Starwood 2008 Annual Report Download - page 76

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Item 1A. Risk Factors.
Risks Relating to Hotel, Resort, Vacation Ownership and Residential Operations
We Are Subject to All the Operating Risks Common to the Hotel and Vacation Ownership and Residential
Industries. Operating risks common to the hotel and vacation ownership and residential industries include:
• changes in general economic conditions, including the severity and duration of the current downturn in the
US and global economies;
• impact of war and terrorist activity (including threatened terrorist activity) and heightened travel security
measures instituted in response thereto;
• domestic and international political and geopolitical conditions;
• travelers’ fears of exposures to contagious diseases;
• decreases in the demand for transient rooms and related lodging services, including a reduction in business
travel as a result of general economic conditions;
• decreases in demand or increases in supply for vacation ownership interests;
• the impact of internet intermediaries on pricing and our increasing reliance on technology;
• cyclical over-building in the hotel and vacation ownership industries;
• restrictive 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;
• changes in travel patterns;
• changes 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;
• the costs and administrative burdens associated with compliance with applicable laws and regulations,
including, among others, franchising, timeshare, privacy, licensing labor and employment, and regulations
under the Office of Foreign Control and the Foreign Corrupt Practices Act.
• disputes with owners of properties, including condominium hotels, franchisees and homeowner associations
which may result in litigation;
• the availability and cost of capital to allow us and potential hotel owners and franchisees to fund
construction, renovations and investments;
• foreign exchange fluctuations;
• the 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
• the 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 in certain circumstances, such as the
bankruptcy of the hotel owner or franchisee, the failure to meet certain financial or performance criteria 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.
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