Starwood Beats Earnings Estimates, Raises Forecast

Starwood Hotels & Resorts Worldwide Inc., owner of luxury brands including the St. Regis and W hotels, reported earnings that beat analysts’ estimates and raised its forecast for revenue per available room.

Excluding one-time items, income from continuing operations rose to $67 million, or 35 cents a share, from $40 million, or 22 cents, a year earlier, the White Plains, New York-based company said in a statement today. Analysts predicted earnings on that basis of 26 cents a share, according to the average of 18 estimates compiled by Bloomberg.

The lodging industry has shown signs of recovery this year after the U.S. recession suppressed travel demand in 2009. Occupancy at U.S. chain hotels with the costliest rooms climbed to 66 percent through June from 60 percent a year earlier, according to Smith Travel Research Inc.

“Looking at occupancy, we are confident rates will sustain their rise through the year,” Starwood Chief Executive Officer Frits van Paasschen said during a conference call with analysts and investors. “A rebound in business travel bodes well for corporate rate negotiations going forward.”

Starwood shares gained $1.65, or 3.8 percent, to $45.45 as of 4:10 p.m. in New York Stock Exchange composite trading. The stock has more than doubled in the past 12 months.

Revenue Rise

Revenue at Starwood, the third-largest U.S. lodging company, increased 13 percent to $437 million in the quarter. Revenue per available room, or revpar, climbed 12 percent in North America and 13.1 percent worldwide at properties the company has operated for at least a year.

Starwood forecast an increase for 2010 worldwide revpar of 7 percent to 9 percent on a same-store, constant dollar basis. In April, it predicted a gain of as much as 8 percent.

“The bigger exposure to luxury compared to its competitors is going to benefit Starwood,” William Marks, a San Francisco- based senior analyst at JMP Securities LLC, said before the earnings release. “Many markets outperformed those of the U.S. Starwood is well-positioned with half of its hotels outside of this country.”

Starwood is looking to sell more of its hotels to focus on management. The company currently owns about 60 of the 1,011 that operate under one of its brands.

Divestiture Options

“As we get to the point when we look at a bigger transaction, we would consider spinning off” a real estate investment trust, said Van Paasschen. “The Host transaction worked well for us and we would be interested in something similar with owners who have the mindset and ability.”

Starwood at the end of 2005 agreed to sell more than 30 properties to Host Hotels & Resorts Inc., then known as Host Marriott Corp., for about $3.4 billion.

Net income declined 15 percent to $114 million, or 61 cents a share, from $134 million, or 74 cents, a year earlier. A gain from an Italian tax-incentive program boosted the 2009 results by $112 million, Starwood said.

The hotelier expects to cut net debt to about $2.5 billion by the end of this year from $2.82 billion at June 30.

Marriott International Inc., the largest U.S. hotel chain, said last week that second-quarter profit more than tripled and the company increased its full-year earnings forecast.

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