Starwood Profit Plummets Amid Rate, Occupancy Decline

Starwood Hotels and Resorts is bracing for double-digit percentage drops in revenue per available room this year following an almost 46 percent drop in net income for the fourth quarter compared with the same period in 2007, the company this week said in its fourth quarter 2008 earnings report.

Worldwide RevPAR dropped by 12.1 percent for Starwood in the quarter, and North America RevPAR was down by 13.2 percent, according to the company, the first major multibrand hotel to report earnings for the quarter. Average daily rate was down by 6 percent in North America and by 5.4 percent worldwide, and occupancy was down by 5.1 percent in North America and by 4.8 percent worldwide.

Starwood's upscale and luxury brands, which CEO Frits van Paasschen said are considered the company's strengths, took the hardest hit. The St. Regis/Luxury Collection and W brands both saw occupancy slip by more than 8 percent worldwide, and worldwide RevPAR for both was down by more than 20 percent. "At the moment, these strengths have turned against us," van Paasschen said Thursday in a call to investors.

For 2009, Starwood is forecasting a 35 percent decline in same-store branded hotel earnings and a 10 percent drop in management and franchise revenue. For the first quarter of 2009, Starwood expects RevPAR to drop between 17 percent and 19 percent worldwide and between 27 percent and 30 percent in North America.

Corporate negotiated rates for 2009 are largely in place and generally remained flat in comparison with 2008 rates, executives said in the earnings call.

Van Paasschen said scaled back capital spending in 2009 as well as continued cost-cutting efforts, which so far have yielded $100 million in savings, would help mitigate the effects of the economy throughout the year. "It has deteriorated further, with businesses cutting back on travel and skittish consumers putting travel on hold," he said.

Other multibrand hotel companies, including Marriott International, Wyndham Worldwide and Choice Hotels International, will report fourth quarter results in the second week of February.