Hilton Hotels Corp.’s profit in the first quarter of 2003 plunged 74% from one year earlier as the sluggish economy and Operation Iraqi Freedom limited travel demand.

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Beverly Hills, Calif.-based Hilton also lowered its 2003 forecast, blaming deteriorating market conditions. Hilton’s revenue per available room (or RevPAR) dropped 2.2% during the first quarter.

"What we anticipated would be a difficult period due to continued economic weakness was made even more challenging by world events," said Stephen Bollenbach, CEO. "Despite the challenges, we were able to maintain solid occupancy levels in most of our larger markets, though changes in the mix of business made it difficult to achieve room rate growth and maintain our margins."

The average daily room rate at Hilton Hotels dropped 2.7% to $145.82, though occupancy rose slightly from 66.5% a year ago to 66.8% at the close of the quarter. One factor that also hampered the company’s first quarter performance was increased insurance costs, reports the firm.

Hilton plans to add 100 to 115 hotels and 12,000 to 15,000 rooms this year. About two-thirds of the hotels are expected to fall under the Hampton Inn and Hilton Garden Inns brands.