Financial Information

PART II

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Investing Activities Cash Flows

Capital Expenditures and Other Investments. We made capital expenditures of $305 million in 2015, $411 million in 2014, and $296 million in 2013. These included expenditures related to the development and construction of new hotels and acquisitions of hotel properties, improvements to existing properties, and systems initiatives. Capital expenditures in 2015 decreased by $106 million compared to 2014, primarily related to the 2014 development of two EDITION hotels, partially offset by 2015 renovations at a North American Full-Service property and investments in our reservations system. Capital expenditures in 2014 increased by $115 million compared to 2013, primarily related to developing two EDITION hotels and our 2014 acquisition of an International property, partially offset by the completion of The London EDITION in the 2013 fourth quarter.

We expect 2016 investment spending will total approximately $450 million to $550 million, including approximately $100 million for maintenance capital spending. Investment spending also includes other capital expenditures, loan advances, contract acquisition costs, acquisitions, and equity and other investments. See our Condensed Consolidated Statements of Cash Flows for information on investment spending for 2015. Our anticipated investment spending does not include additional investments we may make in connection with the Starwood Combination, which we expect will close in mid-2016, after customary conditions are satisfied, including shareholder approvals, required antitrust approvals, and the completion of Starwood's previously announced spin-off of its vacation ownership business, or another spin-off, split-off, analogous disposition, or sale of its vacation ownership business. See Footnote No. 3, “Acquisitions and Dispositions,” for more information about the Starwood Combination.

Over time, we have sold lodging properties, both completed and under development, subject to long-term management agreements. The ability of third-party purchasers to raise the debt and equity capital necessary to acquire such properties 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 of changes in capital market conditions on our business operations. We expect to continue making selective and opportunistic investments to add units to our lodging business, which may include loans and noncontrolling equity investments.

Fluctuations in the values of hotel real estate generally have little impact on our overall business results because: (1) we own less than one percent 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 $673 million cash proceeds in 2015 and $435 million in 2014. See Footnote No. 3, “Acquisitions and Dispositions,” for more information on completed dispositions and planned dispositions.

Loan Activity. From time to time we make loans to owners of hotels that we operate or franchise. Loan collections, net of loan advances, amounted to $26 million in 2015 compared to net advances of $69 million in 2014. At year-end 2015, we had a $3 million senior loan (current) and $218 million of mezzanine and other loans ($215 million noncurrent and $3 million current) outstanding, compared with a $3 million senior loan (current) and $239 million of mezzanine and other loans ($215 million noncurrent and $24 million current) outstanding at year-end 2014. In 2015, our notes receivable balance for senior, mezzanine, and other loans decreased by $21 million, primarily reflecting $86 million of collections on MVW notes receivable issued to us in 2011 in conjunction with our Timeshare spin-off, partially offset by the issuance of the $58 million mezzanine loan (net of a $6 million discount) described in Footnote No. 13, “Notes Receivable.”

Equity and Cost Method Investments. Cash outflows of $7 million in 2015, $6 million in 2014, and $16 million in 2013 for equity and cost method investments primarily reflects our investments in a number of joint ventures.