Hoteliers reap benefits of rise in business travel

By Helen Chernikoff

NEW YORK (Reuters) - Starwood Hotels & Resorts <HOT.N> and Host Hotels & Resorts <HST.N> said they had more guests in the first quarter as a gradual economic recovery sent more workers back on the road to do business.

Both companies focus on the high-end business traveler.

Starwood raised its outlook for the year and reported a higher-than-expected quarterly profit.

The company topped Wall Street forecasts in large part because its brands, including Sheraton and St. Regis, outperformed those of rival Marriott International <MAR.N> in the quarter, said FBR Capital Markets analyst Patrick Scholes.

The weakness in some Marriott brands hurt the results reported by Host, a real estate investment trust that owns many Marriott hotels, Scholes said.

Still, Host reported higher funds from operations, a measure of performance that removes the profit-reducing effect of depreciation, a noncash accounting item.

Scholes has a "hold" rating on Starwood shares and recommends that investors buy Marriott.

"The economy is improving. These companies are benefiting from that," he said.

Last week Marriott reported first-quarter earnings that missed Wall Street expectations.

Starwood forecast 2011 earnings of $1.60 to $1.70 per share, up from an earlier forecast of $1.55 to $1.65.

Excluding a charge related to the earthquake in Japan last month, the company posted first-quarter earnings of $58 million, or 30 cents per share, compared with $24 million, or 13 cents per share, a year earlier.

Analysts expected 25 cents per share, according to Thomson Reuters I/B/E/S.

Starwood, the eighth-biggest hotel operator in the world by room count according to Smith Travel Research, said revenue per available room, or revPAR, rose 10.4 percent in the quarter.

A commonly used gauge of a hotel's financial health, revPAR multiples the occupancy rate by the room rate.

At Host, revPAR increased 7 percent, while FFO rose to 11 cents per share from 8 cents a year earlier.

Although the U.S. economic recovery remains sluggish, lodging has bounced back faster than many industries and asset classes due to hoteliers' ability to adjust its room rates nightly as travel demand rises.

(Reporting by Helen Chernikoff; Editing by John Wallace)