Starwood Hotels raises profit outlook; sees stable Europe

(Reuters) - Starwood Hotels & Resorts Worldwide Inc (HOT.N) raised its full-year earnings forecast after strong growth in the Americas and Asia helped it to post a robust second quarter.

Starwood, which franchises hotels under brands such as W, Sheraton and Westin, also said it is on track to achieve its target of a 6 to 8 percent growth in revenue per room for the year.

In contrast to rival Marriott International (MAR.N), which cut its 2012 fee revenue forecast due to international weakness, Starwood said it is benefiting from tight supply in the high-end category in North America, Japan and Europe.

"We do compare our results to Marriott's ... and Sheraton comfortably outperformed ... Sheraton is clearly driving our growth in the US," Chief Executive Frits van Paasschen said on a conference call with analysts.

Apart from Sheraton, Starwood's brands such as W, Westin, St. Regis and Le Méridien are also targeted at high-end customers.

"Starwood is positioned at the highest end, mainly in upper lifestyle and luxury properties, and those are doing better," Susquehanna Financial Group analyst Rachael Rothman said.

As Starwood's strong results douse the concerns raised by Marriott, the focus now shifts to Hyatt Hotels Corp (H.N), which will report results next week.

Going by the Starwood example, Hyatt is also expected to do well as they are well-positioned at the higher-end, Rothman said.

For the second quarter, Starwood's revenue per available room, or revPAR, a key revenue measure, rose 6.9 percent.

By region, revPAR rose 7.3 percent in North America, 6.1 percent in Latin America, 11.2 percent in Africa and the Middle East and 9.3 percent in Asia-Pacific. Europe revPAR grew 2.3 percent.

EUROPE STABLE, PROMISING CHINA

Starwood said it expects Europe to do well in the third quarter, helped by the Olympics, good backlog in cities like Rome, and on strong dollar earnings powered by U.S. leisure customers.

The company said it expects average revenue per room in Europe to remain stable or even improve in the fourth quarter.

Irrespective of a slowdown in China, Starwood said it saw opportunities for high-end hotels due to a supply crunch.

"So unless you think China will stall permanently, it appears that there is 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," a company executive said on the call.

For the full year, Starwood expects earnings of $2.49 to $2.56 per share, excluding items, up from its prior forecast of $2.35 to $2.46 per share.

Starwood said net income for the second quarter fell to $122 million, or 62 cents per share, from $131 million, or 68 cents per share, a year earlier.

Excluding one-time items, it earned 70 cents per share from continuing operations.

Starwood Hotels' shares, which have shed 13 percent of their value in the last three months, rose as much as 6 percent on Thursday. The results also drove the broader Dow Jones U.S. Hotels Index .DJUSLG up 2 percent.

Shares of rival Host Hotels & Resorts (HST.N) rose 2 percent, while those of Marriott rose 1 percent. Hyatt shares were flat.

(Reporting by Bijoy Koyitty in Bangalore; Editing by Sreejiraj Eluvangal)