Starwood 2006 Annual Report Download - page 11

energy, telecommunications, technology, employee benefits, food and beverage, furniture, fixtures and equipment
and operating supplies.
Diversification of Cash Flow and Assets. Management believes that the diversity of our brands, market
segments served, revenue sources and geographic locations provide a broad base from which to enhance revenue
and profits and to strengthen our global brands. This diversity limits our exposure to any particular lodging or
vacation ownership asset, brand or geographic region.
While we focus on the luxury and upscale portion of the full-service lodging, vacation ownership and
residential markets, our brands cater to a diverse group of sub-markets within this market. For example, the St. Regis
hotels cater to high-end hotel and resort clientele while Four Points by Sheraton hotels deliver extensive amenities
and services at more affordable rates. The aloft brand will provide a youthful alternative to the “commodity
lodging” of currently existing brands in the select-service market segment, and the Element brand will provide
modern, upscale hotels for extended stay travel.
We derive our cash flow from multiple sources within our hotel and vacation ownership and residential
segments, including owned hotels’ operations, management and franchise fees and the sale of VOIs and residential
units. These operations are in geographically diverse locations around the world. The following tables reflect our
hotel and vacation ownership and residential properties by type of revenue source and geographical presence by
major geographic area as of December 31, 2006:
Number of
Properties Rooms
Managed and unconsolidated joint venture hotels ............................. 426 142,000
Franchised hotels ..................................................... 360 95,800
Owned hotels
(a)
...................................................... 85 27,800
Vacation ownership resorts and residential properties .......................... 25 6,900
Total properties ...................................................... 896 272,500
(a) Includes wholly owned, majority owned and leased hotels.
Number of
Properties Rooms
North America ...................................................... 450 153,700
Europe, Africa and the Middle East ....................................... 264 64,600
Asia Pacific ......................................................... 124 41,800
Latin America ....................................................... 58 12,400
Total .............................................................. 896 272,500
Business Segment and Geographical Information
Incorporated by reference in Note 24. Business Segment and Geographical Information, in the notes to
financial statements set forth in Part II, Item 8. Financial Statements and Supplementary Data.
Business Strategy
We have implemented a strategy of reducing our investment in owned real estate and increasing our focus on
the management and franchise business. In furtherance of this strategy, during 2006 we sold a total of 43 hotels for
approximately $4.5 billion, including 33 properties to Host for approximately $4.1 billion in stock, cash and debt
assumption. As a result, our primary business objective is to maximize earnings and cash flow by increasing the
number of our hotel management contracts and franchise agreements; acquiring and developing vacation ownership
resorts and selling VOIs; and investing in real estate assets where there is a strategic rationale for doing so, which
may include selectively acquiring interests in additional assets and disposing of non-core hotels (including hotels
where the return on invested capital is not adequate) and “trophy” assets that may be sold at significant premiums.
We plan to meet these objectives by leveraging our global assets, broad customer base and other resources and by
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