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 II, Item 1A of this Report. 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
September 30, 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 September 30,
                                                           2009                2008          % Change

Lodging
Number of rooms (a)                                          590,900             583,400             1
RevPAR (b)                                             $       34.81       $       41.93           (17 )
Vacation Exchange and Rentals
Average number of members (000s) (c)                           3,781               3,673             3
Annual dues and exchange revenues per member (d)       $      116.76       $      124.51            (6 )
Vacation rental transactions (in 000s) (e)                       367                 360             2
Average net price per vacation rental (f)              $      505.82       $      553.69            (9 )
Vacation Ownership
Gross VOI sales (in 000s) (g)                          $     366,000       $     566,000           (35 )
Tours (h)                                                    173,000             334,000           (48 )
Volume Per Guest ("VPG") (i)                           $       1,944       $       1,550            25

(a) 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 the 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 3,549 and 4,367 affiliated rooms, respectively.

(b) 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.

(c) 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.

(d) 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 3%.

(e) 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.

(f) 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, the average net price per vacation rental would have increased 1%.

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

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

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

THREE MONTHS ENDED SEPTEMBER 30, 2009 VS. THREE MONTHS ENDED SEPTEMBER 30, 2008

Our consolidated results are as follows:


                                           Three Months Ended September 30,
                                         2009              2008          Change

         Net revenues                 $     1,016       $     1,226      $  (210 )
         Expenses                             810               984         (174 )

         Operating income                     206               242          (36 )
         Other income, net                     (2 )              (5 )          3
         Interest expense                      34                21           13
         Interest income                       (1 )              (2 )          1

         Income before income taxes           175               228          (53 )
         Provision for income taxes            71                86          (15 )

         Net income                   $       104       $       142      $   (38 )

During the third quarter of 2009, our net revenues decreased $210 million (17%) principally due to (i) a $200 million decrease in gross sales of VOIs at our vacation ownership business reflecting the planned reduction in tour flow, partially offset by an increase in VPG; (ii) a $30 million decrease in net revenues in our lodging business primarily due to global RevPAR weakness;
(iii) a $14 million decrease in net revenues from rental transactions at our vacation exchange and rentals business due to a decrease in the average net price per rental, including the $19 million unfavorable impact of foreign exchange movements; (iv) a $9 million decrease in ancillary revenues at our vacation exchange and rentals business from various sources, including the impact from our termination of a low margin travel service contract; (v) a $4 million decrease in annual dues and exchange revenues due to a decline in exchange revenue per member, including the $4 million unfavorable impact of foreign exchange movements, partially offset by growth in the average number of members; and (vi) a $3 million decrease in consumer financing revenues earned on vacation ownership contract receivables due primarily to a decline in our contract receivable portfolio. Such decreases were partially offset by (i) a net increase of $38 million in the recognition of revenue previously deferred under the percentage-of-completion method of accounting at our vacation ownership business; (ii) $7 million of incremental property management fees within our vacation ownership business primarily as a result of rate increases and growth in the number of units under management; and (iii) a $4 million increase 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. The net revenue decrease at our vacation exchange and rentals business includes the unfavorable impact of foreign currency translation of $24 million.

