmentmaybegreaterthaninitiallycontemplatedandtheactualnumberofunitsorroomsconstructedmaybe
lessthaninitiallycontemplated.
International Operations Are Subject to Unique Political and Monetary Risks that Could Adversely Affect Our Financial Results and Growth. Wehave
significantinternationaloperationswhichasofDecember31,2015included174owned,managedorfranchisedpropertiesinEurope(including10propertieswith
majorityownership);87managedorfranchisedpropertiesinAfricaandtheMiddleEast;97owned,managedorfranchisedpropertiesinLatinAmerica(including
eight properties withmajority ownership); and317owned,managed orfranchised properties intheAsiaPacific region (including three properties withmajority
ownership).Additionally,ourcurrentgrowthstrategyisheavilydependentupongrowthininternationalmarkets.AsofDecember31,2015,75%ofourpipeline
representedgrowthoutsideNorthAmerica.Further,52%ofourpipelinerepresentsnewpropertiesinAsiaPacificand35%representsnewgrowthinChinaalone.
Internationaloperationsgenerallyaresubjecttovariouspolitical,geopolitical,andotherrisksthatarenotpresentinU.S.operations.Theserisksincludethe
difficultiesinvolvedinmanaginganorganizationdoingbusinessinmanydifferentcountries,exposuretolocaleconomicconditions,potentialadversechangesinthe
diplomaticrelationsbetweenforeigncountriesandtheUnitedStates,includingthethreatofinternationalboycottorU.S.anti-boycottlegislation,hostilityfromlocal
populations, including the risk of war, acts of terrorism, political instability and civil unrest in the Middle East, Eastern Europe, Southeast Asia and elsewhere,
restrictionsontherepatriationofnon-U.S.earningsandwithdrawalofforeigninvestments,restrictionontheabilitytopaydividendsandremitearningstoaffiliated
companies andmanagement orfranchise feestothe United States,uncertainty astothe enforceability ofcontractual rights andintellectual propertyrights under
locallaw,conflictsbetweenlocallawandUnitedStateslawandcompliancewithcomplexandchanginglaws,regulationsandpolicies.Inaddition,asdescribed
below, sales in international jurisdictions typically are made in local currencies, which subject us to risks associated with currency fluctuations. Currency
devaluations andunfavorable changes ininternational monetary andtaxpolicies couldhaveamaterial adverse effect onourprofitability andfinancing plans,as
couldotherchangesintheinternationalregulatoryclimateandinternationaleconomicconditions.Ifourinternationalexpansionplansareunsuccessful,ourfinancial
resultscouldbemateriallyadverselyaffected.
Exchange Rate Fluctuations and Foreign Exchange Hedging Arrangements Could Result in Significant Foreign Currency Gains and Losses and Impact
Our Business Results. ConductingbusinessincurrenciesotherthantheU.S.dollarsubjectsustofluctuationsincurrencyexchangeratesthatcouldhaveanegative
impact on financial results. We earn revenues and incur expenses in foreign currencies as part of our operations outside of the U.S. As a result, fluctuations in
currencyexchangeratesmaysignificantlyincreasetheamountoftranslatedU.S.dollarsrequiredforexpensesoutsidetheU.S.orsignificantlydecreasetheU.S.
dollarsreceivedfromforeigncurrencyrevenues.Wealsohaveexposuretocurrencytranslationriskbecause,generally,theresultsofourbusinessoutsideoftheU.S.
are reported in local currency and then translated to U.S. dollars for inclusion in our consolidated financial statements. As a result, changes between the foreign
exchangeratesandtheU.S.dollarwillaffecttherecordedamountsofourforeignassets,liabilities,revenuesandexpensesandcouldhaveanegativeimpacton
financialresults.OurexposuretoforeigncurrencyexchangeratefluctuationswillgrowiftherelativecontributionofouroperationsoutsidetheU.S.increases.
Toattempttomitigateforeigncurrencyexchangerateexposure,wemayenterintoforeignexchangehedgingagreementswithfinancialinstitutionstoreduce
certainofourexposurestofluctuationsincurrencyexchangerates.However,thesehedgingagreementsmaynoteliminateforeigncurrencyriskentirelyandinvolve
costsandrisksoftheirownintheformoftransactioncosts,creditrequirementsandcounterpartyrisk.
Third-Party Internet Reservation or Booking Channels May Negatively Impact Our Revenues. Someofourhotelroomsarebookedthroughthird-party
internettravelintermediariessuchasExpedia.com,Orbitz.com,Booking.com,andCTrip.com,aswellaslesser-knownonlinetravelserviceproviders.In
addition,travelerscanbookstaysonwebsitesthatfacilitatetheshort-termrentalofhomesandapartmentsfromowners,therebyprovidinganalternativetohotel
rooms. As the percentage of internet bookings increases, these intermediaries may be able to obtain more volume or better rates. Some internet reservation
intermediaries are attempting to commoditize hotel rooms by increasing the importance of price and general indicators of quality (such as three-star downtown
hotel)attheexpenseofbrandidentification,whichisamongourmostimportantassets.Moreover,third-partyreservationchannelsmaybeabletoobtainhigher
commissions,reducedroomratesorothersignificantcontractconcessionsfromus.Overtime,consumersmaydeveloployaltiestothird-partyinternetreservations
systemsratherthantoouronlinebookingtoolsorourlodgingbrands.Althoughweexpecttoderivemostofourrevenuesfromtraditionalchannelsandourwebsites,
ourbusinessandprofitabilitycouldbeadverselyaffectedifcustomerloyaltiessignificantlyshiftfromourlodgingbrandstotheirtravelservices,divertingbookings
awayfromourwebsites,orthroughtheirfeesincreasingtheoverallcostofinternetbookingsforourhotels.
A Failure to Keep Pace With Developments in Technology Could Impair Our Operations or Competitive Position. Thehospitalityindustrycontinuesto
demand the use of sophisticated technology and systems including technology utilized for property management, brand assurance and compliance, procurement,
reservation systems, operation of our Starwood Preferred Guest customer loyalty program, distribution, revenue management and guest amenities. These
technologiescanbeexpectedtorequirerefinements,
15

including complying with legal requirements in connection with privacy and/or security regulations, requirements, and commitments established by third parties
such as the payment card industry, and there is the risk that advanced new technologies will be introduced. Further, the development and maintenance of these
technologiesmayrequiresignificantcapital.Therecanbenoassurancethatasvarioussystemsandtechnologiesbecomeoutdatedornewtechnologyisrequired,we
willbeabletoreplaceorintroducethemasquicklyasourcompetitionorwithinbudgetedcostsandtimeframes.Further,therecanbenoassurancethatwewill
achievethebenefitsthatmayhavebeenanticipatedfromanynewtechnologyorsystem.
Cyber Threats and the Risk of Data Breaches or Disruptions of Our Information Technology Systems Could Harm Our Brand and Adversely Affect Our
Business. Our business involves the processing, use, storage and transmission of personal information regarding our employees, customers, hotel owners, and
vendorsforvariousbusinesspurposes,includingmarketingandpromotionalpurposes.Theprotectionofpersonalaswellasproprietaryinformationiscriticaltous.
Wearedependentoninformationtechnologynetworksandsystemstoprocess,transmitandstoreproprietaryandpersonalinformation,andtocommunicateamong
ourvariouslocationsaroundtheworld,whichmayincludeourreservationsystems,vacationexchangesystems,hotel/propertymanagementsystems,pointofsale
systems,customerandemployeedatabases,callcenters,administrativesystems,andthird-partyvendorsystems.Westoreandprocesssuchproprietaryandpersonal
information both at onsite facilities and at third-party owned facilities, including for example, in a third-party hosted cloud environment. The complexity of this
infrastructure and the shared control and management of hotel systems contributes to the potential risk of security breaches. We rely on the security of our
informationsystems,andthoseofourvendors,ownersandotherauthorizedthirdparties,toprotectourproprietaryandpersonalinformation.
Despite our efforts, information networks and systems may be vulnerable to threats such as system, network or internet failures; computer hacking or
business disruption; cyber-terrorism; viruses, worms or other malicious software programs; employee error, negligence, fraud, or misuse of systems; or other
unauthorized attempts to access, acquire, misuse, modify or delete our proprietary and personal information, including payment card information. In November
2015,wefirstannouncedthepointofsalesystemsofalimitednumberofourhotelsinNorthAmericawereinfectedwithmalware,enablingunauthorizedpartiesto
accesspaymentcarddataofsomecustomers.Basedonextensiveinvestigation,wedeterminedthatthemalwareaffectedcertainrestaurants,giftshopsandother
pointofsalesystemsattherelevantStarwoodproperties.ThereisnoindicationthatourguestreservationorStarwoodPreferredGuestmembershipsystemswere
impacted, nor is there any evidence that other customer information, such as contact information, social security numbers, or PINs, were affected by this issue.
Althoughwehavetakenstepstoaddressthisissue,aswellasrelatedconcerns,byimplementingnetworksecurityandinternalcontrols,therecanbenoassurance
that a system failure, unauthorized access, or breach will not occur again, including breaches of payment card information in point of sale systems as publicly
disclosedbyus.
Anycompromiseofournetworksorsystems,publicdisclosure,orlossorothercompromisetoourpersonalorproprietaryinformation,non-compliancewith
contractualorlegalobligationsregardingpersonalinformation,oraviolationofaprivacyorsecuritypolicyorrequirementpertainingtopersonalinformationcould
resultinadisruptiontoouroperations;damagetoourreputationandalossofconfidencefromourcustomers,employeesorothers;legalclaimsorproceedings,
liabilityunderlawsthatprotectpersonalinformation,regulatorypenalties,andfines,assessmentsandotherliabilitiesimposedbythepaymentcardorganizationsor
others,potentiallyresultinginsignificantmonetarydamages,regulatoryenforcementactions,fines,and/orcriminalorcivilprosecutioninoneormorejurisdictions;
andsubjectingustoadditionalregulatoryscrutiny,oradditionalcostsandliabilitieswhichcouldhaveamaterialadverseeffectonourbrandreputation,business,
operationsorfinancialcondition.
Changes in Privacy Law Could Increase Our Operating Costs and/or Adversely Impact Our Ability to Market Our Products, Properties and Services
Effectively. We are subject to numerous laws, regulations, and contractual obligations designed to protect personal information, including Member State
implementationoftheEuropeanUnionDirectiveonDataProtection,otherforeigndataprivacylaws,variousU.S.federalandstatelaws,andcreditcardindustry
securitystandardsandotherapplicableinformationsecuritystandards.Wehaveestablishedpoliciesandprocedurestohelpprotecttheprivacyandsecurityofour
information.However,everyyearthenumberoflaws,regulations,andinformationsecurityrequirementscontinuetogrow,asdoesthecomplexityofsuchlawsand
requirements.Further,privacyregulations,onoccasion,maybeinconsistentfromonejurisdictiontoanother.AsofOctober6,2015,theEuropeanUnionnolonger
recognizes the U.S.SafeHarbor program. Inthe eventtheEuropean Unionmakes similar decisionsregarding thevalidity ofBindingCorporateRulesorModel
Clauses, it may adversely impact our ability to transfer personal data from the European Economic Area. Compliance with applicable privacy regulations may
increaseouroperatingcostsand/oradverselyimpactourabilitytomarketourproducts,propertiesandservicestoourguests.
We Depend on Senior Management to Achieve Our Operating Strategies. Our future success depends in large part upon the efforts of our senior
management.Competitionforsuchpersonnelisintense.Furthermore,ourheadquartersarelocatedinStamford,Connecticut,anareawherecostoflivingishigher
thaninotherareasoftheUnitedStatesandasaresult,wemayneedtopaymoretoattractseniortalentthanourcompetitorslocatedelsewhere.Therecanbeno
assurancethatwewillcontinuetobesuccessfulinattractingandretainingtoppersonnel.Accordingly,therecanbenoassurancethatourseniormanagementwillbe
abletosuccessfullyexecuteandimplementouroperatingstrategies.
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Significant Owners of Our Properties May Concentrate Risks. Thereispotentialforaconcentrationofownershipofhotelsoperatedunderourbrandsby

anysingleowner.FollowingtheacquisitionoftheLeMridienbrandbusinessandalargedispositiontransactiontooneownershipgroupin2006,singleownership
groupsownsignificantnumbersofhotelsoperatedbyus.Whiletherisksassociatedwithsuchownershiparenodifferentthanexistgenerally(i.e.,thefinancial
positionoftheowner,theoverallstate oftherelationship withtheownerandtheirparticipation inoptionalprogramsandtheimpactoncostefficiencies ifthey
choosenottoparticipate),theyaremoreconcentrated.Ifanownerwithaconsiderableportfolioofhotelsweretoleaveoursystem,itmayhaveasignificantimpact
incertainofourmarketsandonourfinancialconditionandresultsofoperations.
Our Real Estate Investments Subject Us to Numerous Risks. Wearesubjecttotherisksthatgenerallyrelatetoinvestmentsinrealpropertybecauseweown
andleasehotelsandresorts.Theinvestmentreturnsavailablefromequityinvestmentsinrealestatedependinlargepartontheamountofincomeearnedandcapital
appreciation generated by the related properties, and the expenses incurred. In addition, a variety of other factors affect income from properties and real estate
values,includinggovernmentalregulations,insurance,zoning,taxandeminentdomainlaws,interestratelevelsandtheavailabilityoffinancing.Forexample,new
orexistingrealestatezoningortaxlawscanmakeitmoreexpensiveand/ortime-consumingtodeveloprealpropertyorexpand,modifyorrenovatehotels.When
interestratesincrease,thecostofacquiring,developing,expandingorrenovatingrealpropertyincreasesandrealpropertyvaluesmaydecreaseasthenumberof
potentialbuyersdecreases.Similarly,asfinancingbecomeslessavailable,itbecomesmoredifficultbothtoacquireandtosellrealproperty.Finally,undereminent
domainlaws,governmentscantakerealproperty.Sometimesthistakingisforlesscompensationthantheownerbelievesthepropertyisworth.Despiteourassetlightstrategy,ourrealestatepropertiescouldbeimpactedbyanyofthesefactors,resultinginamaterialadverseimpactonourresultsofoperationsorfinancial
condition.Inaddition,equityrealestateinvestmentsaredifficulttosellquicklyandwemaynotbeabletosellourownedhotelsquicklyinresponsetoourplansor
economicorotherconditions.Ifourpropertiesdonotgeneraterevenuesufficienttomeetoperatingexpenses,includingdebtserviceandcapitalexpenditures,our
incomewillbeadverselyaffected.
We May Be Subject to Environmental Liabilities. OurpropertiesandoperationsaresubjecttoanumberofEnvironmentalLaws.Undersuchlaws,wecould
beheldliableforthecostsofremovingorcleaninguphazardousortoxicsubstancesat,on,under,orinourcurrentlyorformerlyownedoroperatedproperties.Such
lawsoftenimposeliabilitywithoutregardtowhethertheowneroroperatorknewof,orwasresponsiblefor,thepresenceofsuchhazardousortoxicsubstances.The
presence of hazardous or toxic substances may adversely affect the owners ability to sell or rent such real property or to borrow using such real property as
collateral. Persons who arrange for the disposal or treatment of hazardous or toxic materials or wastes may be liable for the costs of extraction, removal or
remediationofsuchwastesatthetreatment,storageordisposalfacility,regardlessofwhethersuchfacilityisownedoroperatedbysuchperson.Weusecertain
substancesandgeneratecertainwastesthatmaybedeemedhazardousortoxicunderapplicableEnvironmentalLaws,andwefromtimetotimehaveincurred,andin
thefuturemayincur,costsrelatedtocleaningupcontaminationresultingfromhistoricusesatcertainofourcurrentorformerpropertiesorourtreatment,storageor
disposalofwastesatfacilitiesownedbyothers.OtherEnvironmentalLawsgovernoccupationalexposuretoACMsandrequireabatementorremovalofcertain
ACMs (limited quantities of which are present in various building materials such as spray-on insulation, floor coverings, ceiling coverings, tiles, decorative
treatmentsandpipinglocatedatcertainofourhotels)intheeventofdamageordemolition,orcertainrenovationsorremodeling.EnvironmentalLawsalsoregulate
PCBs,whichmaybepresentinelectricalequipment.AnumberofourhotelshaveUSTsandequipmentcontainingCFCs;theoperationandsubsequentremovalor
upgradingofcertainUSTsandtheuseofequipmentcontainingCFCsalsoareregulatedbyEnvironmentalLaws.Inconnectionwithourownership,operationand
managementofourproperties,wecouldbeheldliableforcostsofremedialorotheractionwithrespecttoPCBs,USTsorCFCs.
U.S.Congress,someU.S.statesandvariouscountriesareconsideringorhaveundertakenactionstoregulateandreducegreenhousegasemissionsand/or
othernaturalresources.Neworrevisedlaws,taxesandregulations,ornewinterpretationsofexistinglawsandregulations,suchasthoserelatedtoclimatechange,
supplychainandwaterrisk,couldaffecttheoperationofourhotelsand/orresultinsignificantadditionalexpenseandoperatingrestrictionsonus.Thecostimpact
ofsuchlegislation,regulation,taxornewinterpretationswoulddependuponthespecificrequirementsenactedandcannotbedeterminedatthistime.
Thepotentialforchangesinthefrequency,durationandseverityofextremeweathereventsthatmaybearesultofclimatechangecouldleadtosignificant
propertydamageatourhotelsandotherassets,impactourabilitytoobtaininsurancecoverageinareasthataremostvulnerabletosuchevents,suchasthecoastal
resortareaswhereweoperateandhaveanegativeeffectonrevenues.
We Could Be Adversely Affected by Violations of the U.S. Foreign Corrupt Practices Act and Similar Anti-Corruption Laws. Ourbusinessoperationsin
countries outside the United States are subject to anti-corruption laws and regulations, including restrictions imposed by the U.S. Foreign Corrupt Practices Act
(FCPA).TheFCPAandsimilaranti-corruptionlawsinotherjurisdictionsgenerallyprohibitcompaniesandtheirintermediariesfrommakingimproperpaymentsto
governmentofficialsoranyotherpersonforthepurposeofobtainingorretainingbusiness.Weoperateinmanypartsoftheworldwheregovernmentcorruptionhas
existed to some degree and, in certain circumstances, our compliance with anti-corruption laws may conflict with local customs and practices. We train our
employees concerning compliance with anti-corruption laws, and notify our third-party hotel and resort owners that we require strict compliance with the anticorruptionlawsofthejurisdictionswhereweoperate.Wealsohavepolicies,
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proceduresandcontrolsinplaceapplicabletoouremployeesandthird-partybusinesspartnersandagentswhoworkwithusoronourbehalfinordertoenforceand
monitorinternalandexternalcompliancewithanti-corruptionlaws.Wecannotprovideassurancethatourinternalcontrolsandprocedureswillalwaysprotectus
fromrecklessorcriminalactscommittedbyouremployeesorthird-partieswithwhomwework.IfwearefoundliableforviolationsoftheFCPAorsimilaranticorruptionlawsinotherjurisdictions,eitherduetoourownactsoroutofinadvertence,orduetotheactsorinadvertenceofothers,wecouldsuffercriminalorcivil
penaltieswhichcouldhaveamaterialandadverseeffectonourresultsofoperations,financialconditionandcashflows.
Failure to Comply With Sanction Laws May Adversely Impact Our Business. From time to time, the United States imposes sanctions that restrict U.S.
companies from engaging in business activities with certain persons or entities, foreign countries, or foreign governments that it determines are adverse to U.S.
foreignpolicyinterests.
Forexample,theUnitedStateshasissuedanexecutiveorderthatprohibitsU.S.companiesfromengagingincertainbusinessactivitieswiththegovernment
of Syria, a country that the United States has identified as a state sponsor of terrorism. Duringfiscal 2015,a foreign subsidiary ofStarwood generated less than
$15,000ofrevenuefrommanagementandotherfeesfromlongstandingrelationshipswithhotelslocatedinSyria.Thisamountconstitutessignificantlylessthan1%
ofourworldwideannualrevenues.WebelieveouractivitiesinSyriaareinfullcompliancewithU.S.andlocallaw.Atanytime,theUnitedStatesmayimpose
additionalsanctionsagainstSyriaoranyothercountrywherewemayhaveongoingactivities.Ifso,ourexistingactivitiesmaybeadverselyaffected,dependingon
thenatureofthesanctionsthatmightbeimposed.
Further, our activities in countries or with persons that are subject to U.S. sanction laws may reduce demand for our stock among certain investors. Any
restrictionsonStarwoodsabilitytoconductitsbusinessoperationsacrosstheworldcouldnegativelyimpactourfinancialresults.
Our Insurance Policies May Not Cover All Potential Losses. Wemaintaininsurancecoverageforliability,property,businessinterruption,andotherrisks
withrespecttoourcorporateoperationsandownedandleasedproperties.Inaddition,wemaymakeselectinsuranceprogramsavailabletoownersofpropertieswe
manageorfranchise.Thesepoliciesoffercoveragetermsandconditionsthatwebelieveareusualandcustomaryforourindustry.Generally,ourall-riskproperty
policiesprovidethatcoverageisavailableonaperoccurrencebasisandthat,foreachoccurrence,thereisalimitaswellasvarioussub-limitsontheamountof
insurance proceeds we will receive in excess of applicable deductibles. In addition, there may be aggregate limits or sub-limits under the policies. Our property
policiesalsoprovidecoverageforearthquake,namedwindstormandfloodevents.Ifaninsurableeventoccursthataffectsmorethanoneofourownedhotelsand/or
managedorfranchisedhotelsownedbythirdpartiesthatparticipateinourinsuranceprogram,theclaimsfromeachaffectedhotelmaybeconsideredtogetherper
policyprovisionstodeterminewhethertheperoccurrencelimit,annualaggregatelimitorsub-limits,dependingonthetypeofclaim,havebeenreached.Ifthelimits
orsub-limitsareexceeded,eachaffectedhotelmayonlyreceiveaproportionalshareoftheamountofinsuranceproceedsprovidedforunderthepolicy.Inaddition,
underthosecircumstances,claimsbythird-partyownerswillreducethecoverageavailableforourownedandleasedproperties.
Inaddition,therearealsootherrisksincludingbutnotlimitedtowar,certainformsofterrorismsuchasnuclear,biologicalorchemicalterrorism,political
risks,someenvironmentalhazardsand/orActsofGodthatmaybedeemedtofallcompletelyoutsidethecoverageofourpoliciesormaybeuninsurableorcost
prohibitivetojustifyinsuringagainst.
WemayalsoencounterchallengeswithaStarwoodand/orThird-PartyOwnersinsuranceproviderregardingwhetheritcanorwillpayaclaim(s)thatwe
believetobecoveredunderthepolicy.Shouldanuninsuredlossoralossinexcessofinsuredlimitsoccur,wecouldlosealloraportionofthecapitalwehave
investedinahotelorresort,aswellastheanticipatedfuturerevenuefromthehotelorresort.Inthatevent,wemightneverthelessremainobligatedforanymortgage
debtorotherfinancialobligationsrelatedtotheproperty.
Our Acquisitions/Dispositions and Investments in New Brands or Businesses May Ultimately Not Prove Successful and We May Not Realize Anticipated
Benefits. Weconsidercorporateaswellaspropertyacquisitions,dispositionsandinvestmentsforourbusinesses.Inmanycases,wecompetefortheseopportunities
withthirdpartieswhomayhavesubstantiallygreaterfinancialresourcesordifferentorloweracceptablefinancialmetricsthanwedo.Therecanbenoassurance
thatwewillbeabletoidentifyacquisition,dispositionorinvestmentcandidatesorcompletetransactionsoncommerciallyreasonabletermsoratall.Iftransactions
areconsummated,therecanbenoassurancethatanyanticipatedbenefitswillactuallyberealized.Similarly,therecanbenoassurancethatwewillbeabletoobtain
additionalfinancingforacquisitionsorinvestments,orthattheabilitytoobtainsuchfinancingwillnotberestrictedbythetermsofourdebtagreements.
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We periodically review our business to identify properties or other assets that we believe either are non-core, no longer complement our business, are in
marketswhichmaynotbenefitusasmuchasothermarketsduringaneconomicrecoveryorcouldbesoldatsignificantpremiums.Wearefocusedonrestructuring
andenhancing real estate returns andmonetizing investments, andfrom time totime, may attempt tosell these identified properties andassets. There canbeno
assurancehowever,thatwewillbeabletocompletedispositionsoncommerciallyreasonabletermsoratallorthatanyanticipatedbenefitswillactuallybereceived.
Inthefuture,wemaydevelopandlaunchadditionalbrandsormakeinvestmentsinnewbusinessesthatcomplementourexistingbusinesses.Forexample,in
2015welaunchedournewestbrand,TributePortfolio.Inaddition,leveragingourownershipinterestinDesignHotels,AG,in2015weannouncedanexpanded
partnershippursuanttowhichasubsetoftheirindependenthotelswithdesignaestheticsdistinctfromour10brandsparticipateaspartnerhotelsintheSPGprogram
andareavailableforbookingthroughourwebsitesandcallcenters.Therecanbenoassuranceregardingthelevelofacceptanceofnewbrandsorourinvestmentsin
newbusinessesbythedevelopmentandconsumermarketplaces,thatthecostincurredindevelopingandintegratingnewbrandsorinvestmentswillberecoveredor
willnotnegativelyimpactourexistingbusinesses,orthattheanticipatedbenefitsfromthesenewbrandsorinvestmentswillberealized.
Investing Through Partnerships or Joint Ventures Decreases Our Ability to Manage Risk. In addition to acquiring or developing hotels and resorts or
acquiringcompaniesthatcomplementourbusinessdirectly,wehavefromtimetotimeinvested,andexpecttocontinuetoinvest,asaco-venturer.Jointventurers
oftenhavesharedcontrolovertheoperationofthejointventureassets.Therefore,jointventureinvestmentsmayinvolveriskssuchasthepossibilitythatthecoventurerinaninvestmentmightbecomebankruptornothavethefinancialresourcestomeetitsobligations,andshouldajointventurepartnerbecomebankruptwe
could become liable for our partners share of joint venture liabilities. Also, our joint venture partner may have economic or business interests or goals that are
inconsistentwithoureconomicorbusinessinterestsorgoals,maybeinapositiontotakeactioncontrarytoourinstructionsormaymakerequestscontrarytoour
policiesorobjectives.Further,wemaybeunabletotakeactionwithouttheapprovalofourjointventurepartnersand,alternatively,ourjointventurepartnerscould
takeactionsbindingonthejointventureorpartnershipwithoutourconsent.Therefore,actionsbyaco-venturermightsubjecttheassetsownedbythejointventure
orpartnershiptoadditionalrisk.Therecanbenoassurancethatourinvestmentsthroughpartnershipsorjointventureswillbesuccessfuldespitetheserisks.
Our Vacation Ownership Business is Subject to Extensive Regulation and Risk of Default. WemarketandsellVOIs,whichtypicallyentitlethebuyerto
occupancyofafully-furnishedresortunitforaspecifictimeperiodoneitheranannualoranalternate-yearbasis.Wealsoacquire,developandoperatevacation
ownershipresorts,andprovidefinancingtopurchasersofVOIs.TheseactivitiesareallsubjecttoextensiveregulationbytheU.S.federalgovernment,statesorother
jurisdictionsinwhichvacationownershipresortsarelocatedandinwhichVOIsaremarketedandsoldincludingregulationofourtelemarketingactivitiesunder
stateandfederalDoNotCalllaws.Inaddition,thelawsofmostjurisdictionsinwhichwesellVOIsgrantthepurchasertherighttorescindthepurchasecontract
for any reason within a statutory rescission period. Laws in some of the jurisdictions would impose liability on us as the developer of the resort for certain
construction related defects. Although we believe that we are in material compliance with all applicable federal, state, local and foreign laws and regulations to
whichvacationownershipmarketing,salesandoperationsarecurrentlysubject,changesintheserequirements,oradeterminationbyaregulatoryauthoritythatwe
werenotincompliance,couldadverselyaffectus.Inparticular,increasedregulationsoftelemarketingactivitiescouldadverselyimpactthemarketingofourVOIs.
WebeartheriskofdefaultsunderpurchasermortgagesonVOIs.IfaVOIpurchaserdefaultsonthemortgageduringtheearlypartoftheloanamortization
period,wewillnothaverecoveredthemarketing,selling(otherthancommissionsincertainevents),andgeneralandadministrativecostsassociatedwithsuchVOI,
andsuchcostswillbeincurredagaininconnectionwiththeresaleoftherepossessedVOI.Accordingly,thereisnoassurancethatthesalespricewillbefullyor
partiallyrecoveredfromadefaultingpurchaseror,intheeventofsuchdefaults,thatourallowanceforlosseswillbeadequate.
Our Revenues are Highly Dependent on the Travel Industry and Declines in or Disruptions to the Travel Industry, Such as Those Caused by Natural or
Man-Made Disasters, Contagious Disease, Terrorist Activity, Political or Civil Unrest and War, May Adversely Affect Us. Our financial and operating
performancemaybeadverselyaffectedbysocalledActsofGod.Hurricanes,earthquakes,tsunamis,andotherman-madeornaturaldisastersinrecentyears,such
asHurricaneOdileinMexicoin2014,theearthquakeandtsunamiinJapanin2011,aswellasthespreadorfearofspreadofcontagiousdiseaseslikeZikaorEbola,
could cause a decline in the level of business and leisure travel in certain regions or as a whole, and reduce the demand for lodging. Actual or threatened war,
terroristactivity,politicalunrest,orcivilstrife,suchasrecenteventsinParis,Jakarta,Turkey,Ukraine,Yemen,SyriaandEgypt,andothergeopoliticaluncertainty
couldhaveasimilareffectonourrevenuesoronourgrowthstrategy.Anyoneormoreoftheseeventsmayreducetheoveralldemandforhotelroomsorlimitthe
pricesthatwecanobtainforthem,bothofwhichcouldadverselyaffectourprofits.
19

Changes in U.S. Federal, State and Local or Foreign Tax Law, Interpretations of Existing Tax Law, or Adverse Determinations by Tax Authorities,
Could Increase Our Tax Burden or Otherwise Adversely Affect Our Financial Condition or Results of Operations. Wearesubjecttotaxationatthefederal,state
orprovincialandlocallevelsintheU.S.andvariousothercountriesandjurisdictions.Ourfutureeffectivetaxratecouldbeaffectedbychangesinthecomposition
ofearningsinjurisdictionswithdifferingtaxrates,changesinstatutoryratesandotherlegislativechanges,includingthosethatmayresultfromtheBaseErosion
ProfitShifting,orBEPS,initiativebeingconductedbytheOrganizationforEconomicCo-operationandDevelopment,orOECD,andfromtheanti-taxavoidance
packagebeingproposedbytheEuropeanCommission.Furthermore,changesinthevaluationofourdeferredtaxassetsandliabilitiesorchangesindeterminations
regardingthejurisdictionsinwhichwearesubjecttotaxortheamountofincomeallocatedtosuchjurisdicti onscouldnegativelyimpactoureffectivetaxrate.
From time to time, the U.S. federal, state and local and foreign governments make substantive changes to tax rules and their application, which could result in
materiallyhighercorporatetaxesthanwouldbeincurredunderexistingtaxlawandcouldadverselyaffectourfinancialconditionorresultsofoperations.
Our effective tax rate includes benefits associated with tax incentives in Singapore and tax-exempt income earned from certain of our operations in
Luxembourg. The Singapore tax incentive is based on a ruling subject to renewal and next expires in 2016. The tax-exempt income from our operations in
Luxembourg is based on application of the current income tax laws and treaties. Provided that no significant changes in facts, laws or circumstances occur, we
expectthatwewillbeabletorenewtheSingaporerulingatsimilartermsandcontinuetobenefitfromthecurrenttaxlawsandtreatiesthatallowfortax-exempt
treatment of the income earned in Luxembourg. If changes in facts, laws, circumstances or interpretations of law occur, our effective tax rate and deferred tax
balancescouldbesignificantlyimpacted.
We record tax expense based in part on our estimates of expected future tax rates, reserves for uncertain tax positions in multiple tax jurisdictions, and
valuation allowances related tocertain netdeferred tax assets,includingnetoperating losscarryforwards. Weare subjecttoongoingandperiodic taxauditsand
disputesrelatingtofederal,state,localandforeigntaxmatters.Forexample,weareunderregularauditbytheInternalRevenueService(IRS).Wehavereceived
certainNoticesofProposedAdjustmentfromtheIRSforyears2007through2009;however,wedisagreewiththeIRSoncertainoftheseadjustmentsandhavefiled
aformalappealsprotesttodisputethem.
Anunfavorableoutcomefromthisoranyothertaxauditcouldresultinhighertaxcosts,penaltiesandinterest,therebyadverselyimpactingourfinancial
conditionorresultsofoperations.
Failure to Compete Regarding Key Associates May Adversely Impact Our Business. Oursuccessdependsinlargepartonourabilitytoattract,retain,train,
manageandengageourkeyassociates.Ourpropertiesarestaffed24hoursaday,sevendaysaweekbythousandsofassociatesaroundtheworld.Ifweandour
franchiseesareunabletoattract,retain,trainandengageskilledassociates,ourabilitytomanageandstaffourpropertiesadequatelycouldbeimpaired,whichcould
reducecustomersatisfaction.Staffingshortagesinvariouspartsoftheworldalsocouldhinderourabilitytogrowandexpandourbusinesses.Becausepayrollcosts
areamajorcomponentoftheoperatingexpensesatourhotels,ashortageofskilledlaborcouldalsorequirehigherwagesthatwouldincreaselaborcosts,which
couldadverselyaffectourresultsofoperations.
Overthelastfewyears,wehavebeenpursuingastrategyofreducingourinvestmentinownedrealestateandincreasingourfocusonthemanagementand
franchisebusiness.Asaresult,weareplanningonsubstantiallyincreasingthenumberofhotelsweopeneveryyearandincreasingtheoverallnumberofhotelsin
oursystem.Thisincreasewillrequireustorecruitandtrainasubstantialnumberofnewassociatestoworkatthesehotels,ofteninemergingmarketswherethere
are rising labor costs and strong competition in labor markets. Further, this will require us to increase our capabilities to enable hotels to open on time and
successfully.Therecanbenoassurancethatwewillbeabletosourceandsecurethesenewassociates,ortrainandmanagethem,tothelevelrequiredtomakethis
strategysuccessful.
Collective Bargaining Activity Could Disrupt Our Operations, Increase Our Labor Costs or Interfere with the Ability of Our Management to Focus on
Executing Our Business Strategies. Some of our properties are subject to collective bargaining agreements, similar agreements or regulations enforced by
governmentalauthorities.Ifrelationshipswithourassociatesortheunionsthatrepresentthembecomeadverse,thepropertieswemanage,franchiseorowncould
experience labor disruptions such as strikes, lockouts and public demonstrations. Labor disruptions, which are generally more likely when collective bargaining
agreementsarebeingrenegotiated,couldharmourrelationshipswithourassociatesorcauseustoloseguests.Further,adversepublicityinthemarketplacerelated
tounionmessagingcouldfurtherharmourreputationandreducecustomerdemandforourservices.Laborregulationcouldleadtohigherwageandbenefitcosts,
changesinworkrulesthatraiseoperatingexpenses,legalcosts,andlimitationsonourabilityortheabilityofourthird-partypropertyownersandfranchiseestotake
costsavingmeasures duringeconomic downturns.Wedonothavetheabilitytocontrolthenegotiations ofcollective bargaining agreementscoveringunionized
laboremployedbythird-partypropertyownersandfranchisees.
20

We and our third-party property owners and franchisees may also become subject to additional collective bargaining agreements in the future. Potential
changes in regulatory schemes across the world could make it easier for unions to organize groups of our associates. If such ch anges take effect, more of our
associates or other field personnel could be subject to increased organizational efforts, which could potentially lead to disruptions or require more of our
managementstimetoaddressunionizationissues.Theseorsimilaragreements,legislationorchangesinregulationscoulddisruptouroperations,hinderourability
to cross-train and cross-promote our associates due to prescribed work rules and job classifications, reduce our profitability, or interfere with the ability ofour
managementtofocusonexecutingourbusinessstrategies.
The Cost of Compliance with the Americans with Disabilities Act and Similar Legislation outside the United States Could Be Substantial. Wearesubject
totheAmericanswithDisabilitiesAct(ADA)andsimilarlegislationincertainjurisdictionsoutsideoftheUnitedStates.UndertheADA,allpublicaccommodations
are required to meet certain federal requirements related to access and use by disabled persons. These regulations apply to accommodations first occupied after
January 26, 1993; public accommodations built before January 26, 1993 are required to remove architectural barriers to disabled access where such removal is
readilyachievable.Theregulationsalsomandatecertainoperationalrequirementsthathoteloperatorsmustobserve.Thefailureofapropertytocomplywiththe
ADA could result in injunctive relief, fines, and awards of damages to private litigants or mandated capital expenditures to remedy such noncompliance. Any
impositionofinjunctiverelief,fines,damageawardsorcapitalexpenditurescouldadverselyaffecttheabilityofanownerorfranchiseetomakepaymentsunderthe
applicablemanagementorfranchiseagreementornegativelyaffectthereputationofourbrands.IfwefailtocomplywiththerequirementsoftheADA,wecouldbe
subjecttofines,penalties,injunctiveaction,reputationalharmandotherbusinesseffectswhichcouldmateriallyandnegativelyaffectourperformanceandresultsof
operations.
The Hospitality Industry is Subject to Seasonal and Cyclical Volatility, Which May Contribute to Fluctuations in Our Results of Operations and
Financial Condition. Thehospitalityindustryisseasonalinnature.Theperiodsduringwhichourlodgingpropertiesexperiencehigherrevenuesvaryfromproperty
toproperty,dependingprincipallyuponlocationandtheconsumerbaseserved.Wegenerallyexpectourrevenuestobelowerinthefirstquarterofeachyearthan
ineachofthethreesubsequentquarterswiththefourthquartergenerallybeingthehighest.Inaddition,thehospitalityindustryiscyclicalanddemandgenerally
follows the general economy on a lagged basis. The seasonality and cyclicality of our industry may contribute to fluctuation in our results of operations and
financialcondition.
Changes to Accounting Rules or Regulations May Adversely Affect Our Financial Condition and Results of Operations. New accounting rules or
regulations and varying interpretations of existing accounting rules or regulations have occurred and may occur in the future. A change in accounting rules or
regulations may even affect our reporting of transactions completed before the change is effective, and future changes to accounting rules or regulations or the
questioningofcurrentaccountingpracticesmayadverselyaffectourfinancialconditionandresultsofoperations.
Changes to Estimates or Projections Used to Assess the Fair Value of Our Assets, or Operating Results That are Lower Than Our Current Estimates at
Certain Locations, May Cause Us to Incur Impairment Charges That Could Adversely Affect Our Results of Operations. Our total assets include goodwill,
intangible assets with an indefinite life, other intangible assets with finite useful lives, and substantial amounts of long-lived assets, principally property and
equipment,includinghotelproperties.Weevaluateourgoodwillandtrademarksforimpairmentonanannualbasisoratothertimesduringtheyearifeventsor
circumstancesindicatethatitismorelikelythannotthatthefairvalueisbelowthecarryingvalue.Weevaluateintangibleassetswithfiniteusefullivesandlonglivedassetsforimpairmentwhencircumstancesindicatethatthecarryingamountmaynotberecoverable.Ourevaluationofimpairmentrequiresustomakecertain
estimates and assumptions including projections of future results. After performing our evaluation for impairment, including an analysis to determine the
recoverabilityoflong-livedassets,wewillrecordanimpairmentlosswhenthecarryingvalueoftheunderlyingasset,assetgrouporreportingunitexceedsitsfair
value.Iftheestimatesorassumptionsusedinourevaluationofimpairmentchange,wemayberequiredtorecordadditionalimpairmentlossesoncertainofthese
assets.Iftheseimpairmentlossesaresignificant,ourresultsofoperationswouldbeadverselyaffected.
We and Our Third-Party Licensees May Not Be Able to Sell Residential Properties Using Our Brands for a Profit or at Anticipated Prices. Welicenseour
brandstothirdpartiesinconnectionwiththeresidential portionsofcertainpropertiesthatareusingourbrands.Residentialpropertiesusingourbrandsmaynot
ultimatelybedevelopedorreceivegovernmentalapprovalsforthesaleofresidences,andevenifdevelopedandapprovedforsaleofresidencescouldbecomeless
attractiveduetochangesinmortgageratesandtheavailabilityofmortgagefinancinggenerally,marketabsorptionoroversupplyinaparticularmarket,changesin
taxlaws,orotherfactors affecting real estate markets. Asaresult, ourthird-party licensees maynotbeabletoselltheseresidences, andwemaynotbeableto
licenseourbrandsforthispurpose,foraprofitoratthepricesthattheyhaveanticipated.
21

If our Third-Party Property Owners are Unable to Repay or Refinance Loans Secured by the Mortgaged Properties, or to Obtain Financing Adequate to
Fund Renovations or Growth Plans, Our Revenues, Profits and Capital Resources Could be Reduced and Our Business Could be Harmed. Manyofourthirdpartypropertyownershavepledgedtheirpropertiesascollateralformortgageloansenteredintoatthetimeofdevelopment,purchaseorrefinancing.Ifourthirdpartypropertyownersareunabletorepayorrefinancematuringindebtednessonfavorabletermsoratall,theirlenderscoulddeclareadefault,acceleratetherelated
debtandrepossesstheproperty.Arepossessioncouldresultintheterminationofourmanagementorfranchiseagreementoreliminaterevenuesandcashflows
from the property. In addition, the owners of managed and franchised hotels depend on financing to buy, develop and improve hotels and in some cases, fund
operationsduringdowncycles.Ourhotelownersinabilitytoobtainadequatefundingcouldmateriallyadverselyaffectthemaintenanceandimprovementplansof
existinghotels,aswellasresultinthedelayorstoppageofthedevelopmentofourexistingpipeline.
Risks Relating to Debt Financing
Our Debt Service Obligations May Adversely Affect Our Cash Flow. Asaresultofourrevolvingcreditfacilityandoutstandingdebtobligations,weare
subjectto:(i)theriskthatcashflowfromoperationswillbeinsufficient tomeetrequiredpaymentsofprincipalandinterest,(ii)restrictivecovenants,including
covenantsrelatingtocertainfinancialratios,and(iii)interestraterisk.Althoughweanticipatethatwewillbeabletorepayorrefinanceourexistingindebtedness
andanyotherindebtednesswhenitmatures,therecanbenoassurancethatwewillbeabletodosoorthatthetermsofsuchrefinancingwillbefavorable.Our
leverage may have important consequences including the following: (i) our ability to obtain additional financing for acquisitions, working capital, capital
expenditures or other purposes, if necessary, may be impaired or such financing may not be available on terms favorable to us and (ii) a substantial decrease in
operating cash flow, EBITDA (as defined in our credit facility) or a substantial increase in our expenses could make it difficult for us to meet our debt service
requirementsandrestrictivecovenantsandforceustosellassetsand/ormodifyouroperations.
We Have Little Control Over the Availability of Funds Needed to Fund New Investments and Maintain Existing Hotels. In order to fund new hotel
investments,aswellasrefurbishandimproveexistinghotels,bothweandcurrentandpotentialhotelownersmusthaveaccesstocapital.Theavailabilityoffunds
fornewinvestmentsandmaintenanceofexistinghotelsdependsinlargemeasureoncapitalmarketsandliquidityfactorsoverwhichwehavelittlecontrol.Current
andprospectivehotelownersmayfindhotelfinancingexpensiveanddifficulttoobtain.Delays,increasedcostsandotherimpedimentstorestructuringsuchprojects
may affect our ability to realize fees, recover loans and guarantee advances, or realize equity investments from such projects. Our ability to recover loans and
guaranteeadvancesfromhoteloperationsorfromownersthroughtheproceedsofhotelsales,refinancingofdebtorotherwisemayalsoaffectourabilitytoraise
newcapital.Inaddition,downgradesofourpublicdebtratingsbyratingagenciescouldincreaseourcostofcapital.Abreachofacovenantcouldresultinanevent
ofdefaultthat,ifnotcuredorwaived,couldresultinanaccelerationofallorasubstantialportionofourdebt.Foramoredetaileddescriptionofthecovenants
imposed byour debt obligations, see Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital
ResourcesCashUsedforFinancingActivitiesinthisAnnualReport.
Volatility in the Credit Markets May Adversely Impact Our Ability to Sell the Loans That Our Vacation Ownership Business Generates. Ourvacation
ownership business provides financing to purchasers of our vacation ownership units, and we attempt to sell interests in those loans in the securities markets.
Volatilityinthecreditmarketsmayimpactthetimingandvolumeofthetimeshareloansthatweareabletosell.Althoughweexpecttorealizetheeconomicvalue
ofourvacationownershipnoteportfolioeveniffuturenotesalesaretemporarilyorindefinitelydelayed,suchdelaysmayresultineitherincreasedborrowingsto
providecapitaltoreplaceanticipatedproceedsfromsuchsalesorreducedspendinginordertomaintainourleverageandreturntargets.
Risks Relating to Ownership of Our Shares
Our Board of Directors May Issue Preferred Stock and Establish the Preferences and Rights of Such Preferred Stock. Ourcharterprovidesthatthetotal
number of shares of stock of all classes which the Corporation has authority to issue is 1,200,000,000, consisting of one billion shares of common stock and
200 million shares of preferred stock. Our Board of Directors has the authority, without a vote of stockholders, to establish the preferences and rights of any
preferredsharestobeissuedandtoissuesuchshares.Theissuanceofpreferredshareshavingspecialpreferencesorrightscoulddelayorpreventachangeincontrol
even if a change in control would be in the interests of our stockholders. Since our Board of Directors has the power to establish the preferences and rights of
preferredshareswithoutastockholdervote,ourBoardofDirectorsmaygivetheholderspreferences,powersandrights,includingvotingrights,seniortotherights
ofholdersofourshares.
Our Board of Directors May Implement Anti-Takeover Devices and Our Bylaws Contain Provisions Which May Prevent Takeovers. Certainprovisionsof
Maryland law permit our Board of Directors, without stockholder approval, to implement possible takeover defenses that are not currently in place, such as a
classifiedboard.AspermittedundertheMarylandGeneralCorporationLaw,ourBylawsprovidethatdirectorshavetheexclusiverighttoamendourBylaws.
22

We Cannot Provide Assurance That We Will Continue to Pay Dividends. Therecanbenoassurancethatwewillcontinuetopaydividends.OurBoardof

DirectorsmaysuspendthepaymentofdividendsiftheBoarddeemssuchactiontobeinthebestinterestsofusorstockholders.Ifwedonotpaydividends,the
priceofourcommonstockmustappreciateforyoutorealizeagainonyourinvestmentinourCompany.Thisappreciationmaynotoccurandourstockmay,infact,
depreciateinvalue.

