Starwood Profit Surges on Luxury Demand, Accounting Change26 Apr 2007 • by Natalie Aster
Starwood Hotels & Resorts Worldwide Inc., which ousted Chief Executive Officer Steven Heyer earlier this month, said first-quarter profit rose on demand for luxury rooms and a year-earlier accounting change, reported the Bloomberg.
Net income climbed 24-fold to $122 million, or 56 cents a share, from $5 million, or 2 cents, a year earlier, White Plains, New York-based Starwood said today in a statement sent by Business Wire. Excluding some expenses, profit exceeded analysts' estimates by 10 cents.
Room rates at Starwood, the third-largest U.S. hotel company, climbed as travelers paid more at higher-end chains such as W Hotels and Le Meridien. Demand also rose overseas, where more than 40 percent of its rooms are located.
``Their exposure is highest in the upscale luxury segment,'' said Amit Kapoor, an analyst at White Plains, New York-based Gabelli & Co., which owns shares of Starwood. ``If there's an economic pullback, they will be shielded.''
Revenue fell 0.7 percent to $1.43 billion from $1.44 billion.
First-quarter revenue per available room, a measure of rates and occupancy, increased 10.2 percent, more than the 8 to 10 percent range Starwood forecast in February.
Heyer was ousted as CEO after he clashed with the company's directors. Heyer, who took over October 2004, was criticized by board members for his management style.
Analysts including UBS Securities LLC's William Truelove said his departure makes it more likely the company would be sold to a buyout firm. Potential buyers who have been cited include Starwood Capital Group LLC, run by Starwood Hotels founder Barry Sternlicht.
Chairman Bruce Duncan is running Starwood until a permanent replacement is found.
Shares of Starwood fell 28 cents to $69.04 in New York Stock Exchange composite trading yesterday. The stock has gained 6.5 percent since March 30, the last trading session before Heyer's resignation.
Marriott International Inc. and Hilton Hotels Corp. are the two largest U.S. hotel companies.
Results a year earlier included an expense of $72 million, or 33 cents a share, related to new accounting rules for the timeshare industry.
Nineteen analysts surveyed by Bloomberg estimated earnings excluding some expenses would be 38 cents a share on average. Starwood said April 2 that first-quarter profit would be 38 cents.
Starwood owns, manages or franchises about 850 hotels under brands including St. Regis, Sheraton and Westin and is introducing other chains to compete with Marriott and Hilton.
The company sold 33 hotels last year for $3.63 billion, part of a plan to divest properties. Starwood said in February that it expects to sell 14 owned hotels and eight partnerships this year for as much as $500 million.