Investor PRESENTATION - May 2018 - Hilton - Investor Relations
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Investor
PRESENTATION
May 2018
Conrad Bora Bora Nui, French Polynesia
HLT VALUE PROPOSITION
Hilton's scale, global presence and leading brands at multiple price
points drive a network effect delivering industry-leading performance
Leading • Award-winning brands that serve guests
Brands serving
for virtually any lodging need they have
virtually any
HLT Financial anywhere in the world
lodging need
Performance anywhere • Leads to satisfied customers, including
over 74 million Hilton Honors loyalty
members
• Creates a network effect that drives a
Satisfied, strong global RevPAR premium of 14%(a)
Loyal
Leading Customers • These premiums drive strong financial
Hotel returns for the company and our hotel
Supply & owners
Pipeline
• Satisfied owners continue to invest in
growing Hilton’s brands, driving leading
organic net unit growth with de minimis
Premium, use of capital
Satisfied Growing • We believe the reinforcing nature of
Owners Market Share
these activities will allow Hilton to
outperform the competition
(a) Source: STR (3 months ended 3/31/2018). “RevPAR” or “Revenue per Available Room” represents hotel room revenue divided by room nights available to guests for a given period.
© 2018 Hilton Proprietary 1
Investment Thesis
1. THE BEST-PERFORMING PORTFOLIO OF BRANDS IN THE
BUSINESS
2. A RESILIENT, FEE-BASED BUSINESS
3. A RECORD PIPELINE GENERATING SUBSTANTIAL
RETURNS ON MINIMAL CAPITAL INVESTMENT
4. SUPPORTED BY STRONG FUNDAMENTALS AND A
DISCIPLINED STRATEGY
5. GENERATING SIGNIFICANT FREE CASH FLOW FOR
SHAREHOLDERS
2
© 2018 Hilton Proprietary
1. THE BEST-PERFORMING PORTFOLIO OF
BRANDS IN THE BUSINESS
14 Industry-leading, clearly defined, global brands that drive a
14% global RevPAR premium(a)
Luxury &
Full Service All Suites Focused Service Timeshare
Lifestyle
Strong commercial engines support $40 billion in annual system revenue(b)
Loyalty Worldwide Online & Reservations & Revenue Information Supply
Program Sales Mobile Customer Care Management Technology Management
~74M members, ~$10B in annual +45M
~250M unique Pricing and yield Proprietary ~$5B of annual
59% system revenue interactions/year
site visits/year systems platform spend influenced
occupancy
With ~5,300 properties & ~863,000 rooms in 106 countries and territories,
Hilton is one of the world’s largest hotel companies
(a) Source: STR (3 months ended 3/31/2018). “RevPAR” or “Revenue per Available Room” represents hotel room revenue divided by room nights available to guests for a given period.
(b) System revenue includes estimated revenues of franchised properties in addition to revenues from properties owned, leased or managed by Hilton.
© 2018 Hilton Proprietary 3
1. THE BEST-PERFORMING PORTFOLIO OF
BRANDS IN THE BUSINESS
We are the most innovative hotel company, leading in delivering
personalized experiences to our guests
The highest-rated travel app, downloaded every 8 seconds
• Exclusively allows guests to select their specific rooms on their phones
• Digital Key enables guests to use their phones as room keys at the most
hotels by far - with 4,000 hotels expected by the end of 2018
• Connected Room – the first mobile-centric hotel room, by means of our app,
will enable members to control lighting, HVAC and entertainment options
AT ~5,100
PROPERTIES
GLOBALLY
AT 3,200+
PROPERTIES
DIGITAL CHECK-IN ROOM SELECTION DIGITAL KEY
© 2018 Hilton Proprietary 41. THE BEST-PERFORMING PORTFOLIO OF
BRANDS IN THE BUSINESS
Hilton Honors loyalty program enables a better, more personalized
hotel stay, driving incremental value to the system
HILTON HONORS IS OFFERING MORE VALUE TO MORE MEMBERS
Members 74M
Share of system
36M Occupancy(b)
2012 2018(a)
59%
+15% CAGR +220 BPS YOY
INNOVATIVE NEW FEATURES & PARTNERSHIPS
POINTS & MONEY 2.0 SHOP WITH POINTS POINTS POOLING
Can choose any combination The first hotel loyalty Can pool Points into a single
of Points and money to pay program to enable members account (for free), generating
for a stay, using an interactive to use their Points on incremental reward stays and
“Slider.” Amazon.com. increasing engagement.