Item 1B.
Unresolved Staff Comments.
None.

Item 2.

Properties.
OurhotelpropertiesandvacationownershipandresidentialbusinesspropertiesaredescribedinPartI,Item1.Business,earlierinthisreport.

OurcorporateheadquartersarelocatedatOneStarPoint,Stamford,Connecticut,whichleaseexpiresinMay2034.Inadditiontoourcorporateheadquarters,
weleasespaceforourdivisionaloffices,servicecentersandsalesoffices,bothdomesticallyandinternationally.
Webelievethatourcorporateheadquartersandotherleasedspaceareingoodconditionandaresufficientandsuitablefortheconductofourbusiness.Inthe
eventweneedtoexpandouroperations,webelievethatsuitablespacewillbeavailableoncommerciallyreasonableterms.

Item 3.
Legal Proceedings.
Information regarding Legal Proceedings is incorporated by reference from the Litigation section in Note 24, Commitments and Contingencies, of our
consolidatedfinancialstatementssetforthinItem8.FinancialStatementsandSupplementaryDataofthisAnnualReport,whichisincorporatedhereinbyreference.

Item 4.
Mine Safety Disclosures.
Notapplicable.

23

PART II
Item 5.

Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information
Ourcommonstock,parvalue$0.01pershare(CorporationShares),istradedontheNewYorkStockExchange(theNYSE)underthesymbolHOT.
ThefollowingtablesetsforththequarterlyrangeofthehighandlowsalepricesoftheCorporationSharesforthefiscalperiodsindicatedasreportedonthe
NYSECompositeTape:

High
Low
2015

Fourthquarter
$
82.83 $
65.40
Thirdquarter
$
86.96 $
63.99
Secondquarter
$
87.99 $
80.06
Firstquarter
$
86.76 $
70.66
2014

Fourthquarter
$
82.80 $
68.53
Thirdquarter
$
86.11 $
76.84
Secondquarter
$
81.82 $
72.97
Firstquarter
$
82.81 $
72.00

Approximate Number of Equity Security Holders

AsofFebruary19,2016,therewereapproximately11,000holdersofrecordofCorporationShares.
Dividends
WedeclaredcashdividendstoholdersofCorporationSharesforthefiscalyearsendedDecember31,2015and2014asfollows:

Dividends
Declared

2015
Fourthquarter
Thirdquarter
Secondquarter
Firstquarter
2014
Fourthquarter
Thirdquarter
Secondquarter
Firstquarter

(a)
(b)

$
$
$
$

$
$
$
$

0.375 (a)
0.375 (a)
0.375 (a)
0.375 (a)

1.00 (b)
1.00 (b)
1.00 (b)
1.00 (b)

Wedeclaredregularquarterlydividendsof$0.375persharetostockholdersofrecordonMarch5,2015,June8,2015,September11,2015,andDecember9,
2015,respectively,whichwerepaidinthecorrespondingperiodsofMarch,June,SeptemberandDecember2015.
We declared regular quarterly dividends of $0.35 per share and special quarterly dividends of $0.65 per share in connection with cash realized from the
completionofTheSt.RegisBalHarbourresidentialprojectandsaleofthehotel,tostockholdersofrecordonMarch11,2014,June6,2014,September5,
2014,andDecember8,2014,respectively,whichwerepaidinthecorrespondingperiodsofMarch,June,SeptemberandDecember2014.

In 2016, we expect to continue paying regular dividends on a quarterly basis. In accordance with the merger agreement with Marriott, such quarterly
dividendsmaynotexceed$0.375pershare.
24

Conversion of Securities; Sale of Unregistered Securities

UnitsofSLCOperatingLimitedPartnership,ourconsolidatedsubsidiary,areconvertibleintoCorporationSharesattheunitholdersoption,providedthat
wehavetheunilateraloptiontosettleconversiondemandsincashorCorporationShares.DuringtheyearendedDecember31,2015,weredeemedapproximately
54,000oftheseunitsforapproximately$4millionincash.AtDecember31,2015and2014therewereapproximately73,000and127,000,respectively,ofthese
unitsoutstanding.
Issuer Purchases of Equity Securities
Inthefirstquarterof2015,ourBoardofDirectorsauthorizeda$750millionincreasetooursharerepurchaseprogram.DuringtheyearendedDecember31,
2015,werepurchased4.7millioncommonsharesatanaveragepriceof$78.39foratotalcostofapproximately$371million.Since2011,wehaverepurchased
36.2millioncommonsharesforatotalcostofapproximately$2.643billion.AsofDecember31,2015,$458millionremainedavailableunderthesharerepurchase
authorization.

October1toOctober31,2015
November1toNovember30,2015
December1toDecember31,2015
Total

Weighted
Average
Price Paid
per Share

Total Number
of Shares
Purchased

509,683
93,430

603,113

$
$
$
$

68.85
79.14

70.44

Maximum Number
(or Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
Under the Program
(in millions)

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans

509,683
93,430

603,113

$
$
$

465
458
458

STOCK RETURN PERFORMANCE AND CUMULATIVE TOTAL RETURN

SetforthbelowisalinegraphcomparingthecumulativetotalstockholderreturnontheCorporationSharesagainstthecumulativetotalreturnontheS&P
500andtheS&PHotels,Resorts&CruiseLinesIndex(theS&P500Hotel)forthefivefiscalyearsbeginningafterDecember31,2010andendingDecember31,
2015. The graph assumes that the value of the investments was $100 on December 31, 2010 and that all dividends and other distributions were reinvested. The
comparisonsareprovidedinresponsetoSECdisclosurerequirementsandarenotintendedtoforecastorbeindicativeoffutureperformance.

12/31/10
12/31/11
12/31/12
12/31/13
12/31/14
12/31/15
Starwood
100.00 79.75 97.43 137.25 146.96 128.31
S&P500
100.00 102.09 118.30 156.21 177.32 179.76
S&P500Hotel
100.00 80.78 100.97 130.02 160.91 167.06

Note: S&P 500 Hotel Index includes Carnival Corp, Marriott, Royal Caribbean, Starwood and Wyndham. Royal Caribbean was added in December 2014. S&P
adjuststheweightingoftheIndexsuchthatanadditionordeletionofacompanydoesnotchangetheleveloftheIndexandreturnsareonlyaffectedonaforward
basis.

25

Item 6.

Selected Financial Data.

ThefollowingselectedfinancialdatashouldbereadinconjunctionwiththeinformationsetforthunderItem7,ManagementsDiscussionandAnalysisof
FinancialConditionandResultsofOperationsandourconsolidatedfinancialstatementsandrelatednotestheretobeginningonpageF-1ofthisAnnualReport.

Year Ended December 31,

2015

Revenues
Operatingincome
Incomefromcontinuingoperations(a)
Dilutedearningspersharefromcontinuing
operations
Cashfromoperatingactivities
Cashfrom(usedfor)investingactivities
Cashusedforfinancingactivities
Aggregatecashdistributionspaid
Cashdistributionsanddividendsdeclaredper
Share

$
$
$

2014

5,763 $
740 $
489 $

$
$
$
$
$

2.88
890
467
(1,227)
259

$
$
$
$
$

2013
2012
(In millions, except per share data)

5,983 $
883 $
643 $
3.46
994
421
(1,087)
735

1.50 $

$
$
$
$
$

4.00 $

6,115 $
925 $
565 $
2.92
1,151
(158)
(678)
256

2011

6,321 $
912 $
470 $

$
$
$
$
$

2.39
1,184
126
(1,456)
242

1.35 $

5,624
630
502

$
$
$
$
$

2.57
641
(176)
(755)
99

1.25 $

0.50

(a)

AmountsrepresentincomefromcontinuingoperationsattributabletoCorporationShares(i.e.,excludingnon-controllinginterests).

2015

Totalassets
Long-termdebt,netofcurrentmaturities

$
$

8,268 $
2,278 $

2014

At December 31,
2013
(In millions)

8,659 $
2,574 $

8,762 $
1,523 $

2012

8,855 $
1,656 $

2011

9,560
2,596

26

Item 7.

Managements Discussion and Analysis of Financial Condition and Results of Operations.

This Managements 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
statementsrequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilities,thedisclosureofcontingentassetsand
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, management evaluates its 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,
restructuringcosts,retirementbenefitsandcontingenciesandlitigation.
Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the
circumstances,theresultsofwhichformthebasisformakingdecisionsaboutthecarryingvaluesofassetsandliabilitiesthatarenotreadilyavailablefromother
sources.Actualresultsmaydifferfromtheseestimatesunderdifferentassumptionsandconditions.

27

RESULTS OF OPERATIONS
ThefollowingdiscussionpresentsananalysisofresultsofouroperationsfortheyearsendedDecember31,2015,2014and2013.
FortheyearendedDecember31,2015,wesawstrongresultsintheAmericas,whileourinternationalresultswerenegativelyimpactedbyforeignexchange
rates.WorldwideSystemwideSame-StoreREVPARfortheAmericassegmentincreased3.7%fortheyearendedDecember31,2015comparedtotheprioryear
whiletheEAMEandAsiaPacificsegmentsexperienceddeclinesprimarilyduetotheunfavorableimpactofforeigncurrencyexchangerates.Occupanciesinevery
segmentcontinuedtorise.
AtDecember31,2015,wehadapproximately530hotelsintheactivepipelinerepresentingapproximately116,000rooms.Oftheserooms,55%areinthe
upperupscaleandluxurysegmentsand75%areoutsideofNorthAmerica.During2015,wesigned220hotelmanagementandfranchisecontracts(representing
approximately 45,800 rooms). Also, during 2015, 105 new hotels and resorts (representing approximately 21,500 rooms) entered the system and 30 properties
(representingapproximately6,300rooms)exitedthesystem.
Inadditiontoouractivepipeline, wehavea74%equityinterest inDesignHotelsAG(DesignHotels),acompanythatrepresents andmarketsadistinct
selection of over 300independent hotels with approximately 23,000 rooms globally. Starwood and Design Hotels entered into an agreement in 2014that allows
greatercoordinationandcooperationbetweenthecompanies.OurREVPARmetricsdonotincluderevenuefromDesignHotelsand,atthisstage,DesignHotels
operatingresultsareinsignificanttoourresultsofoperations.
AnindicatoroftheperformanceofourhotelsisREVPAR,asitmeasurestheperiod-over-periodchangeinroomrevenueforcomparableproperties.Along
withREVPAR,wealsoevaluateourhotelsbymeasuringthechangeinAverageDailyRate(ADR)andoccupancy.ThisisparticularlythecaseintheUnitedStates,
wherethereisnoimpactonthismeasurefromforeigncurrencyexchangerates.
Wecontinuallyupdateandrenovateourowned,leasedandconsolidatedjointventurehotelsandincludethesehotelsinourSame-StoreOwnedHotelresults.
We also undertake major repositionings of hotels. While undergoing major repositionings, hotels are generally not operating at full capacity and, as such, these
repositioningscannegativelyimpactourhotelrevenuesandarenotincludedinSame-StoreOwnedHotelresults.
Our SPG guest loyalty program continues to be an industry leader and innovator. The enhancements to the program in recent years, coupled with the
introductionofprogramslikeSPGPro,helpustoattractthenextwaveofglobal,elitetravelersandcontinuetodriveSPGoccupancyratestorecordlevels.We
continuetofocusondigitalinnovationandpersonalization,whichhelpsusbetterconnectwithguestsandcustomers,sellthroughourownchannelsanddelivermore
personalizedservice,allwhileenhancingourbrands.
OnOctober 27,2015,we entered into definitive agreements withILG pursuant towhich ourvacation ownership business,tobe held byVistana, willbe
spun-off to our stockholders and immediately thereafter Vistana will merge with a wholly-owned subsidiary of ILG. In connection with the transactions, the
considerationourstockholdersareexpectedtoreceiveisprimarilybasedonthevalueofILGscommonstock,whichhasdeclinedinthelasttwomonthsof2015.If
thisdeclineissustained,wecouldrecordamaterialimpairmentchargeatthedateofthePlannedReverseMorrisTrustTransactionresultingfromthedifference
between the carrying value of our investment in the vacation ownership business and the fair value of the consideration our stockholders will receive at the
transaction date. Please see Note 27, Planned Reverse Morris Trust Transaction, of the Notes to our Financial Statements for additional information on the
transaction.
On November 15, 2015, we entered into a definitive merger agreement with Marriott. Please see Note 28, Planned Marriott Merger, of the Notes to our
FinancialStatementsforadditionalinformation.
InNovember2015,wefirstannouncedthepointofsalesystemsofalimitednumberofourhotelsinNorthAmericawereinfectedwithmalware,enabling
unauthorizedpartiestoaccesspaymentcarddataofsomecustomers.Followingextensiveinvestigation,thereisnoindicationthatourguestreservationorSPG
membershipsystemswereimpacted,noristhereanyevidencethatothercustomerinformation,suchascontactinformation,socialsecuritynumbers,orPINs,were
affectedbythisissue.Thecostsofthisinvestigationarenotmaterialtoourresultsofoperations,andwedonotexpectthisdatabreachtohaveamaterialimpacton
ourfinancialconditionorresultsofoperations.
Wemanageandoperateourhotelbusinessinthreeseparatehotelsegments:(i)theAmericas,(ii)EAME,and(iii)AsiaPacific.Ourvacationownershipand
residentialbusinessisaseparatesegment.ThisManagementsDiscussionandAnalysisofFinancialConditionandResultsofOperationsincludesdiscussionofour
consolidatedoperatingresultsaswellasdiscussionabouteachofourfoursegments.Additionally,Note25totheconsolidatedfinancialstatementspresentsfurther
informationaboutoursegments.

28

Year Ended December 31, 2015 Compared with Year Ended December 31, 2014
Consolidated Results

Year Ended
December 31,
2015

Owned, Leased and Consolidated Joint

Venture Hotels
Management Fees, Franchise Fees and
Other Income
Vacation Ownership and Residential
Other Revenues from Managed and Franchised
Properties
Total Revenues

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

Percentage
change
from prior
year

1,293 $

1,541 $

(248)

(16.1)%

1,047
687

1,057
674

(10)
13

(0.9)%
1.9%

2,736
5,763 $

2,711
5,983 $

25
(220)

0.9%
(3.7)%

Thedecreaseinrevenuesfromowned,leasedandconsolidatedjointventurehotelswasprimarilyduetolostrevenuesfrom13ownedhotelsthatweresoldor
closedandtwoleasedhotelsconvertedtomanagedorfranchisedhotelsin2015and2014.Thesesold,closed,orconvertedhotelshadrevenuesof$108millionin
theyearendedDecember31,2015,comparedto$337millionforthecorrespondingperiodin2014.RevenuesatourSame-StoreOwnedHotels(28hotelsforthe
year ended December 31, 2015 and 2014, excluding the 13 hotels sold or closed, two hotels converted to managed or franchised, and four additional hotels
undergoing significant repositionings or without comparable results in 2015 and 2014) increased 0.9%, or $9 million, to $1,007 million for the year ended
December31,2015,whencomparedto$998millioninthecorrespondingperiodof2014.
REVPARatourworldwideSame-StoreOwnedHotelswas$184.26fortheyearendedDecember31,2015,comparedto$182.82inthecorrespondingperiod
in 2014. The increase in REVPAR at these worldwide Same-Store Owned Hotels resulted from an increase in occupancy rates to 75.9% for the year ended
December31,2015,comparedto73.1%inthecorrespondingperiodin2014,partiallyoffsetbyadecreaseinADRto$242.90fortheyearendedDecember31,
2015,comparedto$250.05forthecorrespondingperiodin2014.REVPARandADRwerenegativelyaffectedbytheunfavorableimpactofforeignexchangerates.
GrowthinREVPARwasparticularlystronginMexicoandintheUnitedStatesintheSouthandWest.
Thedecreaseinmanagementfees,franchisefeesandotherincomewasprimarilyduetotheinclusionofsignificantterminationfeesassociatedwiththeexit
ofcertainmanagedandfranchisedhotelsfromthesystemin2014andthenegativeimpactofforeignexchangerates.FortheyearendedDecember31,2014,other
management and franchise revenues included approximately $45 million of fees associated with the termination of certain management and franchise contracts
comparedto$11millionforthesameperiodin2015.Corefees(totalmanagementandfranchisefees),whichwerenegativelyimpactedbyforeignexchangerates,
increased$5millionto$832millionfortheyearendedDecember31,2015comparedto$827millionforthecorrespondingperiodin2014.Theseincreasesincluded
feesfromthenetadditionof75managedorfranchisedhotelstooursystemsinceDecember31,2014partiallyoffsetbya0.4%decreaseinWorldwideSystemwide
REVPAR.AsofDecember31,2015,wehad608managedpropertiesand642franchisedpropertieswithapproximately350,000rooms.
Totalvacationownershipandresidentialsalesandservicesrevenueincreased$13millionto$687millionintheyearendedDecember31,2015,comparedto
thecorrespondingperiodin2014,primarilyduetoa$32millionincreaseinrevenuesfromresortandotheroperationsandanincreaseinoriginatedcontractsalesof
vacationownershipintervalsof$28millionfortheyearendedDecember31,2015comparedtothecorrespondingperiodin2014,astheaveragepricepervacation
ownershipunitincreased3.9%to$15,400andthenumberofcontractssignedincreasedby4.4%.Theseamountswerepartiallyoffsetbya$24millionreductionin
residential sales and services revenue, primarily due to the sellout of Bal Harbour in early 2014, and a decrease in revenues recognized under the percentage of
completionmethodandotherdeferralsof$23million.
Otherrevenuesfrommanagedandfranchisedpropertiesincreasedprimarilyduetoanincreaseinpayrollcostscommensuratewithariseintheoverallcost
of labor at our existing managed hotels and payroll costs for the new hotels entering the system. These revenues represent reimbursements of costs incurred on
behalf of managed hotels, vacation ownership properties and franchisees and relate primarily to payroll costs at managed properties where we are the employer.
Sincethereimbursementsaremadebaseduponthecostsincurredwithnoaddedmargin,theserevenuesandcorrespondingexpenseshavenoeffectonouroperating
incomeorournetincome.
29


Year Ended
December 31,
2015

Selling, General, Administrative and Other

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

388 $

402 $

Percentage
change
from prior
year

(14)

(3.5)%

Selling, general, administrative and other expenses decreased $14 million to $388 million for the year ended December 31, 2015, when compared to the
corresponding period in 2014, primarily due to the implementation of various cost savings initiatives and due to the favorable impact of foreign exchange rates,
partiallyoffsetbyan$11millionreserveforthepotentialfundingofaperformanceguaranteeattwohotelsinGreeceasaresultoftheeconomiccrisisinGreece.

Restructuring and Other Special Charges (Credits), Net

n/m=notmeaningful

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

Year Ended
December 31,
2015

100 $

(4) $

Percentage
change
from prior
year

104

n/m

During the year ended December 31, 2015, restructuring and other special charges (credits), net include $20 million in net restructuring charges and
$80 million of other special charges. The restructuring charges are primarily related to costs associated with our previously announced cost savings initiatives,
partiallyoffsetbythereversalofan$8millionreserveasaresultofthefavorableresolutionofafundingcommitmentassociatedwithavacationownershipproject.
Otherspecialchargesprimarilyconsistof$36millionofcostsassociatedwithprofessionalfeesfortheplannedseparation,distributionandsubsequentmergerofour
vacation ownership business (see Note 27), $20 million of costs primarily associated with professional fees related to our strategic alternatives review which
culminatedintheproposedMarriottmerger(seeNote28),$11millionofchargesassociatedwiththedeparturesofourpriorPresidentandChiefExecutiveOfficer
andourinterimChiefExecutiveOfficer,a$6millionchargefortechnologyrelatedcostsandexpensesthatwenolongerdeemrecoverableandtheestablishmentof
$6millionofreservesrelatedtopotentialliabilitiesassociatedwiththe2005acquisitionofLeMridien.
DuringtheyearendedDecember31,2014,wereverseda$3millionreserverelatedtoanotereceivableassociatedwithapreviousdisposition,whichwas
collected.

Year Ended
December 31,
2015

Depreciation and Amortization

280 $

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

283 $

Percentage
change
from prior
year

(3)

(1.1)%

ThedecreaseindepreciationandamortizationexpensefortheyearendedDecember31,2015,whencomparedtothesameperiodof2014,wasprimarilydue
todecreaseddepreciationexpenserelatedtosoldhotels,partiallyoffsetbyinformationtechnologycapitalexpendituresin2015.

30

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

Year Ended
December 31,
2015

Operating Income

740 $

883 $

Percentage
change
from prior
year

(143)

(16.2)%

ThedecreaseinoperatingincomefortheyearendedDecember31,2015,comparedtothecorrespondingperiodof2014,wasprimarilyduetoanunfavorable
varianceinrestructuringandotherspecialcharges(credits),netof$104million,a$42milliondecreaseinoperations(revenueslessexpenses)relatedtoourowned,
leased and consolidated joint venture hotels, and a $10 million decrease in management fees, franchise fees and other income, partially offset by a decrease in
selling,general,administrativeandotherexpensesof$14million.

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

Year Ended
December 31,
2015

Equity Earnings and Gains and from

Unconsolidated Ventures, Net

41 $

27 $

Percentage
change
from prior
year

14

51.9%

Equity earnings and gains from unconsolidated joint ventures, net increased $14 million for the year ended December 31, 2015, compared to the
correspondingperiodin2014,primarilyrelatedtoa$4milliongainonthesaleofajointventurehotelandduetoanimprovementintheperformanceofthehotels
ownedbythejointventures.

Year Ended
December 31,
2015

Net Interest Expense

111 $

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

94 $

Percentage
change
from prior
year

17

18.1%

Netinterestexpenseincreased$17millionfortheyearendedDecember31,2015,comparedtothesameperiodof2014,primarilyduetoanincreaseinour
averagedebtbalanceduring2015,comparedto2014,associatedwithborrowingsinthesecondhalfof2014,includingtheissuanceof$650millionofseniornotes.
Ourweightedaverageinterestratewasapproximately3.79%atDecember31,2015,comparedto3.90%atDecember31,2014.

Year Ended
December 31,
2015

Loss on Early Extinguishment of Debt, Net

Year Ended
December 31,
2014
(in millions)

1 $

Increase /
(decrease)
from prior
year

Percentage
change
from prior
year

(1)

(100.0)%

During the year ended December 2014, we recorded a loss of $1 million related to the write-off of certain deferred financing costs associated with the
amendmentofourRevolvingCreditFacility(seeNote13).

31


Year Ended
December 31,
2015

Gain (Loss) on Asset Dispositions and Impairments, Net

(1) $

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

(33) $

Percentage
change
from prior
year

32

97.0%

DuringtheyearendedDecember31,2015,werecordedanetlossof$1million,primarilyrelatedto$35millionofimpairmentchargesfortwoownedhotels,
whosebookvaluesexceededtheirfairvalues,a$15millionchargerelatedtoanobligationassociatedwithapreviousdispositionandalossof$9million,primarily
relatedtoassetdispositionsandimpairmentsassociatedwithcertainhotelrenovations,partiallyoffsetbya$36milliongainrelatedtopropertyinsurancesettlement
proceedsforahoteldamagedbyahurricane,a$20milliongainonthesaleofaminoritypartnershipinterestinahotelanda$4milliongainassociatedwiththesale
ofonehotelsoldsubjecttoalong-termfranchiseagreement.
DuringtheyearendedDecember31,2014,werecordedalossof$33million,primarilyduetoa$23millionlossassociatedwithfourownedhotelswhich
were sold subject to long-term franchise agreements, a $21 million loss associated with the conversion of a leased hotel to a managed hotel, a $13 million
impairmentchargeononeownedhotel,whosebookvalueexceededitsfairvalue,a$7millionimpairmentassociatedwithoneofourforeignunconsolidatedjoint
ventures,andalossof$7millionassociatedwiththeterminationofourleaseholdinterestinahotelwhichwasconvertedtoafranchisedhotel.Theselosseswere
partiallyoffsetbyapproximately$31millionofpreviouslydeferredgainswhichwererecognizedprimarilyinconnectionwithhotelsthatconvertedfrommanaged
hotelstofranchisedhotels,anda$10milliongainonthesaleofourinterestinanunconsolidatedjointventurehotel(seeNote4).

Year Ended
December 31,
2015

Income Tax (Benefit) Expense

180 $

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

139 $

Percentage
change
from prior
year

41

29.5%

Theincreaseinincometaxexpensein2015whencomparedto2014wasprimarilyduetonon-recurringtaxbenefitsin2014.Incometaxexpenseincreased
approximately $51 million due to the impact of favorable tax settlements reached with foreign taxing authorities in 2014 compared to 2015, approximately
$44millionduetothetaxeffectsfromassetdispositionsrecognizedin2014comparedto2015andapproximately$15millionduetothetaximpactofchangesin
indefinitereinvestmentassertionsin2014comparedto2015.Thiswaspartiallyoffsetbya$26milliondecreaserelatedtochangesinuncertaintaxpositionsin2015
versus2014,andlowerpretaxincomeandaloweroveralleffectivetaxrateprimarilydrivenbyachangeinthemixofpretaxincomebetweentaxjurisdictions.

Year Ended
December 31,
2015

Discontinued Operations Gain (Loss), Net

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

(10) $

Percentage
change
from prior
year

10

100.0%

DuringtheyearendedDecember31,2014,thelosswasprimarilyduetoliabilitiesassociatedwithanunfavorableruling,during2014,inconnectionwitha
previousdisposition.

32

Segment Results
ThefollowingtablesummarizesREVPAR,ADRandoccupancyforourSame-StoreSystemwideHotelsfortheyearsendedDecember31,2015and2014.
Same-StoreSystemwideHotelsrepresentresultsforsame-storeowned,leased,managedandfranchisedhotels.

Year Ended
December 31,

2015

Worldwide (996hotelswithapproximately291,900rooms)
REVPAR(1)
ADR
Occupancy
Americas (565hotelswithapproximately163,000rooms)
REVPAR(1)
ADR
Occupancy
EAME (195hotelswithapproximately51,100rooms)
REVPAR(1)
ADR
Occupancy
Asia Pacific (236hotelswithapproximately77,800rooms)
REVPAR(1)
ADR
Occupancy

$
$

$
$

$
$

$
$

2014

121.57
172.11
70.6%

129.82
176.26
73.7%

133.14
196.44
67.8%

96.82
146.38
66.1%

$
$

$
$

$
$

$
$

122.02
176.56
69.1%

125.17
173.06
72.3%

146.17
219.75
66.5%

99.86
155.92
64.0%

Variance

(0.4)%
(2.5)%
1.5

3.7%
1.8%
1.4

(8.9)%
(10.6)%
1.3

(3.0)%
(6.1)%
2.1

ThefollowingtablesummarizesREVPAR,ADRandoccupancyforourSame-StoreOwnedHotelsfortheyearsendedDecember31,2015and2014.The
resultsfortheyearsendedDecember31,2015and2014representresultsfor28owned,leasedandconsolidatedjointventurehotels(excluding13hotelssoldor
closed,twoleasedhotelsconvertedtomanagedorfranchised,andfouradditionalhotelsundergoingsignificantrepositioningsorwithoutcomparableresultsin2015
and2014).

Year Ended
December 31,

2015

Worldwide (28hotelswithapproximately9,800rooms)
REVPAR(1)
ADR
Occupancy
Americas (16hotelswithapproximately7,500rooms)
REVPAR(1)
ADR
Occupancy
EAME (9hotelswithapproximately1,600rooms)
REVPAR(1)
ADR
Occupancy
Asia Pacific (3hotelswithapproximately700rooms)
REVPAR(1)
ADR
Occupancy

184.26
242.90
75.9%

168.79
226.83
74.4%

266.17
333.87
79.7%

161.28
195.88
82.3%

2014

$
$

$
$

$
$

$
$

182.82
250.05
73.1%

164.94
228.13
72.3%

282.13
371.94
75.9%

145.48
192.76
75.5%

Variance

0.8%
(2.9)%
2.8

2.3%
(0.6)%
2.1

(5.7)%
(10.2)%
3.8

10.9%
1.6%
6.8

(1)

$
$

$
$

$
$

$
$

REVPARiscalculatedbydividingroomrevenue,whichisderivedfromroomsandsuitesrentedorleased,bytotalroomnightsavailableforagivenperiod.
REVPARmaynotbecomparabletosimilarlytitledmeasuressuchasrevenues.
33

ThefollowingtablessummarizesegmentrevenuesandsegmentearningsfortheyearendedDecember31,2015and2014.

Year Ended
December 31,
2015

Segment Revenues

Americas
EAME
Asia Pacific
Vacation ownership and
residential
Total segment revenues

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

Percentage
change
from prior
year

1,472 $
475
287

1,559 $
597
354

(87)
(122)
(67)

(5.6)%
(20.4)%
(18.9)%

681
2,915 $

663
3,173 $

18
(258)

2.7%
(8.1)%

Segment Earnings

Americas
EAME
Asia Pacific
Vacation ownership and
residential
Total segment earnings

Year Ended
December 31,
2015

Increase /
Year Ended
(decrease)
December 31,
from prior
2014
year
(in millions)

Percentage
change
from prior
year

691 $
175
203

697 $
220
228

(6)
(45)
(25)

(0.9)%
(20.5)%
(11.0)%

168
1,237 $

169
1,314 $

(1)
(77)

(0.6)%
(5.9)%

Weprimarily evaluatetheoperatingperformance ofasegmentbasedonsegmentearnings. Wedefinesegmentearningsasnetincomeattributable toour

commonstockholdersbeforeinterestexpense,taxes,depreciationandamortization,aswellasourshareofinterest,depreciationandamortizationassociatedwith
ourunconsolidatedjointventures,excludingcertainrecurringandnonrecurringitems,suchasrestructuringcostsandotherspecialcharges(credits),lossesonearly
extinguishmentofdebtandgains(losses)onassetdispositionsandimpairments.Residentialrevenuegeneratedathotelpropertiesisrecordedinthecorresponding
geographichotelsegment.General,administrativeandotherexpensesdirectlyrelatedtothesegmentsareincludedinthecalculationofsegmentearnings,whereas
corporate general, administrative, and other expenses are not included in the segment earnings calculation. In addition to revenues recorded within our four
segments, wealsohave other revenuesfrom managed andfranchised properties, whichrepresent the reimbursement ofcostsincurred onbehalf ofmanaged and
franchisedpropertyowners.Theserevenues,togetherwiththecorrespondingexpenses,arenotrecordedwithinoursegments.Othercorporateunallocatedrevenues
andearningsprimarilyrelatetootherlicensefeeincomeandarealsoreportedoutsideofsegmentrevenues.Note25totheconsolidatedfinancialstatementspresents
furtherinformationaboutoursegments.
The Americas
Segmentrevenuesdecreased$87millionintheyearendedDecember31,2015,comparedtothecorrespondingperiodin2014.Thedecreaseinrevenueswas
primarilyrelatedtoa$73milliondecreaseinrevenuesfromourowned,leasedandconsolidatedjointventurehotelsanda$6milliondecreaseinmanagementfees,
franchisefeesandotherincome.
Thedecreaseinrevenuesfromourowned,leasedandconsolidatedjointventurehotelswasprimarilyduetolostrevenuesfromeightownedhotelsthatwere
soldin2015or2014.Thesesoldhotelshad$75millioninrevenuesintheyearendedDecember31,2015comparedto$149millionforthecorrespondingperiodin
2014.Additionally,therewasa$20milliondecreaseinrevenuesfromthreeownedhotelswithoutcomparableresultsin2015and2014duetorenovations,offsetby
a$21millionincreaseinSame-StoreOwnedHotelrevenuesduetoanincreaseinREVPARof2.3%to$168.79fortheyearendedDecember31,2015comparedto
thecorrespondingperiodin2014.
The decrease in management fees, franchise fees and other income for the year ended December 31, 2015, compared to the same period in 2014, was
primarily due to the inclusion in 2014 of approximately $34 million of termination fees associated with the termination of certain management and franchise
contracts,comparedtoapproximately$9millionforthesameperiodof2015.Thisdecreasewaspartiallyoffsetbyfeesfromthenetadditionof36managedand
franchisedhotelssinceDecember31,2014anda3.7%increaseinSame-StoreSystemwideREVPARcomparedtothesameperiodin2014.AsofDecember31,
2015,theAmericassegmenthad160managedpropertiesand525franchisedpropertieswithapproximately189,600rooms.
Segmentearningsdecreased$6millionintheyearendedDecember31,2015,comparedtothecorrespondingperiodin2014,primarilyduetothedecreasein
managementfees,franchisefeesandotherincomediscussedabove.
34

EAME
Segmentrevenuesdecreased$122millionintheyearendedDecember31,2015,comparedtothecorrespondingperiodin2014.Thedecreaseinrevenues
wasprimarilyrelatedtoa$95milliondecreaseinrevenuesfromourowned,leasedandconsolidatedjointventurehotels,a$22milliondecreaseinmanagement
fees,franchisefeesandotherincome,anda$4milliondecreaseinresidentialrevenues.
Thedecreaseinrevenuesfromourowned,leasedandconsolidatedjointventurehotelswasprimarilyduetoan$83milliondecreaseinrevenuesfromfour
hotelsthatweresoldorclosedandtwoleasedhotelsthatwereconvertedtomanagedandfranchisedhotelsduring2015and2014anda$13milliondecreasein
Same-StoreOwnedHotelrevenuesduetoadecreaseinREVPARof5.7%to$266.17fortheyearendedDecember31,2015comparedtothecorrespondingperiod
in2014.
Thedecreaseinmanagementfees,franchisefeesandotherincomewasduetoan8.9%decreaseinSame-StoreSystemwideREVPARto$133.14fortheyear
endedDecember31,2015comparedtothecorrespondingperiodin2014.REVPARthroughoutEAMEwasnegativelyaffectedbytheunfavorableimpactofforeign
exchangeratesduringtheyearendedDecember31,2015,comparedtothecorrespondingperiodin2014.Thisdecreasewaspartiallyoffsetbyfeesfromthenet
additionof14managedorfranchisedhotelssinceDecember31,2014.AsofDecember31,2015,theEAMEsegmenthad188managedpropertiesand63franchised
propertieswithapproximately62,800rooms.
Segment earnings decreased $45 million in the year ended December 31, 2015, compared to the corresponding period in 2014, due to the decrease in
managementfees,franchisefeesandotherincomediscussedabove,a$14milliondecreaseinoperations(revenueslessexpenses)relatedtoourowned,leasedand
consolidatedjointventurehotels,a$5millionincreaseindivisionaloverheadexpenses,anda$4milliondecreaseinresidentialrevenue.Theincreaseindivision
overheadexpensesisprimarilyduetoan$11millionreserveforthepotentialfundingofaperformanceguaranteeattwohotelsinGreeceasaresultoftheeconomic
crisisinGreece.
Asia Pacific
Segmentrevenuesdecreased$67millionintheyearendedDecember31,2015,comparedtothecorrespondingperiodin2014.Thedecreaseinrevenueswas
primarilyrelatedtoa$71milliondecreaseinrevenuesfromourowned,leasedandconsolidatedjointventurehotelsduetolostrevenuesfromoneownedhotelthat
wassoldinlate2014,partiallyoffsetbya$6millionincreaseinmanagementfees,franchisefeesandotherincome,comparedtothecorrespondingperiodin2014.
The increase in management fees, franchise fees and other income for the year ended December 31, 2015, compared to the same period in 2014, was
primarilyduetofeesfromthenetadditionof29managedandfranchisedhotelssinceDecember31,2014partiallyoffsetbyadecreaseinSame-StoreSystemwide
REVPARof3.0%to$96.82fortheyearendedDecember31,2015comparedtothecorrespondingperiodin2014.REVPARthroughoutAsiaPacificwasnegatively
impactedbyforeignexchangeratesduringtheyearendedDecember31,2015,comparedtothecorrespondingperiodin2014.AsofDecember31,2015,theAsia
Pacificsegmenthad260managedpropertiesand54franchisedpropertieswithapproximately97,600rooms.
Segmentearningsdecreased$25millionintheyearendedDecember31,2015,comparedtothecorrespondingperiodin2014,primarilydrivenbyadecrease
inoperations(revenueslessexpenses)relatedtoourowned,leasedandconsolidatedjointventurehotels.
Vacation ownership and residential
Total vacation ownership and residential segment revenue increased $18 million to $681 million for the year ended December 31, 2015 compared to the
correspondingperiodin2014,primarilyduetoa$32millionincreaseinrevenuesfromresortandotheroperationsanda$28millionincreaseinoriginatedcontract
salesofvacationownershipintervals.Theseincreaseswerepartiallyoffsetbyadecreaseof$23millioninrevenuesrecognizedunderthepercentageofcompletion
methodandotherdeferralsandbyareductioninresidentialsalesduetotheselloutofBalHarbourinearly2014.Segmentearningsdecreased$1millionintheyear
endedDecember31,2015,comparedtothecorrespondingperiodin2014,primarilydrivenbyanincreaseinsalesandmarketingexpenses,partiallyoffsetbythe
abovenotedincreasesinrevenues.

