Upscale hotel operator Starwood (NYSE: HOT) may not have duplicated last quarter's eye-popping 123% surge in net income, but the impressive results released this morning should still have shareholders smiling. Like Hilton (NYSE: HLT), Marriott (NYSE: MAR), and most other peers in the lodging industry, Starwood enjoyed a sharp rebound last year, which culminated in fourth-quarter income that pierced the $100 million mark, a solid 15% advance from the $87 million earned a year ago. Excluding one-time items, Starwood's earnings from continuing operations jumped 36% to $0.57, easily outpacing even the high end of analysts' expectations.
Revenues per available room (RevPAR) leaped 11.1% at comparable, owned hotels, with reported gains in all brands, ranging from 9.5% at Westin to 11.8% at Sheraton. Occupancy was higher across the board, but the growth was really fueled by a continued recovery in pricing. Average daily rates (ADR) climbed 6.9% worldwide and 8.0% in North America -- compared with a more subdued 3.1% improvement at Hilton. Price increases have a dramatically greater impact on the bottom line than corresponding occupancy increases, and the uptick in ADR was responsible for 70% of the RevPAR gain.
Gross margins for owned hotels expanded 380 basis points during the quarter, and the company also tacked on 180 basis points to its systemwide (owned, managed, and franchised) market share -- the ninth consecutive quarter where Starwood has picked up market share. With the hotel side running away from the competition, it might be easy to overlook the company's timeshare business. Revenues derived from vacation ownership and residential properties checked in even stronger, though -- climbing 76% to $197 million -- on sales to resort destinations in Hawaii, Florida, and Arizona.
For the full year, income from continuing operations doubled from $176 million to $348 million on revenues that rose 16% to $5.4 billion. Going forward, the company is anticipating more of the same. Management is forecasting that earnings will double in the first quarter and rise 24% over the full year on an 8%-10% gain in RevPAR.
If January is any indication, the company is well on its way to achieving those lofty goals. Internet bookings for the month totaled $82 million, shattering the old record of $68 million that was set last August. Prices also continue to march higher; ADR climbed by 9.5%.
Starwood delivered industry-leading growth at both the top and bottom lines, and with business travel (which represents 85% of revenues) booming again after a three-year slump, it is showing no sign of slowing down. Still, after rising by two-thirds over the past 12 months, the company's stock -- much like its rooms -- has a premium attached.
Fool contributor Nathan Slaughter owns none of the companies mentioned.
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