Hilton’s Profit Falls 29% Despite Surge in Revenue
The pardon-our-dust signs proved costly for Hilton Hotels Corp. as room renovations helped second-quarter profit fall by 29%, the company reported Tuesday.
Beverly Hills-based Hilton, the world’s largest hotelier and third-largest company in the U.S., reported second-quarter net income of $144 million, or 35 cents a share, compared with $202 million, or 49 cents, last year. Revenue rose 87% to $2.2 billion from $1.18 billion.
Analysts had expected earnings per share of 34 cents on sales of $2.21 billion, according to a Thomson Financial survey.
Despite the drop, Hilton officials said during a call with analysts that revenue per room -- a key performance indicator -- increased 6% after adjusting for increased energy and marketing costs.
Stephen F. Bollenbach, co-chairman and chief executive of Hilton, said in a statement that the company continues to perform “extremely well.”
Demand for rooms is high and the company expects to begin seeing positive results of its $5.71-billion acquisition of Hilton International, a deal that made it the leading global hotel company.
“No one is opening more hotels in the U.S. than Hilton, a testament to the power of the Hilton family of brands,” Bollenbach said.
Hilton operates nearly 2,700 hotels and 475,000 rooms in more than 80 countries. The company will open 225 hotels, or 36,000 rooms, this year in the United States and abroad. Its overseas plans include introducing its Hilton Garden Inn and Hampton Inn, as well as Hilton and Doubletree brands.
Opportunities “are plentiful and we are pursuing them aggressively,” Bollenbach said.
Several analysts said the lower earnings were the result of renovations at three major properties -- the Waldorf-Astoria and Hilton in New York and the Hilton Hawaiian Village. The company has been locked in a labor dispute in New York, but recently signed a six-year contract with the union, Unite Here.
Bear Stearns analyst Joseph Greff said in a note to investors that he was reaffirming his “outperform” rating and that he saw positive signs for the future, including the company’s solid position in what is anticipated to be a strong year for U.S. tourism.
Analyst Harry C. Curtis of JPMorgan said renovations and union negotiations could still be reflected in the next two quarters.
Hilton should pay off for investors “who can stomach one more quarter of underwhelming results but can look out two to three quarters,” Curtis wrote in his note.
Hilton shares rose 23 cents to $24.16.
The Associated Press was used in compiling this report.