Total expenses decreased $174 million (18%) principally reflecting (i) an $83 million decrease in marketing and reservation expenses primarily resulting from the reduced sales pace at our vacation ownership business and lower marketing and related spend at our lodging business; (ii) $51 million of lower employee related expenses at our vacation ownership business primarily due to lower sales commission and administration costs as well as cost savings related to organizational realignment initiatives; (iii) $41 million of decreased cost of VOI sales due to the expected decline in VOI sales; (iv) $15 million in cost savings primarily from overhead reductions and benefits related to organizational realignment initiatives at our vacation exchange and rentals business; (v) the favorable impact of foreign currency translation on expenses at our vacation exchange and rentals business of $11 million; (vi) $6 million of lower volume-related expenses at our vacation exchange and rentals business; and
(vii) the absence of $6 million of costs at our lodging and vacation exchange and rentals businesses relating to organizational realignment initiatives (see Restructuring Plan for more details). These decreases were partially offset by
(i) a net increase of $15 million of expenses related to the recognition of revenue previously deferred at our vacation ownership business, as discussed above; (ii) $11 million of increased costs at our vacation ownership business associated with maintenance fees on unsold inventory; (iii) $9 million of incremental expenses at our lodging business primarily related to bad debt expense and remediation efforts on technology compliance initiatives;
(iv) $4 million of decreased payroll costs paid on behalf of property owners at our lodging business; and (v) $4 million of increased corporate expenses primarily related to higher employee incentive programs and hedging activity.

Other income, net decreased $3 million as a result of the absence of income associated with the sale of a non-strategic asset during the third quarter of 2008 at our lodging business and a decline in net earnings from equity investments. Such amounts are included within our segment EBITDA results. Interest expense increased $13 million quarter over quarter due to an increase in interest incurred on our long-term debt facilities resulting from our May 2009 debt issuances (see Note 6 - Long-Term Debt and Borrowing Arrangements) and a decrease in capitalized interest at our vacation ownership business due to lower development of vacation ownership inventory. Interest income decreased $1 million during the three months September 30, 2009 compared with the same period during 2008 due to decreased interest earned on invested cash

balances as a result of a lower rates earned on investments. Our effective tax rate increased from 38% during the third quarter of 2008 to 41% during the third quarter of 2009 primarily due to an increase in foreign taxes. Excluding the tax impact on legacy related matters, we expect our full year 2009 effective tax rate will approximate 39%.

As a result of these items, our net income decreased $38 million (27%) as compared to the third quarter of 2008.

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

                                                Net Revenues                          EBITDA
                                       2009        2008       % Change    2009        2008       % Change

Lodging                               $   183     $   213       (14)     $    58     $    72       (19)
Vacation Exchange and Rentals             327         354       (8)          107         105        2
Vacation Ownership                        508         661       (23)         104         128       (19)

Total Reportable Segments               1,018       1,228       (17)         269         305       (12)
Corporate and Other (a)                    (2 )        (2 )      *           (15 )       (11 )      *

Total Company                         $ 1,016     $ 1,226       (17)         254         294       (14)

Less: Depreciation and amortization                                           46          47
 Interest expense                                                             34          21
 Interest income                                                              (1 )        (2 )

Income before income taxes                                               $   175     $   228

(*) Not meaningful.

(a) Includes the elimination of transactions between segments.

Lodging

Net revenues and EBITDA decreased $30 million (14%) and $14 million (19%), respectively, during the third quarter of 2009 compared to the third quarter of 2008 primarily reflecting a decline in worldwide RevPAR and other franchise fees, partially offset by lower marketing expenses.

The decline in net revenues reflects (i) a $19 million decrease in domestic royalty, marketing and reservation revenues primarily due to a RevPAR decline of 16%; (ii) a $5 million decrease in other franchise fees principally related to lower termination and transfer volume; (iii) $4 million of lower reimbursable revenues recorded within our property management business; and (iv) a $3 million decrease in international royalty, marketing and reservation revenues resulting from a RevPAR decrease of 22%, or 19% excluding the impact of foreign exchange movements, partially offset by a 10% increase in international rooms. Such decreases in net revenues were partially offset by a $1 million increase in ancillary revenue. The RevPAR decline was driven by industry-wide occupancy and rate declines. The $4 million of lower reimbursable revenues recorded within our property management business primarily relates to payroll costs that we incur and pay on behalf of property owners, for which we are entitled to be 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 costs at our managed properties due to lower occupancy, as well as a reduction in the number of hotels under management.

