UPDATE 2-Starwood posts profit, but outlook still murky

* Q3 adj EPS 14 cents; Street view 10 cents

* Q3 revenue down 20 pct

* Shares slightly lower in premarket trade (Recasts, adds details, outlook, analyst comment, CEO comment, byline; previous ATLANTA)

By Kyle Peterson

CHICAGO, Oct 22 (Reuters) - Starwood Hotels & Resorts (HOT.N) reported better-than-expected third-quarter profit on Thursday, but its shares were lower as it said the pace of 2010 bookings so far was lagging behind 2009.

Nevertheless, Starwood joined Host Hotels & Resorts (HST.N) and Marriott International (MAR.N) in saying the hotel industry has overcome the worst of its troubles and was commencing a slow climb to recovery.

Starwood, which operates mostly luxury and other top-tier properties, has been particularly sensitive to the decline in business travel and corporate cost-cutting. It has cut average daily rates dramatically to appease vacationers.

"Our increasingly fee-based, capital-efficient business model will grow as (revenue per available room) recovers and as our pipeline translates into unit additions," Chief Executive Frits van Paasschen said in a statement.

"I can't think of a better time to aggressively relaunch the brand than into the early stages of an up cycle," he said.

The hotel industry is suffering through the toughest economic environment since the Great Depression. Starwood cut its selling, general and administrative costs about 30 percent in the second quarter to offset falling revenue.

Shares of hotel companies have surged since their March lows. Starwood's stock has nearly quadrupled since then, but it was lower in premarket dealings Thursday, trading at $34.10, down from a Wednesday close of $34.20 on the New York Stock Exchange.

"Obviously, the stocks have moved up. There's been recovery priced into these stocks, and people are just sort of reading the tea leaves from each of the companies about how and when that's going to happen," said Robert LaFleur, industry analyst at Susquehanna.

"Certainly, there's no indication in Starwood's forward guidance that it's coming any time soon," LaFleur said.

THE NUMBERS

Starwood's net income fell to $40 million, or 22 cents a share, from $113 million, or 62 cents a share, a year earlier.

Excluding one-time items, profit was 14 cents a share. On that basis, analysts on average had expected 10 cents, according to Thomson Reuters I/B/E/S.

Special items included an impairment charged of $27 million and a $44 million tax benefit related to hotel charges.

Revenue fell 20 percent to $1.22 billion.

Revenue per available room, an industry metric of fiscal health, fell 20.3 percent in the third quarter.

The company said it expected per-share profit of 17 cents to 21 cents before items for the fourth quarter, and 67 cents to 71 cents for the full year.

Analysts currently expect profit of 21 cents a share for the fourth quarter and 67 cents for the full year.

For the fourth quarter, Starwood said it expects adjusted earnings to be $190 million to $200 million. Income from continuing operations, before one-time items, is expected to be $32 million to $39 million, reflecting an effective tax rate of about 30 percent.

Starwood ended the third quarter with total debt of $3.362 billion and cash and cash equivalents of $155 million. (Reporting by Kyle Peterson and Karen Jacobs; Editing by Lisa Von Ahn and John Wallace)