Risk Factors

Investors should carefully consider the factors listed below, since stock investments involve substantial degree of risk. These risks may affect the financial condition and results of operations, from the impact of their activities. Consequently, the market value of the Company will be reduced due to the occurrence of some of these risks, with losses for our investors.

a) With respect to the Company

Competition from foreign groups: Hotéis Othon is still facing an increasingly strong competition from foreign groups, who have invested in the renovation of its hotels and build new ones.

Groups with presence before timid or not present in the country has taken a more aggressive stance with a view to the anticipated growth for the market in the coming years, in addition to the mega events like the World Cup 2014 and Olympics games in 2016.

The hotel industry in general, apparently still suffers competition from apart-hotels, which have grown significantly. However, these enterprises have been unable to satisfactorily meet the increasing demand of business travelers and tourists of the highest standard.

Business strategy

The continued growth of Hotéis Othon depends on factors such as:

  • Meet market demands for services with every day standard getting higher, increase operational efficiency of their installed base and increase its customer base with a focus on tourists from highest standard via electronic distribution executives on business trips.

Use of technology

Our strategy involves the use of information technology and we need to be able to meet all the transformations that area the hotel sector demand.

Dependence on members of our management

The implementation of our strategy depends on the maintenance of the members of senior and executive management as well as our ability to attract qualified personnel.

Fires or natural disasters

The effects caused by fires or natural disasters could have an adverse effect on our business and consequently on the financial situation.

b) In relation to the controlling shareholder, directly or indirectly, by the Company, or to the control group shareholder

The control group of the Company has the power to elect the board of directors and determine the outcome of decisions requiring shareholder approval, including transactions with related parties, provided they are within the rules established by regulators.

c) With respect to the company‘s shareholders

Lack of liquidity

The lack of liquidity in the securities market and the volatility in the stock price, which may hinder investors to sell their shares at the price and time they wish.

We may not pay dividends to our shareholders

According to our bylaws, we must pay our shareholders at least 25% of our annual net income to mandatory dividends, adjusted according to the law of corporations (Lei de sociedade por a√ß√Ķes). The result of a particular year should be used to offset accumulated losses before being distributed mandatory dividends.

d) With respect to subsidiaries and affiliated companies

The Company has subsidiaries and affiliates who in the course of their activities, may become part of legal proceedings that convicted the result of these convictions will impact the Company directly and indirectly.

e) The Company Suppliers

We have no dependence on suppliers, as they are quite fragmented, but we have the risk of held jointly liable for the debts contracted labor, as we have contracts for surveillance activities.

f) With respect to the Company‘s customers

The success of our business depends on our customers‘ satisfaction in the services offered. Besides the necessity of maintaining this relationship as other factors, such as economic downturns, our customers can seek other competitors in that particular case, with a lower standard of service, but with a lower price.

g) Regarding the sector of the Company

The process of consolidation of the hotel market in Brazil, with the arrival of foreign competitors, causes a lot of pressure for companies to monitor these trends and more sophisticated customers with great negotiation skills.

h) With respect to the regulation of the sector where the Company operates

The company has the obligation to comply with various standards related to sanitary, safety and health procedures. Failure to follow these rules in addition to not renew their operating licenses could generate fines and even the prohibition of the establishment.

i) With respect to foreign countries where the company operates.

The Company does not develop activities outside the national territory.