(a) As of March 31, 2018
(b) For the three months ended March 31, 2018
© 2018 Hilton Proprietary 52. A RESILENT, FEE-BASED BUSINESS
Top-Line Driven Majority Franchise Fees Capital Efficient Growth
90% 70% 6.5%
Adj. EBITDA of total fees
from fees, 90% franchise NUG(b)
revenue driven(a) driven(a)
+/- 1% of RevPAR growth Increasing franchise fees as contracts
roll over at higher published rates ~$185M Total HLT
is roughly investment in pipeline, with over
4.8% in-place
+/- 1% of Adjusted EBITDA rate vs. 5.6%
~$160M annual
Adj. EBITDA
50% under construction and
growth published rate(c) average contract term of 19 years
Meaningful Fee Growth Diversified Across Geographies and Chain Scales
MANAGEMENT & FRANCHISE FEES(d) ADJ. EBITDA BY GEOGRAPHY(a) ROOMS BY CHAIN SCALE(f)
Middle East
Americas
$1,939M Non-U.S.
4%
& Africa
3%
Luxury Other
3% 1%
Asia
Pacific
11%
$814M Upper
Upper
Upscale
Midscale 32%
Europe
30%
11%
U.S.
71%
2009(e) LTM(a)
+11% CAGR
No single U.S. market Upscale
accounts for more than 3% of 34%
Adj. EBITDA
(a) Based on last twelve months (“LTM”) 3/31/2018 calculated as the three months ended 3/31/2018 plus the year ended 12/31/2017 less the three months ended 3/31/2017. For Adjusted EBITDA, excludes corporate and other.
(b) Net Unit Growth (NUG) based on year-end 12/31/2017.
(c) As of or for the three months ended 3/31/2018. Effective franchise rate is up 85 bps since FY 2007 and is calculated as the total franchise fee revenue divided by total franchise room revenue. Published franchise rate is calculated as the weighted average of current published brand
franchise fee rates.
(d) Excludes amortization of contract acquisition costs recorded as contra-revenue.
(e) Does not include the effect of the new revenue recognition accounting standard.
6
© 2018 Hilton Proprietary
(f) Room count as of 3/31/2018. Other includes HGV.3. A RECORD PIPELINE GENERATING SUBSTANTIAL
RETURNS ON MINIMAL CAPITAL INVESTMENT
BEST PERFORMING BRANDS
White space: Urban Micro,
Luxury Collection, Luxury
Lifestyle, Hilton+
Existing brands in current markets Existing brands in new markets Organically developed new brands
~55% of pipeline ~20% of pipeline ~25% of pipeline
Resulting in: Record pipelines across all brand segments with minimal HLT capital investment
Pipeline rooms Under Construction % Pipeline Outside U.S. 3rd Party Investment HLT Investment
355K 184K 53% $50B $185M
Stabilized Adj. EBITDA Illustrative Value Creation(a)
$700M $9,500M
(a) Based on 13.5x Illustrative Adjusted EBITDA. Figure is illustrative only and does not reflect the actual valuation or the view of Hilton with respect to proper valuation. The market may attribute a different valuation.
© 2018 Hilton Proprietary 73. A RECORD PIPELINE GENERATING SUBSTANTIAL
RETURNS ON MINIMAL CAPITAL INVESTMENT
Development focused on balanced global growth - brand portfolio
drives high quality, high return, industry-leading organic growth
enabled by demand patterns around the world
LEADING SHARE OF FUTURE DEVELOPMENT MARKET SHARE IS
DEVELOPMENT IN EVERY REGION(a) ~4X LARGER THAN CURRENT SHARE
GLOBAL SHARE OF ROOMS UNDER
CONSTRUCTION/EXISTING SHARE(a)
Existing
Room Rooms Under 4.1x
Supply Construction
% of Total % of Total 2.9x
United States 12% 25%
2.2x
Americas ex. U.S. 3% 15%
Europe 2% 13%
Middle East, Africa 3% 17%
Asia Pacific 1% 22%
Global System 5% 20%
(a) Source: STR Global Census, April (adjusted to March 2018) and STR Global New Development Pipeline, March 2018.
© 2018 Hilton Proprietary 83. A RECORD PIPELINE GENERATING SUBSTANTIAL
RETURNS ON MINIMAL CAPITAL INVESTMENT
Industry-leading growth with great sight lines into future development
GLOBAL SYSTEM ROOM GROWTH HLT NET UNIT GROWTH (000s of rooms)
2007-TODAY(a)
International U.S.