35

Ye ar Ended December 31, 2014 Compared with Year Ended December 31, 2013
Consolidated Results

Year Ended
December 31,
2014

Owned, Leased and Consolidated Joint

Venture Hotels
Management Fees, Franchise Fees and
Other Income
Vacation Ownership and Residential
Other Revenues from Managed and Franchised
Properties
Total Revenues

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

Percentage
change
from prior
year

1,541 $

1,612 $

(71)

(4.4)%

1,057
674

965
924

92
(250)

9.5%
(27.1)%

2,711
5,983 $

2,614
6,115 $

97
(132)

3.7%
(2.2)%

Thedecreaseinrevenuesfromowned,leasedandconsolidatedjointventurehotelswasprimarilyduetolostrevenuesfrom15ownedhotelsthatweresoldor
closedandtwoleasedhotelsconvertedtomanagedorfranchisedhotelsin2014and2013.Thesesold,closed,orconvertedhotelshadrevenuesof$151millionin
theyearendedDecember31,2014,comparedto$305millionforthecorrespondingperiodin2013.RevenuesatourSame-StoreOwnedHotels(28hotelsforthe
year ended December 31, 2014 and 2013, excluding the 15 hotels sold or closed, two hotels converted to managed or franchised, and eight additional hotels
undergoing significant repositionings or without comparable results in 2014 and 2013) increased 3.5%, or $35 million, to $1,043 million for the year ended
December31,2014,whencomparedto$1,008millioninthecorrespondingperiodof2013.Additionally,theeighthotelsundergoingsignificantrepositioningsor
withoutcomparableresultshadrevenuesof$320millionfortheyearendedDecember31,2014comparedto$272millionfortheyearendedDecember31,2013.As
of December 31, 2014, six of the eight hotels undergoing significant repositionings or without comparable results were open and available to operate their
guestroomsatfullcapacity.
REVPARatourworldwideSame-StoreOwnedHotelswas$167.99fortheyearendedDecember31,2014,comparedto$159.96inthecorrespondingperiod
in2013.TheincreaseinREVPARattheseworldwideSame-StoreOwnedHotelsresultedfromanincreaseinADRto$228.42fortheyearendedDecember31,
2014,comparedto$223.56forthecorrespondingperiodin2013andanincreaseinoccupancyratesto73.5%fortheyearendedDecember31,2014,comparedto
71.5%inthecorrespondingperiodin2013.GrowthinREVPARwasparticularlystrongintheSouthernandWesternpartsoftheUnitedStates,BrazilandMexico.
Theincreaseinmanagementfees,franchisefeesandotherincomewasprimarilyaresultofa$53millionincreaseinmanagementfeesandfranchisefeesand
an increase in other revenues of approximately $39 million. Total management and franchise fee revenues increased to $1,033 million for the year ended
December31,2014,comparedto$941millionforthecorrespondingperiodin2013.Managementfeesincreased5.5%to$591millionandfranchisefeesincreased
10.3%to$236million.Theseincreaseswereprimarilyduetothenetadditionof47managedorfranchisedhotelstooursystemin2014anda4.9%increasein
WorldwideSystemwideREVPAR,comparedtothesameperiodin2013.FortheyearendedDecember31,2014,otherincomeincludedapproximately$45million
of fees associated with the termination of certain management and franchise contracts compared to $16 million in 2013. As of December 31, 2014, we had 583
managedpropertiesand588franchisedpropertieswithapproximately333,100rooms.
Total vacation ownership and residential revenue decreased $250 million to $674 million in the year ended December 31, 2014, when compared to the
correspondingperiodin2013,primarilyduetofewerresidentialclosingsatBalHarbour,asthisprojectsoldoutinearly2014.DuringtheyearendedDecember31,
2014,weclosedsalesoffourunitsatBalHarbourandrealizedrevenuesof$20million,comparedtoclosingsof78unitsandrevenuesof$266millionin2013.
VacationownershiprevenuesfortheyearendedDecember31,2014increased$5million,or0.8%,to$643million,comparedtothecorrespondingperiodin
2013, as originated contract sales of vacation ownership intervals, number of contracts signed, and the average price per vacation ownership unit sold remained
substantiallyconsistent.
Otherrevenuesfrommanagedandfranchisedpropertiesincreasedprimarilyduetoanincreaseinpayrollcostscommensuratewithariseintheoverallcost
of labor at our existing managed hotels and payroll costs for the new hotels entering the system. These revenues represent reimbursements of costs incurred on
behalfofmanagedhotelandvacationownershippropertiesandfranchiseesandrelateprimarilytopayrollcostsatmanagedpropertieswherewearetheemployer.
Sincethereimbursementsaremadebaseduponthecostsincurredwithnoaddedmargin,theserevenuesandcorrespondingexpenseshavenoeffectonouroperating
incomeorournetincome.
36

Year Ended
December 31,
2014

Selling, General, Administrative and

Other

402 $

Increase /
(decrease)
from prior
year

Year Ended
December 31,
2013
(in millions)

384 $

Percentage
change
from prior
year

18

4.7%

Selling, general, administrative and other expenses increased $18 million to $402 million for the year ended December 31, 2014, when compared to the
corresponding period in 2013, primarily due to an increase in costs commensurate with our growth and increased funding of certain loyalty and technology
developmentcosts.

Year Ended
December 31,
2014

Restructuring and Other Special

Charges (Credits), Net

(4) $

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

1 $

Percentage
change
from prior
year

(5)

n/m

n/m=notmeaningful
DuringtheyearendedDecember31,2014,wereverseda$3millionreserverelatedtoanotereceivableassociatedwithapreviousdisposition,whichwas
collected.
DuringtheyearendedDecember31,2013,wedecidedtoabsorbcertaintechnologyrelatedcostsandexpensesthatwepreviouslyintendedtocollectfrom
ourmanagedandfranchisedproperties.Asaresult,werecordeda$19millioncharge,representingthecostsandexpensesincurredthroughtheendof2013thatare
nolongerintendedtoberecovered.TheyearendedDecember31,2013alsoincludedapproximately$5millioninseverancecostsrelatedtoaleasedhotelweexited
in 2014. These unfavorable charges were partially offset by a favorable adjustment to a legal reserve of approximately $22 million related to judgment and
settlement,legalfeesandexpensesinregardstoalongstandinglitigation.

Year Ended
December 31,
2014

Depreciation and Amortization

283 $

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

267 $

Percentage
change
from prior
year

16

6.0%

TheincreaseindepreciationandamortizationexpensefortheyearendedDecember31,2014,whencomparedtothesameperiodof2013,wasprimarilydue
to additional depreciation related to the completion of certain hotel renovations, the new capital lease asset for our corporate headquarters, and information
technologycapitalexpendituresinthelasttwelvemonths,partiallyoffsetbydecreaseddepreciationexpenserelatedtosoldhotels.

Year Ended
December 31,
2014

Operating Income

883 $

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

925 $

(42)

Percentage
change
from prior
year

(4.5)%

The decrease in operating income for the year ended December 31, 2014, when compared to the corresponding period of 2013, was primarily due to a
$108 million decrease in operations (revenues less expenses) from residential sales at Bal Harbour which sold out in early 2014, an increase in selling, general,
administrative and other expenses of $18 million, and a $16 million increase in depreciation and amortization, partially offset by a $92 million increase in
management fees, franchise fees and other income and an increase in operations (revenues less expenses) of $10 million related to our owned, leased and
consolidatedjointventurehotels.

37


Year Ended
December 31,
2014

Equity Earnings and Gains and from

Unconsolidated Ventures, Net

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

27 $

Percentage
change
from prior
year

26 $

3.8%

Theincreaseinequityearningsandgainsandfromunconsolidatedjointventures,netfortheyearendedDecember31,2014,whencomparedtothesame
periodof2013,wasprimarilyduetoa$4millionimpairmentchargein2013,partiallyoffsetbytheoperationsatourLatinAmericanunconsolidatedjointventures
whichwerenegativelyimpactedbyunfavorableforeigncurrencyexchangeduringtheyearendedDecember31,2014comparedtothecorrespondingperiodin2013.

Year Ended
December 31,
2014

Net Interest Expense

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

94 $

100 $

Percentage
change
from prior
year

(6)

(6.0)%

Net interest expense decreased $6 million for the year ended December 31, 2014, when compared to the same period of 2013, primarily due to foreign
exchangegainsandaloweraveragesecuritizedvacationownershipdebtbalance,partiallyoffsetbyanincreaseinourdebtbalanceassociatedwithborrowingsto
fundthesignificantincreaseinoursharerepurchaseprogram,includingtheissuanceof$650millionofseniornotesduringthethirdquarterof2014(seeNote13).
Ourweightedaverageinterestratewasapproximately3.90%atDecember31,2014,comparedto5.59%atDecember31,2013.

Loss on Early Extinguishment of

Debt, Net

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

Year Ended
December 31,
2014

1 $

Percentage
change
from prior
year

n/m

During the year ended December 2014, we recorded a loss of $1 million related to the write-off of certain deferred financing costs associated with the
amendmentofourRevolvingCreditFacility(seeNote13).

Loss on Asset Dispositions and

Impairments, Net

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

Year Ended
December 31,
2014

33 $

23 $

Percentage
change
from prior
year

10

43.5%

DuringtheyearendedDecember31,2014,werecordedalossof$33million,primarilyduetoa$23millionlossassociatedwithfourownedhotelswhich
were sold subject to long-term franchise agreements, a $21 million loss associated with the conversion of a leased hotel to a managed hotel, a $13 million
impairmentchargeononeownedhotel,whosebookvalueexceededitsfairvalue,a$7millionimpairmentassociatedwithoneofourforeignunconsolidatedjoint
ventures,andalossof$7millionassociatedwiththeterminationofourleaseholdinterestinahotelwhichwasconvertedtoafranchisedhotel.Theselosseswere
partiallyoffsetbyapproximately$31millionofpreviouslydeferredgainswhichwererecognizedprimarilyinconnectionwithhotelsthatconvertedfrommanaged
hotelstofranchisedhotels,anda$10milliongainonthesaleofourinterestinanunconsolidatedjointventurehotel(seeNote4).
DuringtheyearendedDecember31,2013,werecordedalossof$23millionprimarilyrelatedtoanimpairmentchargeofapproximately$19millionontwo
ownedhotels,whosebookvaluesexceededtheirfairvalues,alossofapproximately$11millionrelatedtothedispositionofvariousnon-coreassetsassociatedwith
hotelrenovationactivitiesandalossof$1million,net,onthesalesoffiveownedhotels,fourofwhichweresoldsubjecttofranchiseagreementsandoneofwhich
wassoldsubjecttoamanagementagreement.Theselosseswerepartiallyoffsetbythereceiptofinsuranceproceedsofapproximately$5millionanda$4million
gainrealizedonthesaleofanon-coreasset(seeNote4).
38


Year Ended
December 31,
2014

Income Tax (Benefit) Expense

139 $

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

263 $

Percentage
change
from prior
year

(124)

(47.1)%

Thedecreaseinincometaxexpenseprimarilyrelatestoataxbenefit,includingforeigntaxcredits,onaportionofforeignearningsnolongerconsidered
permanentlyreinvested,recognitionofabenefitforthefavorablesettlementofaforeigntaxaudit,recognitionofcapitalattributesrelatedtoassetdispositions,and
lowerpretaxincome.

Year Ended
December 31,
2014

Discontinued Operations Gain (Loss),

Net

(10) $

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

71 $

(81)

Percentage
change
from prior
year

n/m

DuringtheyearendedDecember31,2014,thelosswasprimarilyduetoliabilitiesassociatedwithanunfavorableruling,during2014,inconnectionwitha
previousdisposition.
DuringtheyearendedDecember31,2013,thegainwasprimarilyduetoataxbenefitof$70millionwerecordedasaresultofthereversalofstateincome
tax and interest reserves associated with an uncertain tax position, which was related to a previous disposition. The applicable statute of limitation for this tax
positionlapsedin2013.

39

Segment Results
ThefollowingtablesummarizesREVPAR,ADRandoccupancyforourSame-StoreSystemwideHotelsfortheyearendedDecember31,2014and2013.
Same-StoreSystemwideHotelsrepresentresultsforsame-storeowned,leased,managedandfranchisedhotels.

Year Ended
December 31,

2014

Worldwide (960hotelswithapproximately284,400rooms)
REVPAR(1)
ADR
Occupancy
Americas (555hotelswithapproximately163,300rooms)
REVPAR(1)
ADR
Occupancy
EAME (191hotelswithapproximately49,300rooms)
REVPAR(1)
ADR
Occupancy
Asia Pacific (214hotelswithapproximately71,800rooms)
REVPAR(1)
ADR
Occupancy

$
$

$
$

$
$

$
$

2013

123.08
175.64
70.1%

126.23
172.76
73.1%

143.17
214.83
66.6%

102.38
156.10
65.6%

$
$

$
$

$
$

$
$

117.31
172.58
68.0%

118.96
166.93
71.3%

138.36
212.43
65.1%

99.33
159.25
62.4%

Variance

4.9%
1.8%
2.1

6.1%
3.5%
1.8

3.5%
1.1%
1.5

3.1%
(2.0)%
3.2

ThefollowingtablesummarizesREVPAR,ADRandoccupancyforourSame-StoreOwnedHotelsfortheyearendedDecember31,2014and2013.The
resultsfortheyearendedDecember31,2014and2013representresultsfor28owned,leasedandconsolidatedjointventurehotels(excluding15hotelssoldor
closed,twoleasedhotelsconvertedtomanagedorfranchised,andeightadditionalhotelsundergoingsignificantrepositioningsorwithoutcomparableresultsin2014
and2013).

Year Ended
December 31,

2014

Worldwide ( 28hotelswithapproximately10,900rooms)
REVPAR(1)
ADR
Occupancy
Americas (15hotelswithapproximately8,300rooms)
REVPAR(1)
ADR
Occupancy
EAME (10hotelswithapproximately1,900rooms)
REVPAR(1)
ADR
Occupancy
Asia Pacific (3hotelswithapproximately700rooms)
REVPAR(1)
ADR
Occupancy

167.99
228.42
73.5%

143.81
196.90
73.0%

279.86
373.04
75.0%

145.48
192.76
75.5%

2013

$
$

$
$

$
$

$
$

159.96
223.56
71.5%

138.02
193.60
71.3%

262.67
355.76
73.8%

136.44
199.66
68.3%

Variance

5.0%
2.2%
2.0

4.2%
1.7%
1.7

6.5%
4.9%
1.2

6.6%
(3.5)%
7.2

$
$

$
$

$
$

$
$

(1)

REVPARiscalculatedbydividingroomrevenue,whichisderivedfromroomsandsuitesrentedorleased,bytotalroomnightsavailableforagiven
period.REVPARmaynotbecomparabletosimilarlytitledmeasuressuchasrevenues.

40

ThefollowingtablessummarizesegmentrevenuesandsegmentearningsfortheyearendedDecember31,2014and2013.

Segment Revenues

Americas
EAME
Asia Pacific
Vacation ownership and
residential
Total segment revenues

Year Ended
December 31,
2014

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

Percentage
change
from prior
year

1,559 $
597
354

1,548 $
615
349

11
(18)
5

0.7%
(2.9)%
1.4%

663
3,173 $

905
3,417 $

(242)
(244)

(26.7)%
(7.1)%

Segment Earnings

Americas
EAME
Asia Pacific
Vacation ownership and
residential
Total segment revenues

Year Ended
December 31,
2014

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

Percentage
change
from prior
year

697 $
220
228

617 $
220
221

80

7

169
1,314 $

276
1,334 $

(107)
(20)

13.0%

3.2%
(38.8)%
(1.5)%

The Americas
Segmentrevenuesincreased$11millionintheyearendedDecember31,2014,comparedtothecorrespondingperiodin2013.Theincreaseinrevenueswas
primarily relatedtoa$61million increase inmanagement fees,franchisefeesandotherincome,partially offsetbya$41milliondecrease inrevenuesfromour
owned,leasedandconsolidatedjointventurehotels,anda$7milliondecreaseinresidentialrevenues.
The increase in management fees, franchise fees and other income was primarily due to the net addition of 15 managed or franchised hotels since
December31,2013anda6.1%increaseinSame-StoreSystemwideHotelREVPARfortheyearendedDecember31,2014whencomparedtothecorresponding
periodin2013.Additionally,duringtheyearendedDecember31,2014,wereceivedterminationfeesofapproximately$34millionassociatedwiththetermination
ofcertainmanagementandfranchisecontractscomparedtoapproximately$3millionforthesameperiodin2013.AsofDecember31,2014,theAmericassegment
had161managedpropertiesand488franchisedpropertieswithapproximately181,900rooms.
Thedecreaseinrevenuesfromourowned,leasedandconsolidatedjointventurehotelswasprimarilyduetolostrevenuesfrom12ownedhotelsthatwere
soldin2014and2013.Thesesoldhotelshadrevenuesof$32millionintheyearendedDecember31,2014comparedto$140millionforthecorrespondingperiod
in2013.Lostrevenuesfromsoldhotelswereoffsetbya$45millionincreaseinrevenuesfromsixownedhotelswithoutcomparableresultsin2014and2013anda
$22 million increase in Same-Store Owned Hotel revenues due to an increase in REVPAR of 4.2% to $143.81 for the year ended December 31, 2014 when
comparedtothecorrespondingperiodin2013.
Segmentearningsincreased$80millionintheyearendedDecember31,2014,comparedtothecorrespondingperiodin2013,primarilyduetotheincreasein
management fees, franchise fees and other income of $61 million discussed above, a $13 million increase in operations (revenues less expenses) related to our
owned,leasedandconsolidatedjointventurehotels,anda$10milliondecreaseindivisionaloverheadexpenses,primarilyduetohigherlegalcostsin2013and
foreigncurrencyexchangegainsin2014.Theseincreaseswerepartiallyoffsetbya$7milliondecreaseinresidentialearnings.
EAME
Segmentrevenuesdecreased$18millionintheyearendedDecember31,2014,comparedtothecorrespondingperiodin2013.Thedecreaseinrevenueswas
primarily related to a $20 million decrease in revenues from our owned, leased and consolidated joint venture hotels partially offset by a $2 million increase in
managementfees,franchisefeesandotherincome.
41

The$20milliondecreaseinrevenuesfromourowned,leasedandconsolidatedjointventurehotelswasprimarilyduetoa$38milliondecreaseinrevenues
fromtwohotelssoldorclosedandtwoleasedhotelsthatwereconvertedtomanagedorfranchisedhotelsduringtheyearendedDecember31,2014.Thisdecrease
was partially offset by a $14 million increase in Same-Store Owned Hotel revenues due to an increase in REVPAR of 6.5% to $279.86 for the year ended De
cember31,2014comparedtothecorrespondingperiodin2013,anda$4millionincreaseinrevenuesfromtwoownedhotelswithoutcomparableresultsin2014
and2013.
Theincreaseinmanagementfees,franchisefeesandotherincomewasprimarilyduetoa3.5%increaseinSame-StoreSystemwideHotelREVPARforthe
yearendedDecember31,2014whencomparedtothecorrespondingperiodin2013andthenetadditionofsixmanagedorfranchisedhotelssinceDecember31,
2013.AsofDecember31,2014,theEAMEsegmenthad189managedpropertiesand48franchisedpropertieswithapproximately60,200rooms.
SegmentearningsremainedflatintheyearendedDecember31,2014,comparedtothecorrespondingperiodin2013,astheincreaseinmanagementfees,
franchise fees and other income discussed above, and a $2 million increase in residential revenue, was offset by a $4 million increase in divisional overhead
expenses.
Asia Pacific
Segmentrevenuesincreased$5millionintheyearendedDecember31,2014,comparedtothecorrespondingperiodin2013.Theincreaseinrevenueswas
primarily related to a $14 million increase in management fees, franchise fees and other income, partially offset by a $9 million decrease in revenues from our
owned,leasedandconsolidatedjointventurehotels.
Theincreaseinmanagementfees,franchisefeesandotherincomewasduetothenetadditionof25managedorfranchisedhotelssinceDecember31,2013
anda3.1%increaseinSame-StoreSystemwideHotelREVPARfortheyearendedDecember31,2014comparedtothecorrespondingperiodin2013.REVPARin
Asia Pacific was negatively impacted by the unfavorable impact of foreign currency exchange rates during the year ended December 31, 2014 compared to the
correspondingperiodin2013.AsofDecember31,2014,theAsiaPacificsegmenthad233managedpropertiesand52franchisedpropertieswithapproximately
91,000rooms.
Thedecreaseinrevenuesfromourowned,leasedandconsolidatedjointventurehotelswasprimarilyduetolostrevenuesfromoneownedhotelthatwas
soldinlate2014.
Segment earnings increased $7 million in the year ended December 31, 2014, compared to the corresponding period in 2013, primarily driven by the
$14millionincreaseinmanagementfees,franchisefeesandotherincomediscussedabove,partiallyoffsetbya$4millionincreaseindivisionoverheadexpenses
anda$2milliondecreaseinoperations(revenueslessexpenses)relatedtoourowned,leasedandconsolidatedjointventurehotels.
Vacation ownership and residential
Segment revenues decreased $242 million to $663 million for the year ended December 31, 2014 when compared to the corresponding period in 2013,
primarilyduetofewerresidentialclosingsatBalHarbourin2014,asthisprojectsoldoutinearly2014.Segmentearningsdecreased$107millionintheyearended
December31,2014,comparedtothecorrespondingperiodin2013,primarilydrivenbythedecreaseinoperatingincomefromsalesatBalHarbour.
RevenuesandexpensesrecognizedatBalHarbourfortheyearendedDecember31,2014,withcomparabledataforthesameperiodin2013,wereasfollows
(inmillions,exceptforunitsclosed):

Year Ended
December 31,
2014

Residential sales revenues

Residential expenses
Operating income
Operating income margin

Units closed

Increase /
Year Ended
(decrease)
December 31,
from prior
2013
year
(in millions)

20
9
11
55.0%

42

266
147
119
44.7%

78

(246)
(138)
(108)

Percentage
change
from prior
year

(92.5)%
(93.9)%
(90.8)%
10.3%

(74)

(94.9)%

LIQUIDITY AND CA PITAL RESOURCES

In2015,wereturnedapproximately$626millionofcapitaltostockholdersbypayingourquarterlydividends,totaling$1.50pershare,andbyrepurchasing
4.7 million common shares for a total cost of approximately $371 million. Since 2011, we have returned approximately $4.1 billion of capital to stockholders
through dividends and stock repurchases. As of December 31, 2015, $458 million remained available under the share repurchase authorization. We expect to
continuepayingregulardividendsonaquarterlybasis.
Cash From Operating Activities
Wegeneratecashflowsfromoperationsprimarilyfrommanagementandfranchiserevenues,operatingincomefromourownedhotelsandresortsandsales
of VOIs. Cash flow from operating activities decreased to $890 million for the year ended December 31, 2015 compared to $994 million for the year ended
December31,2014,primarilyduetoadecreaseinoperationsatourowned,leasedandconsolidatedjointventurehotels,primarilyduetothesaleorclosureofhotels
in2014and2015,andduetoanincreaseincashpaidforinterestassociatedwithourborrowingsinthesecondhalfof2014.Othersourcesofcasharedistributions
fromjointventures,servicingfinancialassetsandinterestincome.Weusecashprincipallytofundouroperatingexpenses,dividendpayments,sharerepurchases,
interestpaymentsondebt,capitalexpenditures,andpropertyandincometaxes.Webelievethatourcashfromoperationsandourexistingborrowingavailability
together with capacity for additional borrowings will be adequate to meet all funding requirements for our operating expenses, dividend payments, share
repurchases,principalandinterestpaymentsondebt,capitalexpenditures,andpropertyandincometaxes.
Theratioofourcurrentassetstocurrentliabilitieswas1.03and0.95asofDecember31,2015and2014,respectively.Consistentwithindustrypractice,we
sweepthemajorityofthecashatourownedhotels,inthesamejurisdictions,onadailybasisandfundpayablesasneededthroughcashonhand,bydrawingdown
onourexistingrevolvingcreditfacilityorissuingcommercialpaper.
Cash From Investing Activities
GrosscapitalspendingduringthefullyearendedDecember31,2015wasasfollows(inmillions):

Maintenance Capital Expenditures (1) :

Owned,leasedandconsolidatedjointventurehotels
Corporateandinformationtechnology
Subtotal
Net Capital Expenditures for Vacation Ownership Inventory (2) :
Development Capital
Total Capital Expenditures

66
99
165
68
170
403

(1)
(2)

Maintenancecapitalexpendituresincluderenovations,assetreplacementsandimprovementsthatextendtheusefullifeoftheasset.
Representsgrossinventorycapitalexpendituresof$134millionlesscostofsalesof$66million.

Gross capital spending during the year ended December 31, 2015 included approximately $165 million of maintenance capital and $170 million of
developmentcapital.Investmentspendingonvacationownershipinventorywas$134million,primarilyattheWestinNaneaOceanVillasinMaui,Hawaiiandthe
WestinDesertWillowinPalmDesert,California.Ourcapitalexpenditureprogramincludesbothoffensiveanddefensivecapital.Defensivespendingisrelatedto
maintenanceandrenovationsthatwebelievearenecessarytostaycompetitiveinthemarketsinwhichweoperate.Otherthancapitaltoaddressfireandlifesafety
issues,weconsiderdefensivecapitaltobediscretionary,althoughreductionstothiscapitalprogramcouldresultindecreasestoourcashflowfromoperations,as
hotelsincertainmarketscouldbecomelessdesirable.Offensivecapitalexpenditures,whichprimarilyrelatetonewprojectsthatweexpectwillgenerateareturn,
arealsoconsidereddiscretionary.Wecurrentlyanticipatethatourdefensivecapitalexpendituresforthefullyear2016(excludingvacationownershipinventory)
will be approximately $200 million for maintenance, renovations, and technology capital. In addition, for the full year 2016, we currently expect to spend
approximately$100millionforinvestmentprojects,variousjointventuresandotherinvestments.
Inordertosecuremanagementorfranchiseagreements,wehavemadeloanstothird-partyowners,madenon-controllinginvestmentsinjointventuresand
provided certain guarantees and indemnifications. See Note 24 of the consolidated financial statements for discussion regarding the amount of loans we have
outstanding with owners, unfunded loan commitments, equity and other potential contributions, surety bonds outstanding, performance guarantees and
indemnificationsunderwhichweareobligatedandinvestmentsinhotelsandjointventures.
43

Weintendtofinancetheacquisitionofadditionalhotelproperties(includingequityinvestments),hotelrenovations,VOIconstruction,capitalimprovements,
technologyspendandothercoreandancillarybusinessacquisitionsandinvestmentsandprovideforgeneralcorporatepurposes(includingdividendpaymentsand
sharerepurchases)fromcashonhand,netproceedsfromassetdispositionsandcashgeneratedfromoperations.
Weperiodicallyreviewourbusinesstoidentifyassetsthatwebelieveeitherarenon-core,nolongercomplementourbusiness,orcouldbesoldatsignificant
premiums. Aspart of our asset-light strategy, we are focused on reducing our investment in owned real estate, enhancing our real estate returns and monetizing
investments.
Since2006,wehavesold91hotelsrealizingcashproceedsofapproximately$7.8billioninnumeroustransactions,includingcashproceedsnetofclosing
costsofapproximately$767millionfromthesaleoffourhotelsduringtheyearendedDecember31,2015(seeNote4).Todate,wherewehavesoldhotels,we
typicallyhavenotprovidedsignificantsellerfinancingorotherfinancialassistancetobuyers.Therecanbenoassurance,however,thatwewillbeabletocomplete
futuredispositionsoncommerciallyreasonabletermsoratall.
Cash Used for Financing Activities
Inthefirstquarterof2015,ourBoardofDirectorsauthorizeda$750millionincreasetooursharerepurchaseprogram.DuringtheyearendedDecember31,
2015, we repurchased 4.7 million common shares at a weighted average price of $78.39 for a total cost of approximately $371 million. Since 2011, we have
repurchased36.2millioncommonsharesforatotalcostofapproximately$2.643billion,andasofDecember31,2015,$458millionremainedavailableunderthe
sharerepurchaseauthorization.
In2015,wepaid$255millionofdividends,or$1.50pershare.In2014,wepaid$735millionofdividendsconsistingoffourregularquarterlydividends
totaling$1.40pershareandfourspecialquarterlydividendstotaling$2.60pershare.
UnitsofSLCOperatingLimitedPartnership,ourconsolidatedsubsidiary,areconvertibleintoCorporationSharesattheunitholdersoption,providedthat
wehavetheunilateraloptiontosettleconversiondemandsincashorCorporationShares.DuringtheyearendedDecember31,2015,weredeemedapproximately
54,000oftheseunitsforapproximately$4millionincash.
Thefollowingisasummaryofourdebtportfolio(excludingsecuritizedvacationownershipdebtandcapitalleases)asofDecember31,2015:

Amount
Outstanding at
December 31,
2015 (a)
(in millions)

Weighted
Average
Interest Rate at
December 31,

2015

Weighted
Average
Remaining
Term
(in years)

Floating Rate Debt

RevolvingCreditFacility
CommercialPaper
MortgagesandOther
InterestRateSwaps
Total/Average

408
32
250
690

0.51%
3.65%
5.31%
2.41%

4.2
1.0
3.0
3.6

Fixed Rate Debt

SeniorNotes
MortgagesandOther
InterestRateSwaps
Total/Average

1,570
8
(250)
1,328

4.91%
2.26%
6.91%
4.52%

8.3
9.5
3.0
9.3

Total Debt
TotalDebtandWeightedAverageTerms

3.79%

7.3

2,018

(a)

Excludes approximately $186 million of our share of unconsolidated joint venture debt, $169 million of capital lease obligations and $172 million of
securitizedvacationownershipdebt,allofwhichisnon-recourse.

DuringtheyearendedDecember31,2015,weterminatedthesecuritizationoriginallycompletedin2009(the2009Securitization)includingpaydownofall
principal and interest due. The termination required a $3 million pay down of debt and resulted in the release of $35 million of previously securitized vacation
ownershipnotesreceivable,nettounsecuritizednotesreceivable.
44

Additionally,duringtheyearendedDecember31,2015,our7.375%SeniorNotes,whichhadaprincipalamountofapproximately$294million,matured.
Wepaidapproximately$305milliontosettlealloutstandingprincipalandinterestdue.
During the year ended December 31, 2014, we established a Commercial Paper Program (Commercial Paper), which gives us the ability to issue up to
$1.75billionofshort-termunsecurednotes.OurCommercialPaperprogramdoesnothavepurchasecommitmentsfrombuyersforourcommercialpaper;therefore,
ourabilitytoissuecommercialpaperissubjecttomarketdemand.Wereserveunusedcapacityunderour$1.75billionRevolvingCreditFacility(theFacility)to
repayoutstandingCommercialPaperborrowingsintheeventthatthecommercialpapermarketisnotavailabletousforanyreasonwhenoutstandingborrowings
mature.Wedonotexpectfluctuationsinthedemandforcommercialpapertoaffectourliquidity,givenourborrowingcapacityundertheFacility.
Additionally, in 2014, we completed a public offering of $350 million in aggregate principal amount of Senior Notes due 2025 (the 2025 Notes) and
$300millioninaggregateprincipalamountofSeniorNotesdue2034(the2034Notes).The2025Notesbearinterestatafixedrateof3.75%perannumandmature
onMarch15,2025.The2034Notesbearinterestatafixedrateof4.5%perannumandmatureonOctober1,2034.Wepayinterestonthe2025NotesonMarch15
andSeptember15eachyearuntilmaturity.Wepayinterestonthe2034NotesonApril1andOctober1eachyearuntilmaturity.Weusedthenetproceedsfor
generalcorporatepurposes,whichincludedtherepaymentofcommercialpaper,repurchasesofcommonstockandthepaymentofpreviouslyannouncedregularand
specialdividendstoourstockholders.
Further,in2014,weenteredintotheFourthAmendmentoftheFacility.TheamendmentextendedthematurityoftheFacilitybytwoyearstoFebruary2020.
Wepaidfeesofapproximately$2millioninconnectionwiththisamendmentandcapitalizedthesecostsasdeferredfinancingcosts.Additionally,inconnection
withthisamendment,werecordedanetchargeofapproximately$1millioninthelossonearlyextinguishmentofdebt,netlineitemtowrite-offcertaindeferred
financingscosts.
Finally,in2014,weenteredintoamasterleasearrangementtoleasetheentirebuildingsandlandwhereweareheadquarteredinStamford,Connecticut.The
termofthisleaseis20years,withtwofive-yearextensionsatouroption.Wehavefixedannualpaymentsofapproximately$10million,whichescalateat3%per
year.Asaresultofthistransaction,asofDecember31,2014,werecordedacapitalleaseobligationofapproximately$153millionwithaninterestrateof5.76%
(seeNote13).
In2013,weterminatedasecuritizationwecompletedin2005(the2005Securitization),includingpay-downofalloutstandingprincipalandinterestdue.The
terminationrequiredacashsettlementof$21million,$18millionofwhichwasreceivedanddesignatedaspre-fundingfromtheproceedsofasecuritizationwe
completedin2012(the2012Securitization).Upontermination,$19millionofreceivablespreviouslyrelatedtothe2005Securitizationweretransferredtothe2012
Securitizationwiththeremaining$2millionreleasedtounsecuritized.Wealsoterminatedasecuritizationwecompletedin2006(the2006Securitization),which
requireda$12millioncashpaymentandresultedinthereleaseof$12millionofvacationownershipnotesreceivabletounsecuritized.
ThefollowingisasummaryofourunsecuritizedandsecuritizeddebtlesscashasofDecember31,2015and2014:

December 31,
December 31,
2015
2014
(in millions)

Gross Unsecuritized Debt

less:cash(includingrestrictedcashof$50million
in2015and$76millionin2014
Net Unsecuritized Debt
Gross Securitized Debt (non-recourse)
less:cashrestrictedforsecuritizeddebtrepayments
(notincludedabove)
Net Securitized Debt
Total Net Debt

2,187 $

2,695

(1,098)
1,089 $

(1,011)
1,684

172 $

249

(8)
164 $

(11)
238

1,253 $

1,922

TheFacilityisusedtofundgeneralcorporatecashneeds.AsofDecember31,2015,wehaveavailabilityofapproximately$1.34billionundertheFacility.
TheFacilityallowsformulti-currencyborrowingand,whendrawnupon,hasanapplicablemargin,inclusiveofthecommitmentfee,of1.2%,plustheapplicable
currencyLIBORrate.OurabilitytoborrowundertheFacilityissubjecttocompliancewiththetermsandconditionsundertheFacility,includingcertainleverage
covenants.
We have evaluated the commitments of each of the lenders in the Facility, and we have reviewed our debt covenants. We do not anticipate any issues
regardingtheavailabilityoffundsundertheFacility.ThecostofborrowingoftheFacilityisdeterminedbyacombinationofourleverageratiosandcreditratings.
Changesinourcreditratingsmayresultinchangesinourborrowingcosts.Downgradesinourcreditratingswouldlikelyincreasetherelativecostsofborrowing
andreduceourabilitytoissuelong-termdebt,whereasupgradeswouldlikelyreducecostsandincreaseourabilitytoissuelong-termdebt.
45

Baseduponthecurrentlevelofoperations,managementbelievesthatourcashflowfromoperations,togetherwithoursignificantcashbalances,available
borrowingsundertheFacility,issuanceofCommercialPaper,andpotentialadditionalborrowingswillbeadequatetomeetanticipatedrequirementsfordividend
payments,workingcapital,capitalexpenditures,marketingandadvertisingprogramexpenditures,otherdiscretionaryinvestments,interestandscheduledprincipal
paymentsandsharerepurchasesfortheforeseeablefuture.However,therecanbenoassurancethatwewillbeabletorefinanceourindebtednessasitbecomesdue
oronfavorableterms.Inaddition,therecanbenoassurancethatinourcontinuingbusinesswewillgeneratecashflowatorabovehistoricallevels,thatcurrently
anticipated results will be achieved or that we will be able to complete dispositions on commercially reasonable terms or at all. As of December 3 1, 2015,
approximately $1,050 million, included in our cash balance above, resided in foreign countries. The offshore cash, if repatriated, may or may not be subject to
additionalincometaxesinvarioustaxjurisdictionsincludingtheU.S.Thequantificationofsuchtaxesisnotpracticableatthistime.
Ifweareunabletogeneratesufficientcashflowfromoperationsinthefuturetoserviceourdebt,wemayberequiredtoselladditionalassetsatlowerthan
preferredamounts,reducecapitalexpenditures,refinancealloraportionofourexistingdebtorobtainadditionalfinancingatunfavorablerates.Ourabilitytomake
scheduledprincipalpayments,topayinterestonortorefinanceourindebtednessdependsonourfutureperformanceandfinancialresults,which,toacertainextent,
aresubjecttogeneralconditionsinoraffectingthehotelandvacationownershipindustriesandtogeneraleconomic,political,financial,competitive,legislativeand
regulatoryfactorsbeyondourcontrol.
WehadthefollowingcontractualobligationsoutstandingasofDecember31,2015(inmillions)(1):

Due in Less
Than 1 Year

Total

Due in
1-3 Years

Due in
3-5 Years

Due After
5 Years

Debt(2)
$
2,018 $
29 $
375 $
618 $
996
Interestpayable

834
87
174
159
414
Capitalleaseobligations

169
4
10
12
143
Operatingleaseobligations

1,066
74
137
126
729
Unconditionalpurchaseobligations(3)

428
106
193
129

Otherlong-termobligations

9
1
2
2
4
Totalcontractualobligations
$
4,524 $
301 $
891 $
1,046 $
2,286

(1)
Thistableexcludesunrecognized taxbenefits thatwouldrequire cashoutlaysfor$291million, thetimingofwhichisuncertain. RefertoNote12ofthe
consolidatedfinancialstatementsforadditionaldiscussiononthismatter.
(2)
Excludessecuritizeddebtof$172million,allofwhichisnon-recourse.
(3)
Includescommitmentsthatmaybereimbursedorsatisfiedbyourmanagedandfranchisedproperties.

WehadthefollowingcommercialcommitmentsoutstandingasofDecember31,2015(inmillions):

Amount of Commitment Expiration Per Period

Less Than
1 Year

Total

Standbylettersofcredit

80 $

1-3 Years

77 $

After 5
Years

3-5 Years

Off-Balance Sheet Arrangements

AsofDecember31,2015,ouroff-balancesheetarrangementsincludelettersofcreditof$80million,unconditionalpurchaseobligationsof$428millionand
suretybondsof$32million.TheseitemsarediscussedingreaterdetailinItem8,FinancialStatementsandSupplementaryData.

46

CRITICAL ACCOUN TING POLICIES

The preparation of our consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the
reportedamountsofassetsandliabilitiesasofthedateoftheconsolidatedfinancialstatements,thereportedamountsofrevenuesandexpensesduringthereporting
periodsandtherelateddisclosuresintheconsolidatedfinancialstatementsandaccompanyingfootnotes.
WebelievethatthefollowingaccountingpolicieswhicharedescribedinNote2,SignificantAccountingPolicies,inourconsolidatedfinancialstatements,
arecriticalbecausetheyinvolveahigherdegreeofjudgment,andtheestimatesrequiredtobemadewerebasedonassumptionsthatareinherentlyuncertain.Asa
result,theseaccountingpoliciescouldmateriallyaffectourfinancialposition,resultsofoperationsandrelateddisclosures.Onanongoingbasis,weevaluatethese
estimates and judgments based on historical experiences and various other factors that are believed to reflect the current circumstances. While we believe our
estimates,assumptionsandjudgmentsarereasonable,theyarebasedoninformationpresentlyavailable.Actualresultsmaydiffersignificantlyfromtheseestimates
duetochangesinjudgments,assumptionsandconditionsasaresultofunforeseeneventsorotherwise,whichcouldhaveamaterialeffectonourfinancialposition
orresultsofoperations.ManagementhasdiscussedthedevelopmentandselectionofthesecriticalaccountingpoliciesandestimateswiththeAuditCommitteeof
theBoardofDirectors.
Revenue Recognition. Ourrevenuesareprimarilyderivedfromthefollowingsources:(1)hotelandresortrevenuesatourowned,leasedandconsolidated
joint venture properties; (2) management fees and franchise fees; (3) vacation ownership and residential sales; (4) other revenues from managed and franchised
properties.Generally,revenuesarerecognizedwhentheserviceshavebeenrendered.Taxescollectedfromcustomersandsubmittedtotaxingauthoritiesarenot
recordedinrevenue.Thefollowingisadescriptionofthecompositionofourrevenues:

Owned,LeasedandConsolidatedJointVenturesRepresentsrevenueprimarilyderivedfromhoteloperations,includingtherentalofroomsand
foodandbeveragesales,fromourowned,leasedandconsolidatedjointventurehotelsandresorts.Revenueisrecognizedwhenroomsareoccupied
andserviceshavebeenrendered.Theserevenuesareimpactedbyglobaleconomicconditionsaffectingthetravelandhospitalityindustryaswellas
relativemarketshareofthelocalcompetitivesetofhotels.Revenueperavailableroom(REVPAR)isaleadingindicatorofrevenuetrendsatowned,
leasedandconsolidatedjointventurehotelsasitmeasurestheperiod-over-periodgrowthinroomsrevenueforcomparableproperties.

Management Fees and Franchise Fees Represents fees earned on hotels and resorts managed worldwide, usually under long-term contracts,
franchisefeesreceivedinconnectionwiththefranchiseofourLuxuryCollection,Tribute,Westin,LeMridien,Sheraton,FourPointsbySheraton,
Aloft and Element brand names, termination fees and the amortization of deferred gains related to sold properties for which we have significant
continuinginvolvement.Managementfeesarecomprisedofabasefee,whichisgenerallybasedonapercentageofgrossrevenues,andanincentive
fee,whichisgenerallybasedonthepropertysprofitability.Foranytimeduringtheyear,whentheprovisionsofourmanagementcontractsallow
receiptofincentivefeesupontermination, incentivefeesarerecognizedforthefeesdueandearnedasifthecontractwasterminated atthatdate,
exclusiveofanyterminationfeesdueorpayable.Therefore,duringperiodspriortoyear-end,theincentivefeesrecordedmaynotbeindicativeofthe
eventual incentive fees that will be recognized at year-end as conditions and incentive hurdle calculations may not be final. Franchise fees are
generallybasedonapercentageofhotelroomrevenues.Aswithourowned,leasedandconsolidatedjointventurehotelrevenuesdiscussedabove,
theserevenuesourcesareaffectedbyconditionsimpactingthetravelandhospitalityindustryaswellascompetitionfromotherhotelmanagementand
franchisecompanies.

