Most hotel chains, to some degree, rely on business travel, but few more so than Starwood Hotels
Those numbers pale in comparison, though, to the banner third-quarter results that were posted yesterday. Net income more than doubled to $107 million, from $48 million the year before, on revenues that climbed 18% to $1.34 billion. Backing out one-time items, earnings from continuing operations jumped by two-thirds to $0.40, beating estimates by 3 cents.
Echoing comments made this month by rival Marriott
Starwood's timeshare business has been another key source of income and now represents about 13% of revenues. Vacation ownership sales jumped 36% to $175 million, driven by sales of units in Florida, Colorado, Hawaii, and other destinations. Not only did the number of contracts signed grow by 21%, but the average price per unit also climbed by 7.9% to about $20,000.
With a stiff tailwind from robust business travel, Starwood is predicting smooth sailing going forward. Management lifted full-year earnings guidance to $1.48 (well above Street expectations) and from there forecasted a 23% increase in 2005 earnings to $1.82. At 32 times this year's projected earnings, Starwood is not exactly a value play, but the growth rates, expanding margins, and improving balance sheet look attractive.
Considering Starwood has achieved eight consecutive quarters of systemwide domestic market-share gains, and is poised to add another 38,000 rooms now in development (including the Aladdin in Las Vegas), it might well be worth the price.
How are Starwood's competitors faring? Find out by reading:
Fool contributor Nathan Slaughter owns none of the companies mentioned.