Hilton Cuts Room-Revenue Forecast

Hilton Hotels Corp. on Wednesday lowered its second-quarter room-revenue forecast, becoming the industry’s second major player in two weeks to trim its outlook amid signs the sector’s recovery is stalling.

Hilton said it expects room revenue for hotels it owns, a widely watched industry barometer, to fall about 5% in the second quarter from a year ago.

The revision was a significant downgrade from Hilton’s previous forecast of a 1% to 2% drop announced last month when the Beverly Hills-based company released first-quarter results.

Despite the downgrade, Hilton said it expects to earn about $300million, or about 20 cents a share, before interest, taxes, depreciation, amortization and noncash items.

Hilton blamed its lowered room-revenue outlook on depressed room rates, which combine with occupancy rates to generate the overall room-revenue figure.

The company did not say whether the weaker-than-expected second quarter will affect its full-year outlook for a 2% to 3% gain in room revenue.

Its reduced revenue outlook comes nine days after rival Marriott International Inc. said its second-quarter room revenue will come in at the lower end of its April forecast of a 5% to 7% drop.

Both Marriott and Hilton were quick to add that healthy margins obtained through strict cost controls would keep previous second-quarter earnings forecasts on track despite weak revenues.

Hilton said strong demand for its time-share units also would help it meet its second-quarter earnings goals.

The broader industry weakness was reflected in a revised report released Wednesday by PricewaterhouseCoopers, which said it expects U.S. hotel room revenue to decline by 0.7% this year, contrasted with a previous forecast of a 3% gain.

The report blamed the weakness on a slower-than-expected economic recovery and continued sluggishness in business travel.

Analysts said the downgrade was not unexpected in light of a recent stall in the hotel industry’s rebound, which was stronger than expected after the depths reached in the initial weeks of the post-Sept. 11 travel slump.

The attacks on the Pentagon and World Trade Center put a chill on travel nationwide, sending U.S. hotel room revenue down as much as 37%.

Since then, business has recovered steadily and now most declines are in the single digits.

In recent weeks, however, the gains have slowed and remain in a range of down 5% to 10%, according to industry data tracker Smith Travel Research.

Hilton shares rose 6 cents to close at $14.04 on the New York Stock Exchange.

They have lost about 18% since reaching a peak of about $17 last month.

The decline parallels similar movements by other hotel stocks, which have dropped steadily in recent weeks as optimism about the industry’s recovery waned.