Vacation Ownership and Residential Sales We recognize revenue from VOI sales and financings and the sales of residential units which are
typicallyacomponentofmixeduseprojectsthatincludeahotel.Suchrevenuesareimpactedbythestateoftheglobaleconomyand,inparticular,the
U.S.economy,aswellasinterestratesandothereconomicconditionsaffectingthelendingmarket.Revenueisgenerallyrecognizeduponthebuyer
demonstrating a sufficient level of initial and continuing investment, when the period of cancellation with refund has expired and receivables are
deemedcollectible.Wedeterminetheportionofrevenuestorecognizeforsalesaccountedforunderthepercentageofcompletionmethodbasedon
judgmentsandestimatesincludingtotalprojectcoststocomplete.Additionally,werecordreservesagainsttheserevenuesbasedonexpecteddefault
levels.Changesincostscouldleadtoadjustmentstothepercentageofcompletionstatusofaproject,whichmayresultindifferencesinthetiming
andamountofrevenuesrecognizedfromtheprojects.Wehavealsoenteredintolicensingagreementswiththird-partydeveloperstoofferconsumers
brandedcondominiumsorresidences.Ourfeesfromtheseagreementsaregenerallybasedonthegrosssalesrevenueofunitssold.Residentialfee
revenueisrecordedintheperiodthatapurchaseandsalesagreementexists,deliveryofservicesandobligationshasoccurred,thefeetotheowneris
deemed fixed and determinable and collectability of the fees is reasonably assured. Residential revenue on whole ownership units is generally
recordedusingthecompletedcontractmethod,wherebyrevenueisrecognizedonlywhenasalescontractiscompletedorsubstantiallycompleted.
Duringtheperformanceperiod,costsanddepositsarerecordedonthebalancesheet.
47

OtherRevenuesfromManagedandFranchisedPropertiesTheserevenuesrepresentreimbursementsofcostsincurredonbehalfofmanagedhotel
propertiesandfranchisees.Thesecostsrelateprimarilytopayrollcostsatmanagedpropertieswherewearetheemployer.Sincethereimbursements
aremadebaseduponthecostsincurredwithnoaddedmargin,theserevenuesandcorrespondingexpenseshavenoeffectonouroperatingincomeor
ournetincome.

Goodwill and Intangible Assets. Goodwillandintangibleassetsariseinconnectionwithacquisitions,includingtheacquisitionofmanagementandfranchise

contracts.Wedonotamortizegoodwillandintangibleassetswithindefinitelives.Intangibleassetswithfinitelivesareamortizedovertheirrespectiveusefullives.
In accordance with Accounting Standards Codification (ASC) Topic 350, Intangibles Goodwill and Other, we review all goodwill and intangible assets for
impairmentannually(seeNote6),orupontheoccurrenceofatriggerevent.
Whentestinggoodwillforimpairment,ASCTopic350permitsustoassessqualitativefactorstodeterminewhetheritismorelikelythannotthatthefair
valueofthereportingunitislessthanitscarryingamountasabasistodeterminewhetherthetwo-stepimpairmenttestisnecessary.Wealsohavetheoptionto
bypassthequalitative assessment foranyreporting unitinanyperiodandproceed directly toperforming thefirststepofthetwo-stepgoodwillimpairment test.
Impairmentcharges,ifany,arerecognizedinoperatingresults.
Todeterminehowwetestthegoodwillofourreportingunitsforimpairment,weconsidertheresultsofthepreviousyearstestsandthepercentagebywhich
thefairvalueofthereportingunitexceededitscarryingvalue,theperformanceofourcurrentyearoperationsandourexpectationsforfutureoperations.Wehadno
goodwillimpairmentchargesin2015,2014or2013.Basedonthemostrecentgoodwillimpairmenttestperformedin2015,wedonotexpectthegoodwillofour
hotelreportingunitswillbeimpairedinthenearfuture.
Thevacationownershipandresidentialreportingunithad$151millionofgoodwillasofDecember31,2015.AtOctober31,2015,thedateofourannual
impairment valuation, we quantitatively evaluated this goodwill and determined that its fair value exceeded its carrying value. However, the consideration our
stockholdersareexpectedtoreceiveforthisreportingunitinthePlannedReverseMorrisTrustTransactionwithILG(seeNote27)inthesecondquarterof2016is
primarilybasedonthevalueofILGscommonstock,whichhasdeclinedinthelasttwomonthsof2015.Giventheshortperiodoftimeduringwhichthedecline
occurred,wedonotbelievethatitrepresentsasustaineddeclineasofDecember31,2015,andtherefore,thevacationownershipandresidentialgoodwillwasnot
impaired.However,ifthisdeclineissustained,itcouldresultinanimpairmentofthegoodwillin2016.
Wemayalsoqualitativelyassessourindefinitelivedintangibleassetsforimpairmentpriortoperformingthequantitativeimpairmenttest,utilizingthesame
methodologyasdescribedpreviouslyforourgoodwillimpairmentassessment.Ifthequantitativeanalysisisrequired,wedeterminethefairvalueofourindefinite
livedintangibleassetsprimarilyusingtheincomeapproach,whichrequiresustomakecertainassumptionsincludinggrowthinfees,operatingexpenses,inflation,
incometaxesandterminalvalue.Wehadnoimpairmentchargesrelatedtoourindefinitelivedintangibleassetsin2015,2014or2013asthequalitativeassessments
concludedthatitwasnotmorelikely thannotthattheintangible assetswereimpaired orthequantitative analysesreflected thatthefairvaluesoftheintangible
assetssignificantlyexceededtheirbookvalues.
Ourfinitelivedintangiblesaretestedforimpairmentatleastannuallyorwhenevereventsorcircumstancesindicatethatthecarryingamountofalong-lived
asset may notberecoverable. Duringthe years ended December 31, 2015,2014and 2013,werecorded nosignificant impairment charges related to finite lived
intangibleassets.
Frequent Guest Program. StarwoodPreferredGuestisourfrequentguestincentivemarketingprogram.SPGmembersearnpointsbasedonspendingatour
owned,managedandfranchisedhotels,asincentivestofirst-timebuyersofVOIsandresidences,andthroughparticipationinaffiliatedpartnersprogramssuchas
co-branded credit cards and airline travel. Points can be redeemed at substantially all of our owned, managed and franchised hotels as well as through other
redemptionopportunitieswiththirdparties,suchasconversiontoairlinemiles.
We charge our owned, managed and franchised hotels the cost of operating the SPG program, including the estimated cost of our future redemption
obligation,basedonapercentageofourSPGmembersqualifiedexpenditures.Ourmanagementandfranchiseagreementsrequirethatwearereimbursedforthe
costsofoperatingtheSPGprogram,includingmarketing,promotionsandcommunicationsandperformingmemberservicesfortheSPGmembers.Aspointsare
earned,weincreasetheSPGpointliabilityfortheamountofcashwereceivefromourmanagedandfranchisedhotelsrelatedtothefutureredemptionobligation.
Forourownedhotels,werecordanexpensefortheamountofourfutureredemptionobligationwiththeoffsettotheSPGpointliability.Whenpointsareredeemed
bytheSPGmembers,thehotelsrecognizerevenueandtheSPGpointliabilityisreduced.
48

Throughtheservicesofthird-partyactuarialanalysts,wedeterminethevalueofthefutureredemptionobligationbasedonstatisticalformulaswhichproject
the timing of future point redemptions based on historical experience, including an estimate of the b reakage for points that will never be redeemed, and an
estimateofthepointsthatwilleventuallyberedeemedaswellasthecostofreimbursinghotelsandotherthirdpartiesforotherpointredemptionopportunities.
We consolidate the assets and liabilities of the SPG program including the liability associated with the future redemption obligation which is included in
otherlong-termliabilitiesandaccruedexpensesintheaccompanyingconsolidatedbalancesheets.Thetotalactuariallydeterminedliability,asofDecember31,2015
and 2014was $1,219million and$1,115 million, respectively, ofwhich $491 million and$453million, respectively, wasincluded in accrued expenses. A10%
reductionintheestimateofbreakagewouldhaveincreasedtheliabilityatDecember31,2015byapproximately$41million.
Long-Lived Assets. Weevaluatethecarryingvalueofourlong-livedassetsforimpairmentbycomparingtheexpectedundiscountedfuturecashflowsofthe
assetstothenetbookvalueoftheassetsifcertaintriggereventsoccur.Iftheexpectedundiscountedfuturecashflowsarelessthanthenetbookvalueoftheassets,
theexcessofthenetbookvalueovertheestimatedfairvalueischargedtocurrentearnings.Fairvalueisbasedupondiscountedcashflowsoftheassetsatarate
deemedreasonableforthetypeofassetandprevailingmarketconditions,salesofsimilarassets,appraisalsand,ifappropriate,currentestimatednetsalesproceeds
frompendingoffers.Weevaluatethecarryingvalueofourlong-livedassetsbasedonourplans,atthetime,forsuchassetsandsuchqualitativefactorsasfuture
developmentinthesurroundingarea,statusofexpectedlocalcompetitionandprojectedincrementalincomefromrenovations.Changestoourplans,includinga
decisiontodisposeoforchangetheintendeduseofanasset,canhaveamaterialimpactonthecarryingvalueoftheasset(seeNote4).
Loan Loss Reserves. Forthevacationownershipandresidentialsegment,werecordanestimateofexpecteduncollectibilityonourVOInotesreceivableasa
reductionofrevenueatthetimewerecognizeatimesharesale.WeholdlargeamountsofhomogeneousVOInotesreceivableandthereforeassessuncollectibility
basedonpoolsofreceivables.Inestimatingloanlossreserves,weuseatechniquereferredtoasstaticpoolanalysis,whichtracksdefaultsforeachyearsmortgage
originationsoverthelifeoftherespectivenotesandprojectsanestimateddefaultrate.AsofDecember31,2015and2014,theaverageestimateddefaultrateforour
poolsofreceivableswas9.1%and9.2%,respectively.
Weusetheoriginationofthenotesbybrand(Sheraton,Westin,andOther)andtheFairIsaacCorporation(FICO)scoresofthebuyersastheprimarycredit
qualityindicatorstocalculatetheloanlossreserveforthevacationownershipnotes,aswebelievethereisarelationshipbetweenthedefaultbehaviorofborrowers
andthebrandassociated withthevacation ownership property theyhave acquired, supplemented bytheFICOscoresofthebuyers.Inaddition toquantitatively
calculating the loan loss reserve based on our static pool analysis, we supplement the process by evaluating certain qualitative data, including the aging of the
respectivereceivablesandcurrentdefaulttrendsbybrandandoriginationyear.
Given the significance ofour pools of VOInotes receivable, a change in the projected default rate can have a significant impact toour loan loss reserve
requirements,witha0.1%changeestimatedtohaveanimpactofapproximately$5million.
WeconsideraVOInotereceivabledelinquentwhenitismorethan30daysoutstanding.Alldelinquentloansareplacedonnonaccrualstatus,andwedonot
resumeinterestaccrualuntilpaymentismade.Weconsiderloanstobeindefaultuponreaching120daysoutstanding,atwhichpoint,wegenerallycommencethe
repossessionprocess.UncollectibleVOInotesreceivablearechargedoffwhentitletotheunitisreturnedtous.Wegenerallydonotmodifyvacationownership
notesthatbecomedelinquentorupondefault.
For the hotel segments, we measure the impairment of a loan based on the present value of expected future cash flows, discounted at the loans original
effective interest rate, or the estimated fair value of the collateral. For impaired loans, we establish a specific impairment reserve for the difference between the
recordedinvestmentintheloanandthepresentvalueoftheexpectedfuturecashflowsortheestimatedfairvalueofthecollateral.Weapplytheloanimpairment
policyindividuallytoallloansintheportfolioanddonotaggregateloansforthepurposeofapplyingsuchpolicy.Forloansthatwehavedeterminedtobeimpaired,
werecognizeinterestincomeonacashbasis.
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
propertyorgroupofpropertiesforsaleandasignedsalescontractandsignificantnon-refundabledepositorcontractbreak-upfeeexist.Upondesignationasanasset
heldforsale,werecordthecarryingvalueofeachpropertyorgroupofpropertiesatthelowerofitscarryingvalue,whichincludesallocablesegmentgoodwill,orits
estimatedfairvalue,lessestimatedcoststosell,andwestoprecordingdepreciationexpense.Anygainrealizedinconnectionwiththesaleofapropertyforwhich
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.Theoperationsofthepropertiesheldforsalepriortothesaledatearerecordedindiscontinuedoperationsonlyifthedisposalrepresentsastrategicshift
thatwillhaveamajoreffectonouroperationsandfinancialresults.
49

Legal Contingencies. Wearesubjecttovariouslegalproceedingsandclaims,theoutcomesofwhicharesubjecttosignificantuncertainty.Anestimatedloss

fromalosscontingencyshouldbeaccruedbyachargetoincomeifitisprobablethatanassethasbeenimpairedoraliabilityhasbeenincurredandtheamountof
thelosscanbereasonablyestimated.Weevaluate,amongotherfactors,thedegreeofprobabilityofanunfavorableoutcomeandtheabilitytomakeareasonable
estimateoftheamountofloss.Changesinthesefactorscouldmateriallyimpactourfinancialpositionorourresultsofoperations(seeNote24).
Income Taxes. WeprovideforincometaxesinaccordancewithprinciplescontainedinASCTopic740,Income Taxes .Undertheseprinciples,werecognize
theamountofincometaxpayableorrefundableforthecurrentyearanddeferredtaxassetsandliabilitiesforthefuturetaxconsequencesofeventsthathavebeen
recognizedinourfinancialstatementsortaxreturns.
Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be
recoveredorsettled.Theeffectondeferredtaxassetsandliabilitiesofachangeintaxratesisrecognizedinearningsintheperiodwhenthenewrateisenacted.
Deferred tax assets are evaluated for future realization and reduced by a valuation allowance if it is more likely than not that a portion will not be realized. In
assessingwhetheritismorelikelythannotthatdeferredtaxassetswillberealized,weconsiderallavailableevidence,bothpositiveandnegative,includingour
recentcumulativeearningsexperienceandexpectationsoffutureavailabletaxableincomeoftheappropriatecharacterbytaxingjurisdiction,taxattributecarryback
andcarryforwardperiodsavailabletousfortaxreportingpurposes,andprudentandfeasibletaxplanningstrategies.
Wemeasureandrecognizetheamountoftaxbenefitthatshouldberecordedforfinancialstatementpurposesforuncertaintaxpositionstakenorexpectedto
be taken in a tax return. With respect to uncertain tax positions, we evaluate the recognized tax benefits for derecognition, classification, interest and penalties,
interimperiodaccountinganddisclosurerequirements.Judgmentisrequiredinassessingthefuturetaxconsequencesofeventsthathavebeenrecognizedinour
financialstatementsortaxreturns.

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk.

Inlimited instances, weseek toreduce earnings andcashflowvolatility associated withchangesininterest ratesandforeign currency exchange ratesby
enteringintofinancialarrangementsintendedtoprovideahedgeagainstaportionoftherisksassociatedwithsuchvolatility.Wecontinuetohaveexposuretosuch
riskstotheextenttheyarenothedged.
Weenterintoaderivativefinancialarrangementtotheextentitmeetstheobjectivesdescribedabove,andwedonotengageinsuchtransactionsfortrading
orspeculativepurposes(seeNote21).
AtDecember31,2015,wewerepartytothefollowingderivativeinstruments:

Forward contracts to hedge forecasted transactions for management and franchise fee revenues earned in foreign currencies. The aggregate dollar
equivalentofthenotionalamountswasapproximately$24million.Thesecontractsexpirein2016.

Forwardforeignexchangecontractstomanagetheforeigncurrencyexposurerelatedtocertainintercompanyloansnotdeemedtobepermanently
invested.Theaggregatedollarequivalentofthenotionalamountsoftheforwardcontractswasapproximately$860million.Thesecontractsexpirein
2016.

Interestrateswapagreementstomanageinterestexpensetomodifyourinterestrateexposurebyeffectivelyconvertingdebtwithafixedratetoa
floatingrate.Theaggregatenotionalamountoftheinterestrateswapswas$250million.Theswapsexpirein2018and2019whentherelateddebt
matures.

The following table sets forth the scheduled maturities and the total fair value of our indebtedness excluding securitized vacation ownership debt as of
December31,2015(inmillions):

Expected Maturity or Transaction Date

At December 31,
2017
2018
2019
2020

2016

Indebtedness
Fixedrate
Averageinterestrate
Floatingrate
Averageinterestrate

29

228

150

115

100

408

Total at
December
31,

2015

Total Fair
Value at
December 31,
2015

Thereafter

1,139

1,497 $
4.59%
690 $
2.41%

1,521

690

50

Item 8.

Financial Statement s and Supplementary Data.

ThefinancialstatementsandsupplementarydatarequiredbythisitemappearbeginningonpageF-1ofthisAnnualReportandareincorporatedhereinby
reference.
Item 9.

Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure.
None.

Item 9A.

Controls and Procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management,
includingourprincipalexecutiveandprincipalfinancialofficers,oftheeffectivenessofthedesignandoperationofourdisclosurecontrolsandprocedures(assuch
termisdefinedinRules13a-15(e)and15d-15(e)oftheSecuritiesExchangeActof1934,asamended(theExchangeAct)).Basedupontheforegoingevaluation,our
principal executive and principal financial officers concluded that our disclosure controls and procedures were effective and operating to provide reasonable
assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and to provide reasonable assurance that such
informationisaccumulatedandcommunicatedtoourmanagement,includingourprincipalexecutiveandprincipalfinancialofficers,asappropriate,toallowtimely
decisionsregardingrequireddisclosure.
DuringtheyearendedDecember31,2015,weengagedwithanexternalserviceprovidertosimplifyandstandardizevariousaccountingprocessesandfocus
ondevelopingscalable,transactionalaccountingactivities.Wetransitionedsomeofouraccountingandtransactionalprocessingactivitiestothisexternalservice
provider.Pursuanttoourservice agreements, certainofthecontrolspreviouslyestablished aroundtheseaccountingfunctionswillbemaintainedbyourservice
providerwhileotherswillberetainedbyus.Weaddedadditionalgovernancecontrolstomonitortheoutsourcedworkandmaintainappropriateinternalcontrols
overfinancialreporting.
Therewerenootherchangesinourinternalcontroloverfinancialreporting(asdefinedinRules13a15(f)and15d15(f)undertheExchangeAct)during
theperiodcoveredbythisreportthathavemateriallyaffected,orarereasonablylikelytomateriallyaffect,ourinternalcontroloverfinancialreporting.
ManagementsReportonInternalControloverFinancialReportingandtheReportoftheCorporationsIndependentRegisteredPublicAccountingFirmare
setforthinItem8ofthisAnnualReportandareincorporatedhereinbyreference.

Item 9B.

Other Information.

Notapplicable.
51

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

Informationregardingdirectorsandcorporategovernancewillbeincludedinanamendmenttothis10-Kfiling.Theamendmenttothis10-Kfilingwillbe
filedwiththeSecuritiesandExchangeCommissionwithin120daysafterthecloseofourfiscalyearendedDecember31,2015andsuchinformationisincorporated
hereinbyreference.

Item 11.
Executive Compensation.
Informationregardingdirectorsandcorporategovernancewillbeincludedinanamendmenttothis10-Kfiling.Theamendmenttothis10-Kfilingwillbe
filedwiththeSecuritiesandExchangeCommissionwithin120daysafterthecloseofourfiscalyearendedDecember31,2015andsuchinformationisincorporated
hereinbyreference.

Item 12.
Security Ownership of C ertain Beneficial Owners and Management and Related Stockholder Matters.
Informationregardingdirectorsandcorporategovernancewillbeincludedinanamendmenttothis10-Kfiling.Theamendmenttothis10-Kfilingwillbe
filedwiththeSecuritiesandExchangeCommissionwithin120daysafterthecloseofourfiscalyearendedDecember31,2015andsuchinformationisincorporated
hereinbyreference.

Item 13.
Certain Relationships and Related Transactions and Director Independence.
Informationregardingdirectorsandcorporategovernancewillbeincludedinanamendmenttothis10-Kfiling.Theamendmenttothis10-Kfilingwillbe
filedwiththeSecuritiesandExchangeCommissionwithin120daysafterthecloseofourfiscalyearendedDecember31,2015andsuchinformationisincorporated
hereinbyreference.

Item 14.
Principal Accounting Fees and Services.
Informationregardingdirectorsandcorporategovernancewillbeincludedinanamendmenttothis10-Kfiling.Theamendmenttothis10-Kfilingwillbe
filedwiththeSecuritiesandExchangeCommissionwithin120daysafterthecloseofourfiscalyearendedDecember31,2015andsuchinformationisincorporated
hereinbyreference.

52

Item 15.

Exhibits and Fina ncial Statement Schedules.

ThefollowingdocumentsarefiledaspartofthisAnnualReport:

(a)

1-2.

The financial statements and financial statement schedule listed in the Index to Financial Statements and Schedule following the signature
pageshereof.

3.

Exhibits:

Exhibit
Number

2.1

2.2
2.3

3.1
3.2
4.1
4.2

4.3

4.4

4.5
4.6

4.7

4.8

4.9

4.10
4.11

Description of Exhibit

AgreementandPlanofMerger,datedasofOctober27,2015,amongtheCompany,VistanaSignatureExperiences,Inc.,IrisMergerSub,Inc.and
IntervalLeisureGroup,Inc.(incorporatedbyreferencetoExhibit2.1totheCompanysCurrentReportonForm8-K/A(CommissionFileNumber
001-07959)filedwiththeSEConNovember3,2015(theNovember3Form8-K/A)).
SeparationAgreement,datedasofOctober27,2015,amongtheCompany,VistanaSignatureExperiences,Inc.andIntervalLeisureGroup,Inc.
(incorporatedbyreferencetoExhibit2.2totheNovember3Form8-K/A).
AgreementandPlanofMerger,datedasofNovember15,2015,amongMarriottInternational,Inc.,theCompany,SolarMergerSub1,Inc.,Solar
MergerSub2,Inc.,MarsMergerSub,Inc.andMarsMergerSub,LLC(incorporatedbyreferencetoExhibit2.1totheCompanysCurrentReport
onForm8-K(CommissionFileNumber001-07959)filedwiththeSEConNovember16,2015).
ArticlesofAmendmentandRestatementoftheCompany,asofMay30,2007(incorporatedbyreferencetoAppendixAtotheCompanys2007
NoticeofAnnualMeetingandProxyStatement(CommissionFileNumber001-07959)filedwiththeSEConApril26,2007).
AmendedandRestatedBylawsoftheCompany,asamendedandrestatedthroughJune30,2013(incorporatedbyreferencetoExhibit3.1tothe
CompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEConJuly1,2013).
TerminationAgreementdatedasofApril7,2006betweentheCompanyandtheTrust(incorporatedbyreferencetoExhibit4.1totheCompanys
CurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEConApril13,2006(theApril13Form8-K)).
AmendedandRestatedRightsAgreement,datedasofApril7,2006,betweentheCompanyandAmericanStockTransferandTrustCompany,as
RightsAgent(whichincludestheformofAmendedandRestatedArticlesSupplementaryoftheSeriesAJuniorParticipatingPreferredStockas
ExhibitA,theformofRightsCertificateasExhibitBandtheSummaryofRightstoPurchasePreferredStockasExhibitC)(incorporatedby
referencetoExhibit4.2oftheApril13Form8-K).
AmendedandRestatedIndenture,datedasofNovember15,1995,asAmendedandRestatedasofDecember15,1995betweenITTCorporation
(formerlyknownasITTDestinations,Inc.)andtheFirstNationalBankofChicago,astrustee(incorporatedbyreferencetoExhibit4.A.IVtothe
FirstAmendmenttoITTCorporationsRegistrationStatementonFormS-3(CommissionFileNumber333-07221)filedNovember13,1996).
FirstIndentureSupplement,datedasofDecember31,1998,amongITTCorporation,theCompanyandTheBankofNewYork(incorporatedby
referencetoExhibit4.1totheCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEConJanuary8,
1999).
SecondIndentureSupplement,datedasofApril9,2006,amongtheCompany,SheratonHoldingCorporationandBankofNewYorkTrust
Company,N.A.,astrustee(incorporatedbyreferencetoExhibit4.3totheApril13Form8-K).
Indenture,datedasofSeptember13,2007,betweentheCompanyandU.S.BankNationalAssociation,astrustee(incorporatedbyreferenceto
Exhibit4.1totheCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEConSeptember17,2007(the
September17Form8-K)).
SupplementalIndentureNo.2,datedasofMay23,2008,betweentheCompanyandU.S.BankNationalAssociation,astrustee(incorporatedby
referencetoExhibit4.1totheCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEConMay28,
2008).
SupplementalIndentureNo.4,datedasofNovember20,2009,betweentheCompanyandU.S.BankNationalAssociation,astrustee
(incorporatedbyreferencetoExhibit4.1totheCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEC
onNovember23,2009).
Indenture,datedasofDecember10,2012,betweentheCompanyandTheBankofNewYorkMellonTrustCompany,N.A.,astrustee
(incorporatedbyreferencetoExhibit4.1totheCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEC
onDecember10,2012(theDecember10Form8-K)).
SupplementalIndentureNo.1,datedasofDecember10,2012,betweentheCompanyandTheBankofNewYorkMellonTrustCompany,N.A.,
astrustee(incorporatedbyreferencetoExhibit4.2totheDecember10Form8-K).
SupplementalIndentureNo.2,datedasofSeptember15,2014,betweentheCompanyandTheBankofNewYorkMellonTrustCompany,N.A.,
astrustee(incorporatedbyreferencetoExhibit4.1totheCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filed
withtheSEConSeptember15,2014).
53

Exhibit
Number

10.1

10.2
10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10
10.11
10.12
10.13
10.14

10.15
10.16
10.17
10.18

Description of Exhibit

ThirdAmendedandRestatedLimitedPartnershipAgreementofSLCOperatingLimitedPartnership,datedJanuary6,1999(theSLCLPA),
amongtheCompanyandthelimitedpartnersofSLCOperatingLimitedPartnership(incorporatedbyreferencetoExhibit10.2totheCompanys
AnnualReportonForm10-K(CommissionFileNumber001-07959)forthefiscalyearendedDecember31,1998).
AmendmenttotheSLCLPA,effectiveasofDecember27,2013(incorporatedbyreferencetoExhibit10.2totheCompanysAnnualReporton
Form10-K(CommissionFileNumber001-07959)forthefiscalyearendedDecember31,2013(the2013Form10-K)).
FormofTrademarkLicenseAgreement,datedasofDecember10,1997,betweenStarwoodCapitalGroup,L.L.C.andStarwoodLodgingTrust
(incorporatedbyreferencetoExhibit10.22totheCompanysAnnualReportonForm10-K(CommissionFileNumber001-07959)forthefiscal
yearendedDecember31,1997).
CreditAgreement,datedasofNovember30,2012,byandamongtheCompany,certainofitssubsidiaries,asborrowers,thelendersfromtimeto
timepartythereto,JPMorganChaseBank,N.A.,asadministrativeagent,CitigroupGlobalMarketsInc.,assyndicationagent,BankofAmerica,
N.A.,HSBCBankUSA,NationalAssociationandWellsFargoBank,NationalAssociation,asdocumentationagents(incorporatedbyreferenceto
Exhibit10.1totheCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEConDecember5,2012).
FirstAmendmenttoCreditAgreement,datedasofFebruary6,2013,byandamongtheCompany,certainofitssubsidiaries,asborrowers,
JPMorganChaseBank,N.A.,asadministrativeagent,andthelenderspartythereto(incorporatedbyreferencetoExhibit10.4totheCompanys
AnnualReportonForm10-K(CommissionFileNumber001-07959)forthefiscalyearendedDecember31,2012).
SecondAmendmenttoCreditAgreement,datedasofJanuary3,2014,byandamongtheCompany,certainofitssubsidiaries,asborrowers,
JPMorganChaseBank,N.A.,asadministrativeagent,andthelenderspartythereto(incorporatedbyreferencetoExhibit10.6tothe2013Form10 K).
ThirdAmendmenttoCreditAgreement,datedasofJuly29,2014,byandamongtheCompany,certainofitssubsidiaries,asborrowers,JPMorgan
ChaseBank,N.A.,asadministrativeagent,andthelendersandotherpersonspartythereto(incorporatedbyreferencetoExhibit10.4tothe
CompanysQuarterlyReportonForm10-Q(CommissionFileNumber001-07959)forthequarterlyperiodendedSeptember30,2014(the2014
Form10-Q3)).
FourthAmendmenttoCreditAgreement,datedasofSeptember30,2014,byandamongtheCompany,certainofitssubsidiaries,asborrowers,
JPMorganChaseBank,N.A.,asadministrativeagent,andthelendersandotherpersonspartythereto(incorporatedbyreferencetoExhibit10.1to
theCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEConOctober2,2014).
StarwoodHotels&ResortsWorldwide,Inc.1999Long-TermIncentiveCompensationPlan(the1999LTIP)(incorporatedbyreferenceto
Exhibit10.4totheCompanysQuarterlyReportonForm10-Q(CommissionFileNumber001-07959)forthequarterlyperiodendedJune30,
1999(the1999Form10-Q2)).*
FirstAmendmenttothe1999LTIP,datedasofAugust1,2001(incorporatedbyreferencetoExhibit10.1totheCompanysQuarterlyReporton
Form10-Q(CommissionFileNumber001-07959)forthequarterlyperiodendedSeptember30,2001).*
SecondAmendmenttothe1999LTIP(incorporatedbyreferencetoExhibit10.2totheCompanysQuarterlyReportonForm10-Q(Commission
FileNumber001-07959)forthequarterlyperiodendedMarch31,2003(the2003Form10-Q1)).*
FormofNon-QualifiedStockOptionAgreementpursuanttothe1999LTIP(incorporatedbyreferencetoExhibit10.30totheCompanysAnnual
ReportonForm10-K(CommissionFileNumber001-07959)forthefiscalyearendedDecember31,2004(the2004Form10-K)).*
FormofRestrictedStockAgreementpursuanttothe1999LTIP(incorporatedbyreferencetoExhibit10.31tothe2004Form10-K).*
StarwoodHotels&ResortsWorldwide,Inc.2002Long-TermIncentiveCompensationPlan(the2002LTIP)(incorporatedbyreferenceto
AnnexBoftheCompanys2002NoticeofAnnualMeetingandProxyStatement(CommissionFileNumber001-07959)filedwiththeSECon
April12,2002).*
FirstAmendmenttothe2002LTIP(incorporatedbyreferencetoExhibit10.1tothe2003Form10-Q1).*
FormofNon-QualifiedStockOptionAgreementpursuanttothe2002LTIP(incorporatedbyreferencetoExhibit10.49totheCompanysAnnual
ReportonForm10-K(CommissionFileNumber001-07959)forthefiscalyearendedDecember31,2002(the2002Form10-K)).*
FormofRestrictedStockAgreementpursuanttothe2002LTIP(incorporatedbyreferencetoExhibit10.35tothe2004Form10-K).*
StarwoodHotels&ResortsWorldwide,Inc.2004Long-TermIncentiveCompensationPlan,amendedandrestatedasofDecember31,2008
(2004LTIP)(incorporatedbyreferencetoExhibit10.3totheCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)
filedwiththeSEConJanuary6,2009(theJanuary2009Form8-K)).*
54

Exhibit
Number

10.19
10.20
10.21
10.22
10.23
10.24

10.25
10.26
10.27
10.28
10.29

10.30
10.31
10.32
10.33

10.34
10.35
10.36

10.37
10.38
10.39
10.40

Description of Exhibit

FirstAmendmenttothe2004LTIP(incorporatedbyreferencetoExhibit10.1totheCompanysQuarterlyReportonForm10-Q(CommissionFile
Number001-07959)forthequarterlyperiodendedJune30,2013).*
FormofNon-QualifiedStockOptionAgreementpursuanttothe2004LTIP(incorporatedbyreferencetoExhibit10.4totheCompanysQuarterly
ReportonForm10-Q(CommissionFileNumber001-07959)forthequarterlyperiodendedJune30,2004).*
FormofRestrictedStockAgreementpursuanttothe2004LTIP(incorporatedbyreferencetoExhibit10.38tothe2004Form10-K).*
FormofNon-QualifiedStockOptionAgreementpursuanttothe2004LTIP(incorporatedbyreferencetoExhibit10.2totheCompanysCurrent
ReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSECFebruary13,2006(theFebruary2006Form8-K)).*
FormofRestrictedStockAgreementpursuanttothe2004LTIP(incorporatedbyreferencetoExhibit10.1totheFebruary2006Form8-K).*
FormofAmendedandRestatedNon-QualifiedStockOptionAgreementpursuanttothe2004LTIP(incorporatedbyreferencetoExhibit10.1to
theCompanysQuarterlyReportonForm10-Q(CommissionFileNumber001-07959)fortheperiodendedJune30,2006(the2006Form10 Q2)).*
FormofAmendedandRestatedRestrictedStockAgreementpursuanttothe2004LTIP(incorporatedbyreferencetoExhibit10.2tothe2006
Form10-Q2).*
Formof2013PerformanceShareAgreementpursuanttothe2004LTIP(incorporatedbyreferencetoExhibit10.24tothe2013Form10-K).*
Formof2013RestrictedStockAwardAgreementpursuanttothe2004LTIP(incorporatedbyreferencetoExhibit10.24tothe2013Form10-K).
*
AnnualIncentivePlanforCertainExecutives,amendedandrestatedasofDecember2008(incorporatedbyreferencetoExhibit10.2totheJanuary
2009Form8-K).*
StarwoodHotels&ResortsWorldwide,Inc.AmendedandRestatedDeferredCompensationPlan,effectiveasofJanuary22,2008(incorporateby
referencetoExhibit10.35totheCompanysAnnualReportonForm10-K(CommissionFileNumber001-07959)forthefiscalyearended
December31,2007).*
StarwoodHotels&ResortsWorldwide,Inc.2013Long-TermIncentiveCompensationPlan(2013LTIP)(incorporatedbyreferencetoExhibit
4.4totheCompanysRegistrationStatementonFormS-8(CommissionFileNumber333-189674)filedJune28,2013).*
FormofIndemnificationAgreementbetweentheCompanyandeachofitsDirectorsandexecutiveofficers(incorporatedbyreferencetoExhibit
10.10totheCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEConNovember25,2009).*
SeparationAgreementandGeneralRelease,datedFebruary16,2015,betweentheCompanyandFritsvanPaasschen(incorporatedbyreferenceto
Exhibit10.1totheCompanysCurrentReportonForm8-KfiledwiththeSEConFebruary18,2015).*
FormofNon-QualifiedStockOptionAgreementbetweentheCompanyandFritsvanPaasschenpursuanttothe2004LTIP(incorporatedby
referencetoExhibit10.5totheCompanysQuarterlyReportonForm10-Q(CommissionFileNumber001-07959)fortheperiodendedSeptember
30,2007(the2007Form10-Q3)).*
EmploymentAgreement,datedasofNovember13,2003,betweentheCompanyandVasantPrabhu(incorporatedbyreferencetoExhibit10.68to
theCompanysAnnualReportonForm10-K(CommissionFileNumber001-07959)forthefiscalyearendedDecember31,2003).*
LetterAgreement,datedAugust14,2007,betweentheCompanyandVasantPrabhu(incorporatedbyreferencetoExhibit10.3totheCompanys
CurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEConAugust17,2007(theAugust17Form8-K)).*
Amendment,datedasofDecember30,2008,toemploymentagreementbetweentheCompanyandVasantPrabhu(incorporatedbyreferenceto
Exhibit10.34totheCompanysAnnualReportonForm10-K(CommissionFileNumber001-07959)forthefiscalyearendedDecember31,2008
(the2008Form10-K)).*
EmploymentAgreement,datedasofSeptember25,2000,betweentheCompanyandKennethSiegel(incorporatedbyreferencetoExhibit10.57to
theCompanysAnnualReportonForm10-K(CommissionFileNumber001-07959)forthefiscalyearendedDecember31,2000).*
LetterAgreement,datedJuly22,2004betweentheCompanyandKennethSiegel(incorporatedbyreferencetoExhibit10.73tothe2004Form10 K).*
Amendment,datedasofDecember30,2008,toemploymentagreementbetweentheCompanyandKennethS.Siegel(incorporatedbyreferenceto
Exhibit10.43tothe2008Form10-K).*
EmploymentAgreement,datedasofAugust2,2007,betweentheCompanyandBruceW.Duncan(incorporatedbyreferencetoExhibit10.5to
theCompanysQuarterlyReportonForm10-Q(CommissionFileNumber001-07959)forthequarterlyperiodendedJune30,2007).*
55

Exhibit
Number

10.41
10.42

10.43
10.44
10.45
10.46
10.47
10.48

10.49
10.50

10.51
10.52
10.53
10.54
10.55
10.56
10.57

10.58
10.59
10.60

10.61
10.62
10.63

10.64

Description of Exhibit

FormofRestrictedStockUnitAgreementbetweentheCompanyandBruceW.Duncanpursuanttothe2004LTIP(incorporatedbyreferenceto
Exhibit10.4totheCompanysQuarterlyReportonForm10-Q(CommissionFileNumber001-07959)fortheperiodendedMarch31,2007).*
AmendedandRestatedEmploymentAgreement,datedasofApril18,2013,byandbetweenStarwoodHotels&ResortsWorldwide,Inc.andFrits
vanPaasschen(incorporatedbyreferencetoExhibit10.1totheCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)
filedwiththeSEConApril24,2013).*
FormofRestrictedStockUnitAgreementbetweentheCompanyandFritsvanPaasschenpursuanttothe2004LTIP(incorporatedbyreferenceto
Exhibit10.6tothe2007Form10-Q3).*
FormofRestrictedStockGrantbetweentheCompanyandFritsvanPaasschenpursuanttothe2004LTIP(incorporatedbyreferenceto
Exhibit10.7tothe2007Form10-Q3).*
FormofSeveranceAgreementbetweentheCompanyandeachofMessrs.SiegelandPrabhu(incorporatedbyreferencetoExhibit10.57tothe
2008Form10-K).*
LetterAgreement,datedAugust22,2008,betweentheCompanyandMatthewAvril(incorporatedbyreferencetoExhibit10.1totheCompanys
QuarterlyReportonForm10-Q(CommissionFileNumber001-07959)forthequarterlyperiodendedMarch31,2009(the2009Form10-Q1).*
Amendment,datedasofDecember30,2008,toemploymentagreementbetweentheCompanyandMatthewAvril(incorporatedbyreferenceto
Exhibit10.2tothe2009Form10-Q1).*
Amendment,datedasofDecember15,2011,toemploymentagreementbetweentheCompanyandMatthewAvril(incorporatedbyreferenceto
Exhibit10.41totheCompanysAnnualReportonForm10-K(CommissionFileNumber001-07959)forthefiscalyearendedDecember31,
2011).*
AmendedandRestatedSeveranceAgreement,datedasofDecember30,2008,betweentheCompanyandMatthewAvril(incorporatedby
referencetoExhibit10.3tothe2009Form10-Q1).*
RetirementAgreementandMutualGeneralReleaseofClaimsbyandbetweenStarwoodInternationalLicensingCompany,S.A.R.L.,Starwood
Hotels&ResortsWorldwide,Inc.andMatthewE.Avril,datedasofApril12,2012(incorporatedbyreferencetoExhibit10.1totheCompanys
CurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSECApril16,2012).*
LetterAgreement,datedApril15,2008,betweentheCompanyandSimonTurner(incorporatedbyreferencetoExhibit10.7tothe2009Form10 Q1).*
Amendment,datedasofDecember30,2008,toemploymentagreementbetweentheCompanyandSimonTurner(incorporatedbyreferenceto
Exhibit10.8tothe2009Form10-Q1).*
AmendedandRestatedSeveranceAgreement,datedasofDecember30,2008,betweentheCompanyandSimonTurner(incorporatedbyreference
toExhibit10.9tothe2009Form10-Q1).*
EmploymentAgreement,datedAugust27,2012,betweentheCompanyandSergioRivera(incorporatedbyreferencetoExhibit10.24tothe2013
Form10-K).*
SeveranceAgreement,datedAugust27,2012,betweentheCompanyandSergioRivera(incorporatedbyreferencetoExhibit10.24tothe2013
Form10-K).*
StarwoodSavingsRestorationPlan(incorporatedbyreferencetoExhibit10.1totheCompanysQuarterlyReportonForm10-Q(CommissionFile
Number001-07959)forthequarterlyperiodendedSeptember30,2013).*
EmploymentAgreement,datedMay7,2014,betweentheCompanyandMarthaPoulter(incorporatedbyreferencetoExhibit10.1tothe
CompanysQuarterlyReportonForm10-Q(CommissionFileNumber001-07959)forthequarterlyperiodendedJune30,2014(the2014
Form10-Q2)).*
SeveranceAgreement,datedMay7,2014,betweentheCompanyandMarthaPoulter(incorporatedbyreferencetoExhibit10.2tothe2014Form
10-Q2).*
FormofRestrictedStockAwardAgreementpursuanttothe2013LTIP(incorporatedbyreferencetoExhibit10.3tothe2014Form10-Q2).*
EmploymentAgreement,datedAugust18,2014,betweentheCompanyandThomasB.Mangas(includingtheNon-Compete,Non-Solicitation,
ConfidentialityandIntellectualPropertyAgreementbetweentheCompanyandThomasB.Mangas)(incorporatedbyreferencetoExhibit10.1to
theCompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEConAugust27,2014(theAugust27Form
8-K)).*
SeveranceAgreement,datedAugust18,2014,betweentheCompanyandThomasB.Mangas(incorporatedbyreferencetoExhibit10.2tothe
August27Form8-K).*
FormofRestrictedStockAwardRetentionAgreementPursuanttothe2013LTIP(incorporatedbyreferencetoExhibit10.3tothe2014Form10 Q3).*
Amendment,datedasofMay27,2015,totheseveranceagreementbetweentheCompanyandThomasB.Mangas(incorporatedbyreferenceto
Exhibit10.1totheCompanysQuarterlyReportonForm10-Q(CommissionFileNumber001-07959)forthequarterlyperiodendedJune30,
2015).*
EmploymentAgreement,datedJune17,2015,betweentheCompanyandAdamM.Aron(incorporatedbyreferencetoExhibit10.1tothe
CompanysCurrentReportonForm8-K(CommissionFileNumber001-07959)filedwiththeSEConJune23,2015).*
56

Exhibit
Number

10.65

10.66
10.67
12.1
21.1
23.1
31.1
31.2
32.1
32.2
101

Description of Exhibit

LetterAgreement,datedDecember15,2015,betweentheCompanyandThomasB.Mangas(incorporatedbyreferencetoExhibit10.1tothe
CompanysCurrentReportonForm8-K/A(CommissionFileNumber001-07959)filedwiththeSEConDecember22,2015(theDecember22
Form8-K/A)).*
LetterAgreement,datedDecember17,2015,betweentheCompanyandAlanM.Schnaid(incorporatedbyreferencetoExhibit10.2tothe
December22Form8-K/A).*
SeparationAgreement,datedDecember15,2015betweentheCompanyandAdamM.Aron(incorporatedbyreferencetoExhibit10.3tothe
December22Form8-K/A).*
CalculationofRatioofEarningstoTotalFixedCharges.+
ListofourSubsidiaries.+
ConsentofErnst&YoungLLP.+
CertificationPursuanttoRule13a-14undertheSecuritiesExchangeActof1934ChiefExecutiveOfficer.+
CertificationPursuanttoRule13a-14undertheSecuritiesExchangeActof1934ChiefFinancialOfficer.+
CertificationPursuanttoSection1350ofChapter63ofTitle18oftheUnitedStatesCodeChiefExecutiveOfficer.+
CertificationPursuanttoSection1350ofChapter63ofTitle18oftheUnitedStatesCodeChiefFinancialOfficer.+
ThefollowingmaterialsfromStarwoodHotels&ResortsWorldwide,Inc.sAnnualReportonForm10-KfortheyearendedDecember31,2015
formattedinXBRL(eXtensibleBusinessReportingLanguage):(i)theConsolidatedBalanceSheets,(ii)theConsolidatedStatementsofIncome,
(iii)theConsolidatedStatementsofComprehensiveIncome,(iv)theConsolidatedStatementsofEquity,(v)theConsolidatedStatementsofCash
Flows,and(vi)notestotheconsolidatedfinancialstatements.+

+
*

Filedherewith.
Indicatesmanagementcontractorcompensatoryplanorarrangement

The registrant hereby agrees to file with the Commission a copy of any instrument defining the rights of long-term debt holders of the registrant and its
consolidatedsubsidiariesupontherequestoftheCommission.

