Occupancy at Starwood Hotels & Resorts Worldwide's North
American properties during the second quarter topped 76 percent, setting a
record for the company and signaling a position of strength in the upcoming
request-for-proposals season.
Globally, the company's average daily rate during the
quarter increased 2.4 percent year over year to $174.43. ADR in North America
increased 4 percent to $168.83 and remained nearly flat at $182.54 in the rest
of the world. While group demand has remained weak, "transient demand,
especially corporate travel, has been robust," Starwood CFO Vasant Prabhu
said in a Thursday conference call.
The Asia/Pacific region was the only one where Starwood's
ADR dropped during the quarter, down 1.5 percent in greater China and by 1.8
percent in the rest of Asia. ADR was flat in Europe, up 4.5 percent in the
Middle East and Africa and up 4.1 percent in South America.
Government austerity has continued to affect hotel demand in
China, said Starwood CEO Frits van Paasschen, but he noted that the overall "global
recovery is continuing on a slow, but not steady, pace." Besides the record
level in North America—where occupancy at Starwood's Le Meridien and W brands
is higher than 80 percent—Starwood's occupancy in recession-plagued Europe
increased by 1.7 percentage points to 71.9 percent during the quarter.
Prabhu attributed the results to "an extraordinary and
unprecedented" lack of supply growth in upper-tier properties in North
America and Europe, with little on the horizon in coming years.
Sluggish group demand has stifled rate growth, van Paasschen
said. Corporations remain reluctant to book big events, and most meetings still
are smaller, need less food and beverage service and have shorter lead times
compared with pre-recession trends, he said. Additionally, U.S. government
travel cutbacks have diminished attendance at large association events, Prabhu
said.
While Starwood has responded by more aggressively courting
small meetings and investing in sales automation technology, overall demand
also is strong enough to continue to drive up rates, van Paasschen said.
"While group business is important, the fact that we're
at record occupancies today and that hotels in key markets at peak periods are
full is the best way to ensure that rates will continue to go up," he
said. "Our sales teams are confident that rates will reflect the simple
reality that many hotels are full."
Starwood's net income for the quarter was $137 million, up
from $122 million in the second quarter of 2012.