Starwood Hotels & Resorts 4Q profit declines

WHITE PLAINS, New York - Hotel and leisure company Starwood Hotels & Resorts Worldwide Inc. said Thursday that its fourth-quarter profit fell 46 percent, hurt by severance costs and a writedown for two vacation ownership projects.

The company also said its first-quarter and full year results will be squeezed by a significant drop in worldwide revenue per available room and ongoing struggles at its timeshare business.

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

The hotel sector has been pressured as the financial crisis has prompted consumers and businesses to pull back sharply on travel spending, leading to a sharp decline in room demand. Luxury and upscale properties have been particularly hard hit as travelers cut costs by trading down to less expensive places to stay.

Starwood's properties — which are concentrated in the luxury and upscale segments — include the W, Westin and Sheraton brands.

Net income slipped to $79 million, or 43 cents per share, from $146 million, or 74 cents per share, a year earlier.

The White Plains, New York-based company had a loss from continuing operations of $45 million, or 25 cents per share.

Excluding charges of 74 cents per share related to severance costs and the writedown, earnings from continuing operations were 49 cents per share.

Revenue dropped 17 percent to $1.33 billion from $1.61 billion.

Analysts polled by Thomson Reuters forecast profit of 36 cents per share on revenue of $1.39 billion.

Revenue from vacation ownership and residential sales tumbled 49 percent from the prior year.

Starwood's timeshare business is vulnerable to weakening spending, declining real estate values and the tight credit markets.

Starwood said current economic conditions led to an assessment of its timeshare business, which resulted in the closure of five sales center and the elimination of 500 jobs during the quarter.

The company also decided to stop development on vacation ownership projects in their initial stages and will not begin any new projects.

Worldwide systemwide revenue per available room for same-store hotels, also known as revpar, slipped 12.1 percent in the quarter. International systemwide revpar for same-store hotels fell 10.8 percent.

Starwood said it expects a significant decline in worldwide revpar for the hotel business in 2009.

Revpar is a key gauge of a hotel operator's performance.

Chief Executive Frits van Paasschen said the company's quarterly performance was helped by cost cuts that should lower selling, general and administrative costs by $100 million.

For the full year, profit declined 39 percent to $329 million, or $1.77 per share, compared with $542 million, or $2.57 per share, in the previous year.

Earnings from continuing operations dropped to $254 million, or $1.37 per share, from $543 million, or $2.57 per share.

Annual revenue fell 4 percent to $5.91 billion from $6.15 billion.

Starwood said it reached a settlement with the IRS this month related to the tax treatment of its 1998 sale of World Directories Inc. The company anticipates a more than $200 million refund during the summer.

Starwood had total debt of $4.01 billion and net debt of $3.52 billion as of Dec. 31. The company's 2007 net debt was $3.24 billion.

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