FORWARD-LOOKING STATEMENTS

This report includes "forward-looking" statements, as that term is defined by the Securities and Exchange Commission in its rules, regulations and releases. Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions or strategies regarding the future. In some cases, forward-looking statements can be identified by the use of words such as "may," "expects," "should," "believes," "plans," "anticipates," "estimates," "predicts," "potential," "continue," or other words of similar meaning. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, general economic conditions, our financial and business prospects, our capital requirements, our financing prospects, our relationships with associates and those disclosed as risks under "Risk Factors" in Part I, Item 1A, in our Annual Report filed on Form 10-K with the SEC on February 29, 2008. We caution readers that any such statements are based on currently available operational, financial and competitive information, and they should not place undue reliance on these forward-looking statements, which reflect management's opinion only as of the date on which they were made. Except as required by law, we disclaim any obligation to review or update these forward-looking statements to reflect events or circumstances as they occur.

BUSINESS AND OVERVIEW

We are a global provider of hospitality products and services and operate our business in the following three segments:

† Lodging-franchises hotels in the upscale, midscale, economy and extended stay segments of the lodging industry and provides property management services to owners of our luxury, upscale and midscale hotels.

† Vacation Exchange and Rentals-provides vacation exchange products and services to owners of intervals of vacation ownership interests, or VOIs, and markets vacation rental properties primarily on behalf of independent owners.

† Vacation Ownership-markets and sells VOIs to individual consumers, provides consumer financing in connection with the sale of VOIs and provides property management services at resorts.

Discussed below are our key operating statistics, consolidated results of operations and the results of operations for each of our reportable segments. The reportable segments presented below represent our operating segments for which separate financial information is available and which is utilized on a regular basis by our chief operating decision maker to assess performance and to allocate resources. In identifying our reportable segments, we also consider the nature of services provided by our operating segments. Management evaluates the operating results of each of our reportable segments based upon net revenues and EBITDA. Our presentation of EBITDA may not be comparable to similarly-titled measures used by other companies.

As compared to previous filings, we broke out current and prior period consumer financing interest expense amounts from operating expenses in order to provide more transparency.

                              OPERATING STATISTICS

The following table presents our operating statistics for the three months ended
September 30, 2008 and 2007. See Results of Operations section for a discussion
as to how these operating statistics affected our business for the periods
presented.


                                                                    Three Months Ended September 30,
                                                                2008                2007           % Change

Lodging (a)
Number of rooms (b)                                               583,400             540,900              8
RevPAR (c)                                                  $       41.93       $       43.10             (3 )
Royalty, marketing and reservation revenues (in 000s) (d)   $     145,502       $     146,290             (1 )
Vacation Exchange and Rentals
Average number of members (000s) (e)                                3,673               3,538              4
Annual dues and exchange revenues per member (f)            $      124.51       $      131.38             (5 )
Vacation rental transactions (in 000s) (g)                            360                 360              -
Average net price per vacation rental (h)                   $      553.69       $      506.78              9
Vacation Ownership
Gross VOI sales (in 000s) (i)                               $     566,000       $     552,000              3
Tours (j)                                                         334,000             332,000              1
Volume Per Guest ("VPG") (k)                                $       1,550       $       1,545              -

(a) Includes Microtel Inns & Suites and Hawthorn Suites hotel brands, which were acquired on July 18, 2008. Therefore, the operating statistics for 2008 are not presented on a comparable basis to the 2007 operating statistics. On a comparable basis (excluding the Microtel Inns & Suites and Hawthorn Suites hotel brands from the 2008 amounts), the number of rooms would have increased 2% and RevPAR would have declined 3%.

(b) Represents the number of rooms at lodging properties at the end of the period which are either (i) under franchise and/or management agreements,
(ii) properties affiliated with Wyndham Hotels and Resorts brand for which we receive a fee for reservation and/or other services provided and
(iii) properties managed under the CHI Limited joint venture. The amounts in 2008 and 2007 include 4,367 and 7,475 affiliated rooms, respectively.

