Starwood Corporate Rates Rise, Although Below Expectations - Business Travel News

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Starwood Corporate Rates Rise, Although Below Expectations

February 07, 2013 - 01:05 PM ET

By Michael B. Baker

Corporate rates at Starwood Hotels & Resorts Worldwide are up by mid-single-digit percentages compared with last year as the company finalizes negotiations for 2013 hotel programs, said CEO Frits van Paasschen. The increase is below the high-single-digit levels Starwood targeted in the fall, which executives attributed to "certain anxiety" about the economic outlook during negotiations.

However, Starwood is upbeat. "A mid-single-digits increase in rates plus growing transient volume and occupancy is a pretty good story, when supply is set to grow less than 1 percent," van Paasschen said Thursday during the company's fourth-quarter earnings conference call. "With tight supply additions based on construction volumes for the next three years, we still have a good run of room rate increases."

Van Paasschen added that his conversations with executives from tech services companies, consultancies and law firms suggested a positive demand trend in those industries.

"They're all telling us that yet again in 2013, they're likely to travel more than last year, and business books are full to the point of forcing them to do that," he said. He noted that the same is not necessarily true for the financial services industry.

Meanwhile, Starwood CFO Vasant Prabhu said hotels might bring in higher rates on high-occupancy days. "On days mid-week, when we are close to a sellout, there is flexibility on these rates that you can realize," he said.

Group demand is on a "slow and steady" rise, Prabhu added, as U.S. corporations remain wary about adding costs related to meetings and events. As a silver lining, he said this caution indicates that recovery would be sustainable in the long run.

During the fourth quarter of 2012 and based on U.S. dollars, Starwood's average daily global rate increased by 1.6 percent year over year and occupancy increased by 1.3 percentage points to 66.6 percent.

ADR increased by 3.3 percent in North America and decreased by 0.4 percent outside of North America. Globally, rates were up across most Starwood brands with the exception of St. Regis and the Luxury Collection, which was nearly flat. ADR was up across all brands within North America, mostly noticeably for Aloft (5.5 percent) and Sheraton (4.3 percent).

Starwood's net income for the quarter was $142 million, down from $167 million in the fourth quarter of 2011.

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