Bloomberg News

Starwood Hotels Earnings Beat Estimates on Luxury Demand

October 27, 2011

(Updates with closing share price in first, sixth paragraphs.)

Oct. 27 (Bloomberg) -- Starwood Hotels & Resorts Worldwide Inc., owner of the St. Regis and W brands, reported a profit that topped analyst estimates as demand rose for rooms at luxury properties, sending shares to an almost three-month high.

Third-quarter net income was $163 million, or 84 cents a share, compared with a loss of $6 million, or 3 cents, a year earlier, the White Plains, New York-based company said in a statement today. Adjusted earnings, which exclude a tax benefit and other items, were about 42 cents a share, beating the 39- cent average estimate of 25 analysts in a Bloomberg survey.

High-end hotels in major U.S. cities such as New York, Boston and San Francisco have fared best during a recovery in travel. The occupancy rate was 71 percent for the highest-priced segment of the hotel market this year through September, compared with 62 percent for all U.S. hotels, according to Smith Travel Research Inc. in Hendersonville, Tennessee.

“We expect to continue growing faster than the market, both in terms of revpar and footprint, thanks to our brand momentum and exposure to rapidly growing markets,” Chief Executive Officer Frits van Paasschen said in the statement.

The company raised its earnings forecast for the year to $1.75 to $1.79 a share, excluding certain items. In July, it forecast a profit of $1.67 to $1.77 a share.

Starwood rose 6.2 percent to $52.60 in New York trading. Shares last closed higher on Aug. 1.

Revpar Gains

Revenue per available room, an industry measure of occupancy and rate, climbed 11.6 percent in the third quarter for hotels open at least a year. It rose 8.8 percent in North America.

Revpar will increase 7 percent to 9 percent worldwide before currency adjustments for the full year, the company said today. That’s unchanged from a July forecast.

The company plans to focus on investments in its properties next year, such as converting two U.S. hotels to its Aloft brand. Spending related to renovations, asset sales and foreign exchange shifts will reduce earnings before interest, taxes depreciation and amortization by $20 million next year.

“The opportunity to sell right now isn’t one that we think is very strong,” van Paasschen said during a conference call with analysts today. “We’d rather hold, invest in our assets.”

Starwood is seeing some “softening” in bookings in Europe and “subdued” domestic travel demand in Japan, van Paasschen said during the call.

Adjusted Ebitda will be about $1.03 billion to $1.12 billion in 2012, which corresponds to earnings per share of about $1.96 to $2.25, Starwood said. Analyst project a profit of $2.23 a share, according to the average of 14 estimates.

--Editors: Kara Wetzel, Christine Maurus

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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