(c) Represents revenue per available room and is calculated by multiplying the percentage of available rooms occupied during the period by the average rate charged for renting a lodging room for one day.

(d) Royalty, marketing and reservation revenues are typically based on a percentage of the gross room revenues of each hotel. Royalty revenue is generally a fee charged to each franchised or managed hotel for the use of one of our trade names, while marketing and reservation revenues are fees that we collect and are contractually obligated to spend to support marketing and reservation activities.

(e) Represents members in our vacation exchange programs who pay annual membership dues. For additional fees, such participants are entitled to exchange intervals for intervals at other properties affiliated with our vacation exchange business. In addition, certain participants may exchange intervals for other leisure-related products and services.

(f) Represents total revenues from annual membership dues and exchange fees generated for the period divided by the average number of vacation exchange members during the period.

(g) Represents the gross number of transactions that are generated in connection with customers booking their vacation rental stays through us. In our European vacation rentals businesses, one rental transaction is recorded each time a standard one-week rental is booked; however, in the United States, one rental transaction is recorded each time a vacation rental stay is booked, regardless of whether it is less than or more than one week.

(h) Represents the net rental price generated from renting vacation properties to customers divided by the number of rental transactions. Excluding the impact of foreign exchange movements, such increase was 5%.

(i) Represents gross sales of VOIs (including tele-sales upgrades, which are a component of upgrade sales) before deferred sales and loan loss provisions.

(j) Represents the number of tours taken by guests in our efforts to sell VOIs.

(k) Represents revenue per guest and is calculated by dividing the gross VOI sales, excluding tele-sales upgrades, which are a component of upgrade sales, by the number of tours.

THREE MONTHS ENDED SEPTEMBER 30, 2008 VS. THREE MONTHS ENDED SEPTEMBER 30, 2007

Our consolidated results are as follows:


                                           Three Months Ended September 30,
                                        2008              2007            Change

        Net revenues                 $     1,226       $     1,216       $     10
        Expenses                             984             1,019            (35 )

        Operating income                     242               197             45
        Other income, net                     (5 )              (8 )            3
        Interest expense                      21                20              1
        Interest income                       (2 )              (4 )            2

        Income before income taxes           228               189             39
        Provision for income taxes            86                72             14

        Net income                   $       142       $       117       $     25

During the third quarter of 2008, our net revenues increased $10 million (1%) principally due to (i) an $18 million increase in consumer financing revenues earned on vacation ownership contract receivables due primarily to growth in the portfolio; (ii) a $17 million increase in net revenues from rental transactions primarily due to an increase in the average net price per rental, including the favorable impact of foreign exchange movements, and the conversion of one of our Landal parks from franchised to managed; (iii) a $14 million increase in gross sales of VOIs at our vacation ownership businesses primarily due to higher tour flow and increased upgrades; (iv) $9 million of incremental property management fees within our vacation ownership business primarily as a result of growth in the number of units under management; and (v) a $2 million increase in net revenues in our lodging business due to incremental revenues contributed from the acquisition of USFS, higher international royalty, marketing and reservation revenues, increased revenue generated by our Wyndham Rewards loyalty program, partially offset by a decline in domestic royalty, marketing and reservation revenues. Such increases were partially offset by (i) a $33 million increase in our provision for loan losses at our vacation ownership business; (ii) an $11 million decrease in ancillary revenues at our vacation ownership business associated with the usage of bonus points/credits which are provided as purchase incentives on VOI sales; (iii) a net decrease of $2 million in deferred revenue under the percentage-of-completion method of accounting at our vacation ownership business; and (iv) a $2 million decrease in annual dues and exchange revenues due to a decline in exchange revenue per member, partially offset by growth in the average number of members. The total net revenue increase at our vacation exchange and rentals business includes the favorable impact of foreign currency translation of $8 million.

