Hilton Reports Poor Third Quarter

Hilton Hotels Corp. today released generally bleak third-quarter earnings that gave pause to recent speculation that the lodging industry had reached the trough in its two-year-long downturn. Net income for the quarter fell 29 percent over the same period last year. While the company benefited from an increase in leisure travel during the summer, group and business transient demand remained weak. The company's full-service brands, which include Embassy Suites, under-performed its midprice brands, which include Hampton Inn and Hilton Garden Inn. Hilton identified three key business markets where it has significant inventory--Boston, Chicago and San Francisco--as particularly troublesome.

Hotel companies' third-quarter earnings announcements coincide with buyer negotiations for 2004 rates. Reports such as Hilton's add to the sense that buyers continue to hold the upper hand.