INTERVIEW-Starwood CEO sees signs of improving demand

* Travel demand 'reaching a plateau'- CEO

* Economic downturn presents chance to expand - CEO

* Month-old hotel running near full occupancy - CEO

NEW YORK, April 24 - The travel industry is in crisis mode, hotels are reporting sharp drops in demand and global growth has "hit the pause button," says the head of Starwood Hotels & Resorts.

So what better time to expand?

"We're planting seeds for recovery. Today's stay-cation is tomorrow's pent-up demand," Chief Executive Frits van Paasschen told Reuters in an interview on Thursday night.

While a full recovery could still be a ways off, hotel companies may have escaped the free-fall in travel of the past few months as demand appeared to be "reaching a plateau," said van Paasschen.

The company's strategy for staying afloat is to reach new consumers while demand is at the "bottom or the midst of the bottom" in hopes they will come to Starwood hotels when spending eventually picks up.

"We have an opportunity to expand our global footprint," added van Paasschen, who spoke during a launch party of a new W Hotel in Hoboken, New Jersey.

The world's No. 8 hotel group by rooms is expected to report first-quarter earnings next week, following reports from rivals Marriott, Wyndham Worldwide and Host Hotels & Resorts.

White Plains, New York-based Starwood has had to cut development projects as it grapples with a sharp decline in travel demand. In the fourth quarter, Starwood's revenue per available room -- an industry metric of profitability -- fell 12.1 percent. Its peers also reported double-digit drops in RevPAR.

Last week, S&P cut Starwood's credit rating to a "BB," reflecting expectations for a steeper drop in RevPAR. ID:nWNA1876

Starwood decided not to pursue or continue the development of several projects, including two "significant" projects in Mexico and the Caribbean, according to the company's annual regulatory filing in February.

More than half of the company's hotels, which include the W, Sheraton and St. Regis, are outside of the United States.

But van Paasschen, who has been at the helm of Starwood since September 2007, sees signs of improvement. Earlier this month, the company said it was moving ahead with a $4 billion overhaul of its Sheraton brand. ID:nN13340287

He said the month-old Hoboken W Hotel was running near full occupancy.

The opening was celebrated with a glittering bash that featured W-shaped fireworks, a model in black spike heels lounging in an enlarged, rotating martini glass and a live concert from actor and musician Jamie Foxx. Also in attendance were celebrities including actress Shannen Doherty.

Van Paasschen declined to comment on the company's ongoing lawsuit with Hilton Hotels Corp, which it charged with corporate espionage in a lawsuit filed earlier this month. ID:nN16293349

"These times are at least as bad as 9/11 without the prospect of immediate recovery," he said. "It's the worst time for the travel industry in our lifetime.

Yet "we must not let a crisis left to waste."