Investor PRESENTATION - November 2017 - Hilton - Investor Relations

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Investor PRESENTATION - November 2017 - Hilton - Investor Relations
Investor
PRESENTATION
November 2017

                Conrad Bora Bora Nui, French Polynesia
Investor PRESENTATION - November 2017 - Hilton - Investor Relations
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
                                                                                                                                                                              approximately 73 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 (9 months ended 9/30/2017). “RevPAR” or “Revenue per Available Room” represents hotel room revenue divided by room nights available to guests for a given period.

                                                                                                                     © 2017 Hilton Confidential and Proprietary                                                          1
Investor PRESENTATION - November 2017 - Hilton - Investor Relations
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
                      © 2017 Hilton Confidential and 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 $36 billion in annual system revenue(b)
                 Loyalty                             Worldwide                                  Online &                        Reservations &                              Revenue             Information       Supply
                 Program                              Sales                                      Mobile                         Customer Care                              Management           Technology      Management

           ~73M members,                           ~$10B in annual                                                                    +47 million
                                                                                                ~600M site                                                                Pricing and yield      Proprietary    ~$6B of annual
             57% system                               revenue                                                                      interactions/yr.
                                                                                                visits/year                                                                   systems             platform     spend influenced
             occupancy

       With 5,168 properties & ~838,000 rooms in 103 countries and territories,
                 Hilton is one of the world’s largest hotel companies

(a)   Source: STR (9 months ended 9/30/2017). “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.

                                                                                                                     © 2017 Hilton Confidential and 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,
             which is done more than a million times a month
           • Digital Key enables guests to use their phones as room keys at the most
             hotels by far - with 2,500 hotels expected by the end of 2017
           • Coming soon – Connected Room – the first mobile-centric hotel room, by
             means of our app, will enable members to control lighting, HVAC and
             entertainment options

  AT 4,800+
  PROPERTIES
  GLOBALLY

                                                                                                AT 2,500+
                                                                                              PROPERTIES
                                                                                                  YE 2017

               DIGITAL CHECK-IN        ROOM SELECTION                           DIGITAL KEY

                                   © 2017 Hilton Confidential and Proprietary                               4
1. 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   73M
                                                                          Share of system
                                         36M                                Occupancy(b)

                                             2012             Today(a)
                                                                                                               57%
                                            +16% CAGR                                                       +160 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 September 30, 2017.
(b) For the three months ended September 30, 2017.

                                                                   © 2017 Hilton Confidential and Proprietary                                    5
2. A RESILENT, FEE-BASED BUSINESS

Top-Line Driven                                                                                    Majority Franchise Fees                                                                               Capital Efficient Growth

 90%                                                                                                   70%                                                                                                 6.7%
                                               Adj. EBITDA                                                                                              of total fees                                                                              Managed &
                                               from fees, 90%                                                                                           franchise                                                                                  Franchised
                                               revenue driven(a)                                                                                        driven(a)                                                                                  NUG(b)

 +/- 1%                   of RevPAR growth                                                         Increasing franchise fees as contracts
                                                                                                   roll over at higher published rates                                                                      $157M 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
                                                                                                                                                                                                            51% under construction and
                            growth                                                                   published rate(c)                                                                                      average contract term of 19 yrs

Meaningful Fee Growth                                                                                 Diversified Across Geographies and Chain Scales
MANAGEMENT & FRANCHISE FEES                                                                           ADJ. EBITDA BY GEOGRAPHY(a)                                                                                ROOMS BY CHAIN SCALE(d)
                                                                                                                            Americas                   Middle East
                                                                $1,885M                                       Asia
                                                                                                                            Non-U.S.
                                                                                                                              4%
                                                                                                                                                        & Africa
                                                                                                                                                          3%
                                                                                                                                                                                                                                    Luxury Other
                                                                                                                                                                                                                                      3%    1%
                                                                                                             Pacific
                                                                                                              10%
$814M                                                                                                                                                                                                      Upper
                                                                                                                                                                                                                                                          Upper
                                                                                                                                                                                                                                                         Upscale
                                                                                                        Europe                                                                                            Midscale                                         33%
                                                                                                         12%                                                                                                30%

                                                                                                                                                                               U.S.
                                                                                                                                                                               71%
2009                                                                   LTM(a)

         +11% CAGR
                                                                                                                                                            No single U.S. market                                                                     Upscale
                                                                                                                                                         accounts for more than 3% of                                                                  33%
                                                                                                                                                                Adj. EBITDA

 (a)   Based on LTM 9/30/2017 on a pro forma basis calculated as the nine months ended 9/30/2017 plus the pro forma year ended 12/31/2016 less the pro forma nine months ended 9/30/2016. For Adjusted EBITDA, excludes corporate and other.
 (b)   Net Unit Growth (NUG) based on LTM 9/30/2017.
 (c)   As of or for the three months ended 9/30/2017.
 (d)   Room count as of 9/30/2017. Other includes HGV.
                                                                                                                                                                                                                                                                   6
                                                                                                                     © 2017 Hilton Confidential and Proprietary
3. A RECORD PIPELINE GENERATING SUBSTANTIAL
    RETURNS ON MINIMAL CAPITAL INVESTMENT

                                                                                                       BEST PERFORMING BRANDS

                                                                                                                                                                                                                                   White space: Urban
                                                                                                                                                                                                                                   Affordable, Luxury
                                                                                                                                                                                                                                   Collection, Luxury Lifestyle,
                                                                                                                                                                                                                                   Hilton+

      Existing brands in current markets                                                                 Existing brands in new markets                                                                          Organically developed new brands

         ~55%                                      of pipeline                                         ~25%                                       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

      335K                                                         171K                                                               51%                                                          $50B                              $157M
                                                                        Stabilized Adj. EBITDA                                                                      Illustrative Value Creation(a)

                                                                           $650M                                                                                          $8,800M
(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.

