Investing Activities Cash Flows

Capital Expenditures and Other Investments. We made capital expenditures of $183 million in 2011, $307 million in 2010, and $147 million in 2009 that included expenditures related to the development and construction of new hotels and acquisitions of hotel properties, as well as improvements to existing properties and systems initiatives. Timeshare segment development expenditures, which we included in “Cash from Operations” prior to the spin-off, as noted in that section, were not reflected in these numbers. Capital expenditures in 2011 decreased primarily due to the purchase of two hotels in 2010. Capital expenditures in 2010 increased primarily due to the purchase of two hotel properties. We expect investment spending for the 2012 fiscal year will total approximately $550 million to $750 million, including $50 million to $100 million for maintenance capital spending. Investment spending will also include other capital expenditures (including property acquisitions), loan advances, contract acquisition costs, and equity and other investments.

Over time, we have sold lodging properties under development subject to long-term management agreements. The ability of third-party purchasers to raise the necessary debt and equity capital depends in part on the perceived risks inherent in the lodging industry and other constraints inherent in the capital markets as a whole. We monitor the status of the capital markets and regularly evaluate the potential impact on our business operations of changes in capital market conditions. We expect to continue to make selective and opportunistic investments in connection with adding units to our lodging business. These investments include loans and noncontrolling equity investments.

Fluctuations in the values of hotel real estate generally have little impact on the overall results of our Lodging segment because: (1) we own less than one percent of the total number of hotels that we operate or franchise; (2) management and franchise fees are generally based upon hotel revenues and profits rather than current hotel property values; and (3) our management agreements generally do not terminate upon hotel sale or foreclosure.

Dispositions. Property and asset sales generated cash proceeds of $20 million in 2011, $114 million in 2010, and $2 million in 2009.

Loan Activity. From time to time we make loans to owners of hotels that we operate or franchise. Collections and sales for such loans, net of advances during 2011 and 2010, amounted to net loan collections of $84 million in 2011 and net loan advances of $6 million in 2010. At year-end 2011, we had no senior loans and $382 million in mezzanine and other loans (including a current portion of $84 million) outstanding, compared with no senior loans and $191 million in mezzanine and other loans (including a current portion of $7 million) outstanding at year-end 2010. In 2011, our notes receivable balance associated with senior, mezzanine, and other loans increased by $191 million and primarily reflected the funding and collection of several loans offset by the reserves against loans. See the “Senior, Mezzanine, and Other Loans” caption in Footnote No. 1, “Summary of Significant Accounting Policies,” of the Notes to our Financial Statements for additional information.

Equity and Cost Method Investments. Cash outflows of $83 million in 2011, $29 million in 2010, and $28 million in 2009 associated with equity and cost method investments primarily reflects our investments in a number of joint ventures.

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