Starwood Third-Quarter Earnings Fall as Sales of Hotels Slow

Starwood Hotels & Resorts Worldwide Inc. (HOT), owner of the Sheraton and W brands, said third-quarter earnings fell as gains from the sale of two hotels last year weren’t repeated.

Net income declined to $157 million, or 81 cents a share, from $170 million, or 87 cents, a year earlier, the Stamford, Connecticut-based company said today in a statement. The average estimate of 14 analysts was 63 cents a share, according to data compiled by Bloomberg.

Real estate divestments have slowed at Starwood, which in the third quarter of last year sold W hotels in Chicago and Los Angeles and had $12 million of earnings before interest, taxes, depreciation and amortization from condo sales at Miami Beach’s Bal Harbour Resort, which opened in January 2012.

“Last year they primarily benefited from hotel sales as well as condo sales in Florida,” Patrick Scholes, an analyst at SunTrust Robinson Humphrey Inc. in New York, said before earnings were announced. “Bal Harbour is nearly sold out and you don’t have as much income from that anymore.”

Revenue climbed 3.6 percent to $1.51 billion from $1.46 billion a year ago, Starwood said. Revenue per available room, an industry measure of occupancy and rates, rose 4.7 percent worldwide and 5.8 percent in North America adjusted for currency movements.

Better Outlook

Including Bal Harbour, 2013 adjusted earnings per share before special items will probably be $2.93 to $2.95, Starwood said. The company in July had forecast $2.81 to $2.88.

“We remain bullish on the long-term trends of rising wealth and increasing demand for travel in fast-growing economies, even in the face of slower growth in China, unrest in the Middle East and economic challenges in Latin America,” Chief Executive Officer Frits van Paasschen said in the statement.

Less than 40 percent of Starwood’s earnings are from the U.S., according to Nikhil Bhalla, an analyst at FBR & Co. (FBRC) in Arlington, Virginia.

“Outside the U.S., their hotels did OK,” Bhalla said before earnings were released. “Europe held up OK. The expectations for Europe were low because of the Olympic Games last year.”

Asset sales so far this year will reduce 2014 earnings by $12 million from the previous year, Starwood said. The company said it sold a non-core asset in the third quarter and entered an agreement to sell two hotels in a deal it expects to complete in the fourth quarter.

Excluding special items, income from continuing operations climbed to $137 million in the third quarter from $114 million a year earlier.

To contact the reporters on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net; Dalia Fahmy in Berlin at dfahmy1@bloomberg.net

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

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