57

SIGNAT URES
Pursuanttotherequirements ofSection13or15(d)oftheSecuritiesExchangeActof1934,theregistranthasdulycausedthisreporttobesignedonits
behalfbytheundersigned,thereuntodulyauthorized.

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

By: /S/THOMASB.MANGAS

Thomas B. Mangas

Chief Executive Officer and Director

Date:February25,2016

PursuanttotherequirementsoftheSecuritiesExchangeActof1934,thisreporthasbeensignedbelowbythefollowingpersonsonbehalfoftheregistrantin
thecapacitiesandonthedatesindicated.

Signature

Title

Date

/S/THOMASB.MANGAS
ThomasB.Mangas

ChiefExecutiveOfficerandDirector

February25,2016

/S/BRUCEW.DUNCAN
BruceW.Duncan

ChairmanandDirector

February25,2016

/S/ALANM.SCHNAID
AlanM.Schnaid
/S/CHARLENEBARSHEFSKY
CharleneBarshefsky

SeniorVicePresidentandChief
FinancialOfficer(PrincipalAccountingOfficer)

Director

February25,2016

February25,2016

/S/THOMASE.CLARKE
ThomasE.Clarke

Director

February25,2016

/S/CLAYTONC.DALEY,JR.
ClaytonC.Daley,Jr.

Director

February25,2016

/S/LIZANNEGALBREATH
LizanneGalbreath

Director

February25,2016

/S/ERICHIPPEAU
EricHippeau

Director

February25,2016

/S/AYLWINB.LEWIS
AylwinB.Lewis

Director

February25,2016

/S/STEPHENR.QUAZZO
StephenR.Quazzo

Director

February25,2016

/S/THOMASO.RYDER
ThomasO.Ryder

Director

February25,2016

58

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

ManagementsReportonInternalControloverFinancialReporting
ReportofIndependentRegisteredPublicAccountingFirm
ReportofIndependentRegisteredPublicAccountingFirm
ConsolidatedBalanceSheetsasofDecember31,2015and2014
ConsolidatedStatementsofIncomefortheYearsEndedDecember31,2015,2014and2013
ConsolidatedStatementsofComprehensiveIncomefortheYearsEndedDecember31,2015,2014and2013
ConsolidatedStatementsofEquityfortheYearsEndedDecember31,2015,2014and2013
ConsolidatedStatementsofCashFlowsfortheYearsEndedDecember31,2015,2014and2013
NotestoFinancialStatements
Schedule:
ScheduleIIValuationandQualifyingAccounts

Page

F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10

S-1

Managements Report on Internal C ontrol over Financial Reporting

Management of Starwood Hotels & Resorts Worldwide, Inc. and its subsidiaries (Company) is responsible for establishing and maintaining adequate
internalcontroloverfinancialreporting,assuchtermisdefinedinExchangeActRule13a-15(f)or15d-15(f).
OurmanagementassessedtheeffectivenessoftheCompanysinternalcontrolsoverfinancialreportingasofDecember31,2015.Inmakingthisassessment,
theCompanysmanagementusedthecriteriaestablishedinInternalControl-IntegratedFramework(2013)issuedbytheCommitteeofSponsoringOrganizationsof
theTreadwayCommission(COSO).Basedonassessmentandthosecriteria,managementbelievesthat,asofDecember31,2015,theCompanysinternalcontrol
overfinancialreportingiseffective.
ManagementhasengagedErnst&YoungLLP,theindependentregisteredpublicaccountingfirmthatauditedtheconsolidatedfinancialstatementsincluded
inthisAnnualReportonForm10-K,toattesttotheCompanysinternalcontroloverfinancialreporting.Thereportisincludedherein.
F-2

Report of Independent R egistered Public Accounting Firm

TheBoardofDirectorsandStockholdersofStarwoodHotels&ResortsWorldwide,Inc.
WehaveauditedStarwoodHotels&ResortsWorldwide,Inc.s(theCompany)internalcontroloverfinancialreportingasofDecember31,2015,basedon
criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) (the COSO criteria). The Companys management is responsible for maintaining effective internal control over financial reporting, and for its
assessmentoftheeffectivenessofinternalcontroloverfinancialreportingincludedintheaccompanyingManagementsReportonInternalControloverFinancial
Reporting.Ourresponsibilityistoexpressanopiniononthecompanysinternalcontroloverfinancialreportingbasedonouraudit.
WeconductedourauditinaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).Thosestandardsrequirethat
we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects.Ourauditincludedobtaininganunderstandingofinternalcontroloverfinancialreporting,assessingtheriskthatamaterialweaknessexists,testingand
evaluatingthedesignandoperatingeffectivenessofinternalcontrolbasedontheassessedrisk,andperformingsuchotherproceduresasweconsiderednecessaryin
thecircumstances.Webelievethatourauditprovidesareasonablebasisforouropinion.
Acompanysinternalcontroloverfinancialreportingisaprocessdesignedtoprovidereasonableassuranceregardingthereliabilityoffinancialreportingand
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over
financialreportingincludesthosepoliciesandproceduresthat(1)pertaintothemaintenanceofrecordsthat,inreasonabledetail,accuratelyandfairlyreflectthe
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorizedacquisition,use,ordispositionofthecompanysassetsthatcouldhaveamaterialeffectonthefinancialstatements.
Becauseofitsinherentlimitations,internalcontroloverfinancialreportingmaynotpreventordetectmisstatements.Also,projectionsofanyevaluationof
effectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewith
thepoliciesorproceduresmaydeteriorate.
Inouropinion,theCompanymaintained,inallmaterialrespects,effectiveinternalcontroloverfinancialreportingasofDecember31,2015,basedonthe
COSOcriteria.
Wealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates),theconsolidatedbalancesheets
oftheCompanyasofDecember31,2015and2014andtherelatedconsolidatedstatementsofincome,comprehensiveincome,equity,andcashflowsforeachofthe
threeyearsintheperiodendedDecember31,2015oftheCompanyandourreportdatedFebruary25,2016expressedanunqualifiedopinionthereon.

/s/Ernst&YoungLLP

Stamford,Connecticut
February25,2016

F-3

Report of Independent Registered Public Accounting Firm

TheBoardofDirectorsandStockholdersofStarwoodHotels&ResortsWorldwide,Inc.
WehaveauditedtheaccompanyingconsolidatedbalancesheetsofStarwoodHotels&ResortsWorldwide,Inc.(theCompany)asofDecember31,2015
and 2014, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended
December 31, 2015. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the
responsibilityoftheCompanysmanagement.Ourresponsibilityistoexpressanopiniononthesefinancialstatementsandschedulebasedonouraudits.
WeconductedourauditsinaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates).Thosestandardsrequirethat
weplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreeofmaterialmisstatement.Anauditincludesexamining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significantestimatesmadebymanagement,aswellasevaluatingtheoverallfinancialstatementpresentation.Webelievethatourauditsprovideareasonablebasis
forouropinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at
December31,2015and2014,andtheconsolidatedresultsofitsoperationsanditscashflowsforeachofthethreeyearsintheperiodendedDecember31,2015,in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the
basicfinancialstatementstakenasawhole,presentsfairlyinallmaterialrespectstheinformationsetforththerein.
Wealsohaveaudited,inaccordancewiththestandardsofthePublicCompanyAccountingOversightBoard(UnitedStates),theCompanysinternalcontrol
overfinancialreportingasofDecember31,2015,basedoncriteriaestablishedinInternalControl-IntegratedFrameworkissuedbytheCommitteeofSponsoring
OrganizationsoftheTreadwayCommission(2013framework)andourreportdatedFebruary25,2016expressedanunqualifiedopinionthereon.

/s/Ernst&YoungLLP

Stamford,Connecticut
February25,2016

F-4

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED BALANCE SHEETS
(In millions, except share data)

December 31,
2015

ASSETS
Currentassets:
Cashandcashequivalents
Restrictedcash
Accountsreceivable,netofallowancefordoubtfulaccountsof$78and$63
Inventories
Securitizedvacationownershipnotesreceivable,netof
allowancefordoubtfulaccountsof$2and$4
Deferredincometaxes
Prepaidexpensesandother
Totalcurrentassets
Investments
Plant,propertyandequipment,net
Goodwillandintangibleassets,net
Deferredincometaxes
Otherassets
Securitizedvacationownershipnotesreceivable,net

LIABILITIES AND STOCKHOLDERS EQUITY

Currentliabilities:
Short-termborrowingsandcurrentmaturitiesoflong-termdebt
Accountspayable
Currentmaturitiesoflong-termsecuritizedvacationownershipdebt
Accruedexpenses
Accruedsalaries,wagesandbenefits
Accruedtaxesandother
Totalcurrentliabilities
Long-termdebt
Long-termsecuritizedvacationownershipdebt
Deferredincometaxes
Otherliabilities

1,048
54
690
319

32

152
2,295
183
2,144
1,908
747
850
141
8,268

47
199
159
2,321
214
2,634
1,956
596
711
227
8,659

33
98
48
1,354
400
303
2,236
2,154
124
34
2,421
6,969

297
101
73
1,307
416
256
2,450
2,398
176
38
2,069
7,131

Commitmentsandcontingencies

Stockholdersequity:

Commonstock;$0.01parvalue;authorized1,000,000,000
shares;outstanding168,754,605and172,694,299shares
atDecember31,2015and2014,respectively

Additionalpaid-incapital

Accumulatedothercomprehensiveloss

Retainedearnings

TotalStarwoodstockholdersequity

Noncontrollinginterest

Totalequity

Totalliabilitiesandequity
$

Theaccompanyingnotestofinancialstatementsareanintegralpartoftheabovestatements.

F-5

2014

2
115
(668)
1,847
1,296
3
1,299
8,268

935
84
661
236

2
47
(508)
1,984
1,525
3
1,528
8,659

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)

Year Ended December 31,

2014

2015

Revenues
Owned,leasedandconsolidatedjointventurehotels
Vacationownershipandresidentialsalesandservices
Managementfees,franchisefeesandotherincome
Otherrevenuesfrommanagedandfranchisedproperties

Costs and Expenses

Owned,leasedandconsolidatedjointventurehotels
Vacationownershipandresidential
Selling,general,administrativeandother
Restructuringandotherspecialcharges(credits),net
Depreciation
Amortization
Otherexpensesfrommanagedandfranchisedproperties

Operatingincome
Equityearningsandgainsfromunconsolidatedventures,net
Interestexpense,netofinterestincomeof$5,$3and$3
Lossonearlyextinguishmentofdebt,net
Lossonassetdispositionsandimpairments,net
Incomefromcontinuingoperationsbeforetaxesandnoncontrollinginterests
Incometaxexpense
Incomefromcontinuingoperations
Discontinuedoperations:
Lossfromoperations,netoftax(benefit)expenseof$0,$0and$0
Gain(loss)ondispositions,netoftaxbenefitof$0,$(5)and$(69)
NetincomeattributabletoStarwood

2013

1,293
687
1,047
2,736
5,763

1,005
514
388
100
251
29
2,736
5,023
740
41
(111)

(1)
669
(180)
489



489

1,541
674
1,057
2,711
5,983

1,211
497
402
(4)
254
29
2,711
5,100
883
27
(94)
(1)
(33)
782
(139)
643


(10)
633

1,612
924
965
2,614
6,115

1,292
632
384
1
239
28
2,614
5,190
925
26
(100)

(23)
828
(263)
565

(1)
71
635

Earnings (Losses) Per Share Basic

Continuingoperations
Discontinuedoperations
Netincome

$

$

2.90

2.90

3.49
(0.06)
3.43

2.96
0.37
3.33

Earnings (Losses) Per Share Diluted

Continuingoperations
Discontinuedoperations
Netincome

$

$

2.88

2.88

3.46
(0.06)
3.40

2.92
0.36
3.28

Weightedaveragenumberofshares

169

185

191

Weightedaveragenumberofsharesassumingdilution

170

186

193

Dividendsdeclaredpershare

1.50 $

4.00 $

1.35

Theaccompanyingnotestofinancialstatementsareanintegralpartoftheabovestatements.

F-6

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)

2015

Year Ended December 31,

2014

Netincome
$
489 $
Othercomprehensiveincome(loss),netoftaxes:


Foreigncurrencytranslationadjustments

(156)
Definedbenefitpensionandpostretirementplansactivity

(2)
Hedgingactivities

(2)
Totalothercomprehensive(loss)income,netoftaxes

(160)
Totalcomprehensiveincome

329
Comprehensive(income)lossattributable
tononcontrollinginterests


Foreigncurrencytranslationadjustmentsattributable
tononcontrollinginterests


ComprehensiveincomeattributabletoStarwood
$
329 $

Theaccompanyingnotestofinancialstatementsareanintegralpartoftheabovestatements.

F-7

633

(162)
(13)
3
(172)
461

2013

635

(20)
22
1
3
638

(1)
460 $

638

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF EQUITY

Equity Attributable to Starwood Stockholders

Shares
BalanceatDecember31,2012
Netincome
Stockoptionandrestrictedstock
awardtransactions,net(1)
ESPPstockissuances
Sharerepurchases
Othercomprehensiveincome
Dividends
Acquisitionofnon-controlling
interest
BalanceatDecember31,2013
Netincome
Stockoptionandrestrictedstock
awardtransactions,net(1)
ESPPstockissuances
Sharerepurchases
Othercomprehensive(loss)income
Dividends
Acquisitionofnon-controlling
interest
BalanceatDecember31,2014
Netincome
Stockoptionandrestrictedstock
awardtransactions,net(1)
ESPPstockissuances
Sharerepurchases
Othercomprehensiveloss
Dividends
RedemptionofSLCOperating
LimitedPartnershipUnits
Other
BalanceatDecember31,2015

Shares
Amount

193 $

4

(5)

2 $

192

(20)

173

(4)

169 $

Additional
Paid-in

Accumulated
Other
Comprehensive

Retained

Equity
Attributable to
Noncontrolling

Capital

(Loss) Income

Earnings

Interests

(in millions)
816 $
(338) $


154
6
(316)

1
661

79
7
(700)

(335)

(173)

47

(508)

68
7

(160)

2 $

(4)
(3)
115 $

(260)

(936)

(745)

1,984
489

(668) $

3,032
633

2,657 $
635

(371)

(255)

1,847 $

Total

5 $

154
6
(316)
3
(260)

(2)
3

(1)
3,363
633

3,142
635

79
7
(1,636)
(172)
(745)

(1)
3

(1)
1,528
489

68
7
(371)
(160)
(255)

3 $

(4)
(3)
1,299

(1)

Stockoptionandrestrictedstockawardtransactionsarenetofataxbenefitof$13million,$9millionand$26millionin2015,2014,and2013,respectively.
Theaccompanyingnotestofinancialstatementsareanintegralpartoftheabovestatements.

F-8


STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

Year Ended December 31,

2014

2015
Operating Activities
Netincome
Adjustmentstonetincome:
Discontinuedoperations:
(Gain)lossondispositions,net
Stock-basedcompensationexpense
Excessstock-basedcompensationtaxbenefit
Depreciationandamortization
Amortizationofdeferredloancosts
(Gain)lossondebtextinguishment,net
Non-cashportionofrestructuringandotherspecialcharges(credits),net
Non-cashforeigncurrency(gains)losses,net
Amortizationofdeferredgains
Provisionfordoubtfulaccounts
Distributionsin(deficit)excessofequityearnings
Lossonassetdispositionsandimpairments,net
Non-cashportionofincometaxexpense(benefit)
Changesinworkingcapital:
Restrictedcash
Accountsreceivable
Inventories
Prepaidexpensesandother
Accountspayableandaccruedexpenses
Accruedincometaxes
SecuritizedVOInotesreceivableactivity,net
VOInotesreceivableactivity,net
Other,net
Cashfromoperatingactivities
Investing Activities
Purchasesofplant,propertyandequipment
Proceedsfromassetsales,net
Issuanceofnotesreceivable
Collectionofnotesreceivable,net
Acquisitions,netofacquiredcash
Purchasesofinvestments
Proceedsfrominvestments
Other,net
Cashfrom(usedfor)investingactivities
Financing Activities
Revolvingcreditfacilityandshort-termborrowings(repayments),net
Commercialpaper,net
Long-termdebtissued
Long-termdebtrepaid
Long-termsecuritizeddebtrepaid
(Increase)decreaseinrestrictedcash
Dividendspaid
Proceedsfromstockoptionexercises
Excessstock-basedcompensationtaxbenefit
Sharerepurchases
Other,net
Cashusedforfinancingactivities
Exchangerateeffectoncashandcashequivalents
Increase(decrease)incashandcashequivalents
Cashandcashequivalentsbeginningofperiod
Cashandcashequivalentsendofperiod

2013

489

56
(13 )
280
4

13
(12 )
(91 )
37
(8 )
1
19

30
(36 )
(69 )
2
102
22
68
(102 )
98
890

(261 )
767
(44 )
9
(66 )
(2 )
45
19
467

(4 )
(226 )
10
(298 )
(77 )

(259 )
13
13
(371 )
(28 )
(1,227 )
(17 )
113
935
1,048

633

10
52
(9 )
283
4
1
(1 )
(4 )
(86 )
25
6
33
(17 )

(31 )
(8 )
22
(45 )
233

97
(108 )
(96 )
994

(327 )
800
(6 )
5
(45 )
(1 )
6
(11 )
421

634
656
(2 )
(106 )
94
(735 )
27
9
(1,636 )
(28 )
(1,087 )
(9 )
319
616
935

635

(71 )
54
(26 )
267
5
(4 )
1
14
(91 )
22

23
65

46
(42 )
156
(4 )
10
58
144
(157 )
46
1,151

(364 )
260

3
(67 )
(1 )
4
7
(158 )

(1 )
(178 )
(19 )
(256 )
88
26
(316 )
(22 )
(678 )
(4 )
311
305
616

Supplemental Disclosures of Cash Flow Information

Cashpaidduringtheperiodfor:
Interest
Incometaxes,netofrefunds

$
$

111
119

$
$

74
141

$
$

68
130

Non-cashcapitalleaseobligation

Theaccompanyingnotestofinancialstatementsareanintegralpartoftheabovestatements.

F-9

153 $

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO 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&ResortsWorldwide,Inc.andoursubsidiaries(we,us,theCompany,orStarwood).Weareoneoftheworldslargesthotelandleisurecompanies.Our
principal business is hotels and leisure, which is comprised of a worldwide hospitality network of 1,297 full-service hotels, vacation ownership resorts and
residentialdevelopmentsprimarilyservingtwomarkets:luxuryandupperupscale.TheprincipaloperationsofStarwoodVacationOwnership,Inc.(SVO)include
thedevelopmentandoperationofvacationownershipresortsandmarketing,sellingandfinancingofvacationownershipinterests(VOIs)intheresorts.
The consolidated financial statements include our assets, liabilities, revenues and expenses and those of our controlled subsidiaries and partnerships. In
consolidating,allmaterialintercompanytransactionsareeliminated.Wehaveevaluatedallsubsequenteventsthroughthedatetheconsolidatedfinancialstatements
werefiledwiththeSecuritiesandExchangeCommission.
FollowingtheguidancefornoncontrollinginterestsinAccountingStandardsCodification(ASC)Topic810,Consolidation ,referencesinthisreporttoour
earnings per share, net income, and stockholders equity attributable to Starwoods common stockholders do not include amounts attributable to noncontrolling
interests.
Note 2.

Significant Accounting Policies

Cash and Cash Equivalents. Weconsiderallhighlyliquidinvestmentspurchasedwithanoriginalmaturityofthreemonthsorlesstobecashequivalents.

Restricted Cash. Restricted cash primarily consists of deposits received on sales of VOIs that are held in escrow until a certificate of occupancy is
obtained,thelegalrescissionperiodhasexpiredandthedeedoftrusthasbeenrecordedingovernmentalpropertyownershiprecords.Additionally,restrictedcash
includescashheldbyourVIEsfromoursecuritizationtransactions(seeNote8).
Inventories. InventoriesarecomprisedprincipallyofVOIsof$303millionand$213millionasofDecember31,2015and2014,respectively,andhotel
inventory.VOIinventory,whichhasanoperatingcyclethatgenerallyexceeds12months,isclassifiedasacurrentassetconsistentwithrecognizedindustrypractice.
VOI inventory is carried at the lower of cost or net realizable value and includes capitalized interest. Capitalized interest incurred in 2015, 2014 and 2013 was
approximately $5million, $1million and$1million, respectively. Hotelinventory includes operating supplies andfoodandbeverage inventory items whichare
generallyvaluedatthelowerofFIFOcost(first-in,first-out)ormarket.
Loan Loss Reserves. Forthevacationownershipandresidentialsegment,werecordanestimateofexpecteduncollectibilityonourVOInotesreceivable
as a reduction of revenue at the time we recognize a timeshare sale. We hold large amounts of homogeneous VOI notes receivable and therefore assess
uncollectibilitybasedonpoolsofreceivables.Inestimatingloanlossreserves,weuseatechniquereferredtoasstaticpoolanalysis,whichtracksdefaultsforeach
yearsmortgageoriginationsoverthelifeoftherespectivenotesandprojectsanestimateddefaultrate.AsofDecember31,2015and2014,theaverageestimated
defaultrateofourpoolsofreceivableswas9.1%and9.2%,respectively.
Weusetheoriginationofthenotesbybrand(Sheraton,Westin,andOther)andtheFairIsaacCorporation(FICO)scoresofthebuyersastheprimarycredit
qualityindicatorstocalculatetheloanlossreserveforthevacationownershipnotes,aswebelievethereisarelationshipbetweenthedefaultbehaviorofborrowers
andthebrandassociated withthevacation ownership property theyhave acquired, supplemented bytheFICOscoresofthebuyers.Inaddition toquantitatively
calculating the loan loss reserve based on our static pool analysis, we supplement the process by evaluating certain qualitative data, including the aging of the
respectivereceivablesandcurrentdefaulttrendsbybrandandoriginationyear.
Given the significance ofour pools of VOInotes receivable, a change in the projected default rate can have a significant impact toour loan loss reserve
requirements,witha0.1%changeestimatedtohaveanimpactofapproximately$5million.
WeconsideraVOInotereceivabledelinquentwhenitismorethan30daysoutstanding.Alldelinquentloansareplacedonnonaccrualstatus,andwedonot
resumeinterestaccrualuntilpaymentismade.Weconsiderloanstobeindefaultuponreaching120daysoutstanding,atwhichpointwegenerallycommencethe
repossessionprocess.UncollectibleVOInotesreceivablearechargedoffwhentitletotheunitisreturnedtous.Wegenerallydonotmodifyvacationownership
notesthatbecomedelinquentorupondefault.
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NOTES TO FINANCIAL STATEMENTS

Forthehotelsegments,wemeasuretheimpairmentofaloanbasedonthepresentvalueofexpectedfuturecashflows,discountedattheloansoriginal
effective interest rate, or the estimated fair value of the collateral. For impaired loans, we establish a specific impairment reserve for the difference between the
recordedinvestmentintheloanandthepresentvalueoftheexpectedfuturecashflowsortheestimatedfairvalueofthecollateral.Weapplytheloanimpairment
policyindividuallytoallloansintheportfolioanddonotaggregateloansforthepurposeofapplyingsuchpolicy.Forloansthatwehavedeterminedtobeimpaired,
werecognizeinterestincomeonacashbasis.
Investments. Investmentsinjointventuresaregenerallyaccountedforundertheequitymethodofaccountingwhenwehavea20%to50%ownership
interestorexercisesignificantinfluenceovertheventure.Ifourinterestexceeds50%or,ifwehavethepowertodirecttheeconomicactivitiesoftheentityandthe
obligation to absorb losses or receive benefits from the entity that could be significant, then the results of the joint venture are consolidated herein. All other
investmentsaregenerallyaccountedforunderthecostmethod.
Thefairmarketvalueofinvestmentsisbasedonthemarketpricesforthelastdayoftheperiodiftheinvestmenttradesonquotedexchanges.Fornon-traded
investments, fair value is estimated based on the underlying value of the investment, which is dependent on the performance of the investment as well as the
volatility inherent in external markets. In assessing potential impairment for an investment, we will consider these factors as well as the forecasted financial
performanceoftheinvestment.Iftheforecastisnotmet,wemayhavetorecordanimpairmentcharge.
Assets Held for Sale. Weconsiderpropertiestobeassetsheldforsalewhenmanagementapprovesandcommitstoaformalplantoactivelymarketa
propertyorgroupofpropertiesforsaleandasignedsalescontractandsignificantnon-refundabledepositorcontractbreak-upfeeexists.Upondesignationasan
assetheldforsale,werecordthecarryingvalueofeachpropertyorgroupofpropertiesatthelowerofitscarryingvalue,whichincludesallocablesegmentgoodwill,
oritsestimatedfairvalue,lessestimatedcoststosell,andwestoprecordingdepreciationexpense.Anygainrealizedinconnectionwiththesaleofapropertyfor
which we have significant continuing involvement (such as through a long-term management agreement) is deferred and recognized over the initial term of the
relatedagreement(seeNote10).PriortoouradoptionofAccountingStandardUpdate(ASU)No.2014-08,PresentationofFinancialStatementsonJuly1,2014,
theoperationsofthepropertiessoldorheldforsalepriortothesaledatewererecordedindiscontinuedoperationsunlesswehadsignificantcontinuinginvolvement
(suchasthroughamanagementorfranchiseagreement)afterthesale.AfterouradoptionofASUNo.2014-08,theoperationsofpropertiessoldorheldforsaleprior
tothesaledatearerecordedindiscontinuedoperationsonlyifthedisposalrepresentsastrategicshiftthatwillhaveamajoreffectonouroperationsandfinancial
results.
Plant, Property and Equipment. Plant, property and equipment are recorded at cost. We recorded capitalized interest of $2 million, $4 million and
$6 million incurred in 2015, 2014 and 2013, respectively. The costs of improvements that extend the life of plant, property and equipment, such as structural
improvements,equipmentandfixtures,arecapitalized.Costsfornormalrepairsandmaintenanceareexpensedasincurred.Depreciationisrecordedonastraightlinebasisovertheestimatedusefuleconomiclivesof15to40yearsforbuildingsandimprovements;3to10yearsforfurniture,fixturesandequipment;3to20
yearsforinformationtechnologysoftwareandequipment;andthelesseroftheleasetermortheeconomicusefullifeforleaseholdimprovements.Gainsorlosseson
thesaleorretirementofassetsareincludedinincomewhentheassetsareretiredorsoldprovidedthereisreasonableassuranceofthecollectabilityofthesalesprice
andanyfutureactivitiestobeperformedbyusrelatingtotheassetssoldareinsignificant.
We evaluate the carrying value of our assets for impairment in accordance with ASC Topic 360, Property Plant, and Equipment .Whenatrigger event
occursforassetsinuse,wecomparetheexpectedundiscountedfuturecashflowsoftheassetstothenetbookvalueoftheassets.Iftheexpectedundiscountedfuture
cashflowsarelessthanthenetbookvalueoftheassets,wechargetheexcessofthenetbookvalueovertheestimatedfairvaluetocurrentearnings.Fairvalueis
baseduponthediscountedcashflowsoftheassetsatratesdeemedreasonableforthetypeofassetandprevailingmarketconditions,comparativesalesforsimilar
assets,appraisalsand,ifappropriate,currentestimatednetsalesproceedsfrompendingoffers(seeNote4).
Goodwill and Intangible Assets. Goodwill and intangible assets arise in connection with acquisitions, including the acquisition of management and
franchisecontracts.Wedonotamortizegoodwillandintangibleassetswithindefinitelives.Intangibleassetswithfinitelivesareamortizedovertheirrespective
usefullives.InaccordancewithASCTopic350,Intangibles Goodwill and Other, wereviewallgoodwillandintangibleassetsforimpairmentannually,orupon
theoccurrenceofatriggerevent.
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Whentestinggoodwillforimpairment,ASCTopic350permitsustoassessqualitativefactorstodeterminewhetheritismorelikelythannotthatthefair
valueofthereportingunitislessthanitscarryingamountasabasistodeterminewhetherthetwo-stepimpairmenttestisnecessary.Wealsohavetheoptionto
bypassthequalitativeassessmentforanyreportingunitinanyperiodandproceeddirectlytoperformingthefirststepofthetwo-stepgoodwillimpairmenttest.We
mayalsoqualitativelyassessourindefinitelivedintangibleassetsforimpairmentpriortoperformingthequantitativeimpairmenttest.Weevaluatetherecoverability
ofourfinitelivedintangibleassetsinthesamemannerinwhichourproperty,plantandequipmentareevaluated,asdiscussedabove.Impairmentcharges,ifany,are
recognizedinoperatingresults.
Frequent Guest Program. StarwoodPreferredGuest(SPG)isourfrequentguestincentivemarketingprogram.SPGmembersearnpointsbasedon
spendingatourowned,managedandfranchisedhotels,asincentivestofirst-timebuyersofVOIsandresidences,andthroughparticipationinaffiliatedpartners
programssuchasco-brandedcreditcardsandairlinetravel.Pointsmayberedeemedatsubstantiallyallofourowned,leased,managedandfranchisedhotelsaswell
asthroughotherredemptionopportunitieswiththirdparties,suchasconversiontoairlinemiles.
We charge our owned, managed and franchised hotels the cost of operating the SPG program, including the estimated cost of our future redemption
obligation,basedonapercentageofourSPGmembersqualifiedexpenditures.Ourmanagementandfranchiseagreementsrequirethatwearereimbursedforthe
costsofoperatingtheSPGprogram,includingmarketing,promotionsandcommunications,andperformingmemberservicesfortheSPGmembers.Aspointsare
earned,weincreasetheSPGpointliabilityfortheamountofcashwereceivefromourmanagedandfranchisedhotelsrelatedtothefutureredemptionobligation.
Forourownedhotels,werecordanexpensefortheamountofourfutureredemptionobligationwiththeoffsettotheSPGpointliability.Whenpointsareredeemed
bytheSPGmembers,thehotelsrecognizerevenueandtheSPGpointliabilityisreduced.
Throughtheservicesofthird-partyactuarialanalysts,wedeterminethevalueofthefutureredemptionobligation.Thisvalueisbasedonstatisticalformulas
whichprojectthetimingoffuturepointredemptionsbasedonhistoricalexperience,includinganestimateofthebreakageforpointsthatwillneverberedeemed,
and an estimate of the points that will eventually be redeemed as well as the cost of reimbursing hotels and other third-parties for other point redemption
opportunities.
We consolidate the assets and liabilities of the SPG program including the liability associated with the future redemption obligation which is included in
otherlong-termliabilitiesandaccruedexpensesintheaccompanyingconsolidatedbalancesheets.Thetotalactuariallydeterminedliability,asofDecember31,2015
and2014,was$1,219millionand$1,115million,respectively,ofwhich$491millionand$453million,respectively,wasincludedinaccruedexpenses.A10%
decreasetothebreakageestimateusedindeterminingthefutureredemptionobligationatDecember31,2015wouldhaveincreasedtheliabilitybyapproximately
$41million.
Legal Contingencies. Wearesubjecttovariouslegalproceedingsandclaims,theoutcomesofwhicharesubjecttosignificantuncertainty.ASCTopic
450,Contingencies, requiresthatanestimatedlossfromalosscontingencybeaccruedwithacorrespondingchargetoincomeifitisprobablethatanassethasbeen
impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a contingency is required if there is at least a
reasonablepossibilitythatalosshasbeenincurred.Weevaluate,amongotherfactors,thedegreeofprobabilityofanunfavorableoutcomeandtheabilitytomakea
reasonableestimateoftheamountoftheloss.Changesinthesefactorscouldmateriallyimpactourfinancialpositionorourresultsofoperations(seeNote24).
Fair Value of Financial Instruments. Fairvalueisdefinedastheexchangepricethatwouldbereceivedforanassetorpaidtotransferaliability(anexit
price)intheprincipalormostadvantageousmarketfortheassetorliabilityinanorderlytransactionbetweenmarketparticipantsonthemeasurementdate.Thefair
valuehierarchyprioritizestheinputstovaluationmethodologiesusedtomeasurefairvalueasfollows:

Level1Quotedpricesinactivemarketsforidenticalassetsorliabilities.

Level2InputsotherthanLevel1thatareobservable,eitherdirectlyorindirectly,suchasquotedpricesforsimilarassetsorliabilities,quoted
pricesinmarketsthatarenotactive,orotherinputsthatareobservableorcanbecorroboratedbyobservablemarketdataforsubstantiallythefull
termoftheassetsorliabilities.

Level3Unobservableinputsthataresupportedbylittleornomarketactivityandthataresignificanttothefairvalueoftheassetsorliabilities.
F-12

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NOTES TO FINANCIAL STATEMENTS

Derivative Financial Instruments. Werecordderivativesatfairvalue.Thedesignationofaderivativeinstrumentasahedgeanditsabilitytomeetthe

hedgeaccountingcriteriadeterminehowwereflectthechangeinfairvalueofthederivativeinstrumentinourfinancialstatements.Aderivativequalifiesforhedge
accounting if, at inception, the derivative is expected to behighly effective in offsetting the underlying hedgedcash flows or fair value andwefulfill the hedge
documentationstandardsatthetimeweenterintothederivativecontract.Wedesignateahedgeasacashflowhedge,fairvaluehedge,oranetinvestmenthedgein
non-U.S. operations based on the exposure we are hedging. For the effective portion of qualifying cas h flow hedges, we record changes in fair value in other
comprehensiveincome(OCI).WereleasethederivativesgainorlossfromOCItomatchthetimingoftheunderlyinghedgeditemseffectonearnings.
Wereviewtheeffectivenessofourhedginginstrumentsquarterlyandrecognizecurrentperiodhedgeineffectiveness,ifany,immediatelyinearnings.We
recognizechangesinthefairvalueforderivativesnotdesignatedashedgesorthosenotqualifyingforhedgeaccountingincurrentperiodearnings.Wediscontinue
hedge accounting for any hedge that is no longer evaluated to be highly effective. From time to time we may choose to de-designate portions of hedges when
changesinestimatesofforecastedtransactionsoccur.
Wedonotenterintoderivativefinancialinstrumentsfortradingorspeculativepurposes,andwemonitorthefinancialstabilityandcreditstandingofour
counterpartiesinthesetransactions.
Foreign Currency Translation. Balancesheetaccountsaretranslatedattheexchangeratesineffectateachperiodendandincomeandexpenseaccounts
are translated at the average rates of exchange prevailing during the year. The national currencies of foreign operations are generally the functional currencies.
Translationadjustmentsfromforeigncurrencyexchangeandtheeffectofexchangeratechangesonintercompanytransactionsofalong-terminvestmentnatureare
generallyincludedinothercomprehensiveincome.Gainsandlossesfromforeignexchangeratechangesrelatedtointercompanyreceivablesandpayablesthatare
notofalong-terminvestmentnaturearereportedcurrentlyincostsandexpensesandamountedtoanetgainof$12millionin2015,anetgainof$4millionin2014
andanetlossof$14millionin2013.
Income Taxes. We provide for income taxes in accordance with principles contained in ASC Topic 740, Income Taxes. Under these principles, we
recognizetheamountofincometaxpayableorrefundableforthecurrentyearanddeferredtaxassetsandliabilitiesforthefuturetaxconsequencesofeventsthat
havebeenrecognizedinourfinancialstatementsortaxreturns.
Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be
recoveredorsettled.Theeffectondeferredtaxassetsandliabilitiesofachangeintaxratesisrecognizedinearningsintheperiodwhenthenewrateisenacted.
Deferred tax assets are evaluated for future realization and reduced by a valuation allowance if it is more likely than not that a portion will not be realized. In
assessingwhetheritismorelikelythannotthatdeferredtaxassetswillberealized,weconsiderallavailableevidence,bothpositiveandnegative,includingour
recentcumulativeearningsexperienceandexpectationsoffutureavailabletaxableincomeoftheappropriatecharacterbytaxingjurisdiction,taxattributecarryback
andcarryforwardperiodsavailabletousfortaxreportingpurposes,andprudentandfeasibletaxplanningstrategies.
Wemeasureandrecognizetheamountoftaxbenefitthatshouldberecordedforfinancialstatementpurposesforuncertaintaxpositionstakenorexpectedto
be taken in a tax return. With respect to uncertain tax positions, we evaluate the recognized tax benefits for derecognition, classification, interest and penalties,
interimperiodaccountinganddisclosurerequirements.Judgmentisrequiredinassessingthefuturetaxconsequencesofeventsthathavebeenrecognizedinour
financialstatementsortaxreturns.
Stock-Based Compensation. Wecalculatethefairvalueofshare-basedawardsonthedateofgrant.Restrictedstockawardsarevaluedbasedontheshare
price,performanceawardsarevaluedbasedonaMonteCarlosimulationand,whengrantedinpreviousyears,optionswerevaluedusingalatticevaluationmodel.
TheMonteCarlosimulationestimatesthefairvalueofourperformanceawardsprimarilybasedonthetermsassociatedwiththegrantandpublicinformationthatis
readilyavailable.TheunderlyingprinciplesintheMonteCarlosimulationarethatpubliclytradedstocksarefairlypricedandthefuturereturnsofastockmaybe
estimatedprimarilybythestocksassumedvolatility.Thelatticevaluationoptionpricingmodelrequiredthatweestimatekeyassumptionssuchasexpectedlife,
volatility,risk-freeinterestratesanddividendyieldtodeterminethefairvalueofshare-basedawards,basedonbothhistoricalinformationandmanagementdecision
regarding market factors and trends. We amortize the share-based compensation expense over the period that the awards are expected to vest, net of estimated
forfeitures.Iftheactualforfeituresdifferfrommanagementestimates,additionaladjustmentstocompensationexpensearerecorded(seeNote20).Weissuenew
sharestosatisfystockoptionexercises.
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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Revenue Recognition. Ourrevenuesareprimarilyderivedfromthefollowingsources:(1)hotelandresortrevenuesatourowned,leasedandconsolidated

jointventureproperties; (2) management fees and franchise fees; (3) vacation ownership and residential sales; (4) other revenues from managed and franchised
properties.Generally,revenuesarerecognizedwhenservicesarerendered.Taxescollectedfromcustomersandsubmittedtotaxingauthoritiesarenotrecordedin
revenue.Thefollowingisadescriptionofthecompositionofourrevenues:

Owned,LeasedandConsolidatedJointVenturesRepresentsrevenueprimarilyderivedfromhoteloperations,includingtherentalofroomsand
foodandbeveragesales,fromourowned,leasedandconsolidatedjointventurehotelsandresorts.Revenueisrecognizedwhenroomsareoccupied
andserviceshavebeenrendered.

Management Fees and Franchise Fees Represents fees earned on hotels and resorts managed worldwide, usually under long-term contracts,
franchisefeesreceivedinconnectionwiththefranchiseofourLuxuryCollection,TributePortfolio,Westin,LeMridien,Sheraton,FourPointsby
Sheraton, Aloft and Element brand names, termination fees and the amortization of deferred gains related to sold properties for which we have
significantcontinuinginvolvement.Managementfeesarecomprisedofabasefee,whichisgenerallybasedonapercentageofgrossrevenues,andan
incentivefee,whichisgenerallybasedonthepropertysprofitability.Foranytimeduringtheyear,whentheprovisionsofourmanagementcontracts
allowreceiptofincentivefeesupontermination,incentivefeesarerecognizedforthefeesdueandearnedasifthecontractwasterminatedatthat
date,exclusiveofanyterminationfeesdueorpayable.Therefore,duringperiodspriortoyear-end,theincentivefeesrecordedmaynotbeindicative
oftheeventualincentivefeesthatwillberecognizedatyear-endasconditionsandincentivehurdlecalculationsmaynotbefinal.Franchisefeesare
generallybasedonapercentageofhotelroomrevenues.

