Hilton chain keeps busy from New Mexico to Poland; two major projects announced after significant stock gains.

BEVERLY Hills-based Hilton Hotel Corp. announced two major projects last week, a conference hotel to open in Warsaw, Poland, in March and groundbreaking for a casino resort in New Mexico.

Wall Street yawned and Hilton stock stayed around $35. Later in the week, however, analysts Thomas Weisel Partners LLC downgraded the company along with its competitors Marriott International Inc. and Starwood Hotels & Resorts Worldwide Inc.

"It's probably a reaction because there has been such a rapid ran-up in values," said Alan X. Reay, president of Atlas Hospitality Group.

Hilton stock rose 46 percent in 2006. The company bought out its international partner for $5.7 billion last January and spent the rest of the year shedding assets.

"Revenues for hotels really went up tremendously last year and downgrading is probably a reflection that they don't expect as strong an increase as they did last year." Reay thinks the hotel industry is well positioned for a strong 2007 performance, although 2006 will be tough to top.

"Hilton has been clearing up their balance sheet, they're selling at high prices and making long-term management contracts, which is really the most lucrative part of the business," he said. "Each additional franchise they sign is almost all profit."

The 29-story Warsaw property, which will have a ballroom capable of holding 1,850 people, will be Poland's biggest conference hotel.

In Pojoaque, N.M., groundbreaking for the Buffalo Thunder Resort will take place this month. The resort, designed to be a four-star destination, will include a 390-room hotel, spa, restaurants, entertainment venues, meeting space and a casino. The resort, which will be able to recycle 100 percent of its water, is expected to open in late 2008.

The property is owned by the Pueblo of Pojoaque and expected to bring jobs to hundreds of Native Americans.

Reay said these announcements don't necessarily conflict with Hilton's effective 2006 strategy. The hotel chain has been shedding company-owned hotels in favor of long-term management contracts with little risk and a wide profit margin. With large projects, such as the two announced last week, however, Reay said hotel companies often buy a share of the equity, between 10 and 15 percent, in return for the company name on the property and a management contract with the hotel.

"When you consider they're going to have their name on a major hotel in a major market with a long-term management contract, it's very lucrative," he said.