Starwood reports rise in Q2 profits

A sharp cut in costs has helped Starwood Hotels comfortably beat Wall Street expectations with its quarterly figures to June.

Costs and expenses for the second quarter fell by about one-fifth, driven by a 30 percent fall in general and administrative costs.

Starwood reported net income of $134 million, compared with the year-earlier $105 million. The 28 percent jump derived largely a tax incentive programme in Italy.

Excluding that gain and $26 million in other charges, Starwood earned 22 cents a share. But revenue fell 23.4 percent to $1.2 billion, slightly lower than analysts’ forecast.

revPAR also suffered, falling 34.4% in Europe, 25.4% in North America, 36.6% in Latin America and19.9% in Africa and the Middle East.

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“We continue to beat expectations on cost containment,” said Chief Executive Frits van Paasschen in a conference call with analysts.

He added that majority of the savings are sustainable, with the exception of one-time items and a reduction in bonuses to hotel managers this year.

But the hotel giant also fired a warning shot about the future, cutting its full-year outlook to earn 65 cents per share from $1.10 for 2009. Its revised third-quarter estimates also fell far short of analyst expectations.

Starwood said it expects RevPAR to drop 20 percent for its company-operated hotels. RevPAR for its branded hotels could fall 25 percent in 2009.

Chief Financial Officer Vasant Prabhu said that business was stabilizing, but recovery remains slow.