UPDATE 4-Starwood boosts 2010 outlook, shares jump

Thu Feb 4, 2010 11:38am EST

* EPS ex-items 51 cents; Street view 22 cents

* Says outlook for 2010 remains clouded

* Shares up 5 percent on NYSE (Recasts; adds comment from conference call, details on vacation ownership segment, background on hotel industry, updates share price)

By Deepa Seetharaman

NEW YORK, Feb 4 (Reuters) - Starwood Hotels & Resorts (HOT.N), operator of the W and Sheraton hotels, boosted its 2010 outlook on Thursday and expressed cautious optimism for the coming year, sending shares as much as 8.6 percent higher.

The No. 8 hotel operator projected revenue per available room (revPAR) would be flat to up 5 percent this year. It previously projected revPAR, a measure of fiscal health among hotels, would be flat to down 5 percent.

"Last year at this time, our group business was heading downhill fast," said Chief Financial Officer Vasant Prabhu during a conference call with analysts. "Now we have seen a few positive trends."

Shares jumped 5 percent to $37.21 in late morning trade on the New York Stock Exchange, while the broader S&P 500 .SPX index slumped. It was among the biggest percentage gainers on the index.

Starwood is the first U.S. hotel company to report this quarterly earnings season. Hotels have been hammered in the past year by fewer bookings, forcing them to cut room rates.

Starwood said it is likely to be reliant on "late-breaking" corporate business travel this year, which will affect its ability to forecast performance. Group business has picked up with lead volume up 15 percent, but still lags 2009 levels.

RevPAR growth in 2010 will be driven by emerging markets, Prabhu said. RevPAR in North America is expected to be flat to down 3 percent.

"Starwood is definitely benefiting from its 40 percent international exposure because we know the Asian markets and European markets have been recovering faster than the U.S.," Collins Stewart analyst Bryan Maher said.

"One of the most important takeaways from this release is a flat to up revPAR outlook," he added.

Next week, Marriott International MAR.N and Wyndham Worldwide (WYN.N) post earnings. The Dow Jones U.S. Hotels index .DJUSLG rose 1.7 percent. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a graph on U.S. hotel sector stock performance, click here: link.reuters.com/fes67h ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

REVPAR BOOSTS Q4 RESULTS

For 2010, Starwood forecast a profit of 63 cents a share, topping the average analyst estimate of 56 cents, according to Thomson Reuters I/B/E/S.

Starwood forecast the first quarter would break even or see a loss of 4 cents per share. Analysts expect the company to break even.

RevPAR in the fourth quarter was stronger than Starwood had projected. RevPAR for hotels the company operates worldwide fell 6.8 percent, compared with Starwood's projection for a slump of 9 percent to 11 percent.

Starwood has seen its corporate rate negotiations fare better than expected. Prabhu told analysts that companies have said their cuts in travel spending are behind them.

Starwood posted a fourth-quarter loss from continuing operations of $186 million, or $1.03 per share, compared with a loss of $45 million, or 25 cents per share, a year earlier.

Excluding timeshare-related and other charges, it posted a profit of 51 cents per share, far above analysts' average estimate of 22 cents, according to Thomson Reuters I/B/E/S.

Revenue fell 1.2 percent to $1.28 billion, topping analysts' average estimates of $1.17 billion.

Starwood was hit by a $362 million impairment charge after it halted development of certain vacation ownership projects. It was hurt by other charges related to severance and costs linked to five owned hotels.

Revenues in this segment were flat compared with 2008 at $134 million. The average price per vacation ownership unit sold fell 7.1 percent.

(Reporting by Deepa Seetharaman; Editing by Maureen Bavdek, John Wallace and Gunna Dickson)

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