Starwood Hotels & Resorts 1st-quarter profit rises as hotel demand increases

Starwood 1Q profit rises on better hotel demand

NEW YORK — An increase in hotel demand, particularly at its luxury brands, propelled Starwood Hotels & Resorts Worldwide Inc. to a sharply higher first-quarter profit on Thursday.

The results handily beat Wall Street’s expectations.

The owner of the Sheraton, W, Westin and other hotel brands also raised its full-year earnings forecast and gave a second-quarter profit guidance. Both are expected to top analysts’ estimates.

“The lodging recovery seems to be in full force both internationally and in the U.S.,” Steven Kent of Goldman Sachs wrote in a note to clients.

Starwood’s stock soared $1.97, or 3.7 percent, to $55.24 in midday trading after reaching a new 52-week high of $55.64 earlier.

Many companies have started to see demand increase of late as the economy improves. For the hotel industry, both leisure and business travelers are starting to return, which is filling more rooms.

“Lodging demand for our nine global brands accelerated as we moved through the first quarter, allowing us to beat expectations on robust top-line growth,” CEO Frits van Paasschen said in a statement. “Most encouraging for us was that occupancy gains were led by the luxury market.”

Starwood, based in White Plains, N.Y., posted a profit of $30 million, or 16 cents per share, for the three months ended March 31. That compares with earnings of $6 million, or 3 cents per share, a year ago.

Excluding a $6 million benefit related to two asset sales, earnings were 13 cents per share.

Last year’s quarter included an $18 million charge related to restructuring, good will impairment and other items.

Revenue climbed 5 percent to $1.19 billion from $1.13 billion.

The performance bested the estimates of analysts surveyed by Thomson Reuters, who forecast a profit of 2 cents per share on revenue of $1.08 billion.

Starwood also reported an increase in a key revenue figure. At North American hotels open at least a year, systemwide revenue per available room climbed 2.8 percent. That figure increased 6.3 percent worldwide.

Revenue per available room, also known as revpar, is a key gauge of a hotel operator’s performance.

Starwood now predicts a 2010 adjusted profit of about 88 cents per share, up from a prior forecast for earnings of about 63 cents per share. The new outlook would surpass the 74 cents per share that analysts expect.

The lodging company anticipates revpar for worldwide company-run hotels to rise 5 percent to 8 percent for the year.

For the second quarter, Starwood forecasts adjusted earnings in a range of approximately 21 cents to 25 cents per share. Wall Street predicts 19 cents per share.