Hilton Profit Up but Outlook Lowered
Hilton Hotels Corp. reported a tenfold jump in fourth-quarter profit on Monday, but cautioned that a slow business travel market and jitters over a possible war with Iraq had pushed the Beverly Hills-based firm to lower its 2003 earnings expectations.
The owner of the Hilton, Doubletree, Embassy Suites and Hampton Inn lodging chains said strong occupancy levels at its New York, Chicago, Boston and Hawaii properties and easy comparisons with the terrorism-influenced 2001 period pushed net income to $40 million, or 11 cents a share, beating Wall Street estimates by a penny. A year ago, the company earned $4 million, or 1 cent, in the quarter. At the same time, Hilton said business has been slow in the New Orleans, Bay Area, San Jose and Phoenix markets.
Revenue for the three-month period ended Dec. 31 rose 8% to $957 million compared with $887 million a year earlier. For all of 2002, Hilton said net income rose 19% to $198 million, or 53 cents a share, from $166 million, or 45 cents, in 2001. Revenue declined 4% to $3.8 billion from $4 billion.
Hilton, however, said that it anticipates “continued challenges for the lodging industry in the first quarter and full year 2003” that will hurt occupancy and put downward pressure on room rates.
“We see that business travel will be pretty weak this year and there is uncertainty in the world political situation and that uncertainty weighs on travel,” Hilton spokesman Marc Grossman said.
Hilton now expects to earn in the mid- to high-40 cent range in 2003, down about 10 cents from a previous estimate. Hilton also said it expected to earn 5 cents a share in the first quarter.
Although the company had not issued any previous first-quarter guidance, industry analysts had expected 10 cents.
Hilton projected that room revenue, a combination of occupancy and room rates, would be about flat for the first quarter and full 2003, after rising 13.2% in the fourth quarter.
Hilton’s shares fell 15 cents to $11.85 on the New York Stock Exchange.
The hotel company’s grim assessment of the lodging market is shared by much of the industry. A December survey of corporate travel managers by the National Business Travel Assn. found that most do not anticipate full recovery of business travel before 2004.
“While travel is still an essential part of doing business, economic conditions must improve before corporations are willing to return to previous spending levels,” NBTA President Kevin Iwamoto said.
