Mold costs rise at Hilton
By Andrew Gomes
Advertiser Staff Writer
Hilton Hotels Corp. yesterday raised its expected cost to fix a mold problem in guest rooms at Hilton Hawaiian Village's Kalia Tower, bringing the projected bill to $55 million, or more than half the tower's construction cost.
It was the third increase in anticipated spending to correct a still-unexplained mold infestation that forced Hilton to close all 453 rooms at its newest Waikiki tower last July.
The company, which spent $20 million last year to eliminate the mold, yesterday said it expects to spend $35 million this year related to the mold situation.
A spokeswoman with Hilton Hawaiian Village said she could not elaborate on the growing mold-fix cost or describe work ongoing at Kalia.
"We are continuing to move forward on the remediation," said Hilton Hawai'i spokeswoman Karen Winpenny.
Kalia Tower guest rooms are still expected to reopen sometime between April and June, according to Hilton. Other parts of Kalia Tower remain open.
Hilton all along has stressed that mold-related repair costs were estimates that could change.
The expense has included investigation, destroying room furnishings, designing a fix and making repairs to the building. The expense also included eliminating mold from hallway ceilings in Lagoon Tower, a time-share project that has remained open.
The company reduced earnings last year by $20 million to pay for investigation work and account for the loss of room furnishings.
The additional $35 million in expected spending will pay for new furnishings and improvements to the building. The later expense will come out of Hilton's $355 million 2003 capital expenditure budget.
Kalia Tower opened in May 2001 at a cost of $95 million. Hilton said employees first reported finding mold in early June 2002. A mold investigation team from the Mainland arrived in mid-July, prompting the closing of guest rooms July 24.
Hilton is trying to recover mold repair costs and lost revenue from the business interruption under its property insurance policy, but noted yesterday that insurance carriers still have not taken a position on whether such coverage is permitted.
The Kalia Tower mold problem, Hilton reported, is not having a significant effect on the company's bottom line.
The Beverly Hills, Calif-based hotel chain, which operates about 2,000 hotels in the United States, yesterday reported fourth-quarter net income of $40 million, or 11 cents a share. That compared with $4 million, or 1 cent per share, for the 2001 fourth quarter.
The company also reported full-year earnings of $198 million, or 53 cents per share, vs. $166 million, or 45 cents per share, in 2001.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
