Starwood 2008 Annual Report Download - page 77

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 and the availability of mortgage financing generally, 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.
The Current Slowdown in the Lodging Industry and the Global Economy Generally Will Continue to Impact
Our Financial Results and Growth. The present economic slowdown and the uncertainty over its breadth, depth
and duration has had a negative impact on the hotel and vacation ownership and residential industries. Many
economists have reported that the U.S. and many European countries are in a recession. Substantial increases in air
and ground travel costs and decreases in airline capacity have reduced demand for our hotel rooms and interval and
fractional timeshare products. Accordingly, our financial results have been impacted by the economic slowdown
and both our future financial results and growth could be further harmed if the economic slowdown continues for a
significant period or becomes worse. In addition, as a result of the impact on the lodging industry, we may be
required to pay out on certain performance and other guarantees that are contained in our third party contracts.
Moreover, businesses participating in the Troubled Asset Relief Program (TARP) face restrictions on the
ability to travel and hold conferences or events at resorts and luxury hotels. The negative publicity associated with
such companies holding large events has also resulted in cancelations and reduced bookings. New or revised
regulations on businesses participating in the TARP and the negative publicity associated with conferences and
events could continue to impact our financial results.
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.
We Must Compete for Management and Franchise Agreements. Our present growth strategy for devel-
opment of additional lodging facilities entails entering into and maintaining various arrangements with property
owners. We compete with other hotel companies for management and franchise agreements. The terms of our
management agreements, franchise agreements, and leases for each of our lodging facilities are influenced by
contract terms offered by our competitors, among other things. We cannot assure you that any of our current
arrangements will continue or that we will be able to enter into future collaborations, renew agreements, or enter
into new agreements in the future on terms that are as favorable to us as those that exist today. In connection with
entering into management or franchise agreements, we may be required to make investments in or guarantee the
obligations of third parties or guarantee minimum income to third parties.
Any Failure to Protect Our Trademarks Could Have a Negative Impact on the Value of Our Brand Names
and Adversely Affect Our Business. We believe our trademarks are an important component of our business. We
rely on trademark laws to protect our proprietary rights. The success of our business depends in part upon our
continued ability to use our trademarks to increase brand awareness and further develop our brand in both domestic
and international markets. Monitoring the unauthorized use of our intellectual property is difficult. Litigation has
been and may continue to be necessary to enforce our intellectual property rights or to determine the validity and
scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of
resources, may result in counterclaims or other claims against us and could significantly harm our results of
operations. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as
do the laws of the United States. From time to time, we apply to have certain trademarks registered. There is no
guarantee that such trademark registrations will be granted. We cannot assure you that all of the steps we have taken
to protect our trademarks in the United States and foreign countries will be adequate to prevent imitation of our
trademarks by others. The unauthorized reproduction of our trademarks could diminish the value of our brand and
its market acceptance, competitive advantages or goodwill, which could adversely affect our business.
Significant Owners of Our Properties May Concentrate Risks. Generally there has not been a concentration
of ownership of hotels operated under our brands by any single owner. Following the acquisition of the Le Méridien
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