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Hotelier, cruise line net off
April 25, 2001: 3:57 p.m. ET

Hilton and Royal Caribbean beat Wall Street 1Q estimates, but profits decline
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NEW YORK (CNNfn) - Hilton Hotels Corp. and Royal Caribbean Cruises Ltd. both reported a decline in quarterly profits despite beating Wall Street expectations Wednesday, reflecting a slowdown in the U.S. economy that has forced businesses and consumers to scale back on travel.

The companies' results reflect an industry-wide slowdown in corporate travel as companies look for ways to cut costs. Executives who once traveled first class and maybe stayed an extra night, have either scaled back to cheaper coach travel or cut out travel all together, said Jill Rosenberg, manager for corporate incentives and group travel sales at the Automobile Club of New York, Inc., an affiliate of the American Automobile Association.

For its first quarter, ended March 31, Beverly Hills, Calif.-based Hilton Hotels (HLT: down $0.24 to $10.25, Research, Estimates) reported net income of $55 million, or 15 cents a share, down from $58 million, or 16 cents a share, a year earlier. Analysts on average anticipated 14 cents a share, according to earnings tracker First Call.

Revenue increased 5 percent to $833 million in the quarter. Revenue per available room (RevPAR) increased 4.2 percent

Hilton cited softness in the New York and San Francisco markets for the sluggish earnings.

"We do foresee challenges at our major-market owned hotels this year as a result of a general slowdown in business," CEO Stephen Bollenbach said in a statement. "These properties by and large are still running at occupancy levels in the mid-to-high 70 percent range with solid room rates, and we expect that trend to continue."

Separately, Miami-based Royal Caribbean (RCL: down $0.21 to $20.20, Research, Estimates) saw its first-quarter earnings cut in half from a year ago, with net income of $52 million, or 27 cents a share, down from $106 million, or 55 cents, a year earlier. Analysts surveyed by First Call expected 25 cents a share.

Revenue increased 3 percent to $727 million from $708 million.

The cruise line cited the slowing economy for the disappointing quarter, but said tough comparisons to the year-earlier period in which it had solid bookings from its Millennium New Year's event that increased profit.

"Although this year's booking period started out strong, we are disappointed that the momentum did not continue as long as we would have liked," CEO Richard Fain said. "As we all know, the slowdown of the economy is affecting consumer spending. This impact, coupled with increased industry capacity, continues to put pressure on pricing."

Fain said that pressure would cause fiscal 2001 yields, that is, net revenue per available passenger cruise day, to be down 2 percent from a year ago.

Hilton and Royal Caribbean's are just the latest leisure companies to fall victim to the economic downturn in which companies have trimmed thousands of jobs and rising fuel prices have cut into travel profits and consumers' gasoline budgets. Last week, Marriott International Inc. (MAR: down $0.53 to $43.83, Research, Estimates) said it beat Wall Street's first quarter expectations, but warned that 2001 results would likely miss forecasts because of the economic slowdown.

"I do see a definite slowdown on the corporate side where executives were once allowed to travel first class, but now they're cutting back and those executives are traveling coach class," AAA's Rosenberg said, adding that travelers are opting more for value hotels such as Ramada rather than more expensive luxury hotels such as Hilton.

She said it was too early to say whether consumers would cut back on leisure travel during the crucial summer period since it remains unclear whether the slew of layoffs and market volatility will continue. graphic