In addition, EBITDA was positively impacted by (i) a decrease of $19 million in marketing and related expenses primarily due to lower spend across our brands as a result of a decline in related marketing fees received, as well as the timing of spend and (ii) the absence of $4 million of costs relating to organizational realignment initiatives (see Restructuring Plan for more details). Such amounts were partially offset by (i) $4 million of higher bad debt expense as a result of the industry downturn; (ii) $3 million of incremental costs due to remediation efforts on technology compliance initiatives; (iii) $2 million of increased costs associated with ancillary services provided to franchisees; and
(iv) the absence of $2 million of income associated with the sale of a non-strategic asset during the third quarter of 2008.

As of September 30, 2009, we had approximately 7,040 properties and 590,900 rooms in our system. Additionally, our hotel development pipeline included approximately 1,000 hotels and approximately 110,800 rooms, of which 41% were international and 50% were new construction as of September 30, 2009.

Vacation Exchange and Rentals

Net revenues decreased $27 million (8%), while EBITDA increased $2 million (2%) during the third quarter of 2009 compared with the third quarter of 2008. Net revenue and expense decreases include $24 million and $11 million,

respectively, of currency impacts from a stronger U.S. dollar compared to other foreign currencies. The decrease in net revenues reflects a $14 million decrease in net revenues from rental transactions and related services, a $9 million decrease in ancillary revenues and a $4 million decrease in annual dues and exchange revenues. EBITDA further includes the impact of $15 million in cost savings from overhead reductions and benefits related to organizational realignment initiatives and $6 million of lower volume-related expenses, partially offset by $1 million of losses from foreign exchange transactions and the unfavorable impact from foreign exchange hedging contracts.

Net revenues generated from rental transactions and related services decreased $14 million (7%) during the third quarter of 2009 compared with the third quarter of 2008. Excluding the unfavorable impact of foreign exchange movements, net revenues generated from rental transactions and related services increased $5 million (3%) during the third quarter of 2009 driven by a 2% increase in rental transaction volume primarily resulting from 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. Such favorability was partially offset by lower member rentals, which we believe was a result of members reducing the number of extra vacations primarily due to the downturn in the economy. Average net price per rental increased 1% primarily resulting from a change in the mix of various rental offerings, with favorable impacts by our member rental and U.K. cottage businesses, partially offset by an unfavorable impact at our Landal business.

Annual dues and exchange revenues decreased $4 million (4%) during the third quarter of 2009 compared with the third quarter of 2008. Excluding the unfavorable impact of foreign exchange movements, annual dues and exchange revenues remained flat driven by a 3% decline in revenue generated per member, offset by a 3% 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 and subscription fees, partially offset by the impact of higher exchange transaction pricing. We believe that the lower revenue per member reflects: (i) recent heightened economic uncertainty;
(ii) lower subscription fees primarily due to member retention programs offered at multiyear discounts; and (iii) 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 member.

A decrease in ancillary revenues of $9 million was driven by (i) $4 million from various sources, which include fees from additional services provided to transacting members, fees from our credit card loyalty program and fees generated from programs with affiliated resorts; (ii) $4 million in travel revenue primarily due to our termination of a low margin travel service contract; and (iii) $1 million due to the unfavorable impact of foreign exchange movements.

In addition, EBITDA was positively impacted by a decrease in expenses of $29 million (12%) driven by (i) $15 million in cost savings primarily from overhead reductions and benefits related to organizational realignment initiatives; (ii) the favorable impact of foreign currency translation on expenses of $11 million; (iii) $6 million of lower volume-related expenses; and
(iv) the absence of $2 million of costs incurred during the third quarter of 2008 relating to organizational realignment initiatives (see Restructuring Plan for more details). Such decreases were partially offset by $1 million of losses from foreign exchange transactions and the unfavorable impact from foreign exchange hedging contracts.

Vacation Ownership

Net revenues and EBITDA decreased $153 million (23%) and $24 million (19%), respectively, during the third quarter of 2009 compared with the third quarter of 2008.

