Hilton Takes Charge for Mold in Hotel

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Hilton Takes Charge for Mold in Hotel

Tue Jul 30, 3:37 PM ET

By Doug Young

LOS ANGELES (Reuters) - Hilton Hotels Corp. said on Tuesday it took a

second-quarter charge of $10 million related to a 435-room hotel tower in

Hawaii, now closed indefinitely after mold was discovered in the building.

The charge covers estimated future costs to fix the problem, which was

discovered last month in the $95 million, 24-story Kalia tower that opened

last year in the Hilton Hawaiian Village resort at Waikiki.

The tower was closed completely on July 23. About 71 rooms were occupied at

the time. Kalia is one of a half dozen towers at the resort complex -- one

of the biggest on Waikiki -- and accounts for about 15 percent of all rooms

there.

Hilton said final remediation costs are hard to predict, but added it

expects the closure " will have no significant impact " on the resort's

operating earnings for the balance of this year.

Excess humidity in the rooms is the source of the mold, Pat Terwilliger,

senior vice president in charge of architecture and construction, told

investors during a conference call to discuss the company's second-quarter

results.

" We've got a team of technicians that are currently at the property, "

Terwilliger said. " My guess is we're going to find there's a number of

contributing factors here. "

Hilton Chief Executive Officer Bollenbach said the company intends

to " keep open " its options on how it deals financially with issues like

remediation, loss of business and other potential liability.

In addition to property damage and loss of business, Hilton could also face

liability from a personal injury standpoint, according to lawyers who deal

with mold liability.

Hilton said it has received just one report so far of adverse health affects

that may be related to the mold. In that case, an employee sustained a rash

but returned to work the next day saying she felt fine, according to Hilton.

Schall, managing director for Hilton Hawaiian Village, said a team of

experts hired to find the source of the mold identified it as Eurotium. The

gray mold is also called Aspergillus.

When it grows indoors, Eurotium can irritate the eyes, nose and throat and

trigger serious respiratory diseases such as asthma, said ph Jarvis, an

occupational and environmental health expert also hired by Hilton to test

about 50 employees who work in the Kalia Tower.

Hilton's potential for personal injury liability in the situation is unclear

because precedents are relatively few in that area, according to attorneys

familiar with mold liability. In general, most mold-related complaints come

from people whose allergies are exacerbated by breathing in mold spores,

they said.

(Mike Gordon in Honolulu contributed to this report)