Starwood Aims To Translate Record Occupancies Into Corporate Rate Increases - Business Travel News

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Starwood Aims To Translate Record Occupancies Into Corporate Rate Increases

October 24, 2013 - 01:30 PM ET

By Michael B. Baker

Starwood Hotels & Resorts is targeting corporate negotiated rate increases in the mid-to-high single-digit percentage range, executives said on Thursday during the company's third-quarter earnings conference call.

With negotiations now underway, Starwood executives said they planned to leverage high occupancy levels in North America—with corporate transient business growing "at a healthy clip"—and a forecast of strong corporate overall corporate profits. During the third quarter, occupancy across all Starwood brands in North America increased by 0.9 percentage points to 76 percent. Occupancy in every Starwood brand during the quarter was higher than 74 percent. It exceeded 80 percent in the W and Le Meridien brands.

"The fact that we have a couple of quarters of record occupancy means we can go into negotiations with great confidence," Starwood CEO Frits van Paasschen said. "With very little new supply looking to come on in North America, with the possible exception of New York, it's a dynamic that plays very well to the rate story."

Van Paasschen added that the company would seek ways to optimize business amid high occupancy, giving favor to higher-rated business when possible.

During the quarter, Starwood's average daily rate in North America increased by 4.1 percent to $163.92 compared with the year prior and was up across every brand, most strongly for the St. Regis/Luxury Collection (7 percent) and Le Meridien (6.1 percent).

Van Paasschen said that the 16-day U.S. federal government shutdown "should not meaningfully impact the fourth quarter" and that while government travel demand is down, it represents less than 2 percent of Starwood's North American business. Starwood CFO Vasant Prabhu noted that the company had seen "modest cancellations," particularly in Washington, D.C., and such cities as San Diego where government presence is relatively high. In many cases, he said, hotels had replaced them with other business.

Globally, Starwood's ADR increased by 2.6 percent to $172.23 during the quarter, and occupancy increased by 1.1 percentage points to 71.1 percent. ADR was up in all regions except in Asia/Pacific, where ADR declined by 0.6 percent in Greater China and by 4.9 percent in the rest of the region.

Starwood's net income for the quarter was $157 million, down from $170 million in the third quarter of 2012.

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