Starwood Hotels Quarterly Net Declines on Bal Harbour Sales

Starwood Hotels & Resorts Worldwide Inc. (HOT), owner of the Sheraton and W brands, said fourth-quarter earnings declined as sales at its St. Regis Bal Harbour Resort in Florida weren’t repeated and hotel revenue fell.

Net income dropped to $128 million, or 67 cents a share, from $142 million, or 72 cents, a year earlier, the Stamford, Connecticut-based company said today in a statement. The average estimate of 10 analysts was 70 cents a share, according to data compiled by Bloomberg.

Condominium sales at Starwood’s Bal Harbour project, which were completed in late 2013, have contributed to earnings in the past couple of years. On Jan. 22, the company said it sold the resort to a unit of Qatar’s Al Faisal Holding Co. for $213 million, part of its strategy to reduce its real estate holdings. Starwood will continue to manage the property, which includes a 27-story oceanfront hotel with 207 rooms.

“The primary reason for a poor year-over-year comparison is that last year they had income from the Bal Harbour condo sales,” Patrick Scholes, an analyst at SunTrust Robinson Humphrey Inc. in New York, said in an interview before earnings were released.

Results also were hampered by slowing demand growth in Asia as an influx of new hotels, especially in China, created more competition, according to Scholes. Starwood gets about 20 percent of its earnings from Asia, he said.

‘Weak Point’

“Asia is their weak point, specifically China,” Scholes said. “The challenge is that there has been such strong hotel development, which was OK when GDP was growing but now that things have slowed, demand for all these hotels is lower.”

Revenue per available room declined by 3 percent in Asia outside China, the company said. Revenue for hotels owned, leased and held in joint ventures declined to $416 million from $418 million.

Fourth-quarter revenue declined to $1.51 billion from $1.53 billion a year earlier, Starwood said. Revenue per available room, an industry measure of occupancies and rates, rose 5.3 percent percent worldwide and 6.1 percent in North America when adjusted for currency fluctuations.

Revpar probably will grow 5 percent to 7 percent in 2014, compared with 5 percent to 6 percent last year, Starwood said today, repeating a target set in October.

The company’s North American hotel occupancies are at a record, giving Starwood a greater ability than ever to raise rates in the region, Chief Executive Officer Frits van Paasschen said in a Bloomberg Television interview last month at the World Economic Forum in Davos, Switzerland.

Earnings from the company’s vacation ownership and residential business fell by about $31 million in the quarter from a year earlier, the company said. That includes a $20 million decrease in earnings from Bal Harbour, which is “substantially sold out,” it said.

To contact the reporter 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

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