Starwood Hotels 3Q profit declines 64 percent

[October 22, 2009]  WHITE PLAINS, N.Y. (AP) -- The travel slump sparked by the recession shows little sign of abating, as Starwood Hotels & Resorts Worldwide Inc. said Thursday that its third-quarter profit fell 64 percent on lower room rates, especially at its high-end hotels.

The owner of Sheraton and W Hotels, like others in the sector, has been cutting costs and slashing rates to respond to the pullback in discretionary spending by travelers.

CEO Frits van Paasschen conceded that Starwood's upscale hotels have been squeezed, but he remained upbeat that business would pick up along with an anticipated economic recovery.

"Our owned hotels are skewed toward the high end and have been particularly hard-hit over the past twelve months, implying they are poised for a strong rebound as the world economy recovers," he said in statement.

Starwood earned $41 million, or 22 cents per share, for the three months ended Sept. 30. That compares with $113 million, or 62 cents per share, a year ago.

Excluding a $44 million tax benefit related to some hotel sales and other items, profit was 14 cents per share.

Revenue dropped for the fourth consecutive quarter, slipping 32 percent to $1.22 billion.

Still, the performance beat the estimates of analysts polled by Thomson Reuters, who forecast profit of 10 cents per share on revenue of $1.16 billion. Analysts' estimates generally exclude one-time items.

Revenue per available room, a key gauge of a lodging company's performance, was weak during the quarter. Starwood reported the figure for hotels open at least a year declined 20.3 percent worldwide and 21 percent outside the U.S.

The company also pulled in less money from management fees, franchise fees and other income, which dropped $37 million to $181 million.

Timeshares continued to be especially weak, with revenue off 31.7 percent to $125 million and the average price per timeshare unit down 21.9 percent to about $15,000 as lower-priced timeshares made up a bigger chunk of those sold.

The company continues to expand. Starwood added 27 new hotels and resorts during the quarter and removed 11.

Cost-cutting moves helped lower its net debt to $3.21 billion at quarter's end, down from $3.63 billion as of June 30.

For the fourth quarter, Starwood expects income from continuing operations of about $32 million to $39 million, or 17 cents to 21 cents per share. Analysts predict 21 cents per share.

[Associated Press; By MICHELLE CHAPMAN]

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