The hotel recovery appears to be on track, with Host Marriott ( HMT) narrowing losses from a year ago while issuing stronger-than-expected guidance for the second quarter. But the company's fiscal 2004 expectations are still short of current expectations.

On Wednesday, Host Marriott, the nation's largest hotel real estate investment trust, announced a first-quarter net loss of $31 million, or 12 cents a share, slightly less than the loss of $34 million, or 16 cents a share, in the year-ago quarter.

Funds from operations, a key REIT metric called FFO that is closely watched by Wall Street, came in at 13 cents a share, off from 15 cents a share a year ago and short of the 15 cents a share expected by analysts.

Revenue came in at $809 million, up from $775 million a year earlier, while revenue per available room, or revpar, rose 3% year over year, driven by higher room rates and increasing demand.

Host Marriott's results may seem weak compared to Starwood Hotels ( HOT ), which announced a blow-out first quarter on revpar gains that were twice as strong. Host Marriott CEO Christopher Nassetta issued positive guidance going forward. Nassetta said that revpar would grow between 5% and 7% in the second quarter and 4% to 6% for the full year.

"Clearly, the operating environment for the lodging industry has improved considerably over the last few months and we feel the stage has been set for a sustained recovery," said Nassetta, in a statement.

Going forward, however, Host Marriott issued mixed guidance. The company said it expected to lose between 6 cents a share and 8 cents a share in the second quarter, with a loss of 17 cents a share to 27 cents a share for the fiscal year. But while FFO will come in between 17 cents and 20 cents a share in the second quarter, higher than the current Wall Street estimate of 15 cents a share, the company said FFO will range between 61 cents to 71 cents a share for the year, well short of the 75-cent a share estimate.

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