Hilton Hotels ( HLT) announced first-quarter profits that were four times better than a year ago and said earnings would exceed analysts' expectations in 2004, driven by a strengthening travel recovery.

Hilton announced first-quarter net income of $37 million, or 10 cents a share, vs. $9 million, or 2 cents a share, a year ago and better than the 6-cent consensus view. Excluding all charges, the company still earned 10 cents a share in the first quarter of 2004, but would have earned 4 cents in 2003.

"The positive trends that we began seeing in the fourth quarter last year gained strength as we entered 2004, resulting not only in a very strong first quarter, but also confirming our belief that the turnaround in the lodging business is firmly underway," said Stephen Bollenbach, president and CEO.

"All facets of our business performed extremely well," he continued, "and the indicators we are currently seeing -- such as the significant increases in call and reservations volume, improved group business and a steady decline in full-service supply growth -- bode well certainly for the remainder of this year and, we believe, for future years."

Revenue came in at $994 million, up 9% from the year-ago $909 million, driven by a 45% jump in revenue from timeshare operations, which have been surging in recent quarters industry-wide. Revenue per available room, or revpar, rose 2.9% at hotels the company owned a year ago, with the company noting particularly strong results in New York, Washington, D.C., and Hawaii.

Pricing power, however, remains on the weak side. The company's average daily rate came in at $146.65 in the first quarter, an increase of less than 1% from last year's quarter, while occupancy came in at 68.3%, up from 66.7% a year ago. Historically speaking, hotels usually have a better chance to raise rates when occupancies are above 75%.

Hilton sees the growth continuing into 2004, a sign that the industry recovery is for real, unlike the fourth quarter, when many hotel executives were more conservative with guidance. The company said that it expected 2004 net income to come in at $208 million, or 53 cents a share, which is better than the 47-cent estimate currently held, on average, by analysts.

Revpar at hotels the company owned a year ago is expected to increase between 5% and 7% for the full year, slightly above the industry average, with revenue for 2004 coming in around $4.16 billion. That would be a marked increase from the current Wall Street estimate of $3.3 billion.

Hilton shares, which have rallied 7% in the last week on positive comments from rivals Starwood Hotels ( HOT) and Marriott ( MAR), were off 5 cents, or 0.3%, to $17.54 in early Wednesday's session.

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