UPDATE 1-RESEARCH ALERT-Baird cuts Starwood to underperform

July 8 (Reuters) - Robert W. Baird downgraded Starwood Hotels & Resorts Worldwide Inc (HOT.N) to "underperform" from "neutral," citing the hotel chain operator's exposure to the weakest customer segments and a delayed recovery in the sector.

The brokerage said Starwood's former strengths -- including real estate holdings and higher-end brands -- had become weaknesses and exposed the company to higher-than-average risks.

The company caters to high-end corporate and group travelers, the two weakest segments in the industry, Baird analysts wrote in a note to clients.

"We believe the recovery in these segments will also lag, as corporate restrictions won't ease until after positive signs have emerged," the analysts said.

Baird cut its price target by a $1 to $16 on shares of Starwood, which operates the W, Sheraton and St. Regis chains.

Baird now expects the hotel industry to recover in the second half of 2010. It earlier expected a recovery in late 2009.

Starwood's high-end real-estate portfolio, which has high operating leverage, has potential for significant margin degradation well into 2010, the analysts said.

Shares of the company were down 2 percent at $19.55 in trading before the bell. They closed at $19.96 Tuesday on the New York Stock Exchange. (Reporting by Viraj Nair; Editing by Anne Pallivathuckal)