Starwood Q4 Profit Up, To Spin Off Vacation Ownership Business

(RTTNews) - Starwood Hotels & Resorts Worldwide, Inc. (HOT) Tuesday reported increased profit for the fourth quarter, helped by lower costs, despite a slide in revenues. Separately, the company announced a plan to spin-off its vacation ownership business, sending the stock up by nearly 7 percent in pre-market activity.

Net income attributable to the company increased to $234 million or $1.33 per share from $128 million or $0.67 per share reported last year. Income from continuing operations totaled $1.40 per share.

Excluding special items, which primarily related to net gains on the sales of hotels, earnings from continuing operations were $0.97 per share.

On average, 23 analysts polled by Thomson Reuters expected the company to report earnings of $0.76 per share for the quarter. Analysts estimates typically exclude special items.

Revenues slid to $1.49 billion from the prior-year figure of $1.51 billion. Analysts' consensus revenue estimate for the quarter was $1.53 billion.

Worldwide Systemwide Revenue Per Average Room or REVPAR for same-store hotels increased 4.4 percent in constant dollars.

Revenue from Owned, leased and consolidated joint venture hotels dropped 11.1 percent to $370 million, impacted by asset sales since the fourth quarter of 2013.

Vacation ownership and residential sales and services generated $170 million in the quarter, down 3.4 percent from last year. Total vacation ownership revenues increased 15.2 percent due to the timing and recognition of deferred revenues, but residential revenues fell to $3 million from $31 million due to the sale of Bal Harbour in early 2014.

Costs and expenses for the quarter declined to $1.25 billion from $1.31 billion in the previous year.

During the quarter, the company signed 63 hotel management and franchise contracts, representing around 12,900 rooms. The hotel chain also opened 27 hotels and resorts with approximately 5,800 rooms.

Frits van Paasschen, CEO, said, "We delivered another solid year of performance. Worldwide REVPAR was up nearly 6% in constant dollars, and both Adjusted EBITDA and EPS were ahead of our expectations. We posted another year of rising REVPAR index, a sign of the global strength of our brands and platform."

For the first quarter ended March 31, 2015, the company sees earnings per share of $0.53 to $0.57. Analysts expect the company to report earnings of $0.64 per share for the first quarter.

Looking ahead to the full year 2015, earnings per share before special items is expected to be $2.87 to $2.97. Analysts project earnings of $3.13 per share for 2015.

The firm's guidance assumes the planned spin-off of the vacation ownership business occurs on December 31, 2015. Transaction costs related to the spin-off are not included in full year selling, general and administrative expense guidance.

Separately, the company announced a plan to spin-off its vacation ownership business, Starwood Vacation Ownership or SVO, into a separate publicly traded company.

The move is expected to accelerate Starwood's ongoing 'Asset Light' transformation, and create a new pure-play vacation ownership company to take advantage of growth opportunities in the timeshare industry.

The transaction is expected to be tax-free to Starwood shareholders, and will be effected through a pro rata distribution of the new entity's stock to existing Starwood shareholders.

SVO reported vacation ownership revenues of about $640 million in 2014. It has successfully sold more than $6 billion of vacation ownership intervals to over 220,000 owners in its 30-plus year history.

Matthew Avril, who retired as President of Starwood's Hotel Group in 2012, will return to lead the new company as Chief Executive Officer after the spin-off. Stephen Williams will continue to serve as Chief Operating Officer.

HOT closed down 0.6 percent on Monday at $71.23, and climbed around 7 percent in pre-market activity on Tuesday.