Vacation Ownership and Residential Sales We recognize revenue from VOI sales and financings and the sales of residential units which are
typicallyacomponentofmixeduseprojectsthatincludeahotel.Revenueisgenerallyrecognizeduponthebuyerdemonstratingasufficientlevelof
initialandcontinuinginvestmentwhentheperiodofcancellationwithrefundhasexpiredandreceivablesaredeemedcollectible.Wedeterminethe
portionofrevenuestorecognizeforsalesaccountedforunderthepercentageofcompletionmethodbasedonjudgmentsandestimatesincludingtotal
project costs to complete. Additionally, we record reserves against these revenues based on expected default levels. We have also entered into
licensing agreements with third-party developers to offer consumers branded condominiums or residences. Our fees from these agreements are
generallybasedonthegrosssalesrevenueofunitssold.Residentialfeerevenueisrecordedintheperiodthatapurchaseandsalesagreementexists,
deliveryofservicesandobligationshasoccurred,thefeetotheownerisdeemedfixedanddeterminableandcollectabilityofthefeesisreasonably
assured.Residentialrevenueonwholeownershipunitsisgenerallyrecordedusingthecompletedcontract method,wherebyrevenueisrecognized
onlywhenasalescontractiscompletedorsubstantiallycompleted.Duringtheperformanceperiod,costsanddepositsarerecordedonthebalance
sheet.

OtherRevenuesfromManagedandFranchisedPropertiesTheserevenuesrepresentreimbursementsofcostsincurredbymanagedhotelproperties
andfranchisees.Thesecostsrelateprimarilytopayrollcostsatmanagedpropertieswherewearetheemployer.Sincethereimbursementsaremade
baseduponthecostsincurredwithnoaddedmargin,theserevenuesandcorrespondingexpenseshavenoeffectonouroperatingincomeornet
income.

Insurance Retention. Throughourcaptiveinsurancecompany,weprovideinsurancecoverageforworkerscompensation,employmentpracticesliability,

autoliabilityandphysicaldamage,propertyandgeneralliabilityclaimsarisingathotelpropertiesownedormanagedbyusthroughpolicieswrittendirectlyand
throughreinsurancearrangements.Estimatedinsuranceclaimspayablerepresentexpectedsettlementofoutstandingclaimsandaprovisionforclaimsthathavebeen
incurredbutnotreported.Theseestimates arebasedonourassessmentofpotential liabilityusingananalysisofavailable informationincludingpendingclaims,
historicalexperienceandcurrentcosttrends.Theamountoftheultimateliabilitymayvaryfromtheseestimates.Estimatedcostsoftheseself-insuranceprograms
areaccrued,basedontheanalysisofthird-partyactuaries.
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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Costs Incurred to Sell VOIs. WecapitalizedirectcostsattributabletothesaleofVOIsuntilthesalesarerecognized.Sellingcostscapitalizedunderthis

methodologywereapproximately$8millionand$5millionasofDecember31,2015and2014,respectively,andallsuchcapitalizedcostsareincludedinprepaid
expensesandotherassetsintheaccompanyingconsolidatedbalancesheets.CostseligibleforcapitalizationfollowtheguidelinesofASCTopic978,Real Estate
Time Sharing Activities .Ifacontractiscancelled,wechargetheunrecoverabledirectsellingcoststoexpenseandrecordforfeiteddepositsasincome.
VOI and Residential Inventory Costs. Realestateanddevelopmentcostsarevaluedatthelowerofcostornetrealizablevalue.Developmentcostsinclude
both hard and soft construction costs and together with real estate costs are allocated to VOIs and residential units on the relative sales value method. Interest,
propertytaxesandcertainothercarryingcostsincurredduringtheconstructionprocessarecapitalizedasincurred.SuchcostsassociatedwithcompletedVOIand
residentialunitsareexpensedasincurred.
Advertising Costs. We enter into multi-media advertising campaigns, including television, radio, internet, print advertisements and other promotional
activities. Costs associated with these campaigns, including communication and production costs, are aggregated and expensed the first time that the advertising
takesplace.Ifitbecomesapparentthatthemediacampaignwillnottakeplace,thenallcostsareexpensedatthattime.DuringtheyearsendedDecember31,2015,
2014 and 2013, we incurred approximately $162 million, $157 million and $154 million of advertising expense and other promotional activities, respectively, a
significantportionofwhichwasreimbursedbymanagedandfranchisedhotels.
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
managementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesatthedate
ofthefinancialstatementsandthereportedamountsofrevenuesandexpensesduringthereportingperiod.Actualresultscoulddifferfromthoseestimates.
Reclassifications .Certainreclassificationshavebeenmadetotheprioryearsfinancialstatementstoconformtothecurrentyearpresentation.
Impact of Recently Issued Accounting Standards.
Future Accounting Standards
In April 2015, the Financial Accounting Standards Board (FASB) issued ASU No. 2015-05, Intangibles- Goodwill and Other- Internal Use Software
(Subtopic350-40)CustomersAccountingforFeesPaidinaCloudComputingArrangement.Theamendmentsinthistopicareintendedtoprovideguidanceabout
whetheracloudcomputingarrangementincludesasoftwarelicense.ThisupdateiseffectiveforannualandinterimperiodsbeginningafterDecember15,2015with
earlyadoptionpermitted.WeadoptedthisASUprospectivelyonJanuary1,2016.Wedonotbelievetheadoptionofthisupdatewillhaveamaterialimpactonour
financialstatements.
InApril2015,theFASBissuedASUNo.2015-03,Interest-ImputationofInterest(Subtopic835-30)SimplifyingthePresentationofDebtIssuanceCosts.
The amendments in this topic are intended to simplify the presentation of debt issuance costs and are effective for annual and interim periods beginning after
December15,2015withearlyadoptionpermitted.WeadoptedthisASUonJanuary1,2016.Wedonotbelievetheadoptionofthisupdatewillhaveamaterial
impactonourfinancialstatements.
InFebruary2015,theFASBissuedASUNo.2015-02,Consolidation(Topic810)AmendmentstotheConsolidationAnalysis.Theamendmentsinthis
updateareintendedtoimproveandsimplifytargetedareasoftheconsolidationguidanceandareeffectiveforannualandinterimperiodsbeginningafterDecember
15,2015withearlyadoptionpermitted.WeadoptedthisASUonJanuary1,2016.Wedonotbelievetheadoptionofthisupdatewillhaveamaterialimpactonour
financialstatements.
InAugust2014,theFASBissuedASUNo.2014-15,PresentationofFinancialStatements-GoingConcern(Subtopic205-40)DisclosureofUncertainties
aboutanEntitysAbilitytoContinueasaGoingConcern.Thisupdateprovidesguidanceonmanagementsresponsibilitytoevaluatewhetherthereissubstantial
doubtabouttheabilitytocontinueasagoingconcernandtoproviderelatedinterimandannualfootnotedisclosures.TheamendmentsinthisASUareeffectivefor
reporting periods ending after December 15, 2016, and we plan to adopt this ASU for the annual period ending on December 31, 2016. We do not believe the
adoptionofthisupdatewillhaveamaterialimpactonourfinancialstatements.
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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

InMay2014,theFASBissuedASUNo.2014-09,RevenuefromContractswithCustomers(Topic606).Thistopicprovidesforfiveprincipleswhich
shouldbefollowedtodeterminetheappropriateamountandtimingofrevenuerecognitionforthetransferofgoodsandservicestocustomers.Theprinciplesinthis
ASUshouldbeappliedtoallcontractswithcustomersregardlessofindustry,withtwotransitionmethodsofadoptionallowed.InJuly2015,theFASBapproveda
one-yeardeferralofthisstandard,witharevisedeffective dateforreportingperiodsbeginningafterDecember15,2017.Earlyadoptionispermittedforannual
periodsbeginningafterDecember16,2016.WeplantoadoptthisASUonJanuary1,2018.Wearestillevaluatingthefinancialstatementimpactsoftheguidance
inthisASUanddeterminingwhichtransitionmethodwewillutilize.
Adopted Accounting Standards
InNovember2015,theFASBissuedASUNo.2015-17,IncomeTaxes(Topic740)BalanceSheetClassificationofDeferredTaxes.Thisupdateeliminates
theexistingrequirementfororganizationstopresentdeferredtaxliabilitiesandassetsascurrentandnoncurrentinaclassifiedbalancesheetandrequiresalldeferred
taxassetsandliabilitiesbeclassifiedasnoncurrent.TheamendmentsinthisASUareeffectiveforannualreportingperiodsbeginningafterDecember15,2016,and
interimperiodswithinthoseannualperiods,withearlyadoptionpermitted.WeadoptedthisASUonaprospectivebasisonDecember31,2015.Nopriorperiods
wereretrospectivelyadjusted.TheadoptionofthisguidancehadnoimpactontheCompanysconsolidatednetincomeorcomprehensiveincome.Theadoptionof
thisupdatesimplifiedthepresentationofdeferredincometaxesinourfinancialstatements.
In January 2015, the FASB issued ASU No. 2015-01, Income Statement- Extraordinary and Unusual Items (Subtopic 225-20) Simplifying Income
StatementPresentationbyEliminatingtheConceptofExtraordinaryItems.ThistopiceliminatesfromU.S.generallyacceptedaccountingprinciples(GAAP)the
concept of extraordinary items. This update is effective for annual and interim periods beginning after December 15, 2015 with early adoption permitted. We
adoptedthisASUonaprospectivebasisonJanuary1,2015.Theadoptionofthisupdatedidnothaveamaterialimpactonourfinancialstatements.
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360)
Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This topic amends the requirements for reporting discontinued
operations.Thedisposalofacomponentmustrepresentastrategicshiftthatwillhaveamajoreffectonouroperationsandfinancialresultsinordertobereportedas
discontinuedoperationsandrequirescertainadditionalinterimandannualdisclosures.TheamendmentsinthisASUareeffectiveforreportingperiodsbeginning
afterDecember15,2014withearlyadoptionpermitted,andweadoptedthisASUonaprospectivebasisonJuly1,2014.Webelievetheadoptionofthisupdatewill
reducethenumberofdisposalsthatarepresentedasdiscontinuedoperationsinourfinancialstatements.
In January 2014, the FASB issued ASU No. 2014-04, Receivables Troubled Debt Restructurings by Creditors (Subtopic 310-40) Reclassification of
ResidentialRealEstateCollateralizedConsumerMortgageLoansuponForeclosure.Thistopicclarifieswhenanin-substancerepossessionorforeclosureoccurs
andrequirescertainadditionalinterimandannualdisclosuresrelatedtosuchactivity.TheamendmentsinthisASUareeffectiveforreportingperiodsbeginning
afterDecember15,2014,andweadoptedthisASUonaprospectivebasisonJanuary1,2015.Theadoptionofthisupdatedidnothaveamaterialimpactonour
financialstatements.
InJuly2013,theFASBissuedASUNo.2013-11,IncomeTaxes(Topic740)PresentationofanUnrecognizedTaxBenefitWhenaNetOperatingLoss
Carryforward,aSimilarTaxLoss,oraTaxCreditCarryforwardExists.Thistopicprovidesguidanceonwhetheranunrecognizedtaxbenefitshouldbepresented
asareductiontoadeferredtaxassetorasaseparateliability.ThisupdatewaseffectiveforannualandinterimperiodsbeginningafterDecember15,2013,andwe
adoptedthisASUonJanuary1,2014.Theadoptionofthisupdatedidnothaveamaterialimpactonourfinancialstatements.
InMarch2013,theFASBissuedASUNo.2013-05,ForeignCurrencyMatters(Topic830)ParentsAccountingfortheCumulativeTranslationAdjustment
uponDerecognitionofCertainSubsidiariesorGroupsofAssetswithinaForeignEntityorofanInvestmentinaForeignEntity.Thistopicclarifiesthatwhena
reportingentityceasestohaveacontrollingfinancialinterestinasubsidiaryorgroupofassetsthatisanonprofitactivityorabusinesswithinaforeignentity,the
parentisrequiredtoapplytheguidanceinSubtopic830-30toreleaseanyrelatedcumulativetranslationadjustmentintonetincome.Accordingly,thecumulative
translationadjustmentshouldbereleasedintonetincomeonlyifthesaleortransferresultsinthecompleteorsubstantiallycompleteliquidationoftheforeignentity
inwhichthesubsidiaryorgroupofassetshadresided.TheamendmentsinthisASUwereeffectiveprospectivelyforreportingperiodsbeginningafterDecember15,
2013,andweadoptedthisASUonJanuary1,2014.Theadoptionofthisupdatedidnothaveamaterialimpactonourfinancialstatements.

F-16

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 3.

Earnings per Share

ThefollowingisareconciliationofbasicearningspersharetodilutedearningspershareforincomefromcontinuingoperationsattributabletoStarwoods
commonstockholders(inmillions,exceptpersharedata):

Year Ended December 31,

2015
Earnings

Shares

2014
Per
Share

Earnings

Shares

2013
Per
Share

Earnings

Shares

Per
Share

Basicearningsfromcontinuing
operationsattributabletoStarwoods
commonstockholders
$
489
169 $
2.90 $
643
185 $
3.49 $
565
191 $ 2.96
Effectofdilutivesecurities:

Employeeoptionsand
restrictedstockawards


1


1


2

Dilutedearningsfromcontinuing
operationsattributabletoStarwoods
commonstockholders
$
489
170 $
2.88
643
186 $
3.46 $
565
193 $ 2.92

Approximately0.8millionshares,0.5millionsharesand0.3millionshareswereexcludedfromthecomputationofdilutedsharesin2015,2014and2013,
respectively,astheirimpactwouldhavebeenanti-dilutive.

Note 4.

Asset Dispositions and Impairments

DuringtheyearendedDecember31,2015,wesoldfourwholly-ownedhotelsforcashproceedsnetofclosingcostsofapproximately$767million.Threeof
these hotels were sold subject tolong-term management agreements. Thesale of these hotels resulted in pre-tax gainsof approximately $368million, which we
deferredandarerecognizingintomanagementfees,franchisefeesandotherincomeovertheinitialtermofeachmanagementagreement.Theotherhotelwassold
subjecttoalong-termfranchiseagreementandresultedinapre-taxgainofapproximately$4million,whichwerecordedinthegain(loss)onassetdispositionsand
impairments,netlineitem.
Additionally,duringtheyearendedDecember31,2015,werecordeda$15millionchargetothegain(loss)onassetdispositionsandimpairments,netline
item related to an obligation associated with a previous disposition and recorded a loss of $9 million primarily related to asset dispositions and impairments
associated with certain hotel renovations. These losses were partially offset by a $36 million gain related to property insurance settlement proceeds for a hotel
damagedbyahurricaneanda$20milliongainrelatedtothesaleofaminoritypartnershipinterestinahotel.
SubsequenttotheyearendedDecember31,2015,inFebruary2016,wesoldonehotelforcashproceedsnetofclosingcostsofapproximately$79million
subjecttoalong-termmanagementagreement.
DuringtheyearendedDecember31,2014,wesoldeightwholly-ownedhotelsforcashproceedsnetofclosingcostsofapproximately$784million.Three
hotels were sold subject to management agreements that resulted in pre-tax gains of approximately $361 million, which we deferred and are recognizing into
management fees, franchise fees and other income over the initial term of the management agreements. One hotel was sold subject to a long-term management
agreementandthissaleresultedinapre-taxlossof$1million,whichwerecordedinthegain(loss)onassetdispositionsandimpairments,net,lineitem.Fourhotels
weresoldsubjecttofranchiseagreementsthatresultedinapre-taxlossofapproximately$23million,whichwerecordedinthegain(loss)onassetdispositionsand
impairments,net,lineitem.
Additionally,duringtheyearendedDecember31,2014,weconvertedaleasedhoteltoamanagedhotelsubjecttoalong-termmanagementagreement,and
recordedapre-taxlossof$21million,whichwasrecordedinthegain(loss)onassetdispositionsandimpairments,netlineitem.Weprovidedfinancingtothehotel
ownerintheformofanotereceivabletofundthetransactionprice.Wewillprovideadditionalfinancingoverthenextfewyearstofundasignificantrenovationof
thehotel.
Further,duringtheyearendedDecember31,2014,weterminatedourleaseholdinterestinahotelandenteredintoalong-termfranchiseagreementwiththe
hotels owner. In connection with the termination, we recognized a pre-tax loss of $7 million, which was recorded in the gain (loss) on asset dispositions and
impairments,netlineitem.
F-17

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Furthermore,duringtheyearendedDecember31,2014,werecordeda$7millionimpairmentassociatedwithoneofourunconsolidatedjointventuresanda
$10millionpre-taxgainonthesaleofourinterestinanotherunconsolidatedjointventure,bothofwhichwererecordedinthegain(loss)onassetdispositionsand
impairments,netlineitem.
Finally, during the year ended December 31, 2014, we recognized approximately $31 million of previously deferred gains in connection with hotels that
convertedfrommanagedhotelstofranchisedhotels,subjecttolong-termfranchiseagreements.
During the year ended December 31, 2013, we sold six wholly-owned hotels for cash proceeds net of closing costs of approximately $248 million. Four
hotelsweresoldsubjecttolong-termfranchiseagreementsandwerecordedanetpre-taxgainof$6millionrelatedtothesalesofthesehotels.Onehotelwassold
subject to a long-term management agreement and this sale resulted in a pre-tax gain of approximately $3 million, which we deferred and are recognizing into
management fees, franchise fees and other income over the initial term of the management agreement. One hotel was sold subject to a long-term management
agreementandthissaleresultedinapre-taxlossof$7million,whichwerecordedinthegain(loss)onassetdispositionsandimpairments,net,lineitem.
Additionally,duringtheyearendedDecember31,2013,werecordedapre-taxlossof$11millionrelatedtoassetdisposalsinconnectionwithvarioushotel
renovations,whichwaspartiallyoffsetbyinsuranceproceedsof$5millionandapre-taxgainof$4milliononthesaleofanon-coreassetforcashproceedsnetof
closingcostsof$12million.DuringtheyearsendedDecember31,2015,2014and2013,wereviewedtherecoverabilityofthecarryingvaluesofourownedhotels
anddeterminedthatcertainhotelsorhotelassetswereimpaired.Thefairvaluesofthehotelswereestimatedprimarilyfromtheincomeapproachviatheuseof
discountedcashflowsmodelsandthemarketapproach.Impairmentchargestotaling$35million,$13millionand$19million,relatingtotwo,oneandtwohotels,
wererecordedinthegain(loss)onassetdispositionsandimpairments,netlineitemintheyearsendedDecember31,2015,2014and2013,respectively,andtothe
followingsegmentassetgroups(inmillions):

Year Ended December 31,

2014

2015

Americas
EAME
Total

$

$

32 $
3
35 $

2013

13 $

13 $

17
2
19

Note 5.

Plant, Property and Equipment

Plant,propertyandequipmentconsistedofthefollowing(inmillions):

December 31,
2015

Landandimprovements
Buildingsandimprovements
Furniture,fixturesandequipment
Constructionworkinprocess

Lessaccumulateddepreciationandamortization

178
2,198
1,758
100
4,234
(2,090)
2,144

2014

292
2,661
1,849
80
4,882
(2,248)
2,634

The above balances include unamortized capitalized software costs of $251 million and $206 million at December 31, 2015 and 2014, respectively.
Amortizationofcapitalizedsoftwarecostswas$66million,$40millionand$35millionfortheyearsendedDecember31,2015,2014and2013,respectively.
ThenetbookvalueofcapitalleaseassetsasofDecember31,2015and2014was$128millionand$128million,respectively,whichwasnetofaccumulated
depreciationof$13millionand$6million,respectively.

F-18

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 6.

Goodwill and Intangible Assets

ThechangesinthecarryingamountofgoodwillfortheyearsendedDecember31,2015and2014wereasfollows(inmillions):

Americas
Segment

BalanceatJanuary1,2014
Currencytranslationadjustment
Assetdispositions
BalanceatDecember31,2014

705
(1)
(21)
683

Asia
Pacific
Segment

EAME
Segment

Vacation
Ownership
and
Residential
Segment

269
(15)
(12)
242

282

(36)
246

151

151

Total

$
$
$
$

1,407
(16)
(69)
1,322

BalanceatJanuary1,2015
$
683 $
242 $
246 $
151 $
1,322
Currencytranslationadjustment

(1)
(11)
(1)

(13)
Assetdispositions

(31)
(32)

$
(63)
BalanceatDecember31,2015
$
651 $
199 $
245 $
151 $
1,246

AtOctober31,2015,thedateofourannualimpairmentvaluation,wequantitativelyevaluatedthegoodwillofeachofourreportingunitsanddetermined
that,foreachreportingunit,thefairvaluesignificantlyexceededthebookvalue.Weusedamarketapproachtodeterminethefairvalueofthereportingunits.We
utilizedearningsmultiplesfromvariousindependent,third-partyinvestmentfirmsandappliedthoseearningsmultiplestotherespectiveearningsstreamsgenerated
byeachofourreportingunitstodeterminethefairvalueforeachofthesegments.

In2014,weevaluatedthegoodwillofeachofourreportingunitsusingthesameearningsmultiplesapproachdescribedpreviouslyanddeterminedthat,for
eachreportingunit,thefairvaluesignificantlyexceededthebookvalue.
Intangibleassetsconsistedofthefollowing(inmillions):

December 31,
2015

Trademarksandtradenames
Managementandfranchiseagreements
Other

Accumulatedamortization

2014

306
573
15
894
(232)
662

310
519
17
846
(212)
634

Theintangibleassetsrelatedtomanagementandfranchiseagreementshavefinitelives,andaccordingly,werecordedamortizationexpenseof$29million,
$29million,and$28million,respectively,duringtheyearsendedDecember31,2015,2014and2013.Theotherintangibleassetsnotedabovehaveindefinitelives.
AmortizationexpenserelatingtointangibleassetswithfinitelivesforeachoftheyearsendedDecember31isexpectedtobeasfollows(inmillions):

2016
2017
2018
2019
2020

28
27
25
24
21

During the fourth quarters of the years ended December 31, 2015, 2014 and 2013, respectively, we performed our annual quantitative and qualitative
impairmentvaluationsofourindefinitelivedintangibles.Ourfinitelivedintangiblesaretestedforimpairmentatleastannuallyorwhenevereventsorcircumstances
indicate that the carrying amount of a long-lived asset may not be recoverable. During the years ended December 31, 2015, 2014 and 2013, we recorded no
significantimpairmentchargesrelatedtoindefiniteorfinitelivedintangibleassets.

F-19

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 7.

Other Assets
Otherassetsincludedthefollowing(inmillions):

December 31,
2015

VOInotesreceivable,netofallowanceof$70and$61
Prepaidexpenses
Depositsandother
Total

2014

402
277
171
850

295
223
193
711

The increase in VOI notes receivable was primarily due to financed VOI sales throughout the year ended December 31, 2015, as we did not complete a
securitizationin2015.SeeNote9fordiscussionrelatingtoVOInotesreceivable.
Note 8.

Transfers of Financial Assets

We have variable interests in the entities associated with our three outstanding securitization transactions. As these securitizations consist of similar,
homogenousloans,theyhavebeenaggregated fordisclosurepurposes.Weappliedthevariable interestmodelanddetermined wearetheprimary beneficiary of
thesevariableinterestentities(VIEs).Inmakingthisdetermination,weevaluatedtheactivitiesthatsignificantlyimpacttheeconomicsoftheVIEs,includingthe
managementofthesecuritizednotesreceivableandanyrelatednon-performingloans.Wearetheservicerofthesecuritizedmortgagereceivables.Wealsohavethe
option,subjecttocertainlimitations,torepurchaseorreplaceVOInotesreceivablethatareindefaultattheiroutstandingprincipalamounts.Suchactivitytotaled
$10millionand$16millionduring2015and2014,respectively.WehavebeenabletoreselltheVOIsunderlyingtheVOInotesrepurchasedorreplacedunderthese
provisionswithoutincurringsignificantlosses.Weholdtheriskofpotentialloss(orgain),asthelasttobepaidoutbyproceedsoftheVIEsunderthetermsofthe
agreements.Assuch,weholdboththepowertodirecttheactivitiesoftheVIEsandobligationtoabsorbthelosses(orbenefits)fromtheVIEs.
Thesecuritization agreements arewithoutrecoursetous,exceptforbreachesofrepresentations andwarranties.Wehavetherighttofunddefaultsatour
option,subjecttocertainlimitations,andweintendtodosountilthedebtisextinguishedtomaintainthecreditratingoftheunderlyingnotes.
UpontransferofVOInotesreceivabletotheVIEs,thereceivablesandcertaincashflowsderivedfromthembecomerestrictedforuseinmeetingobligations
totheVIEcreditors.TheVIEsutilizetrustswhichhaveownershipofcashbalancesthatalsohaverestrictions,theamountsofwhicharereportedinrestrictedcash.
Ourinterestintrustassetsaresubordinatetotheinterestsofthird-partyinvestorsand,assuch,maynotberealizedbyusifneededtoabsorbdeficienciesincash
flows that are allocated to the investors in the trusts debt (see Note 14). We are contractually obligated to receive the excess cash flows (spread between the
collections on the notes and third party obligations defined in the securitization agreements) from the VIEs. Such activity totaled $29 million, $38 million, and
$51millionduring2015,2014,and2013,respectively,andisclassifiedincashandcashequivalents.
DuringtheyearendedDecember31,2015,weterminatedthesecuritizationoriginallycompletedin2009(the2009Securitization),includingpaydownofall
principal and interest due. The termination required a $3 million pay down of debt and resulted in a release of $35 million of previously securitized vacation
ownershipnotesreceivable,nettounsecuritizednotesreceivable.
SeeNote9fordisclosuresandamountsrelatedtothesecuritizedvacationownershipnotesreceivableconsolidatedonourbalancesheetsasofDecember31,
2015and2014.

F-20

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 9.

Vacation Ownership Notes Receivable

Notesreceivable(netofreserves)relatedtoourvacationownershiploansconsistofthefollowing(inmillions):

December 31,
2015

Vacationownershiploanssecuritized
Vacationownershiploansunsecuritized

Less:currentportion
Vacationownershiploanssecuritized
Vacationownershiploansunsecuritized

2014

173
443
616

(32)
(41)
543

274
331
605

(47)
(36)
522

We include the current and long-term maturities of unsecuritized VOI notes receivable in accounts receivable and other assets, respectively, in our
consolidatedbalancesheets.
WerecordinterestincomeassociatedwithVOInotesinourvacationownershipandresidentialsalesandserviceslineiteminourconsolidatedstatementsof
income.InterestincomerelatedtoourVOInotesreceivablewasasfollows(inmillions):

Year Ended
December 31,
2014

2015

Vacationownershiploanssecuritized
Vacationownershiploansunsecuritized

$

$

31 $
51
82 $

2013

45 $
38
83 $

63
21
84

ThefollowingtablespresentfuturematuritiesofgrossVOInotesreceivable(inmillions)andinterestrates:

Securitized

2016
2017
2018
2019
2020
Thereafter
BalanceatDecember31,2015

WeightedaverageinterestratesatDecember31,2015

Rangeofinterestrates

35
34
30
27
24
38
188

Unsecuritized

13.20%
6.0to17.0%

48
47
47
48
50
280
520

Total

12.92%
5.0to17.0%

83
81
77
75
74
318
708
12.98%
5.0to17.0%

Forthevacationownershipandresidentialsegment,werecordanestimateofexpecteduncollectibilityonourVOInotesreceivableasareductionofrevenue
atthetimewerecognizeprofitonatimesharesale.WeholdlargeamountsofhomogeneousVOInotesreceivableandtherefore,assessuncollectibilitybasedon
poolsofreceivables.Inestimatinglossreserves,weuseatechniquereferredtoasstaticpoolanalysis,whichtracksuncollectiblenotesforeachyearssalesoverthe
lifeoftherespectivenotesandprojectsanestimateddefaultratethatisusedinthedeterminationofourloanlossreserverequirements.AsofDecember31,2015
and2014,theaverageestimateddefaultrateforourpoolsofreceivableswas9.1%and9.2%,respectively.
F-21

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Theactivityandbalancesforourloanlossreservewereasfollows(inmillions):

Securitized

BalanceatDecember31,2012
Provisionsforloanlosses
Write-offs
Other
BalanceatDecember31,2013
Provisionsforloanlosses
Write-offs
Other
BalanceatDecember31,2014
Provisionsforloanlosses
Write-offs
Other
BalanceatDecember31,2015

Unsecuritized

73
(10)

(20)
43
(2)

(13)
28
(2)

(11)
15

Total

48
21
(29)
20
60
24
(29)
13
68
25
(27)
11
77

121
11
(29)

103
22
(29)

96
23
(27)

92

Weusetheorigination ofthe notesbybrand (Sheraton, Westin, andOther) andtheFICOscoresofthe buyersastheprimary credit qualityindicators to
calculate the loan loss reserve for the vacation ownership notes, as we believe there is a relationship between the default behavior of borrowers and the brand
associatedwiththevacationownershippropertytheyhaveacquired,supplementedbytheFICOscoresofthebuyers.Inadditiontoquantitativelycalculatingthe
loanlossreservebasedonourstaticpoolanalysis,wesupplementtheprocessbyevaluatingcertainqualitativedata,includingtheagingoftherespectivereceivables
andcurrentdefaulttrendsbybrandandoriginationyear.
BalancesofourVOInotesreceivablebybrandandbyFICOscorewereasfollows(inmillions):

700+

Sheraton
Westin
Other

600-699

165
185
7
357

As of December 31, 2015

<600

145
89
2
236

14
5

19

No Score

Total

60
32
4
96

384
311
13
708

700+

Sheraton
Westin
Other

600-699

157
186
9
352

As of December 31, 2014

<600

134
88
2
224

15
6

21

No Score

Total

62
36
6
104

368
316
17
701

Given the significance ofour pools of VOInotes receivable, a change in the projected default rate can have a significant impact toour loan loss reserve
requirements,witha0.1%changeestimatedtohaveanimpactofapproximately$5million.
We consider a VOI note receivable delinquent when it is more than 30 days outstanding. Delinquent notes receivable amounted to $46 million and
$42 million as of December 31, 2015 and 2014, respectively. All delinquent loans are placed on nonaccrual status, and we do not resume interest accrual until
payment is made. We consider loans to be in default upon reaching 120 days outstanding, at which point, we generally commence the repossession process.
Uncollectible VOI notes receivable are charged off when title to the unit is returned to us. We generally do not modify vacation ownership notes that become
delinquentorupondefault.
PastduebalancesofVOInotesreceivablewereasfollows(inmillions):

Total
Receivables

Current
30-59 Days

AsofDecember31,2015
AsofDecember31,2014

$
$

708 $
701 $

662 $
659 $

12 $
9 $

Delinquent
60-89 Days
>90 Days

7 $
4 $

27 $
29 $

Total

46
42

F-22

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 10. Deferred Gains

We defer gains realized in connection with the sale of a property for which we continue to manage through a long-term management agreement and
recognizethegainsovertheinitialtermoftherelatedagreement(seeNote4).AsofDecember31,2015and2014,wehadtotaldeferredgainsof$1,412millionand
$1,168 million, respectively, included in accrued expenses and other liabilities in our consolidated balance sheets. Amortization of deferred gains is included in
managementfees,franchisefeesandotherincomeinourconsolidatedstatementsofincomeandtotaledapproximately$91million,$86millionand$91millionin
2015,2014and2013,respectively.
Note 11. Restructuring and Other Special Charges (Credits), Net
Restructuringandotherspecialcharges(credits),netwere$100million,$(4)millionand$1millionfortheyearsendedDecember31,2015,2014and2013,
respectively.Thesenetcharges(credits)arenotrecordedinourreportablesegmentearnings.
DuringtheyearendedDecember31,2015,werecorded$20millioninnetrestructuringchargesand$80millionofotherspecialcharges.Therestructuring
chargesareprimarilyrelatedtocostsassociatedwithourpreviouslyannouncedcostsavingsinitiatives,partiallyoffsetbythereversalofan$8millionreserveasa
resultofthefavorableresolutionofafundingcommitmentassociatedwithavacationownershipproject.Otherspecialchargesprimarilyconsistof$36millionof
costsassociatedwithprofessionalfeesfortheplannedseparation,distributionandsubsequentmergerofourvacationownershipbusiness(seeNote27),$20million
of costs primarily associated with professional fees related to our strategic alternatives review which culminated in the proposed transaction with Marriott
International,Inc.(Marriott)(seeNote28),$11millionofchargesassociatedwiththedeparturesofourpriorPresidentandChiefExecutiveOfficerandourinterim
ChiefExecutiveOfficer,a$6millionchargefortechnologyrelatedcostsandexpensesthatwenolongerdeemrecoverableandtheestablishmentof$6millionof
reservesrelatedtopotentialliabilitiesassumedinconnectionwiththeLeMridienacquisition(seeNote24).
DuringtheyearendedDecember31,2014,wereverseda$3millionreserverelatedtoanotereceivableassociatedwithapreviousdisposition,astheentire
balancewascollectedduring2014.
DuringtheyearendedDecember31,2013,wedecidedtoabsorbcertaintechnologyrelatedcostsandexpensesthatwepreviouslyintendedtocollectfrom
ourmanagedandfranchisedproperties.Asaresult,werecordeda$19millioncharge,representingthecostsandexpensesincurredthroughtheendof2013thatare
nolongerintendedtoberecovered.TheyearendedDecember31,2013alsoincludedapproximately$5millioninseverancecostsrelatedtoaleasedhotelthatwe
exitedduring2014.Thesechargeswerepartiallyoffsetbyafavorableadjustmenttoalegalreserveofapproximately$22millionrelatedtoa2013judgmentand
settlement,legalfeesandexpensesinregardstoalongstandinglitigation.
AsofDecember31,2015,wehadremainingrestructuringaccrualsof$10million,ofwhich$5millionisrecordedinaccruedexpensesandtheremainderis
recordedinotherliabilities.AsofDecember31,2014,wehadremainingrestructuringaccrualsof$15million,whichwereprimarilyrecordedinotherliabilities.
ThefollowingtablesummarizesactivityintherestructuringrelatedaccrualsduringtheyearendedDecember31,2015(inmillions):

Severancecostsrelatedtocostsavingsinitiatives
Impairments
Vacationownershipexitcostfromceasedprojects
Other
Total

December 31,

Expenses/

2014

Reversals

14
1
15

16 $
6
(8)
6
20 $

Other
(14) $

Payments

(1)
(3)
(18)

Non-Cash

(6)
(1)

(7)

December 31,
2015

4
4
10

F-23

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 12. Income Taxes

Incometaxdatafromourcontinuingoperationsisasfollows(inmillions):

2015

Year Ended December 31,

2014

2013

Pretaxincome
U.S.
Foreign

269
400
669

382
400
782

462
366
828

Provision(benefit)forincometax
Current:
U.S.federal
Stateandlocal
Foreign

Deferred:
U.S.federal
Stateandlocal
Foreign

70

91
161

12
2
5
19
180

53
10
93
156

36
19
(72)
(17)
139

77
3
118
198

69
13
(17)
65
263

Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities plus carryforward items. The
compositionofnetdeferredtaxbalanceswereasfollows(inmillions):

December 31,
2015

Currentdeferredtaxassets
Long-termdeferredtaxassets(2)
Currentdeferredtaxliabilities(1)
Long-termdeferredtaxliabilities(2)
Deferredincometaxes

2014

747

(34)
713

199
596
(12)
(38)
745

(1)
(2)

Includedintheaccruedtaxesandotherlineitemintheconsolidatedbalancesheets.
As of December 31, 2015, our balance sheet includes the effects of the adoption of ASU No. 2015-17, Income Taxes (Topic 740) Balance Sheet
ClassificationofDeferredTaxes,requiringalldeferredtaxassetsandliabilitiesbeclassifiedasnon-current.WeadoptedthisASUonaprospective
basisonDecember31,2015.
F-24

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Thetaxeffectofthetemporarydifferencesandcarryforwarditemsthatgiverisetodeferredtaxassets(liabilities)wereasfollows(inmillions):

December 31,
2015

Plant,propertyandequipment
Intangibles
Inventories
Deferredgains
Investments
Receivables(netofreserves)
Accruedexpensesandotherreserves
Employeebenefits
Netoperatingloss,capitallossandtaxcreditcarryforwards
Other

Lessvaluationallowance
Deferredincometaxes

2014

(83)
(41)
51
469
61
(32)
139
76
208
103
951
(238)
713

(52)
(51)
61
396
141
(30)
117
67
269
107
1,025
(280)
745

In assessing whether it is more likely than not that deferred tax assets will be realized, we consider all available evidence, both positive and negative,
including our recent cumulative earnings experience and expectations of future available taxable income of the appropriate character by taxing jurisdiction, tax
attributecarrybackandcarryforwardperiodsavailabletousfortaxreportingpurposes,andprudentandfeasibletaxplanningstrategies.Consideringthefactors,a
possibilityexiststhatwemayreleaseaportionofthevaluationallowanceagainstsomedeferredtaxassetsinthenexttwelvemonthsintheeventofsustainable
earningsortheidentificationofaprudentandfeasibletaxplanningstrategy.
At December 31, 2015, we had gross federal net operating loss carryforwards of $6 million which are subject to certain limitations and have varying
expirationdatesextendingthrough2030,theearliestofwhichwillbegintoexpirein2026.Itismorelikelythannotthatsubstantiallyalloftheseattributeswillbe
realizedpriortoexpiration.
AtDecember31,2015,wehadgrossstate netoperatinglosscarryforwardsofapproximately $1.2billion,whichhavevaryingexpirationdatesextending
through2035,theearliestofwhichwillbegintoexpirein2016.Wealsohadstatetaxcreditcarryforwardsof$22millionofwhich$4millionareindefiniteand
$18millionwillfullyexpireby2026.Wehaveestablishedavaluationallowanceagainstaportionoftheseattributesasitismorelikelythannotthattheywillnotbe
fullyrealizedduetoalackofsustainableearningsinseparatestatefilings.
At December 31, 2015, we had foreign net operating losses, capital losses and other attributes, which are indefinite or have varying expiration dates
extendingthrough2026,ofapproximately$393million,$14millionand$8million,respectively.ThesecarryforwardsprimarilyrelatetocertainoperationsinLatin
AmericaandEuropeandwehaveestablishedavaluationallowanceagainstthemajorityoftheseattributesasitismorelikelythannotthattheseattributeswillnot
berealizedpriortoexpiration.
F-25

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

AreconciliationofourtaxprovisionattheU.S.statutoryratetotheprovisionforincometaxasreportedisasfollows(inmillions):

2015

TaxprovisionatU.S.statutoryrate
U.S.stateandlocalincometaxes
NetU.S.taxonforeignearnings
Foreigntaxratedifferential
Foreignwithholdingtax(netofforeigntaxcredits)
Changeinpermanentreinvestmentassertionon
certainforeignearnings
Changeintaxlaw
Changeinassetbasis
Changeinuncertaintaxpositions
Taxsettlements
Tax/(benefits)onassetdispositions
Changeinvaluationallowances
Other
Provisionforincometax

Year Ended December 31,

2014

2013

234
8

(84)
8

274
17

(90)
16

290
19
5
(81)
17

(10)
7

35


(31)
13
180

(25)
2

49
(51)
(44)
(9)

139

(31)
(2)
20

(7)
48
(15)
263

The foreign tax rate differential includes the impact of U.S. and foreign statutory rate differences as well as tax incentives and tax-exempt income from
operationsincertainforeignjurisdictions.TaxrateincentivesinSingaporeandtax-exemptincomeearnedfromcertainofouroperationsinLuxembourgaccounted
for $70 million, $81 million and $74 million of the 2015, 2014 and 2013 foreign tax rate differential benefit, respectively, presented in the table above. Pre-tax
incomeinSingaporeandLuxembourgaccountedfor$239million,$269millionand$244millionof2015,2014and2013pre-taxincome,respectively.Weviewthe
taxrateincentivesandtax-exemptincometobeequivalenttoareductionofthestatutorytaxratesinthesejurisdictions,andtherefore,haveincludedtheimpactof
theseitemsintheforeigntaxratedifferentiallineabove.
DuringtheyearendedDecember31,2014,weenteredintoaplantoundertakecertaininternallegalentityrestructuringstobetteralignouroperationswith
our global footprint. As a result, we had a change in the indefinite reinvestment assertion regarding undistributed foreign earnings and profits at certain foreign
subsidiariesandwerecognizeda$25milliontaxbenefit,includingtheimpactsofforeigntaxcredits.DuringtheyearendedDecember31,2015,werecordedatrueupofa$6milliontaxexpense.
Inaddition,duringthefourthquarteroftheyearendedDecember31,2015,wereceivedallnecessaryinternalandexternalapprovalstoexecuteataxable
deemed liquidation of one of our controlled foreign corporations for U.S. federal income tax purposes. Due to the change in judgment regarding the indefinite
reinvestmentassertionfortheexcessoftaxoverbookbasisdifferenceinthisinvestment,werecognizeda$14milliontaxbenefitpartiallyoffsetbya$7million
valuation allowance against the portion of the capital loss that is more likely than not unrealizable in the carryover period due to insufficient income of the
appropriatecharacter.
NoU.S.incometaxeshavebeenprovidedonfilingbasisundistributedforeignearningsandprofitsof$3.6billionasofDecember31,2015.Weconsider
theseearningstobeindefinitelyreinvestedandplantousetheearningstofundoverseasoperationsandworkingcapitalneedsaswellasfacilitateoverseasgrowth
including, but not limited to, investments in new hotel contracts, capital expenditures at owned hotels, and acquisitions intended to further our global growth
strategy.Ateachreportingperiod,weassessourpositionwithregardtoundistributedforeignearningsofoursubsidiaries.Totheextentthatearningscannolonger
be indefinitely reinvested, we will accrue the tax impact, if any, attributable to those earnings, including the impact of foreign tax credits, at such time. If such
earningswererepatriated,additionaltaxexpensemayresult,althoughthecalculationofsuchadditionaltaxesisnotpracticable.TheflexibilityinherentintheU.S.
InternalRevenueCodemayalsopermittheultimatedistributiontobetax-freedependingonthenatureofthedistribution.
F-26

