Starwood 2012 Annual Report Download - page 102

Managed Hotels. We manage hotels worldwide, usually under a long-term agreement with the hotel owner
(including entities in which we have a minority equity interest). Our responsibilities under hotel management
contracts typically include hiring, training and supervising the managers and employees that operate these
facilities. For additional fees, we provide centralized reservation services and coordinate national and
international advertising and certain marketing and promotional services. We prepare and implement annual
budgets for the hotels we manage and are responsible for allocating property-owner funds for periodic
maintenance and repair of buildings and furnishings. In addition to our owned and leased hotels, at December 31,
2012, we managed 547 hotels with approximately 183,000 rooms worldwide.
During the year ended December 31, 2012, we generated management fees by geographic area as follows:
United States ................................................................ 33.5%
Asia Pacific ................................................................. 30.5%
Europe ..................................................................... 14.8%
Middle East and Africa ........................................................ 12.7%
Latin America, Caribbean & Canada .............................................. 8.5%
Total ....................................................................... 100.0%
Management contracts typically provide for base fees tied to gross revenue and incentive fees tied to profits
as well as fees for other services, including centralized reservations, national and international advertising and
sales and marketing. In our experience, owners seek hotel managers that can provide attractively priced base,
incentive and marketing fees combined with demonstrated sales and marketing expertise and operations-focused
management designed to enhance profitability. Some of our management contracts permit the hotel owner to
terminate the agreement when the hotel is sold or otherwise transferred to a third party, as well as if we fail to
meet established performance criteria. In addition, many hotel owners seek equity, debt or other investments
from us to help finance hotel renovations or conversions to a Starwood brand, so as to align the interests of the
owner and Starwood. Our ability or willingness to make such investments may determine, in part, whether we
will be offered, will accept or will retain a particular management contract. During the year ended December 31,
2012, we opened 41 managed hotels with approximately 12,500 rooms, and 11 managed hotels with
approximately 2,400 rooms exited our system. In addition, during 2012, we signed management agreements for
79 hotels with approximately 21,600 rooms, a small portion of which opened in 2012 and the majority of which
will open in the future.
Brand Franchising and Licensing. We franchise our Luxury Collection, Westin, Le Méridien, Sheraton,
Four Points by Sheraton, Aloft and Element brand names and generally derive licensing and other fees from
franchisees based on a fixed percentage of the franchised hotel’s room revenue, as well as fees for other services,
including centralized reservations, national and international advertising and sales and marketing. In addition, a
franchisee may purchase hotel supplies, including brand-specific products, from certain Starwood-approved
vendors. We also review certain plans for, and the location of, franchised hotels and review their design. At
December 31, 2012, there were 521 franchised properties with approximately 127,700 rooms.
During the year ended December 31, 2012, we generated franchise fees by geographic area as follows:
United States ................................................................ 69.9%
Latin America, Caribbean & Canada .............................................. 13.6%
Asia Pacific ................................................................. 9.0%
Europe ..................................................................... 7.0%
Middle East and Africa ........................................................ 0.5%
Total ....................................................................... 100.0%
In addition to the franchise contracts we retained in connection with the sale of hotels during the year ended
December 31, 2012, we opened 27 franchised hotels with approximately 5,000 rooms, and 9 franchised hotels
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