Starwood shares downgraded, drop to new 5-year low

Starwood shares dropped $3.13, or 10.3 percent, to $27.14 in afternoon trading. Earlier in the session, the stock touched $26.86, its lowest point since 2003. The shares have traded between $29.26 and $62.83 during the past 52 weeks.

After the market closed on Friday, Citi Investment Research analyst Joshua Attie downgraded Starwood to "Hold" from "Buy" and said there is "significant risk" to 2009 consensus analyst estimates.

Attie said Starwood's strength in international markets and among foreign travelers to major U.S. cities is less helpful as economic conditions in Europe show signs of weakening.

He also said the U.S. economy next year may be weaker than he previously expected, which may hurt group business travel. Group business trends tend to lag behind leisure trends due to the longer lead time.

"As such, we no longer feel comfortable assigning a material growth premium to Starwood," Attie wrote. The analyst dropped Starwood's price target to $33 from $50.

Attie now expects revenue per available room to drop 3 percent at Starwood, after previously projecting a 1.5 percent increase. Revenue per available room, or revpar, is considered a key gauge of a hospitality company's performance.

Attie also reduced his 2009 estimates for 12 lodging companies and cut his ratings for several real estate investment trusts. He lowered Strategic Hotels & Resorts Inc. to "Sell" and reduced both Host Hotels & Resorts Inc. and Sunstone Hotel Investors Inc. to "Hold."

Also weighing on the lodging sector, Goldman Sachs analyst Steven Kent said Monday that he expects hotel industry revpar to remain in negative territory "well into 2009" as troubles in the financial sector exacerbate soft travel trends. He also expects hotel shares "will continue to grind lower in the coming 12 months."