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 27, 2009. 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 ("VOIs") and markets vacation rental properties primarily on behalf of independent owners.

† Vacation Ownership-develops, 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.

                              OPERATING STATISTICS

The following table presents our operating statistics for the three months ended
March 31, 2009 and 2008. See Results of Operations section for a discussion as
to how these operating statistics affected our business for the periods
presented.


                                                                  Three Months Ended March 31,
                                                                2009            2008        % Change

Lodging (a)
Number of rooms (b)                                              588,500        551,100             7
RevPAR (c)                                                  $      27.69      $   32.21           (14 )
Royalty, marketing and reservation revenues (in 000s) (d)   $     95,368      $ 104,162            (8 )
Vacation Exchange and Rentals
Average number of members (000s) (e)                               3,789          3,632             4
Annual dues and exchange revenues per member (f)            $     134.38      $  150.84           (11 )
Vacation rental transactions (in 000s) (g)                           387            387             -
Average net price per vacation rental (h)                   $     335.54      $  412.74           (19 )
Vacation Ownership
Gross VOI sales (in 000s) (i)                               $    280,000      $ 458,000           (39 )
Tours (j)                                                        137,000        255,000           (46 )
Volume Per Guest ("VPG") (k)                                $      1,866      $   1,668            12

(a) Includes Microtel Inns & Suites and Hawthorn Suites hotel brands, which were acquired on July 18, 2008. Therefore, the operating statistics for 2009 are not presented on a comparable basis to the 2008 operating statistics. On a comparable basis (excluding the Microtel Inns & Suites and Hawthorn Suites hotel brands from the 2009 amounts), the number of rooms would have increased 1% and RevPAR and royalty, marketing and reservation revenues would have declined 15% and 13%, respectively.

(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 2009 and 2008 include 4,175 and 4,367 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. Excluding the impact of foreign exchange movements, such decrease was 5%.

(g) Represents the 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 revenue generated from renting vacation properties to customers divided by the number of rental transactions. Excluding the impact of foreign exchange movements, such decrease was 3%.

(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 gross VOI sales (excluding tele-sales upgrades, which are a component of upgrade sales) divided by the number of tours.

    THREE MONTHS ENDED MARCH 31, 2009 VS. THREE MONTHS ENDED MARCH 31, 2008

Our consolidated results are as follows:


                                             Three Months Ended March 31,
                                          2009            2008         Change

           Net revenues                 $    901       $     1,012     $  (111 )
           Expenses                          812               927        (115 )

           Operating income                   89                85           4
           Other income, net                  (2 )              (1 )        (1 )
           Interest expense                   19                19           -
           Interest income                    (2 )              (3 )         1

           Income before income taxes         74                70           4
           Provision for income taxes         29                28           1

           Net income                   $     45       $        42     $     3

During the first quarter of 2009, our net revenues decreased $111 million (11%) principally due to (i) a $178 million decrease in gross sales of VOIs at our vacation ownership businesses primarily due to the planned reduction in tour flow, partially offset by an increase in VPG; (ii) a $30 million decrease in net revenues from rental transactions due to a decrease in the average net price per rental, including the unfavorable impact of foreign exchange movements; (iii) a $16 million decrease in net revenues in our lodging business primarily due to lower RevPAR and a decline in reimbursable revenues, partially offset by incremental revenues contributed from the acquisition of USFS; (iv) a $14 million decrease in ancillary revenues at our vacation exchange and rentals business primarily from various sources, as well as the impact from our termination of a low margin travel service contract; and (v) a $10 million decrease in annual dues and exchange revenues due to a decline in exchange revenue per member, including the unfavorable impact of foreign exchange movements, partially offset by growth in the average number of members. Such decreases were partially offset by (i) a net increase of $128 million in the recognition of revenue previously deferred under the percentage-of-completion method of accounting at our vacation ownership business; (ii) a $10 million increase in consumer financing revenues earned on vacation ownership contract receivables due primarily to growth in the portfolio; and (iii) $6 million of incremental property management fees within our vacation ownership business primarily as a result of growth in the number of units under management. The net revenue decrease at our vacation exchange and rentals business includes the unfavorable impact of foreign currency translation of $37 million.

