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Coronavirus Closes 150 Hilton Hotels in China, Effects Could Last a Year

By Rich Smith - Feb 11, 2020 at 2:03PM

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Hilton weighs risks to revenue growth, earnings.

Today in coronavirus news, a few new developments.

First and foremost, China's coronavirus has a new name. Initially designated 2019-nCoV, the World Health Organization has just renamed the coronavirus outbreak "COVID-19."  

COVID-19 also set a few new records today, with total confirmed cases of the disease passing 43,143, total deaths more than 1,000, and -- some good news for a change -- total recoveries worldwide now over 4,300. And of course, coronavirus is continuing to take a toll on business, in China especially.

Collage of Chinese flag, coronavirus image, and word coronavirus

Image source: Getty Images.

In an earnings report this morning, Hilton Hotels (HLT -0.23%) announced that it earned $0.61 per share in its fiscal fourth quarter, and $3.04 per share for the full year 2019. Pro forma profits were $1.00 and $3.90 respectively, both numbers ahead of Wall Street's consensus expectations.  

Mind you, all of these earnings were recorded before the coronavirus outbreak began, and even then, Hilton noted that its revenue per available room (RevPAR) was decelerating, from up 0.8% for the full year to down 1% for the fiscal fourth quarter. Now, COVID-19 is threatening to weigh on results further.

In its post-earnings conference call this morning, Hilton CEO Christopher Nassetta revealed that Hilton has closed 150 of its hotels, containing 33,000 revenue-generating rooms in China because of travelers' concerns over contracting the coronavirus. Attempting to estimate the disease's future effect on its business, Nassetta noted that "assuming the outbreak lasts around three-to-six months, with an additional three-to-six month recovery period for the full year," Hilton's total RevPAR worldwide could lose another percentage point this year.

The virus's impact would be weighted toward the beginning of the year 2020. Profits-wise, COVID-19 could subtract $25 million to $50 million from full-year adjusted EBIDTA.

Despite all this, Hilton stock is up 2% in afternoon trading.  

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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