WHITE PLAINS, N.Y. >> Starwood Hotels & Resorts Worldwide Inc., owner of the Sheraton and Westin chains, said first-quarter profit fell 48 percent, though it sees enough of a rebound in travel that it is raising room rates and will beat analysts' estimates for 2002. Starwood Hotels profit
down 48%; sees reboundStar-Bulletin staff and wire
Starwood operates or markets about a dozen hotels in Hawaii.
At the company's 16 "boutique" W hotels, which include a Diamond Head property, revenue per room fell 18 percent, the company said. But sales at Starwood's timeshare unit were up 18 percent, helped by the opening of a new resort in Maui.
Last month, Starwood announced advance sales were so strong at Westin Kaanapali Ocean Resort Villas the company was increasing first-phase construction to 103 units from the original 43. The 14-acre complex is expected to receive its first occupants in the fall of 2003.
Net income for the world's largest hotel owner fell to $32 million, or 16 cents a share, from $62 million, or 30 cents, a year earlier, Chief Financial Officer Ronald Brown said on a conference call with analysts. Revenue fell 12 percent to $894 million.
Consumers are spending more on leisure travel, helping Starwood join rivals Marriott International Inc. and Hilton Hotels Corp. in raising earnings estimates. Corporate travel, the most profitable for hotel companies, will be the next to recover from the terrorist attacks and recession, investors said.
"We're going to see a sequential improvement in business travel and room rates," said Basu Mullick, a portfolio manager of the Neuberger Berman Partners Fund, which owned 3 million Starwood shares at the end of 2001. "Business travel is going to come back when the companies have free cash flow."
Starwood Chairman Barry Sternlicht has said the company is trying to avoid cutting hotel rates simply to fill rooms, and is instead focused on cutting costs to support earnings. With demand for its hotels improving, Starwood said today it will raise retail prices 5 percent at all its hotels as of May 1.
Starwood said it's booking more group business for the fourth quarter and at higher rates than it did in 2000. About 90 percent of Starwood's business comes from business travel and group business.
"We're booking business at a rate we haven't done in quite some time over the past 18 months," Sternlicht said on the call. "New York City seems to be selling out again."
Excluding a $23 million gain, mainly related to a foreign exchange transaction, White Plains, N.Y.-based Starwood had a profit from operations of $17 million, or 8 cents a share. On that basis the earnings beat Wall Street's expectations of 5 cents, based on a survey of analysts by Thomson Financial/ First Call.
Starwood shares closed up 35 cents to $38.55 on the New York Stock Exchange, and are up 29.2 percent this year.
The company said it expects to earn $1.38 a share in 2002 and $1.65 a share to $1.75 a share in 2003. Wall Street was expecting earnings of $1.25 in 2002 and $1.69 in 2003, according to First Call. The results are an improvement from the fourth quarter, when Starwood had a loss of $54 million, its first quarterly loss since 1998, and revenue per room fell 24 percent.
Starwood said today it's spending $300 million on new hotels and other capital expenditures this year, and may invest more if demand for lodging continues to improve.
Looking farther forward, Starwood is considering building a time-share resort on Kauai.
Company officials were meeting earlier this month with Princeville residents and Kauai County officials to discuss plans for a 370-unit property on land owned by Princeville Corp.
Though the project has been described as still in the "conceptual" stage, sources said groundbreaking is tentatively set for next spring.