Total expenses decreased $115 million (12%) principally reflecting (i) a $68 million decrease in marketing and reservation expenses primarily resulting from the reduced sales pace at our vacation ownership business and lower marketing spend at our lodging business; (ii) $53 million of lower employee related expenses at our vacation ownership business primarily due to lower sales commission and administration; (iii) $41 million of decreased cost of VOI sales due to the expected decline in VOI sales; (iv) the absence of a $28 million non-cash impairment charge recorded during the first quarter of 2008 due to our initiative to rebrand two of our vacation ownership trademarks to the Wyndham brand; (v) the favorable impact of foreign currency translation on expenses at our vacation exchange and rentals business of $25 million; (vi) $12 million in cost savings primarily from overhead reductions at our vacation exchange and rentals business; and (vii) $5 million of decreased payroll costs paid on behalf of property owners in our lodging business. These decreases were partially offset by (i) a net increase of $58 million of expenses related to the net increase in the recognition of revenue previously deferred at our vacation ownership business, as discussed above; (ii) the recognition of $43 million of costs across all of our businesses due to organizational realignment (see Restructuring Plan for more details); (iii) $11 million of increased costs at our vacation ownership business associated with maintenance fees on unsold inventory; (iv) $7 million of higher corporate costs primarily related to the consolidation of two leased facilities into one, which we occupied during the first quarter of 2009; and (v) a $3 million increase in expenses at our lodging business as a result of our acquisition of USFS.

Other income, net increased $1 million as a result of higher gains associated with the sale of non-strategic assets at our vacation ownership business. Such amounts are included within our segment EBITDA results. Interest expense remained flat quarter over quarter. Interest income decreased $1 million in the first quarter of 2009 compared with the first quarter of 2008 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 decreased from 40% during the first quarter of 2008 to 39% during the first quarter of 2009. We cannot estimate the effect of legacy matters for the remainder of 2009. Excluding the tax impact on such matters, we expect our effective tax rate will approximate 39%.

As a result of these items, our net income increased $3 million (7%) as compared to the first quarter of 2008.

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

                                               Net Revenues                       EBITDA
                                      2009       2008       % Change   2009      2008      % Change

Lodging                               $ 154     $   170       (9)      $  35     $  46       (24)
Vacation Exchange and Rentals           287         341       (16)        76        93       (18)
Vacation Ownership                      462         504       (8)         44         7        *

Total Reportable Segments               903       1,015       (11)       155       146        6
Corporate and Other (a)                  (2 )        (3 )      *         (21 )     (16 )      *

Total Company                         $ 901     $ 1,012       (11)       134       130        3

Less: Depreciation and amortization                                       43        44
 Interest expense                                                         19        19
 Interest income                                                          (2 )      (3 )

Income before income taxes                                             $  74     $  70

(*) Not meaningful.

(a) Includes the elimination of transactions between segments.

Lodging

Net revenues and EBITDA decreased $16 million (9%) and $11 million (24%), respectively, during the first quarter of 2009 compared to the first quarter of 2008 primarily reflecting lower royalty, marketing and reservation revenues and a decline in property management reimbursable revenues, partially offset by incremental net revenues generated from the July 2008 acquisition of USFS. In addition, EBITDA reflects lower marketing expenses and decreased expenses primarily related to a decline in property management reimbursable revenues, partially offset by increased expenses resulting from the USFS acquisition, organizational realignment initiatives and ancillary services provided to franchisees.

The acquisition of USFS contributed incremental net revenues and EBITDA of $5 million and $2 million, respectively. Excluding the impact of this acquisition, net revenues declined $21 million reflecting (i) a $12 million decrease in domestic royalty, marketing and reservation revenues primarily due to a RevPAR decline of 15%, (ii) $5 million of lower reimbursable revenues earned by our property management business, (iii) a $2 million decrease in international royalty, marketing and reservation revenues resulting from a RevPAR decrease of 18%, or 6% excluding the impact of foreign exchange movements, partially offset by a 13% increase in international rooms and (iv) a $2 million net decrease in other revenue. The RevPAR decline was largely driven by a decline in industry occupancy as well as price reductions. The $5 million of lower reimbursable revenues earned by our property management business primarily relates to payroll costs that we incur and pay on behalf of property owners, for which we are fully reimbursed by the property owner. As the reimbursements are made based upon cost with no added margin, the recorded revenue is offset by the associated expense and there is no resultant impact on EBITDA. Such amount decreased as a result of a reduction in variable labor costs at our managed properties due to lower occupancy.

