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A rebounding business and luxury travel sector in North America fueled Starwood’s first-quarter growth, but its presence in growing economies will be key to its long-term profitability.

Starwood Hotels & Resorts Worldwide Inc., whose brands include Sheraton and Westin, reported a quarterly profit that handily beat analysts’ expectations as more people checked into its hotels at higher room rates, particularly in North America.

Shares of the company, which focuses on upscale customers, were up 2 percent before the bell on Tuesday.

A business-led recovery has helped lift U.S. hotel occupancy rates in recent months. Starwood has also benefited from higher demand in Asia, Latin America, Middle East and Africa.

“Tight supply is driving higher room rates in North America, and our footprint continues to expand in the growing economies,” Chief Executive Frits van Paasschen said in a statement.

Starwood, which also franchises the W, St. Regis and Le Meridien brands, runs its hotel and leisure business directly and through subsidiaries.

Starwood said revenue per available room (revPAR) – a key metric for the hotel industry – for all its hotels in North America open for at least a year rose 6.2 percent in the first quarter. Occupancy increased to 68.6 percent from 67.3 percent.

Higher demand drove a recovery in the U.S. hotel industry through 2010 and 2011. However, with hotels running at near-peak levels, operators have had to ramp up room rates at a faster pace to drive results, Suntrust Robinson Humphrey analyst Patrick Scholes said.

“One should see mid-single digits worldwide revPAR growth (in 2013)”, he said.

Starwood on Tuesday maintained its expectation of 2013 revPAR growth of 5 percent to 7 percent at hotels operated by the company and open for at least one year.

The company said it expects to earn 70 cents to 73 cents per share in the second quarter ending June.

Analysts on average were expecting earnings of 72 cents per share, according to Thomson Reuters I/B/E/S.

Net income from continuing operations rose to $143 million, or 73 cents per share, in the first quarter from $129 million, or 65 cents per share, a year earlier.

Excluding items, Starwood earned 76 cents per share, easily topping analysts’ expectations of 53 cents per share.

Revenue dropped 10 percent to about $1.54 billion, but was ahead of the $1.47 billion analysts expected.

Starwood was the first to report quarterly results among the large U.S. hotel operators. Hyatt Hotels Corp and Marriott International Inc are both scheduled to report first-quarter results on Wednesday.

Stamford, Connecticut-based Starwood’s shares gained 9 percent this year to Monday’s close. They were up 2 percent at $63.80 before the bell on Tuesday.

Copyright (2013) Thomson Reuters.

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Tags: earnings, starwood

Photo credit: The exterior of the St. Regis Saadiyat Island Resort in Abu Dhabi. Starwood Hotels and Resorts / Starwood Hotels

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