Rumors of a recovery in the travel industry gained momentum Monday, as Hilton (NYSE: HLT) reported a 68% improvement in fourth-quarter profit. While one might think that would be the mint on investors' pillows, the stock closed the session nearly 3% lower.
It's no secret that the travel industry is taking off after a decidedly tough couple of years. In early January, Reuters reported that hotels rang out the old year with a 15.2% increase in room revenue for the final week of 2003.
Meanwhile, in another testament to the improving climate (think tropical getaways, folks), online travel-related businesses stepped up advertising, with companies like Priceline (Nasdaq: PCLN) and InterActiveCorp.'s (Nasdaq: IACI) HotWire launching stepped-up television campaigns.
Back to Hilton. (And after all the Paris Hilton brouhaha, I never thought I'd say those words.) Fourth-quarter earnings came in at $67 million, or $0.17 a share, compared to $40 million, or $0.11 a share in the year-ago quarter. Total revenue booked a 3% increase, to $989 million from $957 million.
Investors may have gotten snobbish Monday due to the full-year showing. The hotel provider's net income dropped 17% in 2003, to $164 million, or $0.43 per share, from $198 million, or $0.53 per share, on a year-over-year basis.
In addition, the company warned that the first quarter of the year could be comparatively tough, despite the feeling that the year, overall, is gearing up to be better than the last three.
In its conference call (transcript courtesy of CCBN's StreetEvents), the company pointed to a soft market in the Windy City as the culprit for a tough first quarter, and declined to give specific quarterly guidance. As for the second quarter, the company pointed to easy comparisons to the same time last year, when the war in Iraq did a number on the travel business. Certain expense issues, such as health care costs, worker's compensation, and higher property taxes, continue to be an ongoing issue.
If anything might add some friction to what overall sounds like an optimistic year with a tough beginning, also watch for an ultra-competitive climate heating up to win back those erstwhile travelers, both business and leisure. Other companies in the sector include Marriott (NYSE: MAR) and Starwood (NYSE: HOT).
Are you one of the people who's worked themselves into a traveling mood? (And all the snow and ice here in Alexandria, Va., home of Fool HQ, makes the idea of the tropics sound very nice indeed). Try out the Fool's Travel Center to pick up a few essential items (information items, that is) for your trip.
Alyce Lomax rarely travels, but has to admit the idea of someone else making the bed is not so bad. She welcomes your feedback via e-mail.
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