                                                                                                                              © 2017 Hilton Confidential and Proprietary                                                                                           7
3. 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)                                                                                                               ~4.5X LARGER THAN CURRENT SHARE
                                                                                                                                                                    GLOBAL SHARE OF ROOMS UNDER
                                                                                                                                                                    CONSTRUCTION/EXISTING SHARE(a)
                                                                Existing
                                                                 Room                       Rooms Under                                                      4.5x
                                                                Supply                      Construction

                                                              % of Total                       % of Total                                                           3.2x
 United States                                                      12%                              26%
                                                                                                                                                                                2.6x
 Americas ex. U.S.                                                   3%                              15%

 Europe                                                              2%                             20%

 Middle East, Africa                                                 3%                              18%

 Asia Pacific                                                        1%                              23%
 Global System                                                       5%                              22%

(a)   Source: STR Global Census, October 2017 (adjusted to September 2017) and STR Global New Development Pipeline, September 2017.

                                                                                                                © 2017 Hilton Confidential and Proprietary                                           8
3. 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.
                                                                                                           69%
                                                                                                                                                                                                                                                                                        52.5
                                                                                                           58%                                                                                                                                           43.1 45.1
                                                                                                                                                                                                                                        36.2
                                            (b)
                                                                                                           56%                                                                                                                                                                          63%
                                                                                                                                                                                        23.6                            25.4                             57% 69%
                                                                                                                                                                                                                                        53%
                                                                                                                                                                        18.8                             18.3
                                                                                                           38%                                                                          43%                              57%
                                                                                                                                                                        60%                              51%
                                                                                                                                                                                                                                                                                        37%
                                                                                                           30%                                                                           57% 49% 43% 47% 43% 31%
                                              (c)

                                                                                                                                                                        40%

                                                                                                           23%                                                          2010 2011 2012 2013 2014 2015 2016 2017E
                                                    (d)

                                                                                                                                                                          23% 46% 38% 35% 26% 29% 22% 22%
                                                                                                            17%                                                                     % 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: 9/30/2017 for HLT and 6/30/2017 for other peers.   This page contains additional trademarks, service marks and trade names of others, which are the property of their
(b)   Reflects MAR acquisition of HOT in both periods.                                                                                                                                  respective owners.
(c)   Excl. timeshare properties due to lack of 2007 data availability for WYN.                                                                                                         All trademarks, service marks and trade names appearing in this presentation are, to our knowledge, the property of
(d)   Accor data reflects sale of Motel 6 and Studio 6 brands and the acquisition of Fairmont Raffles Hotels International Group.                                                       their respective owners.
(e)   As a % of gross room openings.                                                                                                                                                    Source: Company filings.
                                                                                                                          © 2017 Hilton Confidential and Proprietary                                                                                                                                          9
4. SUPPORTED BY STRONG FUNDAMENTALS…

     GROWING CUSTOMER BASE THAT                                                           HOTEL UNDER-PENETRATION IN
        CAN & WANTS 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.

                                                  © 2017 Hilton Confidential and 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 market gaps with the right brand in the right location at the right
  FOOTPRINT         time
                  • Expand luxury portfolio; execute China growth strategy

                  • Grow market share
   MAXIMIZE
                  • Grow free cash flow per share, preserve strong balance sheet, and
 PERFORMANCE
                    accelerate return of capital

                                   © 2017 Hilton Confidential and Proprietary                  11
5. GENERATING SIGNIFICANT FREE CASH FLOW
    AND CAPITAL RETURN POTENTIAL

                                                                                                                                                2017 OUTLOOK(a)
                                                                                SAME STORE                                                                       NET UNIT                                                                  FEE RATE

                           GROWTH                                                                                                                             50-55K rooms                                                        Effective Franchise
                         (Y/Y % chg.)                                                  +1% to +3%
                                                                                                                                                            (+ 6.5% at midpoint)                                                     Rate(b) = 4.8%

      Annual Adj. EBITDA                                                        1 Pt. = ~$20-25M                                                    10K rooms = ~$20M                                                                  5 bps = ~$8-10M
                                                                                                                                                                 steady-state
             Sensitivity(c)

       Corporate Expense                                                                                                                                         $430-440M

                         Adj. EBITDA                                                                                                                 $1,920M to $1,940M

            Available for                                                                                                                                    $1.0B to $1.1B
      shareholder returns

        Share repurchases                                                                                                                                $800M to $900M