In addition, EBITDA was positively impacted by a decrease of $9 million in marketing expenses primarily due to lower marketing spend across our brands, including decreased costs associated with our Wyndham Rewards loyalty program. Such decrease was partially offset by (i) $3 million of costs relating to organizational realignment initiatives (see Restructuring Plan for more details) and (ii) $3 million of increased costs primarily associated with ancillary services provided to franchisees, as discussed above.

As of March 31, 2009, we had 6,993 properties and approximately 588,500 rooms in our system. Additionally, our hotel development pipeline included 1,000 hotels and approximately 108,600 rooms, of which 39% were international and 54% were new construction as of March 31, 2009.

Vacation Exchange and Rentals

Net revenues and EBITDA decreased $54 million (16%) and $17 million (18%), respectively, during the first quarter of 2009 compared with the first quarter of 2008. Net revenue and expense decreases include $37 million and $25 million, respectively, of currency translation impact from a stronger U.S. dollar compared to other foreign currencies. The decrease in net revenues reflects a $30 million decrease in net revenues from rental transactions and related services, a $14 million decrease in ancillary revenues and a $10 million decrease in annual dues and exchange revenues. EBITDA further includes

the impact of $12 million in cost savings from overhead reductions, partially offset by $4 million of additional costs relating to organizational realignment initiatives.

Net revenues generated from rental transactions and related services decreased $30 million (19%) during the first quarter of 2009 compared with the first quarter of 2008. Excluding the unfavorable impact of foreign exchange movements, net revenues generated from rental transactions and related services decreased $5 million (3%) during the first quarter of 2009 driven by a 3% decrease in the average net price per rental primarily resulting from a change in the mix of various rental offerings and lower pricing at our Landal European vacation rental business, which benefited from premium holiday pricing for Easter in the first quarter of 2008. Rental transaction volume was flat primarily driven by increased volume at (i) our U.K. cottage business due to successful marketing and promotional offers as well as increased functionality of its new web platform and (ii) our Landal business, which benefited from enhanced marketing programs despite the unfavorable impact on arrivals from the Easter holiday falling in the second quarter of 2009 as compared to the first quarter of 2008. Such favorability was offset by lower rental volume at our Novasol European vacation rentals business, which we believe was a result of customers altering their vacation decisions primarily due to the downturn in European economies.

Annual dues and exchange revenues decreased $10 million (7%) during the first quarter of 2009 compared with the first quarter of 2008. Excluding the unfavorable impact of foreign exchange movements, annual dues and exchange revenues declined $1 million driven by a 5% decline in revenue generated per member, partially offset by a 4% increase in the average number of members primarily due to the enrollment of approximately 135,000 members at the beginning of 2009 resulting from our Disney Vacation Club affiliation. The decrease in revenue per member was due to lower exchange transactions, partially offset by the impact of favorable exchange transaction pricing. We believe that the lower revenue per member reflects: (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 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. A decrease in ancillary revenues of $14 million was driven by (i) $6 million 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, (ii) $5 million in travel revenue primarily due to our termination of a low margin travel service contract and
(iii) $3 million due to the unfavorable translation effects of foreign exchange movements.

In addition, EBITDA was positively impacted by a decrease in expenses of $37 million (15%) primarily driven by (i) the favorable impact of foreign currency translation on expenses of $25 million, (ii) $12 million in cost savings primarily from overhead reductions, (iii) $2 million of lower volume-related expenses and (iv) $1 million of lower employee incentive program expenses compared to the first quarter of 2008. Such decreases were partially offset by $4 million of additional costs relating to organizational realignment initiatives (see Restructuring Plan for more details).

