UPDATE 4-Starwood profit beats Street; RevPAR slides

RevPAR was "significantly below expectations," Barclays Capital analyst Felicia Hendrix said in a research note, hurt by a stronger dollar and its luxury segment. Starwood has six luxury brands and more than half its rooms are abroad.

"If you exclude luxury properties, North American company-operated RevPAR would have been better by 200 basis points," van Paasschen said. The stronger dollar lopped off 7 percentage points from international results.

Still the earnings beat boosted investors' confidence in the hotel sector, said Patrick Scholes, an analyst for FBR Capital Markets.

"Positive investor sentiment is trumping fundamentals right now," he said.

Starwood's net debt for the first quarter was $3.8 billion, up from $3.5 billion in the previous quarter.

OUTLOOK

Starwood said it expects second-quarter earnings per share of 14 cents to 20 cents excluding special items.

Citing "significant uncertainty" in the global economy, it said it would be difficult to provide any definitive outlook for the second half of the year.

The company said full-year RevPAR was tracking 6 percentage points below the baseline scenario the company discussed in its January earnings conference call.

During the call, Starwood said if the impact of swine flu in Mexico is similar to SARS' effect earlier this decade, the company could lose between $4 million and $5 million EBITDA.

But Starwood added the affect is unlikely to be long-term. (Reporting by Deepa Seetharaman; Editing by John Wallace, Maureen Bavdek, Leslie Gevirtz)