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Hilton Says $720M Losses in 2020 Pushed it to Cut Costs Permanently

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Hilton $720M Losses

Hilton Says $720M Losses in 2020 Pushed it to Cut Costs Permanently

The ongoing coronavirus pandemic has impacted lives around the world. While many industries have seen huge setbacks, travel has seen one of the biggest declines due to bans and strict requirements, especially early on. So 2020 has been a year to forget for most airlines and hotel brands.

Travel spending in the U.S. totaled a mere $679 billion in 2020. That might sound like a lot, but it is actually a 42% annual decline year over year. That’s nearly half a trillion dollars less when compared to 2019, based on numbers from the U.S. Travel Association.

Now Hilton, the second largest hotel company, has published its massive losses for 2020. Hilton posted an $81 million loss in the third quarter and company leaders thought at the time they were on their way to a breakeven point. But losses almost tripled in the fourth quarter, up to $225 million. Hilton reported a $720 million loss for the entirety of 2020.

Company leaders say they used the crisis as an opportunity to position the business for higher earnings and lower labor costs in the future, Skift reports.

“The positive momentum in demand we saw through the summer and early fall was disrupted in November and December by rising Covid cases, tightening travel restrictions, and further hotel suspensions – particularly in Europe,” Hilton CEO Chris Nassetta said Wednesday during a call with investors. “We remain optimistic that accelerating vaccine distribution will lead to easing government restrictions and unlock pent-up travel demand.”

Hilton has cut costs significantly and has tried to be more efficient across all brands while travel demand was almost non-existent early last year. The company’s general and administrative expenses are down about 30%, said Kevin Jacobs, Hilton’s chief financial officer. One aspect of costs that Hilton can’t control is the possibility of an increase of the minimum wage to $15 per hour. Hilton CEO Chris Nassetta said he supports the movement  for the wage increase, if done in a multi-year phased approach.

“I think we should all assume the minimum wage is going to be going up over time because it needs to,” he said. “I am hopeful it will be done in a staged way and there will be other mechanisms built into the timing and geographical approach to make it make sense on all sides.”

While travel demand is still far from normal, Hilton has seen some positive signs. Group bookings inquiries were up 35% in January from the fourth quarter, and the company sees a generally robust calendar of group reservations in the latter part of this year. “I think there’s a great opportunity for the second half of the year,” Nassetta said.

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DDG
DDGhttp://dannydealguru.com
Based in NYC. Points/miles enthusiast for years and actively writing about it for the last 6+ years at Danny the Deal Guru. I'm always looking out for deals. Making a few bucks is always nice, but the traveling is by far the best part of this business.

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3 COMMENTS

  1. I see it now totally crashed in March now way back up. Should have bought it when COVID hit and cashed out now before it crashes again.

  2. Probably a great time to buy stock while it’s low before it bounces back. When it really opens up again they will probably double in profits.

    • You do realize their stock is at an all time high right… the stimulus is overpricing all asset price, which are screaming for a meltdown.

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