Starwood 2005 Annual Report Download - page 15

We Must Compete for Customers. The hotel and vacation ownership industries are highly competitive.
Our properties compete for customers with other hotel and resort properties, and, with respect to our vacation
ownership resorts and residential projects, with owners reselling their VOIs, including fractional ownership, or
apartments. Some of our competitors may have substantially greater marketing and Ñnancial resources than
we do, and they may improve their facilities, reduce their prices or expand or improve their marketing
programs in ways that adversely aÅect our operating results.
We Must Compete for Management and Franchise Agreements. We compete with other hotel
companies for management and franchise agreements. As a result, the terms of such agreements may not be
as favorable as our current agreements. In connection with entering into management or franchise agreements,
we may be required to make investments in or guarantee the obligations of third parties or guarantee
minimum income to third parties.
Any Failure to Protect our Trademarks Could Have a Negative Impact on the Value of our Brand Names
and Adversely AÅect our Business. We believe our trademarks are an important component of our business.
We rely on trademark laws to protect our proprietary rights. The success of our business depends in part upon
our continued ability to use our trademarks to increase brand awareness and further develop our brand in both
domestic and international markets. Monitoring the unauthorized use of our intellectual property is diÇcult.
Litigation has been and may continue to be necessary to enforce our intellectual property rights or to
determine the validity and scope of the proprietary rights of others. Litigation of this type could result in
substantial costs and diversion of resources, may result in counterclaims or other claims against us and could
signiÑcantly harm our results of operations. In addition, the laws of some foreign countries do not protect our
proprietary rights to the same extent as do the laws of the United States. From time to time, we apply to have
certain trademarks registered. There is no guarantee that such trademark registrations will be granted. We
cannot assure you that all of the steps we have taken to protect our trademarks in the United States and
foreign countries will be adequate to prevent imitation of our trademarks by others. The unauthorized
reproduction of our trademarks could diminish the value of our brand and its market acceptance, competitive
advantages or goodwill, which could adversely aÅect our business.
SigniÑcant Owners of Our Properties May Concentrate Risks. Generally there has not been a
concentration of ownership of hotels operated under our brands by any single owner. Following the acquisition
of the Le Mπeridien brand business and the consummation of the transaction with Host Marriott, single
ownership groups will own signiÑcant numbers of hotels operated by us. While the risks associated with such
ownership are no diÅerent than exist generally (i.e., the Ñnancial position of the owner, the overall state of the
relationship with the owner and their participation in optional programs and the impact on cost eÇciencies if
they choose not to participate), they are more concentrated.
The Hotel Industry Is Seasonal in Nature. The hotel industry is seasonal in nature; however, the periods
during which we experience higher revenue vary from property to property and depend principally upon
location. Our revenue historically has been lower in the Ñrst quarter than in the second, third or fourth
quarters.
Third Party Internet Reservation Channels May Negatively Impact our Bookings. Some of our hotel
rooms are booked through third party internet travel intermediaries such as Travelocity.com», Expedia.com»
and Priceline.com». As the percentage of internet bookings increases, these intermediaries may be able to
obtain higher commissions, reduced room rates or other signiÑcant contract concessions from us. Moreover,
some of these internet travel intermediaries are attempting to commoditize hotel rooms by increasing the
importance of price and general indicators of quality (such as ""three-star downtown hotel'') at the expense of
brand identiÑcation. These agencies hope that consumers will eventually develop brand loyalties to their
reservations system rather than to our lodging brands. Although we expect to derive most of our business from
traditional channels and our websites, if the amount of sales made through internet intermediaries increases
signiÑcantly, our business and proÑtability may be signiÑcantly harmed.
We Place SigniÑcant Reliance on Technology. The hospitality industry continues to demand the use of
sophisticated technology and systems including technology utilized for property management, procurement,
reservation systems, operation of our customer loyalty program, distribution and guest amenities. These
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