Total expenses decreased $35 million (3%) principally reflecting (i) a $24 million decrease in net expenses related to the resolution of and adjustment to certain contingent liabilities and assets; (ii) $20 million of decreased costs at our vacation ownership business primarily related to lower maintenance fees on unsold inventory, a benefit from our trial membership marketing program and decreased sales incentives awarded to owners; (iii) $15 million of decreased cost of sales primarily due to increased estimated recoveries associated with the increase in our provision for loan losses, as discussed above;
(iv) $4 million of lower corporate costs primarily related to currency translation adjustments and legal fees associated with the resolution of certain contingent liabilities; (v) the absence of $4 million of severance related expenses recorded at our vacation exchange and rentals business during the third quarter of 2007; (vi) $4 million in cost savings from overhead reductions at our vacation exchange and rentals business; (vii) $3 million of decreased costs related to our separation from Cendant (the "Separation"); (viii) $3 million of savings from cost containment initiatives at our lodging business; and
(ix) $3 million of lower employee related expenses at our vacation ownership business. These decreases were partially offset by (i) the unfavorable impact of foreign currency translation on expenses at our vacation exchange and rentals business of $10 million; (ii) a $9 million increase in costs related to property management services in our vacation ownership business, as discussed above;
(iii) a $7 million increase in operating and administrative expenses at our vacation exchange and rentals business primarily related to increased resort services expenses resulting from the conversion of one of our Landal parks from franchised to managed and incremental volume-related expenses primarily due to favorability at our Landal and Novasol brands; (iv) the recognition of $6 million of costs at our lodging and vacation exchange and rentals businesses due to organizational realignment (see Restructuring Plan for more details);
(v) $5 million of increased consumer financing interest expense; (vi) a $5 million increase in marketing and reservation expenses primarily resulting from increased marketing initiatives across our vacation exchange and rentals and vacation ownership businesses; (vii) a $4 million increase in expenses at our lodging business as a result of our acquisition of USFS; and (viii) a $4 million increase in depreciation and amortization primarily reflecting increased capital investments over the past two years.

Other income, net decreased $3 million due to the absence of a pre-tax gain recorded during the third quarter of 2007 on the sale of certain vacation ownership properties and related assets, partially offset by higher net earnings primarily from equity investments and income primarily associated with the sale of a non-strategic asset at our lodging business. Such amounts are included within our segment EBITDA results. Interest expense increased $1 million compared to the third quarter of 2007 as a result of lower capitalized interest at our vacation ownership business due to lower development of vacation ownership inventory. Interest income decreased $2 million in the third quarter of 2008 compared with the third quarter of 2007 due to decreased interest income earned on invested cash balances as a result of a decrease in cash available for investment. Our effective tax rate remained unchanged at 38% during the third quarter of 2008 as compared to the third quarter of 2007. We cannot estimate the effect of legacy matters for the remainder of 2008. Excluding the tax impact on such matters, we expect our effective tax rate will approximate 38%.

As a result of these items, our net income increased $25 million (21%) as compared to the third quarter of 2007.

Following is a discussion of the results of each of our reportable segments during the third quarter:

                                                Net Revenues                          EBITDA
                                       2008        2007       % Change    2008        2007       % Change

Lodging                               $   213     $   211        1       $    72     $    70        3
Vacation Exchange and Rentals             354         336        5           105         103        2
Vacation Ownership                        661         671       (1)          128         116        10

Total Reportable Segments               1,228       1,218        1           305         289        6
Corporate and Other (a)                    (2 )        (2 )      *           (11 )       (41 )      *

Total Company                         $ 1,226     $ 1,216        1           294         248        19

Less: Depreciation and amortization                                           47          43
 Interest expense (excluding consumer financing interest)                     21          20
 Interest income                                                              (2 )        (4 )

Income before income taxes                                               $   228     $   189

(*) Not meaningful.

(a) Includes the elimination of transactions between segments.

Other Income, Net

During the three months ended September 30, 2008, other income, net decreased $3 million due to the absence of a $7 million pre-tax gain recorded during the third quarter of 2007 on the sale of certain vacation ownership properties and related assets, as discussed above. Such decrease was offset by (i) $2 million of higher net earnings primarily from equity investments and (ii) $2 million of income associated with the sale of a non-strategic asset at our lodging business. Such amounts are included within our segment EBITDA results.

