Starwood Hotels & Resorts climbs 28 percent mostly on gain from Italian tax incentive program

Starwood 2Q profit rises on Italian program

WHITE PLAINS, N.Y. — Starwood Hotels & Resorts Worldwide Inc. said Thursday that its second-quarter profit rose 28 percent as the lodging chain benefited from tax incentives in Italy.

The profit, which topped analyst expectations, came even as worldwide revenue per available room — a key hotel metric commonly called revpar — slid sharply as business and leisure travel slipped in the recession.

The parent of Sheraton and W Hotels earned $134 million, or 74 cents per share, during the three months that ended June 30. That’s up from the previous year’s $105 million, or 56 cents per share.

Excluding the Italian program and other items, earnings from continuing operations were 22 cents per share.

Analysts surveyed by Thomson Reuters expected the White Plains, N.Y.-based company to post a profit of 17 cents per share. Analysts’ estimates normally exclude one-time items.

Worldwide revpar for same-store hotels slid 27.7 percent. In North America, revpar for same-store hotels slumped 25.4 percent.

The results were worse for hotels Starwood owns under its own brands, with same-store worldwide revpar down 35.5 percent and North American revpar off 34.4 percent.

Revenue dropped 23 percent to $1.21 billion from $1.57 billion, but still beat Wall Street’s forecast of $1.19 billion.

CEO Frits van Paasschen said an approximately $10 million drag from the swine flu did little to hurt its performance, as the hotel operator’s cost controls and revenue results helped it top expectations. Starwood reduced its selling, general, administrative and other expenses about 30 percent during the quarter.

Starwood anticipates third-quarter earnings of about 6 cents to 10 cents per share and full-year profit of about 65 cents per share.

Analysts predict third-quarter net income of 21 cents per share and a full-year profit of 76 cents per share.

Starwood said the Italian program effectively increased the tax basis of Italian-owned hotels in exchange for paying a small current tax, providing a $120 million benefit.

Starwood, whose other brands include Westin, St. Regis, Four Points and Aloft, runs nearly 1,000 hotels worldwide.