Caesars’ improvements help Starwood earnings

Wednesday, Oct. 28, 1998 | 12:16 p.m.

Starwood Hotels & Resorts today said third-quarter profits rose more than sixfold, fueled in part by strong results at its flagship Caesars Palace resort and increases in room rates by the world's largest hotel owner.

The White Plains, New York-based real estate investment trust owns 650 hotels, including Caesars Palace and the Desert Inn. Starwood reported funds from operations of $295 million, or $1.40 a share, up from $49 million, or 80 cents, a year earlier. The profit was in line with the average estimate of $1.39 a share from analysts polled by First Call Corp.

The growing economy has spurred a travel boom that has allowed hotel operators to raise room prices. Starwood owns the Sheraton and Westin hotel chains as well as the Caesars World casinos.

Funds from operations is net income plus depreciation and before any extraordinary items. It's the standard measure of profitability for REITs because it's used to calculate dividends. REITs can shelter income from taxes so long as they pay out most of their earnings as dividends.

Starwood revenues rose to $2.3 billion from $2.1 billion million, reflecting the inclusion of ITT Corp., which Starwood bought in February for $14.6 billion, and Westin Hotels LP, which it bought for $1.57 billion in January.

Starwood's strong results were fueled in part by across-the-board increases at Caesars Palace. Cash flows at Starwood's flagship Strip resort increased approximately 105 percent in the quarter, to $43 million.

Caesars Palace results were driven by the additional 1,130 rooms and 110,000 square feet of meeting space added since last year. Starwood said the new rooms were immediately absorbed. Average daily rate rose 10 percent to $127 on occupancy of 95 percent. Total occupied rooms at Caesars Palace increased by 73 percent from 120,000 in the year-ago quarter to 207,000.

Slot win at Caesars Palace increased 16 percent from the year-ago quarter, and table game win increased 6 percent, despite a 13 percent decline in Baccarat volume.

Starwood also reported a 29 percent increase in cash flows at Caesars Atlantic City, and said it will open its Caesars Indiana riverboat and South African Caesars casino by year's end.

Starwood did not release results for the Desert Inn. The company did say it is continuing its efforts to sell the upscale Strip resort.