Interest Expense/Interest Income

Interest expense increased $1 million in the third quarter of 2008 compared with the third quarter of 2007 as a result of lower capitalized interest at our vacation ownership business due to lower development of vacation ownership inventory. Interest income decreased $2 million in the third quarter of 2008 compared with the third quarter of 2007 due to decreased interest income earned on invested cash balances as a result of a decrease in cash available for investment.

Lodging

Net revenues and EBITDA increased $2 million (1%) and $2 million (3%), respectively, during the third quarter of 2008 compared to the third quarter of 2007 primarily reflecting the July 2008 acquisition of USFS, higher international royalty, marketing and reservation revenues and increased revenue generated by our Wyndham Rewards loyalty program, partially offset by lower domestic royalty, marketing and reservation revenues. Such net revenues increase was partially offset in EBITDA by increased expenses, primarily related to the USFS acquisition and organizational realignment initiatives.

The acquisition of USFS contributed incremental net revenues and EBITDA of $6 million and $2 million, respectively. Apart from this acquisition, the increase in net revenues includes (i) $3 million of incremental international royalty, marketing and reservation revenues resulting from a 16% increase in international rooms, partially offset by an international RevPAR decrease of 2%, or 1% excluding the impact of foreign exchange movements, and (ii) $3 million of incremental revenue generated by our Wyndham Rewards loyalty program primarily due to increased member stays. These fees were

partially offset by a decrease of $10 million in domestic royalty, marketing and reservation revenues due to a domestic RevPAR decline of 5% (4% including USFS) and incremental development advance note amortization, which is recorded net within revenues. The domestic RevPAR decline was principally driven by an overall decline in industry occupancy levels, while the international RevPAR decline was principally due to decline in occupancy levels, partially offset by price increases.

EBITDA further reflects (i) $3 million of savings from cost containment initiatives, (ii) a net decrease of $2 million in marketing expenses primarily due to the timing of our marketing spend, partially offset by increased costs associated with our Wyndham Rewards loyalty program and (iii) $2 million of income associated with the sale of a non-strategic asset. Such amounts were partially offset by $4 million of costs relating to organizational realignment initiatives (see Restructuring Plan for more details).

As of September 30, 2008, we had 6,970 properties and approximately 583,400 rooms in our system. Additionally, our hotel development pipeline included approximately 990 hotels and approximately 111,200 rooms, of which 41% were international and 51% were new construction as of September 30, 2008.

Vacation Exchange and Rentals

Net revenues and EBITDA increased $18 million (5%) and $2 million (2%), respectively, during the third quarter of 2008 compared with the third quarter of 2007. The increase in net revenues primarily reflects a $17 million increase in net revenues from rental transactions and related services and a $3 million increase in ancillary revenues, partially offset by a $2 million decline in annual dues and exchange revenues. Net revenue and expense increases compared to the third quarter of 2007 include $8 million and $10 million, respectively, of currency translation impact from a weaker U.S. dollar compared to other foreign currencies.

Net revenues generated from rental transactions and related services increased $17 million (9%) during the third quarter of 2008 compared with the third quarter of 2007. Excluding the favorable impact of foreign exchange movements, net revenues generated from rental transactions and related services increased $9 million (5%) driven by (i) the conversion of one of our Landal parks from franchised to managed, which contributed an incremental $6 million to revenues, and (ii) a 1% increase in the average net price per rental. Rental transaction volume was flat during the third quarter of 2008 compared to the third quarter of 2007 driven by favorability at our Landal and Novasol brands, offset by lower rental volume at our other European cottage businesses and lower overall member rentals. Both our Landal and Novasol brands benefited from enhanced marketing programs initiated to support an expansion strategy. We believe the decrease in member rentals was a result of customers altering their vacation decisions primarily due to the downturn in worldwide economies. The 1% increase in average net price per rental was primarily a result of a more favorable pricing mix driven by our Landal and Novasol brands.

