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The coronavirus outbreak continues to dampen the hotel industry’s financial outlook for the year.
Wyndham Hotels and Resorts has closed about 70 percent of its hotels in China, and those that remain open are seeing fewer guests, Chief Financial Officer Michele Allen told investors on Thursday during a call detailing the company’s earnings for 2019.
“We expect this to continue through at least the end of March,” Allen said.
Occupancy has dropped about 75 percent at Wyndham’s China properties, Allen said.
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The company’s hotels in Southeast Asia, particularly in Korea, Singapore, and Thailand, are also experiencing declines in occupancy.
The market will likely remain soft for most of the year as occupancy recovers over a three- to six-month period, Allen said.
The company is expecting a 200 to 400 basis point decline in this year’s RevPAR, or revenue per available room, an important measure of fiscal health.
That could translate into a $5 million decrease in the first quarter’s EBITDA, or earnings before interest, taxes, depreciation, and amortization, another key measure of a company’s financial performance. For the full year, Allen is expecting an $8 million to $12 million drop in adjusted EBITDA.
The crisis could also impact the company’s pipeline of new hotels.
“From a net rooms growth perspective, we are expecting the vast majority of our China room openings initially scheduled for the first quarter to slip to later into the year.” Allen said. “As a result, we expect flat to negative room growth in China during the first quarter and for our first-quarter global net rooms growth to pace behind our full-year outlook.”
If hotel openings are delayed past this year, the risk to net room growth would be about 0.5 point, she said.
Wyndham is the latest hotel company to weigh in on the impact of coronavirus, which has caused more than 1,000 deaths in mainland China. Hilton CEO Chris Nassetta said during a conference call with investors earlier this week that the company expected a $25 million to $50 million impact on its full year EBITDA. Hilton has closed about 150 hotels in China.
Major airlines have canceled many flights to China, and some passengers have been quarantined on cruise ships in the area. Other cruises are skipping ports of call in the region.
Wyndham has about 1,500 hotels in China out of approximately 9,300 properties around the world. China represents 2 percent of the company’s adjusted EBITDA.
Wyndham CEO Geoffrey Ballotti said during the earnings call that coronavirus is “becoming a more important factor to our international franchising business.”
About 900 of the 1,000 hotel closures are of the Super 8 brand. Super 8 hotels in China are licensed under one franchisor. About 50 hotels have already reopened in the past few days, Ballotti said.
“Importantly, the majority of the closures resulted from our owners and franchisees doing everything they could to protect their team members and prevent the spread of the virus,” he said.
Wyndham is also waiving change or cancellation fees for guests traveling to or from China through Feb. 29.
Wyndham had a relatively positive 2019 before the outbreak.
Net income increased 49 percent o $64 million for the fourth quarter, and decreased 3 percent to $157 million for the full year. Adjusted EBITDA increased 22 percent to $153 million for the quarter, and 21 percent to $613 million for the full year.
The number of rooms systemwide grew 3 percent in 2019 over the previous year. The company’s development pipeline grew 7 percent year-over-year to 193,000 rooms.