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

DuringtheyearendedDecember31,2013,werecordeda$31milliontaxbenefitforchangesintaxlawprimarilyrelatedtoMexico.OnDecember11,2013,
Mexicanfederalincometaxlawchangeswereenactedeliminatingthestatutoryincometaxratereductionscheduledtostartin2014,andleavingthecurrent30%
statutoryincometaxrateineffectforfutureyears.Additionally,theEntrepreneurialTaxofUniqueRate(IETUorFlatTax)hasbeenrepealedasofJanuary1,2014.
Wehaverevaluedourdeferredincometaxassetsandliabilitiesusingtheratesexpectedtobeineffectwhentheunderlyingtemporarydifferencesareexpectedto
reverse.
DuringtheyearendedDecember31,2015,wereducedthenetvaluationallowanceby$31millionthroughcontinuingoperations.Thereductionisprimarily
relatedtothewriteoffcertaintaxattributesinMexico,asaresultofinternallegalentityrestructurings,andduetotheU.S.VirginIslands,asaresultofanuncertain
taxposition.Thesetaxattributeswerefullyreservedwithavaluationallowancepriortothewriteoff.
DuringtheyearendedDecember31,2015,theProtectingAmericansfromTaxHikesActof2015wassignedintolawwhichextendedcertainbusinesstax
provisions,includingIRCsection954(c)(6)dealingwiththeapplicationofSubpartFtocertaininter-companypaymentsamongcontrolledforeigncorporations.The
expirationofsection954(c)(6),whichwasextendedthroughDecember31,2020,andtheotherexpiredprovisionscouldhaveamaterialimpactonourconsolidated
resultsofoperationssubsequentto2020.
DuringtheyearsendedDecember31,2014and2013,werecordedtaxbenefitsof$5millionand$69million,respectively,indiscontinuedoperations.The
2013taxbenefitof$69millionwastheresultofthereversalofstateincometaxandinterestreservesassociatedwithanuncertaintaxposition,whichwasrelatedto
apreviousdisposition(seeNote16).Theapplicablestatuteoflimitationforthistaxpositionlapsedduring2013.
Aswepursueopportunitiestosellhotels,wecontinuallyassessourtaxpositions,indefinitereinvestmentassertions,andourabilitytorealizedeferredtax
assetstoidentifyifchangesinrecognitionarerequired.
Inaddition,wecontinuallyevaluateinitiativestobetteralignourtaxandlegalentitystructurewiththefootprintofournon-U.S.operationsandrecognizethe
tax impact of these initiatives, including changes in assessment of our uncertain tax positions, indefinite reinvestment assertions and realizability of deferred tax
assetsintheperiodwhenwebelieveallnecessaryinternalandexternalapprovalsassociatedwithsuchinitiativeshavebeenobtained,orwhentheinitiativesare
materiallycomplete,whicheveroccursearliest.
AsofDecember31,2015,wehadapproximately$326millionoftotalunrecognizedtaxbenefits,ofwhich$106millionwouldaffectoureffectivetaxrateif
recognized.Areconciliationofthebeginningandendingbalanceofunrecognizedtaxbenefitsisasfollows(inmillions):

Year Ended December 31,

2015

Beginningofyear
Additionsbasedontaxpositionsrelatedtothecurrentyear
Additionsfortaxpositionsofprioryears
Settlementswithtaxauthorities
Reductionsfortaxpositionsinprioryears
Reductionsduetothelapseofapplicablestatutesoflimitations
Endofyear

2014

240
69
32
(1)
(14)

326

2013

261
37
26
(81)
(3)

240

258
21
40

(19)
(39)
261

DuringtheyearendedDecember31,2014,weresolvedapreviousdisputerelatedtoforeignoperatinglosses,whichresultedinataxbenefitof$52million.
The tax benefit included the recognition of a previously unrecognized tax benefit of $21 million, the $2 million reversal of interest accruals, net of tax, and the
recognitionofa$29milliondeferredtaxassetrelatingtonetoperatinglosses.
Unrecognizedtaxbenefitsaresubjecttochangeoverthenexttwelvemonthsprimarilyasaresultoftheexpirationofcertainstatutesoflimitationsandas
auditsaresettled.Itisreasonablypossiblethatapproximately$12millionofourunrecognizedtaxbenefitsasofDecember31,2015willreversewithinthenext
twelvemonths,themajorityofwhichwillimpacttheeffectivetaxrate.
F-27

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Werecognizeinterestandpenaltiesrelatedtounrecognizedtaxbenefitsthroughincometaxexpense.Wehad$19millionand$16millionaccruedforthe
paymentofinterestasofDecember31,2015andDecember31,2014,respectively.Wehad$3millionand$7millionaccruedforthepaymentofpenaltiesasof
December 31, 2015 and December 31, 2014, respectively. We are subject to taxation in the U.S. federal jurisdiction, as well as various state and foreign jur
isdictions.AsofDecember31,2015,wearenolongersubjecttoexaminationbyU.S.federaltaxingauthoritiesforyearspriorto2007andtoexaminationbyany
U.S.statetaxingauthoritypriorto2006.Allsubsequentperiodsremaineligibleforexamination.Inthesignificantforeignjurisdictionsinwhichweoperate,weare
nolongersubjecttoexaminationbytherelevanttaxingauthoritiesforanyyearspriorto2009.
WeareunderregularauditbytheInternalRevenueService(IRS).WehavereceivedcertainNoticesofProposedAdjustmentfromtheIRSforyears2007
through2009;however,wedisagreewiththeIRSoncertainoftheseadjustmentsandhavefiledaformalappealsprotesttodisputethem.Weintendtovigorously
contest these adjustments, including pursuing litigation, if necessary. If upheld or settled, these unagreed adjustments could result in a significant cash tax and
interestpayment.Morethanhalfofthisamountwouldnotaffecttheeffectivetaxrateduetothetimingnatureofcertainissues.
Note 13. Debt
Long-termdebtandshort-termborrowingsconsistedofthefollowing(inmillions):

December 31,
2015

SeniorCreditFacility:
RevolvingCreditFacility,maturing2020
SeniorNotes,interestat7.375%,matured2015
SeniorNotes,interestat6.75%,maturing2018
SeniorNotes,interestat7.15%,maturing2019
SeniorNotes,interestat3.125%,maturing2023
SeniorNotes,interestat3.75%,maturing2025
SeniorNotes,interestat4.50%,maturing2034
Capitalleaseobligations
Commercialpaper,weightedaverageinterestat
0.509%atDecember31,2015
Mortgagesandother,interestratesrangingfrom
non-interestbearingto3.65%,variousmaturities

Lesscurrentmaturities
Long-termdebt

372
210
349
347
292
169

December 31,
2014

5
294
372
209
349
346
291
156

408

634

40
2,187
(33)
2,154

39
2,695
(297)
2,398

AggregatedebtmaturitiesforeachoftheyearsendingDecember31areasfollows(inmillions):

2016
2017
2018
2019
2020
Thereafter

33
8
378
215
414
1,139
2,187

Wemaintainlinesofcreditunderwhichbankloansandothershort-termdebtcanbedrawnon.Inaddition,smallercreditlinesaremaintainedbyourforeign
subsidiaries.Wehadapproximately$1.34billionofavailableborrowingcapacityunderourdomesticandforeignlinesofcreditasofDecember31,2015.Theshortterm borrowings under these lines of credit at December 31, 2015 and 2014 were de minimis. During 2014, we entered into the Fourth Amendment to our
$1.75billionRevolvingCreditfacility(theFacility).TheamendmentextendedthematurityoftheFacilitybytwoyearstoFebruary2020.TheFacility,whendrawn
upon,hasanapplicablemargin,inclusiveofacommitmentfee,of1.20%,plustheapplicablecurrencyLIBORrate.Wepaidfeesofapproximately$2millionin
connectionwiththisamendmentandcapitalizedthesecostsasdeferredfinancingcosts.Additionally,inconnectionwiththisamendment,werecordedanetcharge
ofapproximately$1millioninthelossonearlyextinguishmentofdebt,netlineitemtowrite-offcertainexistingdeferredfinancingcosts.
F-28

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

During the year ended December 31, 2015, our 7.375% Senior Notes, which had a principal amount of approximately $ 294million, matured. Wepaid
approximately$305milliontosettlealloutstandingprincipalandinterestdue.
DuringtheyearendedDecember31,2014,weenteredintoamasterleasearrangementtoleasetheentirebuildingsandlandwhereweareheadquarteredin
Stamford,Connecticut.Thetermoftheleaseis20years,withtwofive-yearextensionsatouroption.Wehavefixedannualpaymentsofapproximately$10million,
whichescalateat3%peryear.Asaresultofthistransaction,asofDecember31,2014,werecordedacapitalleaseobligationofapproximately$153million.
During the year ended December 31, 2014, we established a Commercial Paper Program (Commercial Paper), which gives us the ability to issue up to
$1.75billionofshort-termunsecurednotes.WereserveunusedcapacityundertheFacilitytorepayoutstandingCommercialPaperborrowingsintheeventthatthe
commercial paper market is not available to us for any reason when outstanding borrowings mature. While any outstanding Commercial Paper and Facility
borrowingsgenerallyhaveshort-termmaturities,weclassifytheoutstandingborrowingsaslong-termbasedonourabilityandintenttorefinancetheoutstanding
borrowingsonalong-termbasis.
Also,duringtheyearendedDecember31,2014,wecompletedapublicofferingof$350millioninaggregateprincipalamountofSeniorNotesdue2025(the
2025 Notes) and $300 million in aggregate principal amount of Senior Notes due 2034 (the 2034 Notes). The 2025 Notes and 2034 Notes are direct, unsecured
obligationsandrankequallywithallofourexistingandfutureunsecuredandunsubordinatedobligations.The2025Notesbearinterestatafixedrateof3.75%per
annumandmatureonMarch15,2025.The2034Notesbearinterestatafixedrateof4.50%perannumandmatureonOctober1,2034.Wepayinterestonthe2025
NotesonMarch15andSeptember15eachyearuntilmaturity.Wepayinterestonthe2034NotesonApril1andOctober1eachyearuntilmaturity.Weusedthenet
proceeds for general corporate purposes, which included the repayment of Commercial Paper, repurchases of our common stock and the payment of previously
announcedregularandspecialdividendstoourstockholders.
Wemayredeemalloraportionofthe2025NotesatouroptionatanytimepriortoDecember15,2024atthemake-wholeredemptionpriceequaltothe
greaterof(1)100%oftheaggregateprincipalamountofthe2025Notesbeingredeemed,plusaccruedandunpaidinterestto,butexcluding,theredemptiondate;
and(2)thesumofthepresentvaluesoftheremainingscheduledpaymentsofprincipalandinterestinrespectofthe2025Notesbeingredeemed(exclusiveofany
interestaccruedtothedateofredemption)discountedtotheredemptiondateonasemi-annualbasisattheTreasuryRate(asdefinedinthesupplementalindenture
relatingtothe2025Notes)plus25basispoints,plusaccruedandunpaidinterestto,butexcluding,theredemptiondate.AtanytimeonorafterDecember15,2024,
wemayredeemalloraportionofthe2025Notesataredemptionpriceequalto100%oftheprincipalamountplusaccruedandunpaidinterestto,butexcluding,the
redemptiondate.
Wemayredeemalloraportionofthe2034NotesatouroptionatanytimepriortoApril1,2034atthemake-wholeredemptionpriceequaltothegreaterof
(1)100%oftheaggregateprincipalamountofthe2034Notesbeingredeemed,plusaccruedandunpaidinterestto,butexcluding,theredemptiondate;and(2)the
sum of the present values of the remaining scheduled payments of principal and interest in respect of the 2034 Notes being redeemed (exclusive of any interest
accruedtothedateofredemption)discountedtotheredemptiondateonasemi-annualbasisattheTreasuryRate(asdefinedinthesupplementalindenturerelating
to the 2034 Notes) plus 25 basis points, plus accrued and unpaid interest to, but excluding, the redemption date. At any time on or after April 1, 2034, we may
redeem all or a portion of the 2034 Notes at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to, but excluding, the
redemptiondate.
We are subject to certain restrictive debt covenants under our short-term borrowing and long-term debt obligations including a financial maintenance
covenant,limitationsonincurringadditionaldebt,restrictionsonliens,limitationsonabilitytopaydividends,escrowaccountfundingrequirementsfordebtservice,
capital expenditures, tax payments and insurance premiums, among other restrictions. We were in compliance with all of the short-term and long-term debt
covenantsatDecember31,2015.
DuringtheyearendedDecember31,2014,weenteredintooneinterestrateswapswithatotalnotionalamountof$50million.Underthisswap,wepay
floatingandreceiveafixedinterestrate(seeNote21).

F-29

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 14. Securitized Vacation Ownership Debt

AsdiscussedinNote8,ourVIEsassociatedwiththesecuritizationofourVOInotesreceivableareconsolidatedinourfinancialstatements.Long-termandshorttermsecuritizedvacationownershipdebtconsistedofthefollowing(inmillions):

December 31,
2015

2009securitization,terminated2015(1)
2010securitization,interestratesrangingfrom3.65%to4.75%,maturing2021
2011securitization,interestratesrangingfrom3.67%to4.82%,maturing2025
2013securitization,interestratesrangingfrom2.00%to2.76%,maturing2023

Lesscurrentmaturities
Long-termsecuritizeddebt

2014

48
61
63
172
(48)
124

13
72
81
83
249
(73)
176

(1)

DuringtheyearendedDecember31,2015,weterminatedthe2009Securitization,includingpaydownofallprincipalandinterestdue(seeNote8).

DuringtheyearsendedDecember31,2015,2014and2013,interestexpenseassociatedwithsecuritizedvacationownershipdebtwas$7million,$11million
and$17million,respectively.
Note 15. Other Liabilities
Otherliabilitiesconsistedofthefollowing(inmillions):

December 31,
2015

Deferredgainsonassetsales
SPGpointliability(a)
Deferredrevenue
Benefitplanliabilities
Deferredrent
Insurancereserves
Other

2014

1,329
830
46
45
27
47
97
2,421

1,079
721
52
53
30
44
90
2,069

(a)

IncludestheactuariallydeterminedliabilityandcertaindeferredrevenuesrelatedtotheSPGprogram.

We defer gains realized in connection with the sale of a property for which we continue to manage through a long-term management agreement and
recognizethegainsovertheinitialtermoftherelatedagreement(seeNote10).
Note 16. Discontinued Operations
Summaryfinancialinformationfordiscontinuedoperationsisasfollows(inmillions):

2015

Income Statement Data

Lossfromoperations,netoftax
Gain(loss)ondispositions,netoftax

$
$

Year Ended December 31,

2014

$
$

$
(10) $

2013

(1)
71

DuringtheyearendedDecember31,2014,thelosswasprimarilyduetoliabilitiesassociatedwithanunfavorableruling,during2014,inconnectionwitha
previousdisposition.
F-30

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

During the year ended December 31, 2013, we recorded a $71 million gain on dispositions (net of tax) primarily as a result of the reversal of a reserve
associatedwithanuncertaintaxposition,whichwasrelatedtoapreviousdisposition.Theapplicablestatuteoflimitationforthistaxpositionlapsedduring2013
(see Note 12). Additionally, a gain of $1 million (net of tax) resulted from the favorable insurance recovery of certain liabiliti es associated with a previously
disposedofsubsidiaryofITTCorporation,whichweacquiredin1998.
Note 17. Employee Benefit Plans
DuringtheyearendedDecember31,2015,werecordednetactuariallossesof$5million(netoftax)relatedtovariousemployeebenefitplansprimarilydue
tochangesintheassumeddiscountrates.Theselosseswererecordedinothercomprehensiveincome.Theamortizationofnetactuariallosses,acomponentofother
comprehensive income, for the year ended December 31, 2015 was a credit of $3 million (net of tax). The actuarial loss included in accumulated other
comprehensive(loss)incomethatisexpectedtoberecognizedinnetperiodicpensioncostduringtheyearendedDecember31,2016is$2million($2million,netof
tax).
Defined Benefit and Postretirement Benefit Plans. We sponsor or previously sponsored numerous funded and unfunded domestic and international
pensionplans.AlldefinedbenefitplanscoveringU.S.employeesarefrozen.Certainplanscoveringnon-U.S.employeesremainactive.
WealsosponsortheStarwoodHotels&ResortsWorldwide,Inc.RetireeWelfareProgram.Thisplanprovideshealthcareandlifeinsurance benefitsfor
certaineligibleretiredemployees,andwefundthisprogramonapay-as-you-gobasis.
Thefollowingtablesetsforththebenefitobligation,fairvalueofplanassets,thefundedstatusandtheaccumulatedbenefitobligationofourdefinedbenefit
pensionandpostretirementbenefitplansatDecember31(inmillions):

Domestic
Pension Benefits
2015
2014

Change in Benefit Obligation

Benefitobligationatbeginningofyear
Servicecost
Interestcost
Actuarialloss(gain)
Effectofforeignexchangerates
Planparticipantcontributions
Benefitspaid
Other
Benefitobligationatendofyear

24

(1)

(1)

22

Foreign
Pension Benefits
2015
2014

21

1
3

(1)

24

242

9
(8)
(6)

(8)
(2)
227

Postretirement
Benefits
2015
2014

216

10
29
(6)

(7)

242

18

1
(2)


(2)

15

18

(2)

18

F-31

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Domestic
Pension Benefits
2015
2014

Change in Plan Assets

Fairvalueofplanassetsatbeginningofyear
Actualreturnonplanassets,netofexpenses
Employercontribution
Planparticipantcontributions
Effectofforeignexchangerates
Benefitspaid
Other
Fairvalueofplanassetsatendofyear
Overfunded(underfunded)fundedstatus

$
$

(1)

(22)

$
$

Accumulatedbenefitobligation

22 $

Plans with Accumulated Benefit Obligations

in excess of Plan Assets
Projectedbenefitobligation

Accumulatedbenefitobligation
Fairvalueofplanassets

Foreign
Pension Benefits
2015
2014

(1)

(24)

$
$

268
(1)
8

(7)
(8)
(2)
258
31

Postretirement
Benefits
2015
2014

$
$

235
32
15

(7)
(7)

268
26

$
$

2


(2)


(15)

$
$

(2)

(18)

24 $

227 $

242

n/a

n/a

22 $

24 $

153 $

159

n/a

22 $

24 $

153 $

159

n/a
n/a

145 $

146

n/a

n/a

n/a

ThenetunderfundedstatusoftheplansatDecember31,2015was$6million,ofwhich$43millionisrecordedinotherliabilities,$3millionisrecordedin
accruedexpensesand$40millionisrecordedinotherassetsintheaccompanyingbalancesheet.
Alldomesticpensionplansarefrozenplans,wherebyemployeesdonotaccrueadditionalbenefits.Therefore,atDecember31,2015and2014,theprojected
benefitobligationisequaltotheaccumulatedbenefitobligation.
ThefollowingtablepresentsthecomponentsofnetperiodicbenefitcostfortheyearsendedDecember31(inmillions):

2015

Domestic
Pension Benefits
2014

2013

2015

Foreign
Pension Benefits
2014

Servicecost
$
$
$
$
$
$
Interestcost

1
1
9
10
Expectedreturnonplanassets

(13)
(13)
Amortizationofnetactuarialloss

2
1
Other

Netperiodicbenefit(income)cost
$
$
1 $
1 $
(2) $
(2) $

TheweightedaverageassumptionsusedtodeterminebenefitobligationsatDecember31wereasfollows:

Domestic
Pension Benefits
2015
2014

Discountrate
Rateofcompensationincrease

4.00%
n/a

3.50%
n/a

2013

2015

$
8
(12)
3

(1) $

2013

Foreign
Pension Benefits
2015
2014

4.06%
3.01%

Postretirement
Benefits
2014

3.80%
3.02%

Postretirement
Benefits
2015
2014

4.00%
n/a

3.75%
n/a

F-32

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

FormeasurementpurposesatDecember31,2015,a7%annualrateofincreaseinthepercapitacostofcoveredhealthcarebenefitswasassumedfor2016,
gradually decreasing to 5% in 2020. A one-percentage point change in assumed health care cost trend rates would have less than a $1 million effect on the
postretirementobligationandanominalimpactonthetotalofserviceandinterestcostcomponentsofnetperiodicbenefitcost.Themajorityofparticipantsinthe
ForeignPensionPlansareemployeesofmanagedhotels,forwhichwearereimbursedforcostsrelatedtotheirbenefits.Theimpactofthesereimbursementsisnot
reflectedabove.TheweightedaverageassumptionsusedtodeterminenetperiodicbenefitcostfortheyearsendedDecember31wereasfollows:

2015

Domestic
Pension Benefits
2014

2013

2015

Foreign
Pension Benefits
2014

2013

2015

Postretirement
Benefits
2014

2013

Discountrate

3.50%
4.26%
3.50%
3.80%
4.63%
4.01%
3.75%
4.25%
3.50%
Rateofcompensation
increase
n/a
n/a
n/a
3.02%
3.03%
3.03%
n/a
n/a
n/a
Expectedreturnon
planassets
n/a
n/a
n/a
5.03%
5.51%
5.81%
n/a
n/a
n/a

Ourinvestmentobjectivesaretominimizethevolatilityofthevalueoftheassetsandtoensuretheassetsaresufficienttopayplanbenefits.Thetargetasset
allocationis28%debtsecurities,28%equitysecuritiesand44%other.

Anumberoffactorswereconsideredinthedeterminationoftheexpectedreturnonplanassets.Thesefactorsincludedcurrentandexpectedallocationof
plan assets, the investment strategy, historical rates of return and our expectations, as well as investment expert expectations, for investment performance over
approximatelyaten-yearperiod.
ThefollowingtablepresentsourfairvaluehierarchyoftheplanassetsmeasuredatfairvalueonarecurringbasisasofDecember31,2015(inmillions):

Assets:
MutualFunds
CollectiveTrusts
EquityIndexFunds
MoneyMarkets
BondIndexFunds
Total

Level 1

Level 2

72

71
1

144

Level 3

$
1

11
2
14 $

Total

100



100

72
101
71
12
2
258

ThefollowingtablepresentsourfairvaluehierarchyoftheplanassetsmeasuredatfairvalueonarecurringbasisasofDecember31,2014(inmillions):

Assets:
MutualFunds
CollectiveTrusts
EquityIndexFunds
MoneyMarkets
BondIndexFunds
Total

Level 1

Level 2

72

79
2

153

Level 3

9


106
115

Total

72
9
79
2
106
268

F-33

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Thecollectivetrustsassetsincludeourinvestmentininsurancecontracts.Thevalueoftheinsurancecontractsusedsignificantunobservableinputsincluding
plan specific data, in addition to other inputs which include bond interest rates. Therefore, we have classified the contracts as Level 3 investments. Fair value
estimatesareprovidedbyexternalpartiesandaresubsequentlyreviewedandapprovedbymanagement.
Allotherassetsarevaluedusingquotedmarketpricesinactivemarketsorotherobservableinputs.
The following table represents our expected pension and postretirement benefit plan payments for the next five years and the five years thereafter (in
millions):

Domestic
Pension Benefits

2016
2017
2018
2019
2020
2021-2025

Foreign
Pension Benefits

2
2
2
2
2
7

16
9
10
10
11
56

Postretirement
Benefits

1
1
1
1
1
5

Weexpecttocontribute$12milliontotheplansduring2016.AsignificantportionofthecontributionsrelatetotheForeignPensionPlans,forwhichweare
reimbursedbyourmanagedhotels.
Defined Contribution Plans. We sponsor various defined contribution plans, including the Starwood Hotels & Resorts Worldwide, Inc. Savings and
RetirementPlan,whichisa401(k)plan.TheplanallowsparticipationbyemployeesonU.S.payrollwhoareatleastage21.Eachparticipantmaycontributeona
pretaxbasisbetween1%and50%ofhisorhereligiblecompensationtotheplansubjecttocertainmaximumlimits.Eligibleemployeesareautomaticallyenrolled
after90days(unlesstheyoptout).Acompany-paidmatchingcontributionisprovidedtoparticipantswhohavecompletedatleastoneyearofservice.Theamount
ofexpenseformatchingcontributionstotaled$16millionineachof2015,2014,and2013.Theplanincludesourpubliclytradedcommonstockasaninvestment
choice.ThebalancesheldinStarwoodsstockwere$72millionand$82millionatDecember31,2015and2014,respectively.

F-34

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Multi-Employer Pension Plans. Certainemployeesarecoveredbyunionsponsoredmulti-employerpensionplanspursuanttoagreementsbetweenusand

variousunions.Ourparticipationintheseplansisoutlinedinthetablebelow(inmillions):

EIN/ Pension
Plan Number

Pension Fund

NewYorkHotelTradesCouncilandHotel
AssociationofNewYorkCity,Inc.PensionFund
OtherFunds
TotalContributions

a)
AsofJanuary1,2015
b)
AsofJanuary1,2014

Pension Protection
Act Zone Status
2015
2014

13 1764242/001

Various

Green (a)

2015

Yellow (b) $

$

Contributions
2014

4 $
4
8 $

4 $
4
8 $

2013

4
4
8

EligibleemployeesatourownedhotelsinNewYorkCityparticipateintheNewYorkHotelTradesCouncilandHotelAssociationofNewYorkCity,Inc.
PensionFund.OurcontributionsarebasedonapercentageofallunionemployeewagesasdictatedbythecollectivebargainingagreementthatexpiresonJune30,
2026. Our contributions did not exceed 5% of the total contributions to the pension fund in 2015, 2014 or 2013. The pension fund has implemented a funding
improvementplanandwehavenotpaidasurcharge.
Multi-Employer Health Plans. Certainemployeesarecoveredbyunionsponsoredmulti-employerhealthplanspursuanttoagreementsbetweenusand
variousunions.Theplanbenefitscanincludemedical,dentalandlifeinsuranceforeligibleparticipantsandretirees.Ourcontributionstotheseplans,whichwere
chargedtoexpenseduring2015,2014and2013,wereapproximately$26million,$24millionand$24million,respectively.
Note 18. Leases and Rentals
We lease certain equipment for the operations of our hotels under various lease agreements. The leases extend for varying periods through 2022 and
generallyareforafixedamounteachmonth.Inaddition,ourcorporateheadquartersandseveralofourhotelsaresubjecttoleasesoflandorbuildingfacilitiesfrom
thirdparties,whichextendforvaryingperiodsthrough2097andgenerallycontainfixedandvariablecomponents.Thevariablecomponentsofleasesoflandor
buildingfacilitiesareprimarilybasedontheoperatingprofitorrevenuesoftherelatedhotels.
OurminimumfuturerentsatDecember31,2015payableundernon-cancelableleaseswiththirdpartieswereasfollows(inmillions):

Operating
Leases

Years Ending December 31,

2016
2017
2018
2019
2020
Thereafter
Totalminimumleasepayments

Lessamountrepresentinginterest
Presentvalueofminimumleasepayments

74
71
66
64
62
729
1,066

Capital Leases

13
13
13
14
14
206
273

(104)
169

F-35

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Rentexpenseundernon-cancelableoperatingleasesconsistedofthefollowing(inmillions):

2015

Minimumrent
Contingentrent
Subleaserent

Year Ended December 31,

2014

80
15
(2)
93

98
12
(4)
106

2013

105
11
(4)
112

Note 19. Stockholders Equity

Share Repurchases. DuringtheyearsendedDecember31,2015and2014,ourBoardofDirectorsauthorizedincreasesof$750millionand$1.1billion,
respectively,tooursharerepurchaseprogram.DuringtheyearendedDecember31,2015,werepurchased4.7millioncommonsharesataweightedaveragepriceof
$78.39foratotalcostofapproximately$371million.DuringtheyearendedDecember31,2014,werepurchasedapproximately20.3millioncommonsharesata
weighted average price of $80.45 for a total cost of approximately $1,636 million. As of December 31, 2015, $458 million remained available under the share
repurchaseauthorization.
Dividends. During the year ended December 31, 2015, we paid approximately $255 million of dividends, or $1.50 per share. During the year ended
December 31, 2014, we paid approximately $735 million of dividends, or $4.00 per share consisting of regular quarterly dividends totaling $1.40 per share and
specialquarterlydividendstotaling$2.60pershare.
SLC Operating Limited Partnership Units. UnitsofSLCOperatingLimitedPartnership,ourconsolidatedsubsidiary,areconvertibleintoCorporation
Sharesattheunitholdersoption,providedthatwehavetheunilateraloptiontosettleconversiondemandsincashorCorporationShares.Duringtheyearended
December31,2015,weredeemedapproximately54,000oftheseunitsforapproximately$4millionincash.
Note 20. Stock-Based Compensation
In2013,weadoptedthe2013Long-TermIncentiveCompensationPlan(the2013LTIP),whichsupersededthe2004Long-TermIncentiveCompensation
Plan(the2004LTIP).The2013LTIPauthorizestheCompensationCommitteeoftheBoardofDirectorstoprovideequity-basedcompensationintheformofstock
options,stockappreciationrights,unrestrictedstock,restrictedstock,restrictedstockunits,performanceshares,performanceunitsandotherstock-basedawardsfor
the purpose of providing our officers and other employees, and those of our subsidiaries, and non-employees who perform employee functions incentives and
rewardsforperformance.Althoughnoadditionalawardswillbegrantedunderthe2004LTIP,theprovisionsunderthepreviousplanwillcontinuetogovernawards
thathavebeengrantedandremainoutstandingunderthatplan.Noawardsmaybegrantedunderthe2013LTIPafterthetenthanniversaryofthedateonwhichthe
stockholdersapprovedthe2013LTIP.However,awardsoutstandingunderthe2013LTIPwillcontinuetobegovernedbythe2013LTIPuntilallawardsgranted
prior to that date are no longer outstanding. The aggregate number of new shares available to be granted under the 2013 LTIP at December 31, 2015 was
approximately10.3million.
A target number of contingent performance shares were awarded to certain executives in February 2015. Vesting of the performance shares is dependent
uponamarketconditionandthreeyearsofcontinuousservicebeginningatdateofgrant,subjecttoaproratedadjustmentforemployeeswhoareterminatedunder
certaincircumstancesorwhoretire.Themarketconditionisbasedonourtotalstockholderreturnrelativetothetotalstockholderreturnofaspecifiedgroupofpeer
companiesattheendofathree-calendar-yearperformanceperiodbeginningJanuary1,2015andendingDecember31,2017.Thenumberofperformanceshares
earnedisdeterminedbasedonourpercentilerankingamongthesecompanies.Theperformancesharesareentitledtoanydividendsmadeduringtheperformance
periodinthesameproportionasthenumberofperformancesharesthatvest.Dividendswillbepaidattheendoftheserviceperiod.
Weclassifiedtheperformancesharesasashare-basedequityaward,andassuch,compensationexpenserelatedtothesesharesisbasedonthegrant-datefair
value,whichwillberecognizedratablyovertherequisiteserviceperiod.WedeterminedthefairvalueoftheperformancesharesusingaMonteCarlosimulation
valuationmodel.TheMonteCarlosimulationestimatesthefairvalueofourperformanceawardsprimarilybasedonthetermsassociatedwiththegrantandpublic
informationthatisreadilyavailable.TheunderlyingprinciplesintheMonteCarlosimulationarethatpubliclytradedstocksarefairlypricedandthefuturereturnsof
astock
F-36

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

maybeestimatedprimarilybythestocksassumedvolatility.DuringtheyearsendedDecember31,2015and2014,wegrantedapproximately124,000and177,000
performance shares, respectively, with grant date fair values of $90.03 and $103.65 per share, respectively, under the 2013 LTIP. During the years ended
December31,2015and2014,approximately67,000and39,000performanceshares,respectively,wereforfeitedwithaweightedaveragefairvalueof$94.86and
$89.86pershare,respectively.AsofDecember31,2015,358,000performancesharesremainedoutstandingwithaweightedaveragefairvalueof$90.24pershare
andaremaininglifeof1year.AsofDecember31,2014,302,000performancesharesremainedoutstanding.
Compensationexpense,includingtheimpactofreimbursementsduring2015,2014and2013wasapproximately$56million,$52millionand$54million,
respectively,resultingintaxbenefitsof$22million,$20millionand$21million,respectively.AsofDecember31,2015,therewasapproximately$58millionof
unrecognizedcompensationcost,netofestimatedforfeitures,includingtheimpactofreimbursementfromthirdparties,whichisexpectedtoberecognizedovera
weighted-averageperiodof1.4yearsonastraight-linebasis.
In2015,2014,and2013,wedidnotgrantanystockoptions.In2012,weutilizedtheLatticemodeltocalculatethefairvalueofoptiongrants.Theweighted
averageassumptionsusedtodeterminethefairvalueofoptiongrantswereasfollows:

Dividendyield
Volatility:
Nearterm
Longterm
Expectedlife
Yieldcurve:
6month
1year
3year
5year
10year

Year Ended
December 31, 2012

1.25%

37.0%
46.0%
6yrs.

0.14%
0.18%
0.41%
0.84%
1.94%

Thedividendyieldwasestimatedbasedontheexpectedannualizeddividendpaymentandtheaverageexpectedpriceofourcommonsharesduringthesame
periods.
Theestimatedvolatilitywasbasedonacombinationofhistoricalsharepricevolatilityaswellasimpliedvolatilitybasedonmarketanalysis.Thehistorical
sharepricevolatilitywasmeasuredoveran8-yearperiod,whichisequaltothecontractualtermoftheoptions.
The expected life represents the period that our stock-based awards are expected to be outstanding and was determined based on an actuarial calculation
usinghistoricalexperience,givingconsiderationtothecontractualtermsofthestock-basedawardsandvestingschedules.
Theyieldcurve(risk-freeinterestrate)wasbasedontheimpliedzero-couponyieldfromtheU.S.Treasuryyieldcurveovertheexpectedtermoftheoption.
F-37

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Thefollowingtablesummarizesourstockoptionactivityduring2015:

OutstandingatDecember31,2014
Granted
Exercised
Forfeited,CanceledorExpired
OutstandingatDecember31,2015
ExercisableatDecember31,2015

Options
(In Millions)

Weighted
Average
Exercise
Price Per Share

0.5

(0.3)

0.2
0.2

$
$

48.41
n/a
50.78
n/a
44.89
42.89

AsofDecember31,2014,wehadnon-vestedoptionstotaling0.1million,withaweightedaveragegrantdatefairvalueof$19.52.Duringtheyearended
December31,2015,0.1millionoptionsvestedwithaweightedaveragegrantdatefairvalueof$19.94.
The service period for options is typically four years. The total intrinsic value of options exercised during 2015, 2014 and 2013 was approximately
$8million,$18millionand$104million,respectively,resultingintaxbenefitsofapproximately$3million,$7millionand$32million,respectively.
The aggregate intrinsic value of outstanding options as of December 31, 2015 was $6 million. The aggregate intrinsic value of exercisable options as of
December 31, 2015 was $5 million. The weighted-average contractual life was 2.6 years for outstanding options and 2.3 years for exercisable options as of
December31,2015.
Werecognize compensationexpense,equaltothefairmarketvalueofthestockonthedateofgrantforrestricted stockandunitgrants,overtheservice
period.During2015,wegrantedapproximately1,000,000sharesofrestrictedstockandrestrictedstockunitsthathadaweightedaveragegrantdatefairvalueof
$79.55pershareorunitunderthe2013LTIP.Theweighted-averagefairvalueperrestrictedstockorunitgrantedduring2014and2013was$81.75and$60.38,
respectively.Theserviceperiodistypicallythreeyears.Thefairvalueofrestrictedstockandunitsforwhichtherestrictionslapsedduring2015,2014and2013was
approximately$104million,$91millionand$103million,respectively.
Thefollowingtablesummarizesourrestrictedstockandunitsactivityduring2015:

Number of
Restricted
Weighted Average
Stock and Units
Grant Date Value

(In Millions)
Per Share

OutstandingatDecember31,2014
Granted
Lapseofrestrictions
Forfeitedorcanceled
OutstandingatDecember31,2015

2.6
1.0
(1.3)
(0.2)
2.1

65.28
79.55
63.11
72.75
72.79

2002 Employee Stock Purchase Plan

InApril2002,theBoardofDirectorsadopted(andinMay2002thestockholdersapproved)our2002EmployeeStockPurchasePlan(theESPP)toprovide
ouremployeeswithanopportunitytopurchasesharesthroughpayrolldeductionsandwereservedapproximately12.0millionsharesforissuanceundertheESPP.
TheESPPcommencedinOctober2002.
Allfull-timeemployeeswhohavecompleted30daysofcontinuousserviceandwhoareemployedbyusonU.S.payrollsareeligibletoparticipateinthe
ESPP.Eligibleemployeesmaycontributeupto20%oftheirtotalcashcompensationtotheESPP.Amountswithheldareappliedattheendofeverythree-month
accumulationperiodtopurchaseshares.Thevalueoftheshares(determinedasofthebeginningoftheofferingperiod)thatmaybepurchasedbyanyparticipantina
calendaryearislimitedto$25,000.Thepurchasepricetoemployeesisequalto95%ofthefairmarketvalueofsharesattheendofeachperiod.Participantsmay
withdrawtheircontributionsatanytimebeforesharesarepurchased.
F-38

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Approximately0.1millionshareswereissuedundertheESPPduringtheyearendedDecember31,2015atpurchasepricesrangingfrom$67.90to$78.62.
Approximately0.1millionshareswereissuedundertheESPPduringtheyearendedDecember31,2014atpurchasepricesrangingfrom$75.05to$80.31.
Note 21. Derivative Financial Instruments
Weenterintoforwardcontractstomanageforeignexchangeriskbasedonmarketconditionsandtohedgecertainforecastedtransactions.Theseforward
contracts have been designated and qualify as cash flow hedges, and their change in fair value is recorded as a component of other comprehensive income and
reclassifiedintoearningsinthesameperiodorperiodsinwhichtheforecastedtransactionoccurs.Toqualifyasahedge,weneedtoformallydocument,designate
andassesstheeffectivenessofthetransactionsthatreceivehedgeaccounting.ThenotionaldollaramountoftheoutstandingEuroforwardcontractsatDecember31,
2015 was $24 million, with average exchange rates of 1.15 and with terms of less than one year. We review the effectiveness of our hedging instruments on a
quarterlybasisandrecordanyineffectivenessintoearnings.Wediscontinuehedgeaccountingforanyhedgethatisnolongerevaluatedtobehighlyeffective.From
timetotime,wemaychoosetode-designateportionsofhedgeswhenchangesinestimatesofforecastedtransactionsoccur.FortheyearendedDecember31,2015,
eachofthesehedgeswashighlyeffectiveinoffsettingfluctuationsinforeigncurrencies.Aninsignificantamountofgainduetoineffectivenesswasrecordedinthe
consolidatedstatementsofincomeduring2015.
Wealsoenterintoforwardcontractstomanageforeignexchangeriskonintercompanyloansthatarenotdeemedlong-terminvestmentnature.Theseforward
contractsarenotdesignatedashedges,andtheirchangeinfairvalueisrecordedinourconsolidatedstatementsofincomeduringeachreportingperiod.Thenotional
dollaramountoftheseoutstandingforwardcontractsatDecember31,2015was$860million,withtermsofprimarilylessthanoneyear.Theseforwardcontracts
provideaneconomichedge,astheylargelyoffsetforeigncurrencyexposuresonintercompanyloans.
We enter into interest rate swap agreements to manage interest expense. The swaps qualify as fair value swaps and modify our interest rate exposure by
effectivelyconvertingdebtwithafixedratetoafloatingrate.Ourobjectiveistomanagetheimpactofinterestratesontheresultsofoperations,cashflowsandthe
marketvalueofourdebt.AtDecember31,2015,wehadfiveinterestrateswapagreementswithanaggregatenotionalamountof$250millionunderwhichwepay
floating rates and receive 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 2018 and 2019. These interest rate swaps have been designated and qualify as fair value hedges and have met the
requirementstoassumezeroineffectiveness.

F-39

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

The counterparties to our derivative financial instruments are major financial institutions. We evaluate the credit ratings of the financial institutions and
believethatcreditriskisatanacceptablelevel.
Thefollowingtablessummarizethefairvaluesofourderivativeinstruments(inmillions):

December 31, 2015

Balance Sheet
Location

Derivatives designated as
hedging instruments
Asset Derivatives
Interestrateswaps
Forwardcontracts
Totalassets

Otherassets
$
Prepaidexpensesandother

December 31, 2014

Balance Sheet
Location

Fair
Value

4
1
5

Fair
Value

Otherassets
$
Prepaidexpensesandother

4
1
5

Derivatives not designated as

hedging instruments
Asset Derivatives
Forwardcontracts
Liability Derivatives
Forwardcontracts

December 31, 2015

Balance Sheet
Location

Fair
Value

Prepaidexpensesandother
$

Accruedexpenses
$

December 31, 2014

Balance Sheet
Location

Fair
Value

Prepaidexpensesandother
$

Accruedexpenses
$

20

ThefollowingtablepresentstheeffectofourderivativesonourConsolidatedStatementsofIncome(inmillions):

Location of
Gain (Loss)
Recognized in
Income on Derivative

Derivatives Not Designated as Hedging Instruments

2015

Foreignforwardexchangecontracts

Interestexpense,net

Amount of
Gain (Loss)
Recognized in
Income on Derivative
Year Ended
December 31,
2014

(21) $

(2) $

2013

14

F-40

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 22. Comprehensive Income

ThefollowingtablepresentsthechangesinaccumulatedothercomprehensiveincomebycomponentfortheyearendedDecember31,2015(inmillions):

BalanceatDecember31,2014
Othercomprehensiveincome(loss)before
reclassifications
Amountsreclassifiedfromaccumulatedother
comprehensiveincome(loss)
Totalbeforetax
Tax(expense)benefit
Netcurrentyearothercomprehensiveincome(loss)
BalanceatDecember31,2015

(a)
Amountsinparenthesesindicatedebits.

