Investor Presentation - May 2019 - Hilton - Investor Relations
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Investor
Presentation
May 2019
New brand bar
What property is that
HLT VALUE PROPOSITION
Hilton's scale, global presence and leading brands at multiple price points drive
a network effect delivering industry-leading performance
Leading
Brands serving
• Award-winning brands that serve guests for virtually any
virtually any lodging need they have anywhere HLT Financial
lodging need
in the world Performance
anywhere
• Leads to satisfied customers, including
approximately 90 million Hilton Honors loyalty
members
• Creates a network effect that drives a strong Satisfied,
global RevPAR premium of 15%(a) Leading Loyal
Hotel Customers
• These premiums drive strong financial returns Supply &
for the company and our hotel owners Pipeline
• Satisfied owners continue to invest in growing
Hilton’s brands, driving leading organic net unit
growth with de minimis use of capital
Premium,
• We believe the reinforcing nature of these Growing
Satisfied
activities will allow Hilton to outperform the Owners
Market Share
competition
(a) Source: STR (three months ended March 31, 2019). “RevPAR” or “Revenue per Available Room” represents hotel room revenue divided by room nights available to guests for a given period.
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© 2019 Hilton ProprietaryInvestment 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 FAVORABLE FUNDAMENTALS AND A
DISCIPLINED STRATEGY
5. GENERATING SIGNIFICANT FREE CASH FLOW FOR
SHAREHOLDERS
2
© 2019 Hilton Proprietary1. THE BEST-PERFORMING PORTFOLIO OF
BRANDS IN THE BUSINESS
Industry-leading, clearly defined, global brands that drive a
15% global RevPAR premium(a)
Luxury & Lifestyle Full Service All Suites Focused Service Timeshare
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
~90M members, ~$13B in annual +45M
~250M unique Pricing and yield Proprietary ~$6B of annual
~60% system revenue interactions/year
site visits/year systems platform spend influenced
occupancy
With ~5,700 properties & ~923,000 rooms in 113 countries and territories,
Hilton is one of the world’s largest hotel companies
(a) Source: STR (three months ended March 31, 2019). “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.
© 2019 Hilton Proprietary 31. THE BEST-PERFORMING PORTFOLIO OF
BRANDS IN THE BUSINESS
We are the most innovative hotel company, leading in delivering personalized
experiences for guests in every interaction they have with Hilton
Our Hilton Honors app is one example of how we offer end-to-end experiences for guests:
• Our Digital Key and welcome experience empowers guests to pick their room before
arrival and bypass the front desk
• At nearly 1,400 of our hotels, Hilton Explore allows guests to explore neighborhoods
surrounding their hotel like locals
• Connected Room enables guests to control lighting, HVAC and entertainment options.
Connected Room will begin to scale through the portfolio in 2019
• We partner with SHOWTIME and Netflix to allow guests to stream their favorite content
• Digital Check-Out gives guests the convenience of checking out of their room in the app
3500+
Connected Rooms
4300+ 44 million ~90 million 90 percent
Digital Key hotels Doors opened with Digital Key Hilton Honors Members Guests say Explore suggestions are useful
© 2019 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 90M
Share of system
36M Occupancy(b)
2012 2019(a)
~60%
+16% CAGR +170 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, 2019.
(b) For the three months ended March 31, 2019.
© 2019 Hilton Proprietary 52. A RESILIENT, FEE-BASED BUSINESS
Top-Line Driven Majority Franchise Fees Capital Efficient Growth
90% 70% ~7%
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 $200M Total HLT
is roughly investment in pipeline, with over
4.9% in-place
+/- 1% of Adjusted EBITDA rate vs. 5.6%
~$140M 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)
Americas Middle East
$2,167M Non-U.S. & Africa
3%
Luxury Other
3% 1%
Asia 3%
Pacific
10%
$814M Upper
Upper
Upscale
Europe Midscale 32%
11% 31%
U.S.
73%
2009(e) 2019(a)
+11% CAGR
No single U.S. market Upscale
accounts for more than 3% of 33%
Adj. EBITDA
(a) Based on last twelve months (“LTM”) 3/31/2019 calculated as the three months ended 3/31/2019 plus the year ended 12/31/2018 less the three months ended 3/31/2018. For Adjusted EBITDA, excludes corporate and other.
(b) Net Unit Growth (“NUG”) based on LTM 3/31/2019.
(c) As of or for the three months ended 3/31/2019. Effective franchise rate is up 89 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.
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(e) Does not include the effect of the revenue recognition standard adopted on January 1, 2018. © 2019 Hilton Proprietary
(f) Room count as of 3/31/2019. Other includes HGV.3. A RECORD PIPELINE GENERATING SUBSTANTIAL
RETURNS ON MINIMAL CAPITAL INVESTMENT
BEST PERFORMING BRANDS
Existing brands in current markets Existing brands in new markets Organically developed new brands
~55% of pipeline ~20% of pipeline ~30% 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(b)
371K 193K 54% $50B $200M
Stabilized Adj. EBITDA Illustrative Value Creation(a)
$740M $10,000M
(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.
