For the three months ended September 30, Beverly Hills, California-based Hilton reported net income of $79 million, or 30 cents a diluted share, falling short of analysts' expectations by one penny. A year earlier, it earned $94 million, or 35 cents a share.

The company had previously forecast lower profits due to empty rooms at its Honolulu and San Francisco operations and lower management fees from Conrad International Hong Kong, all due to the Asian economic crisis.

In a statement, it also cited higher debts and depreciation related to acquisitions and sluggish gambling operations in Atlantic City, N.J., and Las Vegas.

Revenues for the third quarter were $1.33 billion, compared with $1.31 billion a year earlier.

Earnings before interest, taxes, depreciation and amortization for Hilton's lodging division were up 16 percent.

Double-digit gains were reported at most of its "Top 10" luxury hotels located in cities with high barriers to entry from competitors, including Washington, New York, Chicago and New Orleans.

"We are confident in our ability to withstand what will be a difficult operating environment in Las Vegas for the next year or so, while taking advantage of prevailing economic conditions to continue growing our lodging business," chief executive Stephen Bollenbach said in a statement.

Hilton said its plan to separate its lodging and gambling businesses was on track. Earlier this summer, it agreed to merge its gaming businesses with those of Grand Casinos Inc.

The deal will create a new gambling company by the end of 1998 known as Park Place Entertainment Corp., which will become the nation's largest gambling company.

Hilton also agreed to buy three Mississippi-based hotels from Grand Casinos in a deal worth $1.2 billion.