Annual dues and exchange revenues decreased $2 million (2%) during the third quarter of 2008 compared with the third quarter of 2007 driven by a 5% decline in revenue generated per member, partially offset by a 4% increase in the average number of members. Foreign exchange movements had a minimal impact on annual dues and exchange revenues. The decrease in revenue generated per member was driven by lower exchange transactions per member, partially offset by the impact of favorable exchange transaction pricing. We believe that lower exchange transactions reflect: (i) recent heightened economic uncertainty and (ii) recent trends among timeshare vacation ownership developers to enroll members in private label clubs, whereby the members have the option to exchange within the club or through other RCI channels. Such trends have a positive impact on the average number of members but an offsetting effect on the number of exchange transactions per average member. Ancillary revenues increased $3 million during the third quarter of 2008 from various sources, which include fees from additional services provided to transacting members, club servicing revenues, fees from our credit card loyalty program and fees generated from programs with affiliated resorts.

EBITDA further reflects an increase in expenses of $16 million (7%) primarily driven by (i) the unfavorable impact of foreign currency translation on expenses of $10 million, (ii) $5 million of increased resort services expenses as a result of the conversion of one of our Landal parks from franchised to managed, as discussed above, (iii) $5 million of incremental marketing expenses incurred to support product and geographic expansion, (iv) a $2 million increase in volume-related expenses, which was substantially comprised of incremental costs to support growth in rental transaction volume at our Landal business, as discussed above, and increased staffing costs to support member growth and
(v) $2 million of costs relating to organizational realignment initiatives (see Restructuring Plan for more details). Such increases were partially offset by
(i) the absence of $4 million of severance related expenses recorded during the third quarter of 2007 and (ii) $4 million in cost savings from overhead reductions.

Vacation Ownership

Net revenues decreased $10 million (1%) and EBITDA increased $12 million (10%) during the third quarter of 2008 compared with the third quarter of 2007. The operating results reflect growth in consumer finance income, gross VOI sales and property management fees, as well as lower cost of sales and operating and administrative expenses. Such growth was primarily offset by a higher provision for loan losses and increased costs related to property management services.

Gross sales of VOIs at our vacation ownership business increased $14 million (3%) during the third quarter of 2008, driven principally by a 1% increase in tour flow, an increase of less than 1% in VPG and increased upgrades. Tour flow was positively impacted by the opening of new sales locations and the continued growth of our in-house sales programs, albeit slower than during the third quarter of 2007 due to the impact of negative economic conditions faced during the third quarter of 2008. VPG was impacted by higher pricing, partially offset by a decrease in sales to new customers. Upgrades were positively impacted by an increased owner base and higher pricing. Net revenues were also favorably impacted by $9 million of incremental property management fees primarily as a result of growth in the number of units under management. Such revenue increases were more than offset by (i) an increase of $33 million in our provision for loan losses during the third quarter of 2008 as compared to the third quarter of 2007 primarily due to a higher estimate of uncollectible receivables as a percentage of VOI sales financed and (ii) an $11 million decrease in ancillary revenues associated with the usage of bonus points/credits which are provided as purchase incentives on VOI sales. The trend of increased provision for loan losses has continued since the fourth quarter of 2007 as the strains of the overall economy appear to be negatively impacting the portfolio borrowers, particularly those with lower credit scores. While the continued impact of the economy is uncertain, we are taking measures that, over time, should leave us with a smaller portfolio that has a stronger credit profile. See Critical Accounting Policies for more information regarding our allowance for loan losses.

Under the percentage-of-completion method of accounting, a portion of the total revenue associated with the sale of a vacation ownership interest is deferred if the construction of the vacation resort has not yet been fully completed. Such revenue will be recognized in future periods as construction of the vacation resort progresses. Our sales mix during the third quarter of 2008 included higher sales generated from vacation resorts where construction was still in progress resulting in deferred revenue under the percentage-of-completion method of accounting of $2 million during the third quarter of 2008 compared to the recognition of $1 million of previously deferred revenue during the third quarter of 2007. Accordingly, net revenues and EBITDA comparisons were negatively impacted by $2 million (after deducting the related provision for loan losses) and $1 million, respectively, as a result of the net increase in deferred revenue under the percentage-of-completion method of accounting. We . . .