Starwood Hotels 2Q net income falls, revenue up
NEW YORK (AP) — Starwood Hotels & Resorts Worldwide Inc. said Thursday that its second-quarter net income slipped 7 percent as charges including those to pay off debt early offset the impact of higher revenue.
Contrary some of its rivals, Starwood said its seeing strength overseas. It's confident in its planned China expansion and said it's filling rooms at a rapid clip that will allow for further increases in rates. Shares rose almost 4 percent in midday trading.
The company, which runs the Sheraton, Westin and other brands, reported net income of $122 million, or 62 cents per share, for the period ended June 30. That's down from $131 million, or 68 cents per share, a year ago.
Removing early debt extinguishment costs, earnings from continuing operations amounted to 70 cents per share. Analysts surveyed by FactSet expected 61 cents per share.
Revenue rose 13 percent to $1.62 billion from $1.43 billion a year ago, topping Wall Street's estimate of $1.57 billion.
Revenue per available room — a key measure of rates — climbed 6.9 percent in the quarter, while the occupancy rate topped 71 percent.
"We kept up our momentum in the second quarter, despite a choppy global economy," CEO Frits van Paasschen said in a statement.
Its shares rose $1.78, or 3.6 percent, to $51.33 in midday trading. Its shares have fallen almost 16 percent from their 52-week high of $60.81 in early May.
Starwood, which is based in Stamford, Conn., saw particular strength in the Asia Pacific region, Africa and the Middle East. That's an especially good sign because other companies have started to see a slowdown overseas. Also, Starwood has been expanding rapidly in China, which said last week that its economic growth fell to a three-year low. Starwood has more than 100 hotels there, along with another 100 signed deals for future hotels.
CEO Paasschen said in a conference call that expansion plan is still on target.
"Some would argue that makes us vulnerable to a downturn in China. That might be true but this is the more important point: China has a long way to grow," he said. "Look at it this way: China's economy is over one-third the size of the U.S. but there are less than one-quarter the high-end hotels to serve that market. So unless you think China will stall permanently, it appears that there's much more risk in missing out on the growth than living through the fits and starts inevitable in an economy this large and growing this fast."
Earlier this month, Marriott International Inc. raised its profit expectation for the full year but said demand growth is slowing in the Middle East and in Asia, where economic growth is weakening. It's particularly concerned about demand for higher-end hotels.
By brand, Starwood said its top performers were Aloft and W Hotels.
Starwood has about 1,100 properties in almost 100 countries.
AP Business Writer Michelle Chapman contributed to this report.