Starwood Reports Strong 3Q Earnings
Buoyed by strong hotel and vacation ownership revenue, Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) reported net income $170 million and $0.87 per share in the third quarter of 2012, a 4.2 percent increase from the previous year's quarterly net income.
Meanwhile, the luxury real estate market got a big boost when Starwood said its high-end St. Regis Bal Harbour residential project in South Florida reported $12 million of EBITDA in the quarter, contributing to Starwood's overall adjusted EBITDA of $275 million. Overall, earnings from Starwood's vacation ownership and residential business increased approximately $19 million compared to 2011, including $12 million of St. Regis Bal Harbour earnings.
Year-to-date adjusted EBITDA was $895 million through Sept. 30, 2012, which includes a $125 million of EBITDA from the St. Regis Bal Harbour resort development, compared to $711 million in the same period in 2011.
In another sign that investors continue to gain more confidence in vacation real estate, Starwood said it completed a securitization Oct. 24 involving the issuance of $165.7 million of fixed rate notes. Starwood is contributing approximately $174.4 million in timeshare mortgages resulting in an advance rate of 95% with an effective note yield of 2.02%.
"We delivered another solid quarter of EBITDA and EPS growth led by continued gains in both room rates and occupancy," said Starwood CEO Frits van Paasschen. "Global RevPAR grew nearly 5% in constant currency, despite a deceleration in the global economy. In fact, occupancy rose in all regions and is now reaching or exceeding peak levels in many markets around the world.
"Looking ahead, our results will be driven by two things: first, the trajectory of the global recovery and whether it regains its momentum in 2013; and second, our ability to use our high-end, global brands, to get more than our fair share of the long-term growth in global travel."
Starwood did note net income in the third quarter of 2012 benefited from a $23 million (net of tax) reversal of reserves, following the favorable settlement, in the quarter, of certain liabilities associated with a former ITT subsidiary, Starwood recently reported.
Worldwide system wide REVPAR for same-store hotels increased 4.7% in constant dollars (1.3% in actual dollars) compared to 2011. In North America, system wide REVPAR for same-store hotels was up 5.3% in constant dollars (4.8% in actual dollars).
Management fees, franchise fees and other income increased 8.4% compared to 2011.
As for future development, Starwood said it signed 25 hotel management and franchise contracts during the recent quarter, representing approximately 4,800 rooms, and opened 20 hotels and resorts with approximately 6,500 rooms.
Year-to-date financial news was equally as strong for Starwood, with income from continuing operations at $405 million in the nine months ended September 30, compared to $344 million in the same period in 2011. Excluding special items, income from continuing operations was $376 million in the nine months ended September 30, 2012, compared to $273 million in the same period in 2011.
Net income was $420 million and $2.14 per share in the nine months ended September 30, 2012 compared to $322 million and $1.66 per share in the same period in 2011. Adjusted EBITDA was $895 million year-to-date through Sept. 30, 2012, which includes $125 million of EBITDA from the St. Regis Bal Harbour Resort residential project, compared to $711 million in the same period in 2011.