Updated from 11:27 a.m. EDT

Judging from better-than-expected second-quarter results, the lodging recovery is gaining momentum, but given a recent dip in shares, Raymond James upgraded Hilton Hotels ( HLT) and Starwood Hotels ( HOT) to strong buy, citing an investment opportunity.

This week , Starwood announced adjusted second-quarter earnings that nearly doubled last year's quarterly results, while raising guidance for the third-consecutive quarter. With shares of both companies off 5% since last week -- and with Hilton set to release earnings this Wednesday -- Raymond James analyst William Crow raised his rating on the duo.

In reaction, shares of Starwood rose $1.38, or 3.2%, to $44.60, while Hilton rose 25 cents, or 1.4%, to $18.08. (Raymond James does and seeks to do business with the companies covered in its research reports.)

"Starwood's outstanding quarter and management's optimistic outlook on 2004 support our positive view of the industry, the company and Starwood shares," said Crow, in his upgrade. "The combination of our increased estimates with recent share price weakness -- Starwood shares are off 6% since July 16 -- creates what we view as a compelling buying opportunity."

Going forward, Crow said there could be more catalysts to boost Starwood's stock. Specifically, he said the company could make an announcement regarding its $200 million investment into Le Meridien's high-yield debt, with Starwood ending up with lucrative management contracts and as much as $100 million cash for recapitalizing the company.

Also, he said that a successor to acting CEO Barry Sternlicht could be announced in the next three months.

As for Hilton, the analyst said to expect strong second-quarter results and rising guidance when it releases earnings next week and recommended buying shares now to take advantage. And because of Hilton's exposure to the Chicago market, which accounts for 6% to 8% of its EBITDA, the analyst said Hilton's easier comparisons will allow the company to outperform rivals in the second half of the year, making shares a solid long-term bet.

"We believe Hilton is primed to outperform peers in 2005, largely because the company's comparisons will not be as difficult," said the analyst. "Hilton is also likely to see a springboard effect on 2005 revenue per available room growth as a favorable convention schedule should propel very strong performance in Chicago."

Just two quarters ago, management at some of the largest hotel companies was conservative when it came to talking up the industry recovery, but after the release of second-quarter earnings, it has become clear that profits are surging.

Earlier this week, Host Marriott ( HMT) raised earnings guidance for the rest of the year and posted a net profit in the second quarter, a reversal from the year-ago loss, on a 12% jump in revenue. During the quarter, fundamentals were strong, with occupancy at the nation's largest real estate investment trust climbing 5.5 percentage points while the average daily room rate rose 1.1%.

Two weeks ago, Marriott International ( MAR) kicked off the second-quarter earnings season by blowing away Wall Street estimates by six cents a share, while guiding higher for the rest of the year. "After three difficult years, strong demand returned to the markets most impacted by the downturn," said J.W. Marriott Jr., chairman and CEO.