Hilton gets $25M from mold lawsuit

The payment is for costs incurred when it had to fix its Kalia Tower

Hilton Hotels Corp. received $25 million from settling its lawsuit over the 2002 mold growth in the Hilton Hawaiian Village's Kalia Tower -- a problem the company has said cost more than $55 million to fix.

Hilton and several parties in the lawsuit over construction of the tower reached a settlement in February, but declined to say how much was recovered in the deal.

But in Hilton's first-quarter earnings statement yesterday, the company listed a $25 million recovery from a legal settlement in Hawaii.

"The settlement was from suits that we filed in regard to the Kalia Tower," said Kathy Shepard, vice president of corporate communications for Hilton.

The settlement completed years of litigation involving the Kalia Tower, which Hilton opened in May 2001. About a year later, there were such large quantities of mold growing in the tower's 453 guest rooms that the property had to be shut down and a rash of lawsuits followed.

Hilton and various contractors sued each other, and the hotel chain faced a class-action suit from customers who said Hilton had not disclosed the problem.

Hilton settled with customers in late 2005, agreeing to give those involved either $150 travel coupons or $50 in cash.

With the settlement and Hilton's agreement to give coupons to guests affected by the mold, most if not all outstanding issues have been resolved, Shepard said.

In its earnings statement, Hilton said its first-quarter profit climbed 63 percent, driven by strengthening demand from business travelers and various one-time items.

Beverly Hills, Calif.-based Hilton reported net income of $104 million, or 26 cents per share, for the three months ended March 31, versus a profit of $64 million, or 16 cents a share, a year earlier.

Nonrecurring items like a contract termination fee, foreign exchange gains and other items bolstered the most recent quarter's results by 6 cents a share.

Revenue rose 41 percent to $1.52 billion from $1.08 billion in the year-earlier period.

The earnings-per-share results beat the average estimate of 18 cents by analysts surveyed byThomson Financial.The analysts' forecasts included the impact of expensing stock options.

Revenue per available room, a key performance indicator, increased 9 percent, driven by rate increases and high demand in most major markets, the company said. Increased demand from both business and leisure travelers resulted in high single-digit or double-digit average daily rate increases at many of its major U.S. hotels.

The company's profit margins fell in the quarter as Hilton embarked on an aggressive refurbishing of some of its high-profile properties, including the New York Hilton and a resort in Hawaii. Margins were also affected by a new marketing campaign and higher energy costs, the company said.