Starwood 2004 Annual Report Download - page 22

¬Hotels or brands which would enable us to provide a wider range of amenities and services to
customers or provide attractive geographic distribution; and
¬Portfolios of hotels or hotel companies that exhibit some or all of the criteria listed above, where the
purchase of several hotels in one transaction enables us to obtain favorable pricing or obtain attractive
assets that would otherwise not be available or realize cost reductions on operating the hotels by
incorporating them into the Starwood system.
We may also selectively choose to develop and construct desirable hotels and resorts to help us meet our
strategic goals, such as the ongoing development of the St. Regis Museum Tower Hotel in San Francisco,
California which is expected to have approximately 260 hotel rooms and 102 residential condominiums.
Furthermore, we have developed plans along with third party developers for Öexible new-build Sheraton
and Westin prototypes, with the intent of expanding these brands into tertiary markets.
Competition
The hotel industry is highly competitive. Competition is generally based on quality and consistency of
room, restaurant and meeting facilities and services, attractiveness of locations, availability of a global
distribution system, price, the ability to earn and redeem loyalty program points and other factors.
Management believes that we compete favorably in these areas. Our properties compete with other hotels and
resorts, including facilities owned by local interests and facilities owned by national and international chains, in
their geographic markets. Our principal competitors include other hotel operating companies, ownership
companies (including hotel REITs) and national and international hotel brands.
We encounter strong competition as a hotel, resort and vacation ownership operator and developer. While
some of our competitors are private management Ñrms, several are large national and international chains that
own and operate their own hotels, as well as manage hotels for third-party owners and develop and sell VOIs,
under a variety of brands that compete directly with our brands. In addition, hotel management contracts are
typically long-term arrangements, but most allow the hotel owner to replace the management Ñrm if certain
Ñnancial or performance criteria are not met.
Environmental Matters
We are subject to certain requirements and potential liabilities under various federal, state and local
environmental laws, ordinances and regulations (""Environmental Laws''). For example, a current or previous
owner or operator of real property may become liable for the costs of removal or remediation of hazardous or
toxic substances on, under or in such property. Such laws often impose liability without regard to whether the
owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The
presence of hazardous or toxic substances may adversely aÅect the owner's ability to sell or rent such real
property or to borrow using such real property as collateral. Persons who arrange for the disposal or treatment
of hazardous or toxic wastes may be liable for the costs of removal or remediation of such wastes at the
treatment, storage or disposal facility, regardless of whether such facility is owned or operated by such person.
We use certain substances and generate certain wastes that may be deemed hazardous or toxic under
applicable Environmental Laws, and we from time to time have incurred, and in the future may incur, costs
related to cleaning up contamination resulting from historic uses of certain of our current or former properties
or our treatment, storage or disposal of wastes at facilities owned by others. Other Environmental Laws require
abatement or removal of certain asbestos-containing materials (""ACMs'') (limited quantities of which are
present in various building materials such as spray-on insulation, Öoor coverings, ceiling coverings, tiles,
decorative treatments and piping located at certain of our hotels) in the event of damage or demolition, or
certain renovations or remodeling. These laws also govern emissions of and exposure to asbestos Ñbers in the
air. Environmental Laws also regulate polychlorinated biphenyls (""PCBs''), which may be present in
electrical equipment. A number of our hotels have underground storage tanks (""USTs'') and equipment
containing chloroÖuorocarbons (""CFCs''); the operation and subsequent removal or upgrading of certain
USTs and the use of equipment containing CFCs also are regulated by Environmental Laws. In connection
14