Starwood 2006 Annual Report Download - page 17

kdecreases in demand or increases in supply for vacation ownership interests;
kthe impact of internet intermediaries on pricing and our increasing reliance on technology;
kcyclical over-building in the hotel and vacation ownership industries;
krestrictive changes in zoning and similar land use laws and regulations or in health, safety and environmental
laws, rules and regulations and other governmental and regulatory action;
kchanges in travel patterns;
kchanges in operating costs including, but not limited to, energy, labor costs (including the impact of
unionization), food costs, workers’ compensation and health-care related costs, insurance and unanticipated
costs such as acts of nature and their consequences;
kdisputes with owners of properties, including condominium hotels, franchisees and homeowner associations
which may result in litigation;
kthe availability of capital to allow us and potential hotel owners and franchisees to fund construction,
renovations and investments;
kforeign exchange fluctuations;
kthe financial condition of third-party property owners, project developers and franchisees, which may
impact our ability to recover indemnity payments that may be owed to us and their ability to fund amounts
required under development, management and franchise agreements and in most cases our recourse is
limited to the equity value said party has in the property; and
kthe financial condition of the airline industry and the impact on air travel.
We are also impacted by our relationships with owners and franchisees. Our hotel management contracts are
typically long-term arrangements, but most allow the hotel owner to replace us if certain financial or performance
criteria are not met and in certain cases, upon a sale of the property. Our ability to meet these financial and
performance criteria is subject to, among other things, the risks described in this section. Additionally, our operating
results would be adversely affected if we could not maintain existing management, franchise or representation
agreements or obtain new agreements on as favorable terms as the existing agreements.
We utilize our brands in connection with the residential portions of certain properties that we develop and
license our brands to third parties to use in a similar manner for a fee. Residential properties using our brands could
become less attractive due to changes in mortgage rates, market absorption or oversupply in a particular market. As
a result, we and our third party licensees may not be able to sell these residences for a profit or at the prices that we or
they have anticipated.
General Economic Conditions May Negatively Impact Our Results. While the lodging and travel industries
have generally recovered from events occurring in the first half of the decade, the duration, pace and full extent of
the current growth environment remains unclear. Moderate or severe economic downturns or adverse conditions
may negatively affect our operations. These conditions may be widespread or isolated to one or more geographic
regions. A tightening of the labor markets in one or more geographic regions may result in fewer and/or less
qualified applicants for job openings in our facilities. Higher wages, related labor costs and the increasing cost
trends in the insurance markets may negatively impact our results as wages, related labor costs and insurance
premiums increase.
We Must Compete for Customers. The hotel, vacation ownership and residential 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 own-
ership, or apartments. Some of our competitors may have substantially greater marketing and financial resources
than we do, and they may improve their facilities, reduce their prices or expand or improve their marketing
programs in ways that adversely affect our operating results.
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