UPDATE 3-Starwood Hotels profit drops 28 pct, shares fall
(Adds background, details on outlook, analyst comment)
NEW YORK, July 24 (Reuters) - Starwood Hotels & Resorts Worldwide Inc (HOT.N), operator of the W, Sheraton and St. Regis brands, posted a 28 percent drop in quarterly profit on Thursday as the U.S. economy slowed and demand for lodging weakened.
Shares of Starwood, whose full-year earnings outlook was below Wall Street expectations, fell 10 percent to $35.84.
Net income in the second quarter declined to $105 million, or 56 cents per share, from $145 million, or 67 cents per share, a year earlier.
Analysts on average expected quarterly earnings of 52 cents per share, according to Reuters Estimates.
"While international lodging demand remains solid, the economic picture in the U.S. has continued to deteriorate, with lodging demand dropping significantly in May," Chief Executive Frits van Paasschen said in a statement.
Starwood said revenue per available room, a key industry measure known as revpar, increased 9.6 percent at comparable hotels worldwide, but only 3 percent in North America.
Starwood said the uncertainty surrounding the U.S. economy made it difficult to predict future results, but it expects full-year earnings per share of $2.17 to $2.32 before special items. Analysts on average were expecting $2.45.
U.S. hotel executives have said they expect high oil prices, a broad economic slowdown and a crisis in the U.S. airline industry to hurt the travel sector. Airlines are slashing routes and jobs to survive amid sky-high fuel prices.
On July 10, Marriott International Inc (MAR.N) reported lower quarterly profit and said it expects weak economic growth and soft U.S. lodging demand to persist into next year.
WAKE UP
On Thursday, Starwood said it expects business conditions to remain challenging for the next few quarters.
But Starwood's chief executive told investors in a conference call that the company's diversified portfolio around the world would position it better than competitors.
About 55 percent of Starwood's management and franchise fees are generated outside the United States.
"We have some concerns about the weakening of the entire North American travel market, even further than we are seeing now," said Jeremy Glaser, hotels analyst at Morningstar.
"I think slowly the industry is starting to wake up to the fact that travel is slowing down and they are not immune to economic conditions -- the question now is just how deep and how long does the slowdown go?" added Glaser. (Reporting by Mark McSherry; Editing by Lisa Von Ahn, Maureen Bavdek, Dave Zimmerman)
