Hilton bracing for impact from coronavirus

Hilton is projecting impact from the ongoing coronavirus outbreak will shave $25 million to $50 million off the company’s EBITDA for 2020, while concurrently cutting comparable systemwide RevPAR growth for the year by 1%.

The company reported during Tuesday’s full-year earnings call that it has closed 150 hotels in China, comprising approximately 33,000 rooms.

Hilton CEO Christopher Nassetta provided further color on the “evolving” situation during the call, telling investors that the hotel group also expects the health crisis to curb net unit growth for 2020 by half a basis point.

“While it is still early days, drawing from the industry’s experience with SARS and other similar situations, we’ve tried to estimate the potential impact on our business,” said Nassetta. “[We’re predicting] three to six months of escalation and impact from the outbreak, and then these things don’t typically turn around overnight, so another three to six months of recovery.”

Nassetta added that Hilton expects the vast majority of negative impact to be felt throughout China and Asia but that Chinese travel to the U.S. and other markets will also take a hit.

According to Nassetta, the inbound China market currently accounts for roughly 2.7% of Hilton’s companywide EBITDA, while outbound Chinese travel contributes to around 0.7% of systemwide revenues outside of China and 0.2% of systemwide revenues in the U.S.

The coronavirus outbreak comes as Hilton reports a relatively soft performance in China and the Asia Pacific region for 2019. For the fourth quarter, the company reported a 3.8% RevPAR decline across Asia Pacific, with China RevPAR dropping 7.8% due to a slowdown in leisure travel and the Hong Kong protests. For the full year, RevPAR in Asia Pacific and China was down 0.9% and 3.2%, respectively.

Companywide, Hilton posted a systemwide RevPAR decrease of 1% for the fourth quarter, with Nassetta citing “weaker than expected business transient performance.” For the full year, Hilton’s systemwide RevPAR grew just 0.8%.

Net income for the quarter fell more than 21%, to $176 million, while Hilton’s net income for the year rose 15% to $886 million.

Source: Read Full Article