Bloomberg News

Starwood Net Drops as Europe Slows, Settlement Unrepeated

February 03, 2012

(Updates with closing share price in fifth paragraph.)

Feb. 2 (Bloomberg) -- Starwood Hotels & Resorts Worldwide Inc., owner of the luxury St. Regis and W brands, said fourth- quarter profit fell after a payment from a lawsuit settlement boosted year-earlier earnings and demand in Europe weakened.

Net income fell to $167 million, or 85 cents a share, from $339 million, or $1.78, a year earlier, the Stamford, Connecticut-based company said in a statement today. The year- earlier results included $75 million from the settlement. Adjusted earnings, which exclude a tax benefit and other items, equaled 71 cents a share, more than the 57-cent average estimate of 22 analysts in a Bloomberg survey.

Starwood’s worldwide revenue per available room for 2011 was 7.4 percent, at the low end of the hotelier’s October forecast of 7 percent to 9 percent before currency adjustments. The company expects growth in global revpar, an industry measure of occupancy and rates, of 5 percent to 7 percent for this year.

“Weaker-than-expected revenue per available room growth, particularly in Europe, heightens our concerns that Starwood’s outsized exposure to the region could present downside risk to our estimates in 2012,” David Loeb, a hotel analyst at Milwaukee-based Robert W. Baird & Co., wrote in a note to investors today.

Shares Fall

Starwood fell 1.5 percent to $54.22 today at the close in New York. The shares have climbed 13 percent this year.

“The stock had run-up year to date and investors did not view what are essentially in-line results as good enough to keep the rally going,” Patrick Scholes, an analyst at FBR Capital Markets Corp., said in an interview after earnings were announced.

Revpar climbed 5.9 percent in the fourth quarter for hotels open at least a year, below Starwood’s projection of 6 percent to 8 percent. It rose 7.7 percent in North America and 0.2 percent in Europe.

“Revpar was flat in Europe and no surprise,” Chief Executive Officer Frits van Paasschen said during the earnings conference call. “The softness is likely to continue.” Europe accounts for 12 percent of the company’s room count, he said.

Last year was the first since 2008 that the U.S. hotel industry reported occupancy of more than 60 percent and an average daily room rate higher than $100, Smith Travel Research Inc. of Hendersonville, Tennessee reported on Jan. 23.

Occupancy rates at U.S. hotels run by Starwood are back to their level from before the national recession began, President Matthew Avril said in an interview at the World Economic Forum in Davos, Switzerland, on Jan. 25.

Starwood opened 27 hotels in North America in 2011 and plans 20 more this year. The company expects to repeat this year’s addition of a record number of rooms globally in 2012, Van Paasschen said during the call.

--Editors: Christine Maurus, Daniel Taub

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

To contact the editor responsible for this story: Daniel Taub at dtaub@bloomberg.net


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