74%
55.0
51.6
69% 43.1 45.1
36.2 58%
58% 66%
(b)
23.6 25.4 57% 69%
53%
18.8 18.3
42% 43% 57%
60% 51%
42%
33% 57% 49% 43% 47% 43% 31% 34%
(c)
40%
27% 2010 2011 2012 2013 2014 2015 2016 2017 2018E
(d)
23% 46% 38% 35% 26% 29% 22% 20% 21%
18% % Conversions(e)
(a) Note: “2007” metrics are as of 6/30/07, except for H which is as of 12/31/07; “Today” metrics are as of most recent reporting: 12/31/2017 for MAR and CHH, and 3/31/2018 for HLT and other peers.
(b) Reflects MAR acquisition of HOT in both periods. This page contains additional trademarks, service marks and trade names of
(c) Excl. timeshare properties due to lack of 2007 data availability for WYN. others, which are the property of their respective owners.
(d) Accor data reflects sale of Motel 6 and Studio 6 brands and the acquisition of Fairmont Raffles Hotels International Group. All trademarks, service marks and trade names appearing in this presentation
(e) As a % of gross room openings. are, to our knowledge, the property of their respective owners.
Source: Company filings.
© 2018 Hilton Proprietary 94. SUPPORTED BY STRONG FUNDAMENTALS…
GROWING CUSTOMER BASE THAT HOTEL UNDER-PENETRATION IN
CAN & WANT TO TRAVEL HIGH GROWTH MARKETS
15.8
2x
(hotel rooms per 1,000 people)
GLOBAL MIDDLE CLASS
Last 20 years,
double again
next 20 years
UNITED STATES
1.1 1.5
0.2
GLOBAL TOURIST
+1BN
ARRIVALS
Incremental
CHINA
BRAZIL
annual trips
INDIA
expected over
next 20 years
Source: STR, UNWTO, World Bank, OECD
© 2018 Hilton Proprietary 10… AND A DISCIPLINED STRATEGY
ALIGN CULTURE & • Performance-driven, purpose-led culture based on common vision,
ORGANIZATION mission, values and key strategic priorities
STRENGTHEN • Maximize relevance of existing brands, strategically add new brands
BRANDS & • Build on leading commercial capabilities to maximize revenues
COMMERCIAL • Lead in digital and personalization capabilities
SERVICES • Drive deeper loyalty and more direct relationships with guests through
PLATFORM Hilton Honors
• Deliver industry-leading, high-quality organic net unit growth
EXPAND GLOBAL
• Fill gaps with the right brand in the right location at the right time
FOOTPRINT
• Expand luxury portfolio; execute international growth strategy
• Grow market share
MAXIMIZE
• Grow free cash flow per share, preserve strong balance sheet, and
PERFORMANCE
accelerate return of capital
© 2018 Hilton Proprietary 115. GENERATING SIGNIFICANT FREE CASH FLOW
AND CAPITAL RETURN POTENTIAL
2018 OUTLOOK(a)
SAME STORE NET UNIT FEE RATE
GROWTH Effective Franchise
+2% to +4% + 6.5%
(Y/Y % chg.) Rate = 4.8%
Annual Adj. EBITDA 1 Pt. = ~$20-25M 10K rooms = ~$20M 10 bps = ~$20M
steady-state
Sensitivity(b)
General and $400-425M
Administrative Expense
$2,060M to $2,100M
Adj. EBITDA +9% Y/Y at midpoint
Available for $1.7B to $1.9B
shareholder returns
$1.5B to $1.7B
Share repurchases
(a) Outlook as of 4/26/2018.
(b) Sensitivity within the ranges given.
© 2018 Hilton Proprietary 12Appendix
Waldorf Astoria Resort Boca Raton, FloridaFLEXIBLE CAPITAL STRUCTURE WITH
SIGNIFICANT LIQUIDITY
CAPITAL STRUCTURE DEBT BREAKDOWN / SCHEDULED AMORTIZATION
OVERVIEW(a) AND MATURITIES(a)(b)
Net debt % fixed ($ in millions) Weighted average term: 6.6 years
$7.2B 85%
$4,000
$3,419
$3,000
Net leverage(c) % unsecured
3.5x 53% $2,000
$1,500
$1,000
% freely $1,000
$900
WACD $600
prepayable
4.3% 47% $0 $0 $0 $90 $0
$0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
(a) Represents pro forma information to include the effect of the stock buyback from HNA Tourism Group Co., Ltd. (“HNA”) and the senior notes offering and use of proceeds therefrom, each of which occurred in April 2018, as if they occurred on March 31, 2018.
(b) Excludes capital lease obligations and other debt of our consolidated variable interest entities.
(c) Ratio of pro forma net debt as of 3/31/2018 to the midpoint of FY 2018 Adjusted EBITDA outlook range as of 4/26/2018. Ratio of pro forma net debt as of 3/31/2018 to LTM 3/31/2018 Adjusted EBITDA was 3.7x.
