Starwood 2011 Annual Report Download - page 82

Investing Through Partnerships or Joint Ventures Decreases Our Ability to Manage Risk
In addition to acquiring or developing hotels and resorts or acquiring companies that complement our
business directly, we have from time to time invested, and expect to continue to invest, as a co-venturer. Joint
venturers often have shared control over the operation of the joint venture assets. Therefore, joint venture
investments may involve risks such as the possibility that the co-venturer in an investment might become
bankrupt or not have the financial resources to meet its obligations, or have economic or business interests or
goals that are inconsistent with our business interests or goals, or be in a position to take action contrary to our
instructions or requests or contrary to our policies or objectives. Consequently, actions by a co-venturer might
subject hotels and resorts owned by the joint venture to additional risk. Further, we may be unable to take action
without the approval of our joint venture partners. Alternatively, our joint venture partners could take actions
binding on the joint venture without our consent. Additionally, should a joint venture partner become bankrupt,
we could become liable for our partner’s share of joint venture liabilities.
Our Vacation Ownership Business is Subject to Extensive Regulation and Risk of Default
We market and sell VOIs, which typically entitle the buyer to ownership of a fully-furnished resort unit for
a one-week period on either an annual or an alternate-year basis. We also acquire, develop and operate vacation
ownership resorts, and provide financing to purchasers of VOIs. These activities are all subject to extensive
regulation by the federal government and the states in which vacation ownership resorts are located and in which
VOIs are marketed and sold including regulation of our telemarketing activities under state and federal “Do Not
Call” laws. In addition, the laws of most states in which we sell VOIs grant the purchaser the right to rescind the
purchase contract at any time within a statutory rescission period. Although we believe that we are in material
compliance with all applicable federal, state, local and foreign laws and regulations to which vacation ownership
marketing, sales and operations are currently subject, changes in these requirements, or a determination by a
regulatory authority that we were not in compliance, could adversely affect us. In particular, increased
regulations of telemarketing activities could adversely impact the marketing of our VOIs.
We bear the risk of defaults under purchaser mortgages on VOIs. If a VOI purchaser defaults on the
mortgage during the early part of the loan amortization period, we will not have recovered the marketing, selling
(other than commissions in certain events), and general and administrative costs associated with such VOI, and
such costs will be incurred again in connection with the resale of the repossessed VOI. Accordingly, there is no
assurance that the sales price will be fully or partially recovered from a defaulting purchaser or, in the event of
such defaults, that our allowance for losses will be adequate.
Risks Related to Our Dependence on Senior Management and Our Ability to Achieve Our Growth Strategy
Our future success and our ability to manage future growth depend in large part upon the efforts of our
senior management and our ability to attract and retain key officers and other highly qualified personnel.
Competition for such personnel is intense. In the past several years, we have experienced significant changes in
our senior management, including executive officers (see Item 10, Directors, Executive Officers and Corporate
Governance of this Annual Report). There can be no assurance that we will continue to be successful in attracting
and retaining qualified personnel. Accordingly, there can be no assurance that our senior management will be
able to successfully execute and implement our growth and operating strategies.
Over the last few years we have been pursuing a strategy of reducing our investment in owned real estate
and increasing our focus on the management and franchise business. As a result, we are planning on substantially
increasing the number of hotels we open every year and increasing the overall number of hotels in our system.
This increase will require us to recruit and train a substantial number of new associates to work at these hotels as
well as increasing our capabilities to enable hotels to open on time and successfully. There can be no assurance
that our strategy will be successful.
Tax Risks
Evolving Government Regulation Could Impose Taxes or Other Burdens on Our Business. We rely upon
generally available interpretations of tax laws and other types of laws and regulations in the countries and locales
in which we operate. We cannot be sure that these interpretations are accurate or that the responsible taxing or
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