Starwood 2009 Annual Report Download - page 88

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 Privacy Initiatives
We collect information relating to our guests for various business purposes, including marketing and
promotional purposes. The collection and use of personal data are governed by privacy laws and regulations
enacted in the United States and other jurisdictions around the world. Privacy regulations continue to evolve and on
occasion may be inconsistent from one jurisdiction to another. Compliance with applicable privacy regulations may
increase our operating costs and/or adversely impact our ability to market our products, properties and services to
our guests. In addition, non-compliance with applicable privacy regulations by us (or in some circumstances non-
compliance by third parties engaged by us) or a breach of security on systems storing our data may result in fines,
payment of damages or restrictions on our use or transfer of data.
Risks Related to Our Ability to Manage Growth
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
Failure of the Trust to Qualify as a REIT Would Increase Our Tax Liability. Qualifying as a real estate
investment trust (a “REIT”) requires compliance with highly technical and complex tax provisions that courts and
administrative agencies have interpreted only to a limited degree. Due to the complexities of our ownership,
structure and operations, the Trust is more likely than are other REITs to face interpretative issues for which there
are no clear answers. We believe that for the taxable years ended December 31, 1995 through April 10, 2006, the
date which Host acquired the Trust, the Trust qualified as a REIT under the Internal Revenue Code of 1986, as
amended. If the Trust failed to qualify as a REIT for any prior tax year, we would be liable to pay a significant
amount of taxes for those years. Subsequent to the Host Transaction, the Trust is no longer owned by us and we are
not subject to this risk for actions following the transaction.
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 other
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