Starwood Hotels 2Q Profit Rises 28% On Tax Gain; View Cut

   DOW JONES NEWSWIRES 
 

Starwood Hotels & Resorts Worldwide Inc.'s (HOT) second-quarter earnings rose 28% on a tax benefit while profit excluding that topped its downbeat forecast despite a 28% slump in revenue per available room.

The hotelier also cut its 2009 earnings estimate again, this time to 65 cents a share from its prior view of $1.10. Analysts' surveyed by Thomson Reuters recently anticipated a smaller cut to 76 cents.

For the third quarter, Starwood projected earnings of 6 cents to 10 cents per share, far below analysts' estimate of 21 cents.

The weak economy has squeezed the hotel industry for some time, with timeshare businesses also under pressure. The outlook for 2009 is grim, despite efforts by hoteliers to cut costs. Hoteliers and cruise lines have offered discounts and promotions in an effort to boost slumping sales, with Starwood earlier this month offering one of the bigger ones, featuring rate cuts of up to half at nearly 600 of its global locations.

The operator of the W Hotels, Westin, St. Regis and Sheraton hotel brands reported a profit of $134 million, or 74 cents a share, up from $105 million, or 56 cents a share, a year earlier. Excluding items such as the 50-cent tax benefit, earnings slid to 22 cents from 56 cents. Starwood in April projected 14 cents to 20 cents, below analysts' views at the time.

Revenue decreased 23% to $1.21 billion. Analysts polled by Thomson Reuters most recently were looking for $1.19 billion.

Revpar fell 25% in North America and 30% internationally.

President and Chief Executive Frits van Paasschen said the company's focus on cost cutting and long-term growth strategy boosted results, despite an estimated $10 million impact from the swine flu. He noted Starwood raised nearly $1 billion to help reduce its debt in the period.

At its timeshare business, revenue from vacation ownership fell 35% and residential sales dropped 47% amid average prices that fell 24% and weak demand.

Shares closed at $21.28 on Wednesday and didn't trade premarket. The stock is up 19% this year.

-By Tess Stynes, Dow Jones Newswires; 212-416-2481; [e-mail]