© 2018 Hilton Proprietary 14RECONCILIATIONS
($ in millions)
Q1 2018 FY 2017
Net income $ 163 $ 1,089
Interest expense 83 351
Income tax expense (benefit) 58 (336)
Depreciation and amortization 82 336
EBITDA 386 1,440
Gain on foreign currency transactions (11) (3)
Loss on debt extinguishment - 60
FF&E replacement reserve (a) 12 55
Share-based compensation expense 28 121
Amortization of contract acquisition costs 7 17
Net other expenses from managed and franchised properties 21 172
Other adjustment items (b) 2 47
Adjusted EBITDA $ 445 $ 1,909
As of As of
Mar. 31, 2018 Dec. 31, 2017
Long-term debt, including current maturities $ 6,605 $ 6,602
Add: unamortized deferred financing costs and discount 78 81
Long-term debt, including current maturities and excluding unamortized deferred financing
costs and discount 6,683 6,683
Add: Hilton's share of unconsolidated affiliate debt, excluding unamortized deferred
financing costs 15 13
Less: cash and cash equivalents (610) (570)
Less: restricted cash and cash equivalents (73) (100)
Net debt $ 6,015 $ 6,026
Pro forma adjustments (c) 1,190
Pro forma net debt (c) $ 7,205
Net debt/Adjusted EBITDA ratio 3.1x 3.2x
Pro forma net debt/Adjusted EBITDA ratio (d) 3.5x NA
(a) Represents furniture, fixture & equipment (“FF&E”) replacement reserves established for the benefit of lessors for requisition of capital assets under certain lease agreements.
(b) Includes adjustments for severance, transaction costs and other items.
(c) Includes the effect of the stock buyback from HNA and the senior notes offering and use of proceeds therefrom, each of which occurred in April 2018, as if they occurred on March 31, 2018.
(d) Ratio of pro forma net debt as of 3/31/2018 to the midpoint of our FY 2018 Adjusted EBITDA guidance range as of 4/26/2018.
© 2018 Hilton Proprietary 15DISCLAIMER
This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements related to our expectations regarding the
performance of our business, our financial results, our liquidity and capital resources and other non-historical statements. You can identify these forward-
looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,”
“predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements
are subject to various risks and uncertainties, including, among others, risks inherent to the hospitality industry, macroeconomic factors beyond our control,
competition for hotel guests and management and franchise contracts, risks related to doing business with third-party hotel owners, performance of our
information technology systems, growth of reservation channels outside of our system, risks of doing business outside of the United States and our
indebtedness, as well as those described under the section entitled “Risk Factors” in Hilton Worldwide Holdings Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2017, as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission
(“SEC”), which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or
results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction
with the other cautionary statements that are included in this presentation and in our filings with the SEC. We undertake no obligation to publicly update or
review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
All results herein, including prior year, reflect the adoption of new accounting standards, including Accounting Standards Update No. 2014-09, Revenue from
Contracts with Customers (Topic 606), unless otherwise noted. This presentation includes certain financial measures, including adjusted earnings before
interest expense, taxes, depreciation and amortization (“Adj. EBITDA”), Net Debt, and Net Debt to Adj. EBITDA ratio, that are not calculated in accordance
with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP financial measures should be considered only as supplemental to, and not as
a substitute for or superior to, financial measures prepared in accordance with U.S. GAAP. Please refer to the Appendix and footnotes of this presentation
for a reconciliation of the historical non-GAAP financial measures included in this presentation to the most directly comparable financial measures
prepared in accordance with U.S. GAAP. In addition, this presentation includes Pro Forma Net Debt and Pro Forma Net Leverage as of March 31, 2018. Please
refer to Hilton Worldwide Holding Inc.’s Current Report on Form 8-K dated April 26, 2018 for additional information on the stock buyback from HNA and the
senior notes offering and use of proceeds therefrom, and the effect of the adoption of new accountings standards..
Slides in this presentation include certain Adj. EBITDA amounts that are used only for illustrative purposes to present illustrative Adj. EBITDA amounts by
applying assumptions to existing rooms pipeline, increases of in-place rates and increases in RevPAR, as applicable, in each case based on information for
the LTM ended March 31, 2018. These amounts do not represent projections of future results and may not be realized. Value information on such slides that
is derived from such illustrative Adj. EBITDA amounts is indicative only, based upon a number of assumptions, and does not reflect actual valuation. Please
review carefully the detailed footnotes in this presentation.
© 2018 Hilton Proprietary 16“It has been, and continues to be, our
responsibility to fill the earth with the light
and warmth of hospitality.”
CONRAD HILTON
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