Hilton, Starwood Earnings Show Meetings Softness

Hilton Hotels Corp. today, in announcing disappointing second-quarter results, highlighted a particular weakness in the meetings side of the business, which bodes well for meeting planners, as well as travel buyers overall, in the upcoming negotiations for 2004 rates.

During the quarter, Hilton's higher-yielding group business fell short, which attributed to an almost 4 percent drop in average daily rate. Groups also contribute disproportionately to a hotel's food and beverage revenues, so this revenue stream suffered as well.

More ominous projections pertaining to the group business occurred during the conference call by Starwood Hotels & Resorts Worldwide to accompany its quarterly earnings release on Friday. During the call, company executives noted that group bookings for October and November were below the pace of last year's bookings. October and the first half of November is a key period for business meetings, which doesn't bode well for earnings later in the year.

"Transient demand could pick up the room night slack, but not incremental group F&B revenue," said Harry Curtis, lodging industry analyst for J.P. Morgan. "If group and transient demand fails to materialize in the October/November timeframe, fourth-quarter earnings could be at risk."

Hilton reported a second-quarter decrease in revenue per available room of 6.9 percent, compared with the same period last year. Hilton's RevPAR losses generally were consistent with decreases reported at other large multi-brand hotel companies, including Marriott International and Starwood. In each case, the drop was attributed to the slowdown in business travel compounded by the effects of the Iraqi war and severe acute respiratory syndrome during the quarter.