(a)   Outlook as of 10/26/2017
(b)   Effective franchise fee rate is 4.8% in Q3 2017, up 83 bps since FY2007, moving towards published rate of 5.6%, Effective franchise rate calculated as total Franchise fee revenue divided by total Franchise room revenue. Published Franchise rates calculated as the weighted average of
      current published brand Franchise fee rates.
(c)   Sensitivity within the ranges given.
                                                                                                                       © 2017 Hilton Confidential and Proprietary                                                                                                                                   12
Appendix
           Waldorf Astoria Resort Boca Raton, Florida
FLEXIBLE CAPITAL STRUCTURE WITH
SIGNIFICANT LIQUIDITY

      CAPITAL STRUCTURE                                                                                      DEBT BREAKDOWN / SCHEDULED AMORTIZATION
          OVERVIEW                                                                                                       AND MATURITIES(a)

                          Net debt                                                                          % fixed                                  ($ in millions)       Weighted average term: 6.7 years

                $5.9B                                                                                  75%
                                                                                                                                                         $4,000                                     $3,729

                                                                                                                                                         $3,000

                   Net leverage(b)                                                                  % unsecured

                           3.1x                                                                       39%                                                $2,000

                                                                                                                                                                                                         $1,000
                                                                                                       % freely                                           $1,000                                               $900
                         WACD(a)                                                                                                                                                                                           $600
                                                                                                      prepayable

                      4.1%                                                                               61%                                                    $0
                                                                                                                                                                        $10 $40 $40 $40 $40 $40                       $0

                                                                                                                                                                        2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

(a)   Excludes capital lease obligations and other debt of our consolidated variable interest entities. As of September 30, 2017.
(b)   Ratio of net debt as of 9/30/2017 to LTM 9/30/2017 pro forma Adjusted EBITDA.

                                                                                                                           © 2017 Hilton Confidential and Proprietary                                                             14
RECONCILIATIONS
      ($ in millions)

                                                                                                                                                                                           Q3 YTD 2017     FY 2016 (a)
                   Income from continuing operations, net of taxes                                                                                                                                 $423           $127
                      Interest expense                                                                                                                                                              304            394
                      Income tax expense                                                                                                                                                            241            647
                      Depreciation and amortization                                                                                                                                                 259            364
                   EBITDA                                                                                                                                                                         1,237          1,532
                      Gain on sales of assets, net                                                                                                                                                    -               (8)
                      Loss (gain) on foreign currency transactions                                                                                                                                   (3)             16
                      Loss on debt extinguishment                                                                                                                                                    60                -
                      FF&E replacement reserve (b)                                                                                                                                                   37              55
                      Share-based compensation expense                                                                                                                                               91              83
                      Impairment loss                                                                                                                                                                 -              15
                      Other adjustment items (c)                                                                                                                                                     45              70
                   Adjusted EBITDA                                                                                                                                                               $1,467         $1,763

                                                                                                                                                                                              As of         As of
                                                                                                                                                                                          September 30, December 31,
                                                                                                                                                                                              2017         2016 (a)
                   Long-term debt, including current maturities                                                                                                                                  $6,613        $6,616
                   Add: unamortized deferred financing costs and discount                                                                                                                            84             90
                   Long-term debt, including current maturities and excluding unamortized deferred financing
                   costs and discount                                                                                                                                                             6,697           6,706
                      Add: Hilton's share of unconsolidated affiliate debt, excluding unamortized deferred
                      financing costs                                                                                                                                                                13              12
                      Less: cash and cash equivalents                                                                                                                                              (670)         (1,062)
                      Less: restricted cash and cash equivalents                                                                                                                                   (126)           (121)
                   Net debt                                                                                                                                                                      $5,914          $5,535

                   Net debt/Adjusted EBITDA (d)                                                                                                                                                     3.1x           3.1x

(a)    On a pro forma basis, giving effect to the spin-off transactions.
(b)    Represents furniture, fixture & equipment (“FF&E”) replacement reserves established for the benefit of lessors for requisition of capital assets under certain lease agreements.
(c)    Represents adjustments for severance and other items.
(d)    For the September 30, 2017 ratio, represents 9/30/2017 Net Debt / LTM pro forma Adjusted EBITDA.
                                                                                                                             © 2017 Hilton Confidential and Proprietary                                                     15
DISCLAIMER

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 agreements, 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, 2016, as such factors may be updated from time to time in our periodic filings with the 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.

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 Adjusted EBITDA and other Pro Forma information as of December 31, 2016 and for the last twelve months (“LTM”) ended
September 30, 2017 for Hilton. Refer to the Current Report on Form 8-K filed with the SEC on January 4, 2017 for additional information on the spin-off
transactions and pro forma financial information, as well as the Current Report on Form 8-K filed with the SEC on July 26, 2017 for additional pro forma
financial information.

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 September 30, 2017. 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.

                                                                 © 2017 Hilton Confidential and Proprietary                                                         16
“It has been, and continues to be, our
responsibility to fill the earth with the light
and warmth of hospitality.”
                               CONRAD HILTON

                                     Hilton Phuket Arcadia Resort, Thailand
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