Hilton Has Temporarily Closed 150 Hotels In China

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Hilton was the first hotel company to release earnings and to have a call since the coronavirus outbreak started in Wuhan.

Conrad

Hilton franchisees have decided to close the majority of hotels in China and, once the outbreak is over, it probably takes a minimum of three to six months to get things rolling as usual.

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Here’s what CEO Mr. Nassetta stated:

While it is still early days drawing on the industry’s experience with SARS and other similar situations, we’ve tried to estimate the potential impact on our business.

Assuming the outbreak lasts around three to six months with an additional three – to six -month recovery period, for the full year, we would estimate a potential 100 basis point impact to comp system -wide RevPAR growth, assuming closed hotels ultimately wind up being non -comp.

We would expect roughly a half a point impact to net unit growth, which would be largely within our guidance range, and a $25 million to $50 million impact to full year Adjusted EBITDA.

At this point, roughly 150 of our hotels in China totaling approximately 33,000 rooms are closed.

Conclusion

I just went through the Hilton affiliated hotels in China, and they had no availability (or Diamond override only) at 150+ hotels. Considering that Hilton has 6,000+ hotels opened worldwide, this represents roughly 2% of their portfolio.

The situation in China not only affects the Greater China occupancy but destinations where Chinese business and leisure travelers flock to.

I recently spoke with a hotelier from China, and the occupancy rates at still open hotels are in the low to mid-single digits. It perhaps makes financial sense to close as occupancies such as these cannot even cover operating expenses.

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