Starwood 2006 Annual Report Download - page 28

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142,000 rooms worldwide. During the year ended December 31, 2006, we generated management fees by
geographic area as follows:
United States ............................................................. 43.7%
Europe ................................................................. 17.9%
Asia Pacific . ............................................................. 15.7%
Middle East and Africa ..................................................... 15.4%
Americas (Latin America & Canada) ........................................... 7.3%
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, sales and marketing, public relations and national
and international media advertising. In our experience, owners seek hotel managers that can provide attractively
priced base, incentive, marketing and franchise 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 the Company. 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. In addition to the management
contracts we retained in connection with the sale of hotels discussed earlier, during the year ended December 31,
2006, we opened 29 managed hotels with approximately 7,000 rooms, and 13 hotels with approximately
3,000 rooms left the system. In addition, during 2006, we signed management agreements for 68 hotels with
approximately 18,000 rooms, a portion of which opened in 2006 and a portion of which will open in the future.
Brand Franchising and Licensing. We franchise our Sheraton, Westin, Four Points by Sheraton, Luxury
Collection, Le Méridien, 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, sales and marketing, public relations and national and international media
advertising. In addition, a franchisee may also purchase hotel supplies, including brand-specific products, from
certain Starwood-approved vendors. We approve certain plans for, and the location of, franchised hotels and review
their design. At December 31, 2006, there were 360 franchised properties with approximately 96,000 rooms
operating under the Sheraton, Westin, Four Points by Sheraton, Luxury Collection and Le Méridien brands. During
the year ended December 31, 2006, we generated franchise fees by geographic area as follows:
United States ............................................................. 65.2%
Europe ................................................................. 14.3%
Americas (Latin America & Canada) ........................................... 11.6%
Asia Pacific . ............................................................. 8.0%
Middle East and Africa ..................................................... 0.9%
In addition to the franchise contracts we retained in connection with the sale of hotels discussed earlier, during
the year ended December 31, 2006, we opened 27 franchised hotels with approximately 7,000 rooms, and 17 hotels
with approximately 4,000 rooms left the system. In addition, during 2006, we signed franchise agreements for
88 hotels with approximately 18,000 rooms, a portion of which opened in 2006 and a portion of which will open in
the future.
Vacation Ownership and Residential Business
We develop, own and operate vacation ownership resorts, market and sell the VOIs in the resorts and, in many
cases, provide financing to customers who purchase such ownership interests. Owners of VOIs can trade their
interval for intervals at other Starwood vacation ownership resorts, for intervals at certain vacation ownership
resorts not otherwise sponsored by Starwood through an exchange company, or for hotel stays at Starwood
properties. From time to time, we securitize or sell the receivables generated from our sale of VOIs.
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