Starwood Hotels & Resorts Worldwide today reported annual average rate drops of nearly 20 percent and revenue per available room drops of nearly 30 percent for the second quarter of 2009, though cost-cutting and an Italian tax incentive still helped the company boost profits year-over-year.
Systemwide RevPAR for Starwood dropped 27.7 percent for the quarter, slighty higher than the drop Marriott reported last week
(BTNonline, July 16). International properties took the biggest hit, with international RevPAR dropping 30.6 percent compared with North America's drop of 25.4 percent.
Swine flu concerns cost the company about $10 million in revenue during the quarter, according to Starwood CEO Frits van Paasschen.
Average daily rates for the quarter dropped by 18.4 percent worldwide. Luxury brands and upper upscale brands saw the steepest drops: Le Meridien was down 22.2 percent, St. Regis and the Luxury Collection were down 24 percent and W was down 25.9 percent.
Occupancy for the quarter was down 8.1 percent worldwide. Most brands saw occupancy drops within a few percentage points of that range with the exception of W, which had an occupancy drop of only 4.4 percent.
Despite the drops, Starwood did beat analyst expectations and increased its year-over-year profits by 27.6 percent for the quarter. A $120 million benefit for a tax incentive program in Italy helped to boost those profits. The company said cost-cutting efforts have not disrupted its growth strategy.
"Economic times like these afforded us the opportunity to realign the organization around a sustainably lower cost base while continuing to invest in our brands and global growth opportunities," van Paasschen said in a statement. "We are committed to our long-term growth strategy, and by the end of 2009, 60 percent of our 1,000 hotels will have opened or been renovated during the past three years."
During the second quarter, Starwood signed 20 hotel management and franchise contracts, the equivalent of 4,300 rooms, and 17 of those will be new builds. The company opened 16 new hotels during the quarter and removed 10 properties from its portfolio.