The Hilton group has been forced to close 150 hotels in China due to the coronavirus outbreak. CEO Chris Nassetta revealed that this equates to about 39,000 non-revenue generating rooms and fears that this could affect the business for up to a year. This is based on past experience with the Sars epidemic.
Nassetta said:
We’ve tried to estimate the potential impact on our business. 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
Although it will mostly affect China and elsewhere in Asia, it will also affect the US and other global markets with a downturn in outbound China travel.
The inbound China market currently accounts for about 2.7% of Hilton’s EBITDA (earnings before interest, tax, depreciation and amortization). The outbreak could shave off $25 million to $50 million in 2020.
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Revenues had already been impacted previously by the Hong Kong pro-democracy protests with revenue per available room down 7.7 per cent.
Nevertheless, Nasseta remained upbeat:
Our brands continue to perform well, achieving the strongest market share gains we’ve seen in a decade, despite a more challenging environment that weighed on our top line.