WYNDHAM WORLDWIDE CORPORATION

associated with maintenance fees on unsold inventory, increased property management expenses, incremental
WAAM related expenses, higher deed recording costs and higher litigation expenses.
Gross sales of VOIs, net of WAAM sales, at our vacation ownership business increased $97 million (7%)
during the year ended December 31, 2010 compared to the same period during 2009, driven principally by an
increase of 11% in VPG and an increase of 3% in tour flow. 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 coming from upgrades to existing owners during the year ended December 31, 2010
as compared to the same period during 2009 as a result of changes in the mix of tours. Tour flow reflects the
favorable impact of growth in our in-house sales programs, partially offset by the negative impact of the closure of
over 25 sales offices during 2009 primarily related to our organizational realignment initiatives. Our provision for
loan losses declined $109 million during the year ended December 31, 2010 as compared to the same period during
2009. Such decline includes (i) $83 million primarily related to improved portfolio performance and mix during the
year ended December 31, 2010 as compared to the same period during 2009, partially offset by the impact to the
provision from higher gross VOI sales, and (ii) a $26 million impact on our provision for loan losses from the
absence of the recognition of revenue previously deferred under the POC method of accounting during the year
ended December 31, 2009. Such favorability was partially offset by a $35 million decrease in ancillary revenues
primarily associated with a change in the classification of revenues related to incidental operations, which were
misclassified on a gross basis during prior periods and classified on a net basis within operating expenses during the
second half of 2010.
In addition, net revenues and EBITDA comparisons were favorably impacted by $31 million and $9 million,
respectively, during the year ended December 31, 2010 due to commissions earned on VOI sales of $51 million
under our WAAM. During the first quarter of 2010, we began our initial implementation of WAAM, which is our
fee-for-service vacation ownership sales model designed to capitalize upon the large quantities of newly developed,
nearly completed or recently finished condominium or hotel inventory within the current real estate market without
assuming the investment that accompanies new construction. We offer turn-key solutions for developers or banks in
possession of newly developed inventory, which we will sell for a commission fee through our extensive sales and
marketing channels. This model enables us to expand our resort portfolio with little or no capital deployment, while
providing additional channels for new owner acquisition. In addition, WAAM may allow us to grow our
fee-for-service consumer finance servicing operations and property management business. The commission revenue
earned on these sales is included in service fees and membership revenues on the Consolidated Statement of
Operations.
Under the POC method of accounting, a portion of the total revenues associated with the sale of a VOI is
deferred if the construction of the vacation resort has not yet been fully completed. Such revenues are recognized in
future periods as construction of the vacation resort progresses. There was no impact from the POC method of
accounting during the year ended December 31, 2010 as compared to the recognition of $187 million of previously
deferred revenues during the year ended December 31, 2009. Accordingly, net revenues and EBITDA comparisons
were negatively impacted by $161 million (including the impact of the provision for loan losses) and $89 million,
respectively, as a result of the absence of the recognition of revenues previously deferred under the POC method of
accounting. We do not anticipate any impact during 2011 on net revenues or EBITDA due to the POC method of
accounting as all such previously deferred revenues were recognized during 2009. We made operational changes to
eliminate additional deferred revenues during 2010.
Our net revenues and EBITDA comparisons associated with property management were positively impacted by
$29 million and $7 million, respectively, during the year ended December 31, 2010 primarily due to growth in the
number of units under management, partially offset in EBITDA by increased costs associated with such growth in
the number of units under management.
Net revenues were unfavorably impacted by $10 million and EBITDA was favorably impacted by $24 million
during the year ended December 31, 2010 due to lower consumer financing revenues attributable to a decline in our
contract receivable portfolio, more than offset in EBITDA by lower interest costs during the year ended
December 31, 2010 as compared to the same period during 2009. We incurred interest expense of $105 million on
our securitized debt at a weighted average interest rate of 6.7% during the year ended December 31, 2010 compared
to $139 million at a weighted average interest rate of 8.5% during the year ended December 31, 2009. Our net
interest income margin increased from 68% during the year ended December 31, 2009 to 75% during the year ended
December 31, 2010 due to:
k a 179 basis point decrease in our weighted average interest rate on our securitized borrowings;
k $62 million of decreased average borrowings on our securitized debt facilities; and
k higher weighted average interest rates earned on our contract receivable portfolio.
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