Starwood Hotels & Resorts ( HOT) shares rallied almost 7% Thursday after the company posted a blowout quarter, raised guidance and said business travel is improving, boosting the entire lodging sector. Starwood said fourth-quarter net earnings totaled $87 million, or 42 cents a share, down 6.6% from $91 million, or 45 cents a share, a year earlier. But excluding items, which is how Wall Street views the company, Starwood earned 42 cents a share, much higher than the 32 cents a share expected by analysts and nearly twice as much as the 24 cents a share it had in the year-ago quarter. Revenue rose 3.1% to $1.2 billion, while revenue per available room -- or revpar, a key metric for the hotel industry -- increased 6.6% worldwide and 4.7% in the U.S., indicating that business travel is picking up. "The positive trends we saw emerge in September continued through the fourth quarter as the weakness in group business was more than offset by continued strength in business transient, powered by significant market share gains in nearly every brand in our system," said Barry Sternlicht, company chairman and CEO. "Indeed, without the major unanticipated increases in workers compensation, our performance and margin growth in the fourth quarter would have been much better." Shares of Starwood rocketed higher, gaining $2.25 to $37.15, helping touch off a sector-wide rally, spurred by hopes that business travelers will fatten industry profit margins and fuel a strong recovery. The Dow Jones Hotel Index was up 4% by midday, with Marriott ( MAR) up 3.3% and Hilton Hotels ( HLT) up 2.5%. In addition to the strong quarter, Starwood boosted guidance for the first quarter. Assuming revpar increases between 5% and 6% in same-store hotels in North America, Starwood said net income would be $16 million, or 8 cents a share, surpassing current Wall Street expectations of flat earnings.