UPDATE 1-Starwood going ahead with $4 bln Sheraton overhaul

NEW YORK, April 13 (Reuters) - Starwood Hotels & Resorts Worldwide (HOT.N) said on Monday it was moving ahead with a $4 billion overhaul of its Sheraton brand despite an economic slump that has spurred a sharp drawdown in travel spending.

Starwood, the world's No. 8 hotel group by rooms, said the project was 70 percent complete. The initiative, which began in 2007, designated $2 billion for new hotels, $1.3 billion for renovations and $400 million in other changes.

The company, which also operates the W and St. Regis chains, plans to open 20 Sheratons, including nine in North America this year after opening 26 new hotels in 2008.

Like other hotel operators, Starwood has suffered from lower revenue per available room from the broad decline in leisure and business travel amid rising unemployment and political pressure on businesses to curtail corporate spending.

In an interview with CNBC on Monday morning, Starwood's Chief Executive Fritz van Paasschen said group cancellations were up about 50 percent, adding that in the current climate, legitimate business meetings were being portrayed as symbols of excess.

The White Plains, New York-based company also launched a promotion on Monday allowing new and existing members of the company's rewards program to earn free weekend stays, without limits on the number of earned nights and no blackout dates until the end of September. (Reporting by Deepa Seetharaman, editing by Maureen Bavdek)