Reeling from double-digit declines in revenue per available room (RevPAR) in the U.S. and abroad, Starwood Hotel & Resorts Worldwide on Thursday reported a 65% drop in third-quarter profit. Net income totaled $40 million, or 22 cents per share during the period, down from $113 million, or 62 cents per share, in the third quarter of 2008.

RevPAR system-wide in North America fell 19.7% in the third quarter on a same-store basis. The company also reported a 20.3% drop in RevPAR system-wide globally.

Despite the weak earnings report, White Plains, N.Y.-based Starwood (NYSE: HOT) beat analysts’ expectations, which called for the company to earn 10 cents a share in the third quarter.

“Over the past 12 months, we have focused on cost containment and debt reduction, which positions us well to own the upswing,” stated CEO Frits van Paasschen in a company news release. “Our increasingly fee-based, capital-efficient business model will grow as RevPAR recovers and as our pipeline translates into unit additions.” He added that with half of its hotels outside the U.S, Starwood is poised to benefit from growth in international markets.

Investors appear to be underwhelmed by the earnings announcement. At mid-afternoon, Starwood’s stock was trading at $32.83 per share, down from the previous day’s close of $34.20 per share.

Looking under the hood, Starwood reported total revenue of $1.2 billion in the third quarter, down nearly 21% from the same period a year ago. Revenue from ownership and residential sales and services fell from $226 million to $126 million, a 44% drop, on a year-over-year basis. Revenue from owned, leased and consolidated joint venture hotels fell from $575 million to $396 million, a 31% decline.

Starwood expects RevPAR at same-store company operated hotels worldwide to decline 9% to 11% in the fourth quarter of 2009 compared with a year earlier. For all of 2009, the company expects RevPAR to drop 20% on a year-over-year basis.

While the business climate appears to be gradually improving globally, Starwood officials say that it’s difficult to predict the pace of recovery in 2010, particularly when it comes to room rates.

“While group bookings have picked up for 2011 and beyond, the booking pace for 2010 has continued to lag below 2009,” according to a company press release. The booking window for both transient and group business has shortened considerably, Starwood officials point out. “As such, late-breaking business is a larger component of what will drive our performance next year, making forward-looking predictions four quarters out particularly challenging.”

Starwood owns 63 hotels, manages 438 hotels, and franchises another 468.