Vacation Ownership

Net revenues decreased $42 million (8%) and EBITDA increased $37 million during the first quarter of 2009 compared with the first quarter of 2008.

During October 2008, we announced plans to refocus our vacation ownership sales and marketing efforts on consumers with higher credit quality beginning the fourth quarter of 2008. As a result, operating results for the first quarter of 2009 reflect decreased gross VOI sales and costs related to realignment initiatives. Results were enhanced by the recognition of previously deferred revenue as a result of continued construction of resorts under development, decreased marketing and employee related expenses, lower cost of sales and growth in consumer finance income.

Gross sales of VOIs at our vacation ownership business decreased $178 million (39%) during the first quarter of 2009, driven principally by a 46% decrease in tour flow, partially offset by an increase of 12% in VPG. Tour flow was negatively impacted by the closure of over 85 sales offices since October 1, 2008 related to our organizational realignment initiatives.

VPG was positively impacted by (i) a favorable tour flow mix resulting from the type of sales offices closed as part of the organizational realignment and
(ii) a higher percentage of sales being upgrades to existing owners during the first quarter of 2009 as compared to the first quarter of 2008 as a result of the expected decline in sales to new customers. Our provision for loan losses increased $25 million during the first quarter of 2009 as compared to the first quarter of 2008 primarily related to the recognition of revenue previously deferred under the percentage-of-completion method of accounting, as discussed below. Such results were partially offset by $6 million of incremental property management fees primarily as a result of growth in the number of units under management.

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 first

quarter of 2009 included higher sales generated from vacation resorts where construction was more complete, resulting in the recognition of $67 million of revenue previously deferred under the percentage-of-completion method of accounting compared to $82 million of deferred revenue during the first quarter of 2008. Accordingly, net revenues and EBITDA comparisons were positively impacted by $128 million (after deducting the related increase in provision for loan losses) and $70 million, respectively, as a result of the net increase in the recognition of revenue previously deferred under the percentage-of-completion method of accounting. We anticipate a net benefit of approximately $150 million to $200 million during 2009 from the recognition of previously deferred revenue as construction of these resorts progresses, partially offset by continued sales generated from vacation resorts where construction is still in progress.

Net revenues and EBITDA comparisons were favorably impacted by $10 million and $11 million, respectively, during the first quarter of 2009 due to net interest income of $77 million earned on contract receivables during the first quarter of 2009 as compared to $66 million during the first quarter of 2008. Such increase was primarily due to growth in the portfolio. We incurred interest expense of $32 million on our securitized debt at a weighted average rate of 5.9% during the first quarter of 2009 compared to $33 million at a weighted average rate of 4.9% during the first quarter of 2008. Our net interest income margin increased from 67% during the first quarter of 2008 to 71% during the first quarter of 2009 due to approximately $365 million of decreased average borrowings on our securitized debt facilities during the first quarter of 2009 as compared to the first quarter of 2008 resulting from a decline in advance rates (i.e., less borrowings as a percentage of receivables securitized), partially offset by a 99 basis point increase in interest rates.

In addition, EBITDA was positively impacted by $136 million (27%) of decreased expenses, exclusive of incremental interest expense on our securitized debt, primarily resulting from (i) $59 million of decreased marketing expenses due to the reduction in our sales pace, (ii) $53 million of lower employee-related expenses primarily due to lower sales commission and administration costs,
(iii) $41 million of decreased cost of VOI sales due to the expected decline in VOI sales and (iv) the absence of a $28 million non-cash impairment charge due to our initiative to rebrand two of our vacation ownership trademarks to the Wyndham brand. Such decreases were partially offset by (i) $35 million of costs relating to organizational realignment initiatives (see Restructuring Plan for more details) and (ii) $11 million of increased costs associated with maintenance fees on unsold inventory.

Corporate and Other

Corporate and Other expenses increased $6 million during first quarter of 2009 compared with the first quarter of 2008. Such increase includes (i) $7 million of increased corporate expenses primarily related to the consolidation of two leased facilities into one, which we occupied during the first quarter of 2009, . . .