Comfort Inn 2013 Annual Report Download - page 26

Table of Contents
•the costs and administrative burdens associated with compliance with applicable laws and regulations, including, among others, franchising,
lending, privacy, marketing and sales, licensing, labor, climate change, employment and regulations applicable under the Office of Foreign
Asset Control and the Foreign Corrupt Practices Act;
•other unpredictable external factors, such as acts of God, war, terrorist attacks, pandemics, epidemics, airline strikes, transportation and fuel
price increases, natural disasters, and severe weather may reduce business and leisure travel or reduce the number of hotels open and operating
within our system;
•the financial condition of franchisees and travel related companies;
•franchisors’ ability to develop and maintain positive relations with current and potential franchisees; and
•changes in exchange rates or sustained economic weakness in the United States (affecting domestic travel) and internationally could also
unfavorably impact future results.
Acquisition and development of new brands and markets.
From time-to-time, we consider acquisitions of new brands that complement our current portfolio of brands as well as expansion of our brands in
international markets. In many cases, we will be competing for these opportunities with third parties who may have substantially greater financial resources or
different or lower acceptable return requirements than we do. There can be no assurance that we will be able to identify acquisition candidates, acceptable new
markets or complete transactions on commercially reasonable terms or at all. If transactions are consummated or new markets entered, there can be no
assurance that any anticipated benefits will actually be realized. Similarly, there can be no assurance that we will be able to obtain additional financing for
acquisitions or investments, or that the ability to obtain such financing will not be restricted by the terms of our existing debt agreements.
We have recently developed and launched additional hotel brands, such as Cambria Suites and Ascend Collection, and may develop and launch
additional brands in the future. In addition, we plan to expand the distribution of existing brands in international markets. There can be no assurance
regarding the level of acceptance of these brands in the development and consumer marketplaces, that costs incurred to develop the brands or expand in
international markets (including advances for system services we provide) will be recovered or that the anticipated benefits from these new brands or markets
will be realized.
We are subject to risks relating to acts of God, terrorist activity, epidemics and war.
Our financial and operating performance may be adversely affected by acts of God, such as natural disasters and/or pandemics, epidemics, terrorist
activities and acts of war affecting locations where we have a high concentration of franchisees and areas of the world from which our franchisees draw a large
number of guests. Some types of losses, such as from terrorism and acts of war, may be either uninsurable or too expensive to justify insuring against.
Should an uninsured loss or a loss in excess of insured limits occur, our results from operations and financial condition may be adversely affected.
We may not grow our franchise system or we may lose business by failing to compete effectively.
Our success and growth prospects depend on the strength and desirability of our brands. We believe that hotel operators choose lodging franchisors
based primarily on the value and quality of each franchisor’s brand and services, the extent to which affiliation with that franchisor may increase the hotel
operator’s reservations and profits, and the franchise fees charged. Demographic, economic or other changes in markets may adversely affect the desirability
of our brands and, correspondingly, the number of hotels franchised under the Choice brands.
We compete with other lodging companies for franchisees. As a result, the terms of new franchise agreements may not be as favorable as our current
franchise agreements. For example, competition may require us to reduce or change fee structures, make greater use of financial incentives such as loans and
guarantees to acquire franchisees and/or reduce the level of property improvements required before operating under our brand names. This could potentially
impact our margins negatively. New competition may also emerge using different business models with a lesser reliance on franchise fees. In addition, an
excess supply of hotel rooms or unfavorable borrowing conditions may discourage potential franchisees from expanding or constructing new hotels, thereby
limiting a source of growth of the franchise fees received by us.
In addition, each of our hotel brands competes with major hotel chains in national and international markets and with independent companies in regional
markets. Our ability to remain competitive and to attract and retain business and leisure travelers depends on our success in distinguishing our products and
services from those offered by our competitors. If we are unable to compete successfully in these areas, this could adversely affect our market share and our
results of operations.
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