Starwood 2006 Annual Report Download - page 14

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present in electrical equipment. A number of our hotels have underground storage tanks (“USTs”) and equipment
containing chlorofluorocarbons (“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 with our
ownership, operation and management of our properties, we could be held liable for costs of remedial or other
action with respect to PCBs, USTs or CFCs.
Environmental Laws are not the only source of environmental liability. Under the common law, owners and
operators of real property may face liability for personal injury or property damage because of various environ-
mental conditions such as alleged exposure to hazardous or toxic substances (including, but not limited to, ACMs,
PCBs and CFCs), poor indoor air quality, radon or poor drinking water quality.
Although we have incurred and expect to incur remediation and various environmental-related costs during the
ordinary course of operations, management anticipates that such costs will not have a material adverse effect on our
operations or financial condition.
Seasonality and Diversification
The hotel industry is seasonal in nature; however, the periods during which our properties experience higher
revenue activities vary from property to property and depend principally upon location. Generally, our revenues and
operating income have been lower in the first quarter than in the second, third or fourth quarters.
Comparability of Owned Hotel Results
We continually update and renovate our owned, leased and consolidated joint venture hotels. While under-
going renovation, these hotels are generally not operating at full capacity and, as such, these renovations can
negatively impact our revenues and operating income. Other events, such as the occurrence of natural disasters, may
cause a full or partial closure of a hotel, and such events can negatively impact our revenues and operating income.
Regulation and Licensing of Gaming Facilities
We have an interest in the gaming operations of the Aladdin Resort and Casino in Las Vegas, Nevada and we
and certain of our affiliates and officers have obtained from the Nevada Gaming Authorities (herein defined) the
various registrations, approvals, permits and licenses required to engage in these gaming activities in Nevada. The
casino gaming licenses are not transferable and must be renewed periodically by the payment of various gaming
license fees and taxes. The gaming authorities may deny an application for licensing for any cause which they deem
reasonable and may find an officer or key employee unsuitable for licensing or unsuitable to continue having a
relationship with us in which case all relationships with such person would be required to be severed. In addition,
the gaming authorities may require us to terminate the employment of any person who refuses to file the appropriate
applications or disclosures.
The ownership and/or operation of casino gaming facilities in the United States where permitted are subject to
federal, state and local regulations which under federal law, govern, among other things, the ownership, possession,
manufacture, distribution and transportation in interstate commerce of gaming devices, and the recording and
reporting of currency transactions, respectively. Our Nevada casino gaming operations are subject to the Nevada
Gaming Control Act and the regulations promulgated thereunder (the “Nevada Act”), and the licensing and
regulatory control of the Nevada Gaming Commission (the “Nevada Commission”) and the Nevada State Gaming
Control Board (the “Nevada Board”), as well as certain county government agencies (collectively referred to as the
“Nevada Gaming Authorities”).
If it were determined that applicable laws or regulations were violated, the gaming licenses, registrations and
approvals held by us and our affiliates and officers could be limited, conditioned, suspended or revoked and we and
the persons involved could be subject to substantial fines for each separate violation. Furthermore, a supervisor
could be appointed by the Nevada Commission to operate the gaming property and, under certain circumstances,
earnings generated during the supervisor’s appointment (except for reasonable rental value of the affected gaming
property) could be forfeited to the State of Nevada. Any suspension or revocation of the licenses, registrations or
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