Hilton Hotels ( HLT) saw second-quarter profit increase by nearly 40% as business travelers continue to return to hotel lobbies and reaffirmed guidance for the remainder of 2004.

Hilton announced second-quarter net income of $75 million, or 19 cents a share, up 39% from the $54 million, or 14 cents a share, it had a year ago. Wall Street expected the company to earn 18 cents a share in the quarter, according to Thomson First Call. In reaction, shares of Hilton were off 9 cents, or 0.5%, to $17.95 early Wednesday morning.

Revenue came in at $1.065 billion, a 9% jump from $976 million a year ago, but slightly below Wall Street expectations. Rising sales were fueled by the cyclical turn in the lodging industry -- a trend cited by Host Marriott ( HMT), Marriott International ( MAR) and Starwood Hotels ( HOT) this quarter -- and the return of the business traveler, which is starting to boost fundamentals.

Revenue per available room, a key industry metric called revpar, rose 8.3% at comparable hotels, despite the fact that the company faced tough comparisons in the Chicago market, which was stronger last year due to a number of conventions.

"Our business is improving in a big way, with all aspects of our company capitalizing on these strengthening trends," said Stephen Bollenbach, co-chairman and CEO. "With the strength in business transient travel that we began seeing last year and the more recent upturn in group travel, a return to true pricing power is nearing."

All told, Hilton filled 76.7% of its rooms in the second quarter, up from 73.4% a year ago, enabling it to boost its average daily rate by 3.6% to $153. The company's upscale brands saw revpar increases from last year, with Hilton Garden Inn's revpar rising 9.6%, Hilton rising 9.5% and Doubletree gaining 8.5%.

The company's timeshare business continued to grow at a rapid pace as well, with revenue coming in at $98 million, up 24% year over year due to strength in Hawaii, Orlando and Las Vegas. Overall unit sales rose 34%, with the average unit price rising 7%.

Going forward, the company reiterated its earnings guidance for 2004, unlike Starwood, which raised guidance for the third straight quarter last week.

The company said that revpar would increase between 6% and 8% for the rest of the year, with earnings per share in the mid- to high-50-cents range on $4.17 billion in revenue. Analysts expect the company to earn 56 cents a share in fiscal 2004 on $4.03 billion in revenue.