Hotel operator Starwood (NYSE:HOT) stepped up to the microphone yesterday to regale the Wall Street crowd with a few numbers from its recently completed second quarter. But the audience's reaction was ho-hum at best. It couldn't have been a dull recital; earnings from continuing operations jumped 40% to $0.70 per share. Were the listeners expecting something more? Not really -- the bottom-line result easily blew past analyst expectations and the company's most recent guidance.

Was Starwood's short-term outlook less than captivating? Ding, ding, ding! We have a winner. The company actually lifted its full-year forecast and is now projecting earnings to rise 35% to $2.18 per share -- a nickel above analysts' estimates and roughly 50% better than the 24% growth rate targeted when the year began. But investors were hoping for an even sharper increase. Talk about a tough crowd.

To a certain extent, it's understandable. The cyclical hotel industry is rebounding sharply from a severe multiyear downturn, and resurgent travel is lifting occupancy levels and driving room rates higher across the board. In this highly favorable operating environment, with many companies reporting key metrics at record levels, the bar has been raised -- "pretty good" is simply unacceptable.

Still, Starwood is more than holding its own. With average daily rates climbing a solid 9%, North American revenues per available room (RevPAR) across all of the company's owned properties jumped 12.7% -- with each of its four brands registering double-digit growth. The results compare well with Marriott (NYSE:MAR), which reported a comparable 10% gain two weeks ago, and Hilton (NYSE:HLT), which announced a 9.4% increase earlier this morning.

Domestically, Starwood continues to gain ground against its peers, tacking on another 90 basis points in systemwide market share last quarter -- the company's 11th straight quarter of net improvement in that department.

Overall, Starwood raked in more than $1.5 billion in revenues for the quarter, driven by a 14.4% increase in management and franchise fees and a 66% jump in the timeshare division. Two other noteworthy improvements: Margins at owned hotels expanded 230 basis points, and cash flows surged 44% to $171 million.

Though the lodging industry's recovery has gained strength for more than a year, Starwood CEO Steve Heyer hinted that additional progress is likely, claiming, "We are in the early stages of the up cycle." While that observation may not exactly be heartening for travelers scouring InteractiveCorp's (NASDAQ:IACI) Expedia for cheap last-minute reservations, the return of pricing power should be welcome news for anyone with a stake in the industry.

Thus far this year, Starwood has capitalized on favorable market conditions by selling certain non-core hotel assets, generating $425 million to fund future growth and share repurchases. Overall, it's hard not to like the company's future growth prospects. However, at these lofty levels, the slightest misstep could give investors a rude wake-up call.

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Fool contributor Nathan Slaughter hates wake-up calls -- and alarm clocks. He owns none of the companies mentioned.