Starwood 2011 Annual Report Download - page 75

positive relationships with current and potential hotel owners and franchisees. Consequently, 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 and Our Third Party Licensees May Not Be Able to Sell Residential Properties Using our Brands for
a Profit or at Anticipated Prices. 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 Recent Recession in the Lodging Industry and the Global Economy Generally Will Continue to
Impact Our Financial Results and Growth.The recent economic recession and continued economic uncertainty
in the United States, Europe and much of the rest of the world has had a negative impact on the hotel and
vacation ownership and residential industries. 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 recession and both our future financial
results and growth could be further harmed if recovery from the economic recession slows or the economic
recession becomes worse. In certain cases, we have entered into third party hotel management contracts which
contain performance guarantees specifying that certain operating metrics will be achieved. As a result of the
impact of the economic downturn on the lodging industry (and despite the stabilization in lodging that began in
2010), we may not meet the requisite performance levels, and we may be forced to loan or contribute monies to
fund the shortfall of performance levels or terminate the management contract. For a more detailed description of
our performance guarantees, see Note 25 of the consolidated financial statements.
Moreover, many businesses, particularly financial institutions, face restrictions on the ability to travel and
hold conferences or events at resorts and luxury hotels. These restrictions as well as negative publicity associated
with such companies holding large conference and corporate events has resulted in reduced corporate bookings
that could impact our financial results in the future.
Our Revenues, Profits, or Market Share Could Be Harmed If We Are Unable to Compete Effectively. The
hotel, vacation ownership and residential industries are highly competitive. Our properties compete for customers
with other hotel and resort properties, ranging from national and international hotel brands to independent, local
and regional hotel operators, and, with respect to our vacation ownership resorts and residential projects, with
owners reselling their VOIs, including fractional ownership, or apartments. We compete based on a number of
factors, including quality and consistency of rooms, restaurant and meeting facilities and services, attractiveness
of locations, availability of a global distribution system, price, and the ability to earn and redeem loyalty program
points. Some of our competitors may have substantially greater marketing and financial resources than we do,
and if we are unable to successfully compete in these areas, our operating results could be adversely affected.
Moreover, our present growth strategy for development of additional lodging facilities entails entering into
and maintaining various management agreements, franchise agreements, and leases with property owners. We
compete with other hotel companies for this business primarily on the basis of fees, contract terms, brand
recognition, and reputation. In connection with entering into these agreements, we may be required to make
investments in, or guarantee the obligations of, third parties or guarantee minimum income to third parties. 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.
Our Businesses Are Capital Intensive. For our owned, managed and franchised properties to remain
attractive and competitive, the property owners and we have to spend money periodically to keep the properties
well maintained, modernized and refurbished. This creates an ongoing need for cash. Third-party property
owners may be unable to access capital or unwilling to spend available capital when necessary, even if required
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