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If You Invested $10,000 in Hilton Worldwide in January, Here's What Your Shares Are Worth Now

By Rich Smith - Aug 15, 2020 at 6:48PM

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Coronavirus did a real number on hotel demand -- and hotel stocks.

The International Monetary Fund called the global response to COVID-19 the "Great Lockdown" -- and it's a label that should strike fear into the hearts of investors in hotel stocks like Hilton Worldwide (HLT -0.56%).  

In the worst economic downturn since the Great Depression, here in the U.S. the pandemic eliminated perhaps 40 million jobs and caused a 33% plunge in second-quarter GDP. Most relevant to hotel stocks, lockdowns kept folks confined to their homes, unable (or unwilling) to travel -- and thus not needing hotel rooms.

Coronavirus microbes hovering over a city

Image source: Getty Images.

Hilton Worldwide, which despite the name gets 78.5% of its revenue from the U.S., saw sales slide 23% in the first quarter of 2020 (when the coronavirus began to take hold) -- then collapse into an 82% decline in Q2.

But revenue declines are just the start of this story. Hotels need to maintain a certain level of occupancy just to break even and generate cash to service the heavy debts accrued in building them. Hilton owes its creditors $11.7 billion. But as investing maven John Mauldin recently pointed out, "half of hotel rooms in the U.S. are empty as of six days ago. They need at least 80% occupancy to break even."  

Result: Hilton Worldwide stock that cost $111 a share at the beginning of this year closed at just $86 Friday. It's lost 22.5% of its value since the year began. If on Jan. 1 of this year you had invested $10,000 in Hilton stock, today you would have lost $2,250 of that investment.

And all you'd have left is $7,750.

HLT Chart

HLT data by YCharts

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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