Starwood Hotels & Resorts Moves To 4Q Profit

NEW YORK (AP) - Starwood Hotels & Resorts Worldwide Inc. made money in its fourth quarter, thanks in part to IRS and lawsuit settlements.

The results reversed a loss a year earlier, but the comparison was helped by hefty charges in the earlier period.

The company, which operates Sheraton, Westin and other lodging chains, remains cautiously confident about its industry's ongoing recovery and predicts raising rates will be critical to 2011's success. In 2010, it said, its concentration was on increasing occupancy.

Shares of the White Plains, N.Y., company fell 95 cents, or 1.6 percent, to $59.86 in mid-afternoon trading Thursday.

Starwood reported fourth-quarter net income of $339 million, or $1.78 per share, for the period ended Dec. 31. It lost $107 million, or 59 cents per share, a year earlier.

Its revenue was $1.34 billion, up from $1.25 billion in 2009's fourth quarter.

Excluding one-time items, Starwood said it earned 52 cents per share. Analysts by FactSet forecast adjusted earnings of 39 cents per share and revenue of $1.34 billion.

A one-time benefit in the most recent quarter of 56 cents per share included an IRS settlement related to selling World Directories Inc. in 1998 and a favorable lawsuit settlement. The year-ago period included a charge of $1.54 per share primarily to reflect the declining value of Starwood's vacation ownership projects, its goodwill and hotels that it owns.

Steven Kent of Goldman Sachs called it a strong quarter and said cost cuts made during the economic downturn are giving Starwood more room to increase its profit.

Worldwide, revenue per available room for the company's hotels open at least a year climbed 10.1 percent. The figure rose 10.2 percent for North America. It is a key gauge of a hotel operator's health, and CEO Frits van Paasschen expects it to grow 7 percent to 9 percent in local currencies around the world if current trends continue.

Van Paasschen said during a conference call that North America and Europe may both be on the verge of a multiyear surge in rates due to strong demand and tight supply.

Chief Financial Officer Vasant Prabhu said North America's rates have started to pick up partly because of strong sales to groups.

Corporate rates are on track to increase by a percentage in the high single digits in 2011, according to van Paasschen. This is important because business travelers produce 75 percent of Starwood's revenue.

The company hopes to grow in emerging markets, where Van Paasschen said wealth creation is fueling demand for luxury. He estimates 70 percent of Starwood's planned St. Regis and Luxury Collection hotels are in Asia, Latin America and the Middle East.

For 2010, Starwood reported net income of $477 million, or $2.51 per share, compared with $73 million, or 41 cents per share, in 2009. Excluding one-time items, it said it earned $1.25 per share.

Annual revenue improved to $5.07 billion from $4.7 billion.

Analysts were expecting adjusted earnings of $1.13 on revenue of $5.06 billion, according to FactSet.

Starwood anticipates earning about $1.55 to $1.65 per share for 2011 and 22 cents to 26 cents per share for the first quarter.

Wall Street predicts full-year earnings of $1.58 per share and first-quarter earnings of 24 cents per share.

Starwood expects to open 70 to 80 hotels in 2011, more than half outside the U.S., Prabhu said. The company operates 1,041 hotels in nearly 100 countries.