Hilton Hotels Corp. (HLT) Tuesday said quarterly profit jumped 73 percent as a recovery in business travel fueled higher room rates and management fees.

Hilton, the third-largest upscale U.S. hotel chain, said the trend toward stronger profit margins will lift 2005 earnings about 10 percent more than it had expected.

"We are in the up part of the classic hotel cycle ... it is a pattern that drives rates higher," Hilton Chief Executive Stephen Bollenbach (search) said on a conference call.

First-quarter net income rose to $64 million, or 16 cents per share, displacing lower-rate leisure travel," said Matthew Hart, the company's chief operating officer. The trend will boost both room rates and food and beverage business, he said.

Hilton operates hotels under the Hampton Inn (search) and Embassy Suites (search) brands, as well as its flagship hotels. It owns star properties in urban areas, like New York's Waldorf-Astoria (search), where the lodging recovery is strongest.

"It was reassuring that they raised their guidance," said Robert LaFleur, an analyst with Susquehanna Financial. There had been some concern heading into earnings season about whether hotel companies could maintain momentum, he said.

"A couple weeks ago some investors thought the economy was going over a cliff and the hotel industry along with it," LaFleur said.

The company also said it bought back 7.2 million shares of its stock in the quarter.

Excluding special items, Hilton reported a profit of 17 cents a share, beat the average analyst forecast of 13 cents a share, as compiled by Reuters Estimates.

Bear Stearns analyst Joe Greff in a report called results "a positive sign and evidence that accumulated room rate gains are translating into stronger operating profits."

Marc Falcone, an analyst with Deutsche Bank, said Hilton's results were "strong across the board," adding, "we are very excited about the level of share repurchase activity -- it's a good use of capital."

First-quarter revenue rose 8 percent to $1.08 billion, about in line with the $1 billion analysts had expected.

Revenue per available room, a key measure of health in the lodging industry, rose 9.1 percent on a comparable basis and is expected to rise 8 percent to 9 percent for the full year, the company said.

Hilton raised its full-year 2005 earnings per share target to 78 to 80 cents, compared with a January forecast that EPS would come in at the low 70 cents-a-share range, including a 6 cent-per-share hit from new accounting rules.

Harris Nesbitt analyst Brian Egger attributed about 4 cents of the higher guidance to the first quarter performance, 3 cents to increased expectations for the second through fourth quarters and 2 cents to 3 cents to the effects of an accounting change.

Hilton, based in Beverly Hills, California, said it sees total 2005 revenue at $4.510 billion to $4.535 billion.

Analysts expect a 2005 profit of 75 cents a share on revenue of $4.41 billion.

The company plans later this year to launch a marketing and and public relations campaign to boost the profile of its brands, Hart said. Hilton is also nearing the end of a program to improve room amenities including bedding, televisions, high-speed Internet access and clocks, he said.

The company's shares were up 42 cents, or 1.9 percent, at $22.45 on the New York Stock Exchange.