Starwood 2006 Annual Report Download - page 13

kMajor tourist hotels, destination resorts or conference centers that have favorable demographic trends and
are located in markets with significant barriers to entry or with major room demand generators such as office
or retail complexes, airports, tourist attractions or universities;
kUndervalued hotels whose performance can be increased by re-branding to one of our hotel brands, the
introduction of better and more efficient management techniques and practices and/or the injection of
capital for renovating, expanding or repositioning the property; and
kPortfolios 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 current construction of a dual hotel campus in Lexington, Massachusetts featuring both
an aloft hotel and an Element hotel.
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 in their geographic markets,
including facilities owned by local interests and facilities owned by national and international chains. 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, residential, resort and vacation ownership operator and developer.
While some of our competitors are private management firms, 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 firm if certain
financial or performance criteria are not met. Our timeshare and residential business depends on our ability to obtain
land for development of our timeshare and residential products and to utilize land already owned by us but used in
hotel operations. Changes in the general availability of suitable land or the cost of acquiring or developing such land
could adversely impact the profitability of our timeshare and residential business.
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 affect 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, floor
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 fibers in the air. Environmental Laws also regulate polychlorinated biphenyls (“PCBs”), which may be
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