Hilton Hotels Corp. (HLT) on Monday said fourth-quarter net earnings fell on one-time items, but said its revenue per room rose as increased travel fueled higher room rates.

Net income fell to $65 million, or 16 cents per share, from $67 million, or 17 cents per share, a year earlier when it .

Excluding special items, Hilton reported a profit of 18 cents a share, compared with analysts' average forecast of 16 cents a share, according to Reuters Estimates.

"It was a solid fourth quarter, the signs of returning capital to shareholders were positive, but margins were a little disappointing," said Marc Falcone, an analyst with Deutsche Bank.

Hilton said it bought back 2.3 million shares in the quarter.

Falcone said profit margins were likely contained by the impact of a labor dispute in San Francisco, costs of upgrading hotel bedding and a lag in the Chicago convention market, where Hilton has a large presence.

Shares of Hilton, based in Beverly Hills, Calif., fell 39 cents, or 1.7 percent, to $22.31 in New York Stock Exchange (search) trading.

Fourth quarter revenue rose 7 percent to $1.054 billion.

Analysts had expected revenue of $993.3 million.

Revenue per available room, a key measure of health in the lodging industry, rose 8.3 percent as a strengthening economy boosted travel.

"Pent-up demand for travel and a shortage of first-class hotel rooms in most major cities should generate continued strong results — particularly in increased room rates — in many of our most important markets, including New York Washington, Boston and Hawaii," Hilton Chief Executive Stephen Bollenbach (search) said in a statement.

Hilton operates hotels under the Hampton Inn and Embassy Suites brands, as well as its flagship hotels.

Looking ahead, Hilton said it expects full-year 2005 earnings in the low 70 cents-a-share range, including a 6-cent-per-share adverse impact from convertible debt and stock option accounting changes. It sees revenue of $4.5 billion to $4.53 billion.

Analysts expect 2005 earnings of 76 cents a share on revenue of $3.82 billion.

Revenue per room at Hilton-owned hotels open at least a year should rise 7.5 percent to 8.5 percent in 2005, up from a previous forecast of 5 percent to 7 percent, the company said.