Starwood Hotels & Resorts Worldwide Inc. (HOT) has reported its first quarter earnings from continuing operations of 13 cents per share, well ahead of the Zacks Consensus Estimate of 1 cent. Including a benefit of $6 million from asset sales, the earnings came in at 16 cents.

The beat was driven by strong demand for hotels. Revenues were better than expected, with the revenue per available room (RevPAR) reporting considerable increases in the quarter. The company experienced occupancy gains that were primarily driven by the luxury segment. The company’s guidance for the second quarter and full year 2010 are also ahead of the Zacks Consensus Estimate.

GAAP net income was $30 million or 16 cents per share, compared with a net income of $6 million or 3 cents in the year-ago quarter. Total revenue was up 5.3% year over year to $1.19 billion. Management and franchise revenues increased 5.6% from the prior-year period.

Worldwide system-wide RevPAR for same-store hotels increased 6.3% (3.0% in constant dollars) year over year. System-wide RevPAR for same-store hotels in North America increased 2.8% (1.2% in constant dollars). There was strong growth in RevPAR in Asia-Pacific and Europe, which were up 20.9% (12.8% in constant dollars) and 10.8% (3.7% in constant dollars), respectively.

Worldwide RevPAR for Starwood branded Same-Store Owned Hotels increased 6.6% (2.1% in constant dollars) from the prior-year period. RevPAR for Starwood branded same-store owned hotels in North America increased 5.8% (2.8% in constant dollars). Internationally, Starwood branded same-store owned hotel RevPAR increased 7.9% (0.8% in constant dollars).

However, vacation ownership revenues decreased 2.2% year over year with a 4.9% drop in originated contract sales of vacation ownership intervals, driven by the closure of fractional sales centers in 2009.

The increase in RevPAR has also resulted in improved margins. Worldwide same-store company-operated gross operating profit margins were up about 10 basis points (bps), primarily reflecting a 150 bps improvement in International and a 180 bps drop in the North American division.

Outlook

Starwood expects its second quarter earnings per share before special items between 21 to 25 cents, with a RevPAR increase of 9% to 11% in constant dollars at same-store company operated hotels worldwide. Before the company’s earnings release, the Zacks Consensus Estimate was 17 cents per share for the second quarter.

For full-year 2010, the company expects earnings of 88 cents with an increase in RevPAR between 5% and 8% in constant dollars at same-store company operated hotels worldwide. Prior to the earnings announcement, the Zacks Consensus Estimate was 72 cents per share for full-year 2010.

With the recovery of the global economy, the lodging industry is experiencing favorable trends. Yesterday, Wyndham Worldwide Corporation (WYN) reported first quarter adjusted earnings of 34 cents, ahead of the Zacks Consensus Estimate of 30 cents and the company’s previous guidance of 27 cents to 37 cents. The beat was driven by better-than-expected revenues.

Last week, Marriott International (MAR) reported first quarter earnings of 22 cents per share, 2 cents ahead of the Zacks Consensus Estimate of 20 cents. Results were also above the company’s guidance of 15 cents to 21 cents issued at the time of the fourth quarter earnings release back on February 11, 2010.
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