Hilton Follows Peers, Lowers Outlook

LOS ANGELES (Reuters) – Hilton Hotels Corp. on Tuesday reported second-quarter earnings that held up better than many of its peers, but lowered its outlook for the rest of the year bringing it more in line with the rest of the struggling hotel industry.

Hilton reported second-quarter net income of $76 million, or 20 cents a share, compared with $86 million, or 23 cents a share, a year earlier. Revenue fell 5 percent, to nearly $1.04 billion.

Analysts polled by market tracking firm Thomson First Call had, on average, forecast earnings of 20 cents per share, with estimates ranging from 18 cents to 21 cents.

Hilton reported total earnings before interest, taxes, depreciation, amortization and noncash items of $303 million in the quarter, down from $345 million a year ago.

But the figure that surprised investors and analysts was a 6.1 percent decline in Hilton’s average revenue per hotel room for its comparable owned properties in the quarter.

The decline was more modest than that for either of its two biggest rivals, Marriott International Inc. and Starwood Hotels & Resorts Worldwide Inc. , which reported second-quarter declines of 8 percent and 10 percent, respectively.

GRADUAL IMPROVEMENT

Earlier in the second quarter, Hilton and Marriott both said they expected average revenue per room to come in at the lower end of or below previous forecasts. Analysts blamed a stall in the industry’s fledgling recovery as an expected rebound in business travel failed to materialize.

“We are in fact seeing the gradual improvement we expected early this year, and things are getting better,” Hilton Chief Executive Officer Stephen Bollenbach said in a conference call to discuss the results. “Unfortunately, the improvement is not as fast as we originally anticipated.”

Bollenbach said Hilton is focused on rebuilding hotel occupancy, which dropped sharply as people delayed or canceled trips en masse after Sept. 11. But company officials declined to say specifically why Hilton’s hotels performed better than Starwood’s or Marriott’s in the second quarter.

The company was more in sync with its peers in announcing new third-quarter forecasts that were down sharply from previous expectations.

It said it expects third-quarter earnings of about 10 cents a share, or well below the average First Call estimate of 17 cents. It said it expects full-year 2002 earnings in the low- to mid-50 cents range, again well below the average analysts’ forecast of 62 cents.

The company said total revenue would be about flat in the third quarter from a year earlier and down 2 percent to 4 percent for the year. It said revenue per room for its owned hotels would be flat to down 2 percent in the third quarter and down in the low single digit percent range for the year.

“All things considered, Hilton’s second-quarter numbers were OK,” said J. Cogan, a senior research analyst at Banc of America Securities. “The (room revenue) environment in the second quarter was disappointing for the lodging industry.”

In a separate matter, Hilton said it took a $10 million charge in the second quarter related to the discovery of mold in its $95 million Kalia tower, part of its Hilton Hawaiian Village resort at Waikiki.

It said the charge includes an estimated impairment loss for certain fixed assets, as well as the cost for investigative work and rectification of the problem.

Author: Contributor