During October 2008, in response to an uncertain credit environment, we announced plans to (i) refocus our vacation ownership sales and marketing efforts, which resulted in fewer tours, and (ii) concentrate on consumers with higher credit quality beginning in the fourth quarter of 2008. As a result, operating results for the third quarter of 2009 reflect decreased gross VOI sales, decreased marketing and employee-related expenses, lower cost of VOI sales and the recognition of previously deferred revenue as a result of continued construction of resorts under development.

Gross sales of VOIs at our vacation ownership business decreased $200 million (35%) during the third quarter of 2009, driven principally by a 48% decrease in tour flow, partially offset by an increase of 25% 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 closure of underperforming sales offices as part of the organizational realignment and
(ii) a higher percentage of sales being upgrades to existing owners during the third quarter of 2009 as compared to the third quarter of 2008 as a result of changes in the mix of tours. Such results were partially offset by a $4 million increase in ancillary revenues associated with the usage of bonus points/credits, which are provided as purchase incentives on VOI sales.

Our net revenues and EBITDA comparisons associated with property management were positively impacted by $7 million and $7 million, respectively, during the third quarter of 2009 primarily due to higher management fees earned as a result of rate increases and growth in the number of units under management. In addition, EBITDA was positively impacted due to cost containment initiatives implemented during 2009 and in the fourth quarter of 2008.

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. During the third quarter of 2009, we continued construction on resorts where VOI sales were primarily generated during 2008, resulting in the recognition of $36 million of revenue previously deferred under the percentage-of-completion method of accounting compared to $2 million of deferred revenue during the third quarter of 2008. Accordingly, net revenues and EBITDA comparisons were positively impacted by $33 million (including the impact of the provision for loan losses) and $18 million, respectively, as a result of the net increase in the recognition of revenue previously deferred under the percentage-of-completion method of accounting.

Our net revenues and EBITDA comparisons were negatively impacted by $3 million and $4 million, respectively, during the third quarter of 2009 due to net interest income of $73 million earned on contract receivables during the third quarter of 2009 as compared to $77 million during the third quarter of 2008. Such decrease was primarily due to higher interest costs during the third quarter 2009 and a decline in our contract receivable portfolio. We incurred interest expense of $35 million on our securitized debt at a weighted average interest rate of 8.9% during the third quarter of 2009 compared to $34 million at a weighted average interest rate of 5.5% during the third quarter of 2008. Our net interest income margin decreased from 69% during the third quarter of 2008 to 68% during the third quarter of 2009 due to a 349 basis point increase in our weighted average interest rate and a decline in our contract receivable portfolio.

In addition, EBITDA was positively impacted by $145 million (35%) of decreased expenses, exclusive of incremental property management expenses and interest expense on our securitized debt, primarily resulting from (i) $64 million of decreased marketing expenses due to the reduction in our sales pace;
(ii) $51 million of lower employee-related expenses primarily due to lower sales commission and administration costs as well as cost savings related to organizational realignment initiatives; and (iii) $41 million of decreased cost of VOI sales due to the planned reduction in VOI sales. Such decreases were partially offset by $11 million of increased costs associated with maintenance fees on unsold inventory.

Corporate and Other

Corporate and Other expenses increased $4 million during the third quarter of 2009 compared with the third quarter of 2008. Such increase primarily includes
(i) increased corporate expenses primarily related to $2 million of higher employee incentive programs and $1 million of hedging activity and
(ii) $1 million increase in net expense related to the resolution of and adjustment to certain contingent liabilities and assets.

Other Income, Net

Other income, net decreased $3 million during the three months ended September 30, 2009 as compared to the same period in 2008 primarily as a result of (i) the absence of $2 million of income associated with the sale of a non-strategic asset at our lodging business and (ii) a $2 million decline in net earnings from equity investments. Such amounts are included within our segment EBITDA results.

. . .