2 $

1 $

(77) $

(434) $

(508)

(1)

(3)

(156)

(156)

(156)

(156)
(590)

(1)
(157)
(3)
(160)
(668)

Cash Flow
Hedges

For the Year Ended December 31, 2015 (a)

Defined Benefit
Foreign
Net
Pension and
Currency
Investment
Postretirement
Translation
Hedges
Benefit Plans
Adjustments

(4)

(1)
(1)
1

(1)

(1)

3

(2)
(2)
(79)

Total

DuringtheyearendedDecember31,2015,gainsincludedinaccumulatedothercomprehensivelossrelatedtointra-entityforeigncurrencytransactionsthat
areofalong-terminvestmentnatureamountedto$64millioncomparedtogainsof$87millionfortheyearendedDecember31,2014.

F-41

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Thefollowingtablepresentsthecomponentsofourothercomprehensiveincome(loss)andrelatedtaxeffectsfortheyearsendedDecember31,2015,2014
and2013(inmillions):

For the Year Ended December 31, (a)

BeforeTax
Amount

2015
Tax
(Expense)
Benefit

Net-ofTax
Amount

BeforeTax
Amount

2014
Tax
(Expense)
Benefit

Net-ofTax
Amount

BeforeTax
Amount

2013
Tax
(Expense)
Benefit

Net-ofTax
Amount

Cashflowhedges:

Gains(losses)arising
duringperiod
$
4 $
(1) $
3 $
3 $
$
3 $
$
$

Amountsreclassifiedfrom
accumulatedother
comprehensiveincome(b)

(4)

(4)
(1)

(1)
1

1
Netgains(losses)oncash
flowhedges

(1)
(1)
2

2
1

1
Netinvestmenthedges:

Gains(losses)arising
duringperiod
$
(1) $
$
(1) $
1 $
$
1 $
$
$

Amountsreclassifiedfrom
accumulatedother
comprehensiveincome

Netgains(losses)onnet
investmenthedges

(1)

(1)
1

1

Definedbenefitpensionand
postretirementbenefitplans:

Gains(losses)arising
duringtheyear

(3)
(2)
(5)
(13)
1
(12)
21
(2)
19
Amountsreclassifiedfrom
accumulatedother
comprehensiveincome(c)

3

3
(1)

(1)
3

3
Netgains(losses)ondefined
benefitpensionand
postretirementbenefitplans

(2)
(2)
(14)
1
(13)
24
(2)
22
Foreigncurrency
translationadjustments:

Foreigncurrency
translationadjustments

(156)

(156)
(153)

(153)
(20)

(20)
Amountsreclassifiedfrom
accumulatedother
comprehensiveincome(d)

(10)

(10)

Netgains(losses)on
foreigncurrency
translationadjustments

(156)

(156)
(163)

(163)
(20)

(20)
Othercomprehensive
income(loss)
$ (157) $
(3) $ (160) $ (174) $
1 $ (173) $
5 $
(2) $
3

(a)
Amountsinparenthesesindicatedebits.
(b)
Pretaxgainsandlossesonforwardcontractcashflowhedgesarereclassifiedtomanagementfees,franchisefeesandotherincome.
(c)
Pretaxamortizationofdefinedbenefitpensionandpostretirementbenefitplansisreclassifiedtoselling,general,administrativeandother.
(d)
DuringtheyearendedDecember31,2014,werecognized$4millioninthegain(loss)onassetdispositionsandimpairments,netlineitemand$6millionin
theotherliabilitieslineitemduetothesubstantialliquidationoftwoforeignentities.

F-42

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 23. Fair Value of Financial Instruments

ThefollowingtablepresentsourfairvaluehierarchyforourfinancialassetsandliabilitiesmeasuredatfairvalueonarecurringbasisasofDecember31,
2015(inmillions):

Level 1
Level 2
Level 3
Total


Assets:

Interestrateswaps
$
$
4 $
$
4
Forwardcontracts


10

10

$
$
14 $
$
14
Liabilities:

Forwardcontracts
$
$
1 $
$
1

The interest rate swaps are valued using an income approach. Expected future cash flows are converted to a present value amount based on market
expectationsoftheyieldcurveonfloatinginterestrates,whichisreadilyavailableonpublicmarkets.

Theforwardcontractsareoverthecountercontractsthatdonottradeonapublicexchange.ThefairvaluesofthecontractsareclassifiedasLevel2since
theyarebasedoninputssuchasforeigncurrencyspotratesandforwardpointsthatarereadilyavailableonpublicmarkets.Weconsiderbothourcreditrisk,aswell
as our counterparties credit risk in determining fair value and we did not make an adjustment as it was deemed insignificant based onthe short duration of the
contractsandourrateofshort-termdebt.
Webelievethecarryingvaluesofourfinancialinstrumentsrelatedtocurrentassetsandliabilitiesapproximatefairvalue.Thefollowingtablepresentsthe
carryingamountsandestimatedfairvaluesofourlong-termfinancialinstruments(inmillions):

December 31, 2015

December 31, 2014

Hierarchy
Level

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value

Assets:
Restrictedcash
VOInotesreceivable
Securitizedvacationownershipnotesreceivable
Othernotesreceivable
Totalfinancialassets

1
3
3
3

4
402
141
63
610

4
495
174
63
736

3
295
227
45
570

3
369
287
45
704

Liabilities:
Long-termdebt
Long-termsecuritizeddebt
Totalfinancialliabilities

1
3

2,154
124
2,278

2,178
126
2,304

2,398
176
2,574

2,503
182
2,685

Off-Balancesheet:

Lettersofcredit

2
$
$
80 $
$
83
Suretybonds

2


32

27
Totaloff-balancesheet

$
$
112 $
$
110

Thecarryingvalueofourrestrictedcashapproximatesitsfairvalue.Weestimatethefairvalueofourvacationownershipnotesreceivableusingassumptions
related to current securitization market transactions. The fair value of other notes receivable is estimated based on terms of the instrument and current market
conditions.Thesefinancialinstrumentassetsarerecordedintheotherassetslineiteminourconsolidatedbalancesheet.

Weestimatethefairvalueofourpubliclytradeddebtbasedonthebidpricesinthepublicdebtmarkets.Thecarryingamountofourfloatingratedebtisa
reasonablebasisoffairvalueduetothevariablenatureoftheinterestrates.Ournon-public,securitizeddebtandfixedratedebtfairvalueisdeterminedbasedupon
discountedcashflowsforthedebtatratesdeemedreasonableforthetypeofdebt,prevailingmarketconditionsandthelengthtomaturityforthedebt.
Thefairvaluesofourlettersofcreditandsuretybondsareestimatedtobethesameasthecontractvaluesbasedonthenatureofthefeearrangementswith
theissuingfinancialinstitutions.
F-43

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 24. Commitments and Contingencies

WehadthefollowingcontractualobligationsoutstandingasofDecember31,2015(inmillions):

Unconditionalpurchaseobligations(a)
Otherlong-termobligations
Totalcontractualobligations

Due in Less
Than 1 Year

Total

$

$

428 $
9
437 $

106 $
1
107 $

Due in
1-3 Years

193 $
2
195 $

Due in
3-5 Years

Due After
5 Years

129 $
2
131 $

4
4

(a)

Includedinthesebalancesarecommitmentsthatmaybereimbursedorsatisfiedbyourmanagedandfranchisedproperties.

DuringtheyearendedDecember31,2015,weenteredintoalong-termagreementfortheprovisionofinformationtechnologyservicesandsupportfroma
thirdparty.Whiletheamountsdueundertheagreementarevariableinnature,weexpecttohaveafuturepurchaseobligationofapproximately$331millionoverthe
termoftheagreementdueasfollows:$72millionin2016;$74millionin2017;$75millionin2018;$77millionin2019;and$33millionin2020.Aportionof
thesecostsareexpectedtobereimbursedbyourmanagedandfranchisedproperties.Inaddition,wemayterminatethisagreementincertaincircumstancesduring
thetermoftheagreementinexchangeforaterminationfee.
WehadthefollowingcommercialcommitmentsoutstandingasofDecember31,2015(inmillions):

Amount of Commitment Expiration Per Period

Total

Less Than
1 Year

1-3 Years

3-5 Years

After
5 Years

Standbylettersofcredit
$
80 $
77 $
$
$
3

Variable Interest Entities. Wehavedeterminedthatwehaveavariableinterestin22hotels,generallyintheformofinvestments,loans,guarantees,or

equity.Wedetermineifwearetheprimarybeneficiaryofthesehotelsbyprimarilyconsideringcertainqualitativefactors.Qualitativefactorsincludeevaluatingif
wehavethepowertocontroltheVIEandhavetheobligationtoabsorbthelossesandrightstoreceivethebenefitsoftheVIE,thatcouldpotentiallybesignificantto
theVIE.WehavedeterminedthatwearenottheprimarybeneficiaryoftheseVIEsandtherefore,theseentitiesarenotconsolidatedinourfinancialstatements.See
Note8fortheVIEsinwhichwearedeemedtheprimarybeneficiaryandhaveconsolidatedtheentities.

The22VIEsassociatedwithourvariableinterestsrepresententitiesthatownhotelsforwhichwehaveenteredintomanagementorfranchiseagreements
withthehotelowners.Wearepaidafeeprimarilybasedonfinancialmetricsofthehotel.Thehotelsarefinancedbytheowners,generallyintheformofworking
capital,equity,anddebt.
AtDecember31,2015,wehaveapproximately$106millionofinvestmentsandaloanbalanceof$1millionassociatedwiththeseVIEs.Themaximumloss
undertheseagreementsequalsthecarryingvaluebecausewearenotobligatedtofundfuturecashcontributions.Inaddition,wehavenotcontributedamountstothe
VIEsinexcessofourcontractualobligations.
AtDecember31,2014,weevaluatedthe21hotelsinwhichwehadavariableinterest.Asofthatdate,wehadapproximately$106millionofinvestments
andaloanbalanceof$2millionassociatedwiththoseVIEs.
Guaranteed Loans and Commitments. Inlimitedcases,wehavemadeloanstoownersoforpartnersinhotelorresortventuresforwhichwehavea
managementorfranchiseagreement.Loansoutstandingunderthisprogramtotaled$39million,net,atDecember31,2015.Weevaluatetheseloansforimpairment,
and at December 31, 2015, believe these loans are collectible. Unfunded loan commitments aggregating $61million were outstanding at December 31,2015,of
which$35millionisexpectedtobefundedinthenexttwelvemonths.Theseloanstypicallyaresecuredbypledgesofprojectownershipinterestsand/ormortgages
ontheprojects.Wealsohave$261millionofequityandotherpotentialcontributionsassociatedwithmanaged,franchised,orjointventureproperties,$93million
ofwhichisexpectedtobefundedinthenexttwelvemonths.
SuretybondsissuedonourbehalfatDecember31,2015totaled$32million,asrequiredbystateorlocalgovernmentsrelatingtoourvacationownership
operations,certaintaxappealsandbyourinsurerstosecurelargedeductibleinsuranceprograms.
F-44

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Tosecuremanagementcontracts,wemayprovideperformanceguaranteestothird-partyowners.Mostoftheseperformanceguaranteesallowustoterminate
thecontractratherthanfundshortfallsifcertainperformancelevelsarenotmet.Inlimitedcases,weareobligatedtofundshortfallsinperformancelevelsthrough
theissuanceofloans.Manyoftheperformancetestsaremulti-yeartests,aretiedtotheresultsofacompetitivesetofhotels,andhaveexclusionsforforcemajeure
andactsofwarorterrorism.DuringtheyearendedDecember31,2015,werecordedan$11millionreserveforthepotentialfundingofaperformanceguarantee
associatedwithtwohotelsinGreece,asaresultoftheeconomiccrisisinGreece.Wedonotanticipateanyothersignificantfundingunderperformanceguarantees,
nordoweanticipatelosingasignificantnumberofmanagementorfranchisecontractsin2016.
InconnectionwiththepurchaseoftheLeMridienbrandinNovember2005,wewereindemnifiedforcertainofLeMridienshistoricalliabilitiesbythe
entity that bought Le Mridiens owned and leased hotel portfolio. The indemnity is limited to the financial resources of that entity, which have significantly
decreasedinrecentyears.Wehavereceivedvariousclaimsonthesehistoricalliabilities.Ifwehavetofundanyoftheseclaims,therecanbenoassurancethatwe
willbeabletorecoversuchamountsthroughtheindemnification.DuringtheyearendedDecember31,2015,certainemployeepensionclaimsweredeterminedto
be probable and reasonably estimable, based on the review of additional information provided to us by the plaintiffs, and we recorded a reserve of $6 million
associatedwiththeseclaims.
Inconnectionwiththesaleof33hotelsin2006,weagreedtoindemnifythebuyerforcertainliabilities,includingoperationsandtaxliabilities.Atthistime,
webelievethatwewillnothavetomakeanymaterialpaymentsundersuchindemnities.
Litigation. Weareinvolvedinvariouslegalmattersthathaveariseninthenormalcourseofbusiness,someofwhichincludeclaimsforsubstantialsums.
Accrualshavebeenrecordedwhentheoutcomeisprobableandcanbereasonablyestimated.AsofDecember31,2015,certaincontingencieshavebeenevaluatedas
reasonablypossible,butnotprobable,witharangeofexposureof$0to$25million.Whiletheultimateresultsofclaimsandlitigationcannotbedetermined,wedo
notexpectthattheresolutionoftheselegalmatters willhaveamaterial adverse effectonourconsolidatedresultsofoperations,financial positionorcashflow.
However,dependingontheamountandthetiming,anunfavorableresolutionofsomeorallofthesematterscouldmateriallyaffectourfutureresultsofoperations
orcashflowsinaparticularperiod.
Collective Bargaining Agreements. At December 31, 2015, approximately 24% of our U.S.-based employees were covered by various collective
bargainingagreements,generallyprovidingforbasicpayrates,workinghours,otherconditionsofemploymentandorderlysettlementoflabordisputes.Generally,
laborrelationshavebeenmaintainedinanormalandsatisfactorymanner,andwebelievethatouremployeerelationsaresatisfactory.
Environmental Matters. We are subject to certain requirements and potential liabilities under various federal, state and local environmental laws,
ordinancesandregulations.Suchlawsoftenimposeliabilitywithoutregardtowhetherthecurrentorpreviousowneroroperatorknewof,orwasresponsiblefor,the
presence of such hazardous or toxic substances. Although we have incurred and expect to incur remediation and other environmental costs during the ordinary
courseofoperations,weanticipatethatsuchcostswillnothaveamaterialadverseeffectonouroperationsorfinancialcondition.
Captive Insurance Company. EstimatedinsuranceclaimspayableatDecember31,2015and2014,were$75millionand$73million,respectively.At
December31,2015and2014,standbylettersofcreditamountingto$65millionand$60million,respectively,hadbeenissuedtoprovidecollateralfortheestimated
claims.Weguaranteethelettersofcredit.
ITT Industries. In1995,theformerITTCorporation,renamedITTIndustries,Inc.(ITTIndustries),distributedtoitsstockholdersalloftheoutstanding
shares of common stock of ITT Corporation, then a wholly-owned subsidiary of ITT Industries (the Distribution). In connection with this Distribution, ITT
Corporation,whichwasthennamedITTDestinations,Inc.,changeditsnametoITTCorporation.SubsequenttotheacquisitionofITTCorporationin1998,we
changedthenameofITTCorporationtoSheratonHoldingCorporation.
ForpurposesofgoverningcertainoftheongoingrelationshipsbetweenusandITTIndustriesaftertheDistributionandspin-offofITTCorporationandto
provideforanorderlytransition,wehaveenteredintovariousagreementswithITTIndustries.Theseagreementsincludeaspin-offagreement,EmployeeBenefits
ServicesandLiabilityAgreement,TaxAllocationAgreementandIntellectualPropertyTransferandLicenseAgreements.Wemaybeliabletoorduereimbursement
fromITTIndustriesrelatingtotheresolutionofcertainpre-spin-offmattersundertheseagreements.Basedonavailableinformation,managementdoesnotbelieve
thatthesematterswouldhaveamaterialimpactonourconsolidatedresultsofoperations,financialpositionorcashflows.DuringtheyearendedDecember31,2013
werecordedagain,netoftax,indiscontinuedoperations,netof$1millionfromafavorableinsurancerecoveryofcertainliabilities.
F-45

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 25. Segment Information

Our hotel business is segregated into three separate hotel segments: (i) the Americas, (ii) EAME, and (iii) Asia Pacific. The vacation ownership and
residentialbusinessisaseparatesegment.
Ourreportablesegmentseachhaveadivisionpresidentwhoisresponsibleforthemanagementofthedivision.Eachdivisionpresidentreportsdirectlytoour
ChiefExecutiveOfficerwhoisalsotheChiefOperatingDecisionMaker(CODM).FinancialinformationforeachreportablesegmentisreviewedbytheCODMto
assessperformanceandmakedecisionsregardingtheallocationofresources.
Each hotel segment generates its earnings through a network of owned, leased, consolidated and unconsolidated joint venture hotels and resorts operated
primarilyunderourproprietarybrandnamesincludingSt.Regis,TheLuxuryCollection,W,Westin,LeMridien,Sheraton,FourPointsby
Sheraton,Aloft,Element,andTributePortfolio TM,aswellashotelsandresortswhicharemanagedorfranchisedunderthesebrandnamesinexchangefor
fees.
The management of our vacation ownership and residential sales business is conducted by the vacation ownership and residential segment. The vacation
ownershipandresidentialsegmentgeneratesitsearningsthroughtheacquisition,developmentandoperationofvacationownershipresorts,marketingandsellingof
VOIs and residential units, and providing financing to customers who purchase such interests. See Note 27, Planned Reverse Morris Trust Transaction, for a
discussionofourplansfortheseparationofourvacationownershipbusiness,distributionofthesharesofVistanaSignatureExperiences,Inc.(Vistana)common
stocktoourstockholdersonaproratabasisandVistanassubsequentmergerwithawholly-ownedsubsidiaryofIntervalLeisureGroup,Inc.(ILG).
TheCODMprimarilyevaluatestheoperatingperformanceofasegmentbasedonsegmentearnings.Wedefinesegmentearningsasnetincomeattributable
toourcommonstockholdersbeforeinterestexpense,taxes,depreciationandamortization,aswellasourshareofinterest,depreciationandamortizationassociated
withourunconsolidatedjointventures,excludingcertainrecurringandnonrecurringitems,suchasrestructuringandotherspecialcharges(credits),lossonearly
extinguishmentofdebt,andgains(losses)onassetdispositionsandimpairments.Residentialrevenuegeneratedathotelpropertiesisrecordedinthecorresponding
geographichotelsegment.General,administrativeandotherexpensesdirectlyrelatedtothesegmentsareincludedinthecalculationofsegmentearnings,whereas
corporate general, administrative, and other expenses are not included in the segment earnings calculation. In addition to revenues recorded within our four
segments, wealsohave other revenuesfrom managed andfranchised properties, whichrepresent the reimbursement ofcostsincurred onbehalf ofmanaged and
franchisedpropertyowners.Theserevenues,togetherwiththecorrespondingexpenses,arenotrecordedwithinoursegments.Othercorporateunallocatedrevenues
andearningsprimarilyrelatetootherlicensefeeincomeandarealsoreportedoutsideofsegmentrevenues.
The following tables present revenues, segment earnings, earnings from unconsolidated ventures, capital expenditures, total assets, and investments in
unconsolidatedventuresforourreportablesegments(inmillions):

Year Ended December 31,

Revenues:
Americas(a)
EAME
AsiaPacific
Vacationownershipandresidential
Totalsegmentrevenues
Otherrevenuesfrommanagedandfranchisedhotels
Othercorporaterevenuesunallocated

2015

2014

1,472
475
287
681
2,915
2,736
112
5,763

2013

1,559
597
354
663
3,173
2,711
99
5,983

1,548
615
349
905
3,417
2,614
84
6,115

(a)

Includesrevenuesof$1.0billion,$1.1billionand$1.1billionfortheyearsended2015,2014and2013,respectively,fromhotelslocatedintheUnitedStates.
Noothercountrycontributedmorethan10%ofourtotalrevenues.

F-46

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Segment earnings:
Americas
EAME
AsiaPacific
Vacationownershipandresidential
Totalsegmentearnings
Othercorporateincomeunallocated
Corporateselling,general,administrativeandotherexpenses
unallocated
Lossonassetdispositionsandimpairments,net
Restructuringandotherspecial(charges)credits
Adjustmentstoequityearnings(a)
Interestexpense
Lossonearlyextinguishmentofdebt,net
Depreciationandamortization
Discontinuedoperations
Incometaxexpense
NetincomeattributabletoStarwood

2015

Year Ended December 31,

2014

2013

691
175
203
168
1,237
116

697
220
228
169
1,314
100

617
220
221
276
1,334
86

(156)
(1)
(100)
(31)
(116)

(280)

(180)
489

(176)
(33)
4
(46)
(97)
(1)
(283)
(10)
(139)
633

(157)
(23)
(1)
(42)
(103)

(267)
71
(263)
635

(a)

Includesimpairmentlosses,interestexpense,depreciation,andamortizationexpenserelatedtoequityearningsnotallocatedtosegmentearnings.

Earnings from unconsolidated ventures:

Americas
EAME
AsiaPacific
Vacationownershipandresidential
Totalearningsfromunconsolidatedventures

2015

Year Ended December 31,

2014

41
1
29
1
72

38

34
1
73

2013

32

34
2
68

Capital expenditures:
Americas
EAME
AsiaPacific
Vacationownershipandresidential(a)(b)
Totalsegmentcapitalexpenditures
Othercorporateunallocated

2015

Year Ended December 31,

2014

165
27
20
93
305
98
403

151
53
12
14
230
146
376

2013

256
45
17
(13)
305
83
388

(a)
(b)

Representsgrossinventorycapitalexpenditureslesscostofsalesof$68million,$(14)millionand$(38)millionfortheyearsended2015,2014and2013,
respectively.Additionally,includesdevelopmentcapitalof$25million,$28millionand$25millionfortheyearsended2015,2014and2013,respectively.
Amountspresentedfortheyearsended2014and2013excludecostsofsalesofBalHarbourof$7millionand$112million,respectively.

F-47

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Assets:
Americas
EAME
AsiaPacific
Vacationownershipandresidential
Totalsegmentassets(a)
Othercorporateassets

December 31,
2015

2014

1,564
634
685
1,376
4,259
4,009
8,268

1,845
840
901
1,285
4,871
3,788
8,659

(a)

Includeslong-lived assetsof$1.1billionand$1.2billion atDecember 31,2015and2014,respectively, located intheUnitedStates.AsofDecember 31,

2015,noothercountrycontributedmorethan10%ofourtotallong-livedassets.

Investments in unconsolidated ventures:

Americas
EAME
AsiaPacific
Vacationownershipandresidential
Totalinvestmentsinunconsolidatedventures

December 31,
2015

2014

26
22
122
13
183

50
24
125
15
214

F-48

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

Note 26. Quarterly Results (Unaudited)

Three Months Ended

June 30
September 30
December 31
(In millions, except per share data)

March 31

2015
Revenues
Costsandexpenses
Incomefromcontinuingoperations
Discontinuedoperations
NetincomeattributabletoStarwood
Earningspershare(a)
Basic
Incomefromcontinuingoperations
Discontinuedoperations
Netincome
Diluted
Incomefromcontinuingoperations
Discontinuedoperations
Netincome
2014
Revenues
Costsandexpenses
Incomefromcontinuingoperations
Discontinuedoperations
NetincomeattributabletoStarwood
Earningspershare(a)
Basic
Incomefromcontinuingoperations
Discontinuedoperations
Netincome
Diluted
Incomefromcontinuingoperations
Discontinuedoperations
Netincome

$
$
$
$
$

$
$
$
$
$

1,415
1,262
99

99

0.59

0.59

0.58

0.58

1,458
1,264
136
1
137

0.71
0.01
0.72

0.71
0.01
0.72

$
$
$
$
$

$
$
$
$
$

1,481
1,285
136

136

0.80

0.80

0.79

0.79

1,539
1,302
153

153

0.81

0.81

0.80

0.80

$
$
$
$
$

$
$
$
$
$

1,434
1,234
88

88

0.53

0.53

0.53

0.53

1,493
1,283
109

109

0.60

0.60

0.59

0.59

$
$
$
$
$

$
$
$
$
$

1,433 $
1,242 $
166 $
$
166 $


0.99 $

0.99 $

0.98 $

0.98 $

1,493 $
1,251 $
245 $
(11) $
234 $


1.41 $
(0.07)
1.34 $

1.40 $
(0.07)
1.33 $

Year

5,763
5,023
489

489

2.90

2.90

2.88

2.88

5,983
5,100
643
(10)
633

3.49
(0.06)
3.43

3.46
(0.06)
3.40

(a)

AmountspresentedareattributabletoStarwoodscommonstockholders.

Note 27. Planned Reverse Morris Trust Transaction

OnFebruary10,2015,weannouncedplanstospin-offourvacationownershipbusinesstostockholdersasaseparatepubliclytradedcompany,Vistana.
OnOctober27,2015,weenteredintodefinitiveagreementswithILG,awholly-ownedsubsidiaryofILG(ILGMergerSub)andVistana,throughaReverse
MorrisTrusttransaction,pursuanttowhich,subjecttothetermsandconditionsthereof,(a)weandcertainofoursubsidiarieswillengageinaseriesoftransactions
inwhichcertainassetsandliabilitiesnotcurrentlyownedbyVistana,includingfivehotelstobeconvertedtovacationownershipproperties,willbe(i)solddirectly
tooneormoresubsidiariesofILGor(ii)otherwiseconveyedpursuanttoaninternalrestructuringtoVistanaandentitiesthatwillbecomeVistanasubsidiaries,in
ordertoseparateourvacationownershipbusinessfromourotherbusinesses,(b)immediatelyaftersuchseparation,wewilldistributethesharesofVistanacommon
stocktoourstockholdersonaproratabasisand(c)immediatelyaftersuchdistribution,VistanawillmergewithILGMergerSub.TheholdersofSLCOperating
LimitedPartnershipunits,whichareentitledtothedistribution,willalsoreceivesharesofVistanacommonstock.Whentheforegoingtransactionsarecompleted,
Vistanawillbethesurvivingcompanyinthemergerandawholly-ownedsubsidiaryofILG,ourstockholderswillownapproximately55%oftheoutstandingshares
ofILGonafully-dilutedbasisandtheexistingshareholdersofILGwillownapproximately45%ofILGonafully-dilutedbasis.Inconnectionwiththe
F-49

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.

NOTES TO FINANCIAL STATEMENTS

transactions,theconsiderationourstockholdersareexpectedtoreceiveisprimarilybasedonthevalueofILGscommonstock,whichhasdeclinedinthelasttwo
monthsof2015.Ifthisdeclineissustained,wecouldrecordamaterialimpairmentchargeatthedateofthePlannedReverseMorrisTrustTransactionresultingfrom
thedifferencebetweenthecarryingvalueofourinvestmentinthevacationownershipbusinessandthefairvalueoftheconsiderationourstockholderswillreceive
at the transaction date .Both the distribution of the shares of Vistana common stock and merger of Vistana with ILG Merger Sub are expected to qualify as
transactions that are tax-free to Starwood stockho lders. The transactions are subject to customary closing conditions, including regulatory and ILG shareholder
approvals.Thetransactionswillnotrequireavoteofourstockholders.Upontheclosingofthetransactions,ILGsboardofdirectorswillconsistof13directors,
comprisingninecurrentILGdirectorsandfourofourdirectorappointees.
DuringtheyearendedDecember31,2015,werecordedapproximately$36millionofcosts,primarilyassociatedwithprofessionalfeesfortheplannedspinoff. The transaction is expected to close in the second quarter of 2016 but there can be no assurance regarding the ultimate timing of the transaction or that the
transactionwillultimatelybecompleted.

Note 28. Planned Marriott Merger

OnNovember15,2015,weenteredintoadefinitivemergeragreementwithMarriott.Atclosing,Starwoodstockholderswillreceive0.92sharesofMarriott
common stock and $2.00 in cash for each share of Starwood common stock. On a pro forma basis, Starwood stockholders will own approximately 39% of the
combinedcompanyscommonstockafterthecompletionofthemerger.Starwoodstockholderswillseparatelyreceiveconsiderationfromthetransactionsinvolving
theseparationoftheStarwoodvacationownershipbusiness,thedistributionofthesharesofVistanacommonstocktoStarwoodstockholdersonaproratabasisand
subsequentmergerofVistanawithILGMergerSub.MarriottsBoardofDirectorsfollowingtheclosingwillincreasefrom11to14memberswiththeexpected
additionofthreemembersoftheStarwoodBoardofDirectors.
ThetransactionissubjecttoMarriottandStarwoodshareholderapprovals,completionofStarwoodsplanneddispositionofitsvacationownershipbusiness,
regulatoryapprovalsandthesatisfactionofothercustomaryclosingconditions.Assumingreceiptofthenecessaryapprovals,thepartiesexpectthetransactionto
closeinmid-2016.

F-50


SCHEDU LE II
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In millions)

Balance
January 1,

2015
Tradereceivablesallowancefor
doubtfulaccounts
Notesreceivableallowancefor
doubtfulaccounts
Reservesincludedinaccruedand
otherliabilities:
Restructuringandotherspecialcharges
2014
Tradereceivablesallowancefor
doubtfulaccounts
Notesreceivableallowancefor
doubtfulaccounts
Reservesincludedinaccruedand
otherliabilities:
Restructuringandotherspecialcharges
2013
Tradereceivablesallowancefor
doubtfulaccounts
Notesreceivableallowancefor
doubtfulaccounts
Reservesincludedinaccruedand
otherliabilities:
Restructuringandotherspecialcharges

Additions (Deductions)
Charged
to/reversed
from
Expenses

Charged
to/from Other
Accounts (a)

Payments/
Other

50 $

11 $

5 $

(2) $

64

124 $

23 $

(28) $

119

15 $

20 $

(25) $

10

47 $

5 $

(2) $

50

132 $

24 $

(32) $

124

20 $

(1) $

5 $

(9) $

15

40 $

11 $

2 $

(6) $

47

159 $

20 $

(47) $

132

78 $

1 $

(20) $

(39) $

20

(a)

Balance
December 31,

Chargedto/fromotheraccounts:
Description of
Charged to/from
Other Accounts

2015
Accruedexpenses
Totalchargedto/fromotheraccounts

5
5

2014
Accruedexpenses
Totalchargedto/fromotheraccounts

3
3

2013
Accruedexpenses
Totalchargedto/fromotheraccounts

(18)
(18)

S-1

Exhibit 12.1
Starwood Hotels & Resorts Worldwide, Inc.
Calculation of Ratio of Earnings to Total Fixed Charges

(Dollars in millions, except ratio)

2015

2014

Year Ended December 31,

2013

2012

2011

Incomefromcontinuingoperationsbeforeincometaxes
Incomerelatedtoequitymethodinvestees

Add/(deduct):
Fixedcharges
Interestcapitalized
Amortizationofcapitalizedinterest
Distributedincomeofequitymethodinvestees
Noncontrollinginterestinpre-taxloss(income)
Earningsavailableforfixedcharges

669
(41)
628

154
(7)
8
57

840

782
(27)
755

138
(5)
10
39

937

828
(26)
802

147
(7)
23
30

995

618
(25)
593

215
(7)
66
28

895

425
(11)
414

283
(42)
19
22
2
698

Fixedcharges:
Interestandotherfinancialcharges
Interestfactorattributabletorentals(a)
Interestcapitalized
Totalfixedcharges

116
31
7
154

98
35
5
138

103
37
7
147

172
36
7
215

203
38
42
283

Ratioofearningstofixedcharges

5.45
6.79
6.77
4.16
2.47

Notes:
(a)
Theinterestfactorattributabletorentalsconsistsofone-thirdofrentalcharges,whichisdeemedbyStarwoodtoberepresentativeoftheinterestfactor
inherentinrents.


Exhibit 21.1
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
SUBSIDIARIES OF THE REGISTRANTS

Jurisdiction of
Organization

Name

StarwoodHotels&ResortsWorldwide,Inc.(SH&RWI)
HOTGlobalHoldingsSCS(HGH)
HOTInternationalHoldingSarl(HIH)
HOTLuxembourgHoldingSarl(HLH)
StarwoodInternationalHoldingSARL(SIH)
StarwoodItaliaS.r.l.
StarwoodInternationalLicensingCoSARL(SILC)
StarwoodAsiaPacificHotels&ResortsPteLtd
SIIRealEstateHoldings,Inc.(SRE)
StarwoodFinanceLuxembourgSARL
StarwoodVacationOwnership,Inc.(SVO)
SheratonFlexVacations,LLC

Maryland
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Italy
Luxembourg
Singapore
Delaware
Luxembourg
Florida
Florida

Line of
Business

Lodging
Lodging
Lodging
Lodging
Lodging
Lodging
Lodging
Lodging
Lodging
Lodging
Lodging
Lodging

Parent

SH&RWI

HGH

HIH

HLH

SIH

HLH

SILC
SH&RWI

SRE
SH&RWI

SVO

Wholly Owned Direct or Indirect

Subsidiaries Carrying on the Same
Line of Business as Named Subsidiary

Operating
Operating

in the
in Foreign

United States
Countries

282
0
0
0
7
0
1
0
7
0
72
0

22
1
1
2
46
14
7
13
27
1
22
0

NOTE:ThenamesofsomeconsolidatedwhollyownedsubsidiariesoftheCorporationcarryingonthesamelineofbusinessasothersubsidiariesnamedabovehave
beenomitted,thenumberofsuchomittedsubsidiariesoperatingintheUnitedStatesandinforeigncountriesbeingshown.Alsoomittedfromthelistarethenames
ofothersubsidiariesthat,ifconsideredintheaggregateasasinglesubsidiary,wouldnotconstituteasignificantsubsidiary.


EXHIBIT 21.1 (Continued)
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
ASSUMED NAMES REPORT

Arizona
Entity Name

Assumed Name

StarwoodHotels&ResortsWorldwide,Inc.

AloftTucsonUniversity

Colorado
Entity Name

Assumed Name

StarwoodHotels&ResortsWorldwide,Inc.

St.RegisAspen

Connecticut
Entity Name

Assumed Name

StarwoodHotels&ResortsWorldwide,Inc.

SheratonStamfordHotel

Georgia
Entity name

Assumed Name

StarwoodHotels&ResortsWorldwide,Inc.

WAtlanta
WBuckheadDowntownandMidtown

Hawaii
Entity Name

Assumed Name

StarwoodHotels&ResortsWorldwide,Inc.
StarwoodHotels&ResortsWorldwide,Inc.
StarwoodHotels&ResortsWorldwide,Inc.

SheratonKauai
SheratonKeauhouBayResort&Spa
TheWestinMauiResort&Spa

Illinois
Entity Name

Assumed Name

StarwoodHotels&ResortsWorldwide,Inc.

TheTremontChicagoHotel

New York
Entity Name

Assumed Name

StarwoodHotels&ResortsWorldwide,Inc.
StarwoodHotels&ResortsWorldwide,Inc.

WNewYorkUnionSquare
WNewYorkTimesSquare

Pennsylvania
Entity Name

Assumed Name

StarwoodHotels&ResortsWorldwide,Inc.
StarwoodHotels&ResortsWorldwide,Inc.
StarwoodHotels&ResortsWorldwide,Inc.
StarwoodHotels&ResortsWorldwide,Inc.

Washington
Entity Name

Assumed Name

StarwoodHotels&ResortsWorldwide,Inc.
StarwoodHotels&ResortsWorldwide,Inc.

WSeattle
TheWestinSeattle

AloftPhiladelphiaAirport
FourPointsbySheratonPhiladelphiaAirport
SheratonSuitesPhiladelphiaAirport
TheWestinPhiladelphia

Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
WeconsenttotheincorporationbyreferenceinthefollowingRegistrationStatements:

(1)

Registration Statement Form S-8 No. 333-189674 pertaining to Starwood Hotels & Resorts Worldwide, Inc. (the Company) 2013 Long-term
IncentiveCompensationPlan,

(2)

RegistrationStatementFormS-8No.333-115926pertainingtotheCompanys2004Long-termIncentiveCompensationPlan,

(3)

RegistrationStatementFormS-8No.333-115926-01pertainingtotheCompanys2004Long-termIncentiveCompensationPlan,

(4)

Registration Statement Form S-8 No. 333-97469 pertaining to the Companys Employee Stock Purchase Plan, 2002 Long-term Incentive
CompensationPlanand1999Long-termIncentiveCompensationPlan,

(5)

Registration Statement Form S-8 No. 333-97469-01 pertaining to the Companys Employee Stock Purchase Plan, 2002 Long-term Incentive
CompensationPlanand1999Long-termIncentiveCompensationPlan,

(6)

RegistrationStatementFormS-8No.333-111384pertainingtotheCompanys1999AnnualIncentivePlanforCertainExecutives,and

(7)

RegistrationStatementFormS-8No.333-111384-01pertainingtotheCompanys1999AnnualIncentivePlanforCertainExecutives;

ofourreportsdatedFebruary25,2016,withrespecttotheconsolidatedfinancialstatementsandscheduleoftheCompanyandtheeffectivenessofinternalcontrol
overfinancialreportingoftheCompanyincludedinthisAnnualReport(Form10-K)oftheCompanyfortheyearendedDecember31,2015.

/s/Ernst&YoungLLP
Stamford,Connecticut
February25,2016

Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14 UNDER THE SECURITIES EXCHANGE
ACT OF 1934
I,ThomasB.Mangas,certifythat:

1)

IhavereviewedthisannualreportonForm10-KofStarwoodHotels&ResortsWorldwide,Inc.;

2)

Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethe
statementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythis
report;

3)

Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthe
financialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;

4)

TheregistrantsothercertifyingofficerandIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedin
ExchangeActRules13a-15(e)and15d-15(e))andinternalcontroloverfinancialreporting(asdefinedinExchangeActRules13a-15(f)and15d15(f))fortheregistrantandhave:

(a)

Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,to
ensurethatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthose
entities,particularlyduringtheperiodinwhichthisreportisbeingprepared;

(b)

Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderour
supervision,toprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsfor
externalpurposesinaccordancewithgenerallyacceptedaccountingprinciples;

(c)

Evaluatedtheeffectivenessoftheregistrantsdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsaboutthe
effectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and

(d)

5)

Disclosedinthisreportanychangeintheregistrantsinternalcontroloverfinancialreportingthatoccurredduringtheregistrantsmostrecent
fiscalquarter(theregistrantsfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelyto
materiallyaffect,theregistrantsinternalcontroloverfinancialreporting;and
TheregistrantsothercertifyingofficerandIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,tothe
registrantsauditorsandtheauditcommitteeoftheregistrantsboardofdirectors(orpersonsperformingtheequivalentfunctions);

(a)

Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhichare
reasonablylikelytoadverselyaffecttheregistrantsabilitytorecord,process,summarizeandreportfinancialinformation;and

(b)

Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheregistrantsinternal
controloverfinancialreporting.

Date:February25,2016

/s/ThomasB.Mangas
ThomasB.Mangas
ChiefExecutiveOfficer

Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14 UNDER THE SECURITIES
EXCHANGE ACT OF 1934
I,AlanM.Schnaid,certifythat:

1)

IhavereviewedthisannualreportonForm10-KofStarwoodHotels&ResortsWorldwide,Inc.;

2)

Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethe
statementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythis
report;

3)

Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthe
financialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;

4)

TheregistrantsothercertifyingofficerandIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedin
ExchangeActRules13a-15(e)and15d-15(e))andinternalcontroloverfinancialreporting(asdefinedinExchangeActRules13a-15(f)and15d15(f))fortheregistrantandhave:

(a)

Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,to
ensurethatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthose
entities,particularlyduringtheperiodinwhichthisreportisbeingprepared;

(b)

Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderour
supervision,toprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsfor
externalpurposesinaccordancewithgenerallyacceptedaccountingprinciples;

(c)

Evaluatedtheeffectivenessoftheregistrantsdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsaboutthe
effectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and

(d)

5)

Disclosedinthisreportanychangeintheregistrantsinternalcontroloverfinancialreportingthatoccurredduringtheregistrantsmostrecent
fiscalquarter(theregistrantsfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelyto
materiallyaffect,theregistrantsinternalcontroloverfinancialreporting;and
TheregistrantsothercertifyingofficerandIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,tothe
registrantsauditorsandtheauditcommitteeoftheregistrantsboardofdirectors(orpersonsperformingtheequivalentfunctions);

(a)

Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhichare
reasonablylikelytoadverselyaffecttheregistrantsabilitytorecord,process,summarizeandreportfinancialinformation;and

(b)

Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheregistrantsinternal
controloverfinancialreporting.

Date:February25,2016

/s/AlanM.Schnaid
AlanM.Schnaid
ChiefFinancialOfficer

Exhibit 32.1
CertificationPursuanttoSection1350ofChapter63
ofTitle18oftheUnitedStatesCode
I,ThomasB.Mangas,theChiefExecutiveOfficerofStarwoodHotels&ResortsWorldwide,Inc.(Starwood),certify,pursuantto18U.S.C.1350,as
adoptedpursuantto906oftheSarbanes-OxleyActof2002,that(i)theaccompanyingForm10-KofStarwoodfortheyearendedDecember31,2015(theForm
10-K)fullycomplieswiththerequirementsofSection13(a)or15(d)oftheSecuritiesExchangeActof1934and(ii)theinformationcontainedintheForm10-K
fairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsofStarwood.

/s/ThomasB.Mangas

ThomasB.Mangas
ChiefExecutiveOfficer
StarwoodHotels&ResortsWorldwide,Inc.

February25,2016

Exhibit 32.2
CertificationPursuanttoSection1350ofChapter63
ofTitle18oftheUnitedStatesCode
I, Alan M. Schnaid, the Chief Financial Officer of Starwood Hotels & Resorts Worldwide, Inc. (Starwood), certify, pursuant to 18 U.S.C. 1350, as
adoptedpursuantto906oftheSarbanes-OxleyActof2002,that(i)theaccompanyingForm10-KofStarwoodfortheyearendedDecember31,2015(theForm
10-K)fullycomplieswiththerequirementsofSection13(a)or15(d)oftheSecuritiesExchangeActof1934and(ii)theinformationcontainedintheForm10-K
fairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsofStarwood.

/s/AlanM.Schnaid

AlanM.Schnaid

ChiefFinancialOfficer

StarwoodHotels&ResortsWorldwide,Inc.

February25,2016