Starwood Hotels Shares Fall on Weakening Demand for Rooms

Starwood Hotels & Resorts Worldwide Inc. (HOT), owner of the luxury St. Regis and W brands, fell to a three-month low after predicting earnings below analysts’ estimates as demand for rooms slows around the world.

Profit in the last three months of the year will be 64 cents to 66 cents a share, the Stamford, Connecticut-based company said today in its third-quarter earnings statement. Analysts project earnings of 68 cents a share, based on the average of 26 estimates in a Bloomberg survey.

A recovery in demand has “lost its steam,” Chief Executive Officer Frits van Paasschen said on a conference call. For the third quarter, Starwood reported a 9.1 percent drop in revenue per available room in Europe and only a “modest” 1.3 percent increase worldwide, said Nikhil Bhalla, a senior lodging analyst at FBR & Co. in Arlington, Virginia..

“The concern is that they lowered fourth-quarter guidance while international and domestic results were weak,” Bhalla said in a telephone interview.

Starwood dropped 2.8 percent to $51.92 at 11:15 a.m. New York time. The shares earlier fell to $51.16, the lowest intraday price since July 26.

Net income in the third quarter rose to $170 million, or 87 cents a share, from $163 million, or 84 cents, a year earlier, the company said. The results included a $33 million gain related to a tax benefit on the sale of two hotels, while year- earlier profit included a benefit of $35 million.

Bal Harbour

The latest quarter’s results were boosted by vacation-unit sales at the company’s St. Regis Bal Harbour in Miami Beach, Florida, which isn’t reflective of the main hotel business, Bhalla said.

Earnings from Starwood’s vacation ownership and residential business climbed about $19 million from 2011. That included $12 million of earnings from the St. Regis Bal Harbour in Florida, about $7 million more than analysts predicted, according to Bhalla.

Growth has slowed around the world, including in China, where new supply in metropolitan areas has added to competition, van Paasschen said during the call today. Forecasting 2013 results is “quite difficult” because it’s unclear whether the slowdown will be temporary, he said.

To contact the reporters on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.