Hilton Analysts Undaunted as Virus Fear Shuts Rooms in China
Hilton Analysts Unfazed as Rooms in China Closed Amid Virus Fear
(Bloomberg) -- Hilton Worldwide Holdings Inc. analysts shrugged off the impact of the coronavirus on the company after it mostly stopped taking new reservations for roughly 150 hotels in China due to the outbreak.
Some of the affected hotels -- which represent about 33,000 rooms -- may still operate for existing reservations and for emergency personnel, company spokesperson Nigel Glennie said in a phone interview. Some of the hotels may not be in operation at all, he said, without providing specifics.
Details about the closed rooms came during Hilton’s earnings conference call from Chief Executive Officer Christopher Nassetta, who said the company is working with local governments and health officials. He predicts a $25 million to $50 million impact on full-year adjusted Ebitda, assuming the outbreak and recovery lasts six to 12 months.
“This was slightly lower than what we expected the total impact to be,” Macquarie analyst Chad Beynon said in an email. China represents 3% of the company’s Ebitda, he wrote.
Even though Hilton has hundreds of hotels in China, the company doesn’t own any of them, SunTrust Robinson Humphrey’s C. Patrick Scholes said in a phone interview.
Nassetta’s commentary on the impact from the virus came after the company posted fourth-quarter results that analysts said beat expectations.
The company reported an earnings beat, with higher fees helping to offset a 1% contraction in revenue per available room, Citi analyst Smedes Rose said. The results underscore “the strength of the company’s fee-based model.”
Hilton’s shares rose 1.4% on Tuesday, marking five days of gains in the past seven trading sessions.
On the earnings conference call, Nassetta also pointed to a potential 100 basis point impact to comparable system-wide revenue per available room growth for the full year.
What Bloomberg Intelligence Says
“Hilton’s profit exposure to the coronavirus outbreak may be more moderate than that of cruise lines and Macau casinos ... Effects on 1Q and 2020 Ebitda would crimp profit by just 2-4% and 1-2%. Closed Hilton hotels in China account for less than 3.5% of its Ebitda, hotels and rooms.”
-- Analyst Brian Egger
--Click here for the research
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