(b) Reflects committed investment.
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© 2019 Hilton Proprietary3. 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 3.6x
Supply Construction
% of Total % of Total 2.8x
United States 13% 23%
1.7x
Americas ex. U.S. 3% 16%
Europe 2% 9%
Middle East, Africa 3% 14%
Asia Pacific 2% 22%
Global System 5% 18%
(a) Source: STR Global Census, April 2019 (adjusted to March 2019) and STR Global New Development Pipeline, April 2019.
© 2019 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.
57 57
86%
52
45
43
90%
(b)
56% 54%
36
(c)
66% 66%
57% 69%
25
24 53%
50%
(d)
19 18
43% 57%
49%
60% 51% 44% 46%
47% 43% 34%
46%
(e)
57% 31%
40% 49% 43%
(f)
28%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E
23% 46% 38% 35% 26% 29% 22% 20% 25% 20%
% Conversions(g)
(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: 3/31/2019 for HLT and peers. This page contains additional trademarks, service marks and trade
(b) Room count includes Q4 acquisition of Two Roads Hospitality, adding approximately 12,000 rooms. Excluding acquisition growth would be 81%. names of others, which are the property of their respective
(c) Reflects MAR acquisition of HOT in both periods.. Data as of 12/31/2018. owners.
(d) Excl. timeshare properties due to lack of 2007 data availability for WYN. All trademarks, service marks and trade names appearing in this
(e) Accor data reflects sale of Motel 6 and Studio 6 brands and the acquisition of Fairmont Raffles Hotels International Group. presentation are, to our knowledge, the property of their
(f) Data as of 12/31/2018. respective owners. 9
(g) As a % of gross room openings. © 2019 Hilton Proprietary Source: Company filings.4. SUPPORTED BY STRONG FUNDAMENTALS…
GROWING CUSTOMER BASE THAT HOTEL UNDER-PENETRATION IN
CAN & WANT TO TRAVEL HIGH GROWTH MARKETS
16.0
2x
(hotel rooms per 1,000 people)
GLOBAL MIDDLE CLASS
Last 20 years,
double again
next 20 years
UNITED STATES
1.3 1.8
0.2
GLOBAL TOURIST
+1BN
ARRIVALS
Incremental
CHINA
BRAZIL
annual trips
INDIA
expected over
next 20 years
Source: STR, UNWTO, World Bank, OECD
© 2019 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
• Maximize relevance of existing brands, strategically add new brands
• Build on leading commercial capabilities to maximize revenues
WIN ON CUSTOMER
• Lead in digital and personalization capabilities
EXPERIENCE
• Drive deeper loyalty and more direct relationships with guests through
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
© 2019 Hilton Proprietary 115. GENERATING SIGNIFICANT FREE CASH FLOW
AND CAPITAL RETURN POTENTIAL
2019 OUTLOOK(a)
SAME STORE NET UNIT FEE RATE
GROWTH Effective Franchise
+1% and +3% + 6.5%
(Y/Y % chg.) Rate = 4.9%
Annual Adj. EBITDA 1 Pt. = ~$25M 10K rooms = ~$20M 10 bps = ~$20M
steady-state
Sensitivity(b)
General and $430M and $450M
Administrative Expense
$2,265M to $2,305M
Adj. EBITDA +9% Y/Y at midpoint
Available for $1.3B and $1.8B
shareholder returns
$1.1B to $1.6B
Share repurchases
(a) Outlook as of 5/1/2019.
(b) Sensitivity within the ranges given.
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© 2019 Hilton ProprietaryAppendix Hilton Haikou
FLEXIBLE CAPITAL STRUCTURE WITH
SIGNIFICANT LIQUIDITY
CAPITAL STRUCTURE DEBT BREAKDOWN / SCHEDULED AMORTIZATION
OVERVIEW AND MATURITIES(a)
Net debt % fixed ($ in millions) Weighted average term: 5.7 years
$7.0B 78%
$4,000
$3,119
$3,000
Net leverage(b) % unsecured
3.2x 56% $2,000
$1,500
$1,000
% freely $1,000
$900
WACD
prepayable $600
4.5% 44% $0
$0 $0 $50
2019 2020 2021
$0
2022 2023 2024 2025 2026 2027
(a) Excludes finance lease liabilities and other debt of our consolidated variable interest entities.
(b) Ratio of net debt as of 3/31/2019 to LTM ended 3/31/2019 Adjusted EBITDA.
© 2019 Hilton Proprietary 14RECONCILIATIONS
($ in millions)
Q1 2019 LTM FY 2018
Net income $ 765 $ 769
Interest expense 386 371
Income tax expense 310 309
Depreciation and amortization 327 325
EBITDA 1,788 1,774
Loss on foreign currency transactions 22 11
FF&E replacement reserves (a) 52 50
Share-based compensation expense 133 127
Amortization of contract acquisition costs 27 27
Net other expenses from managed and franchised properties 98 85
Other adjustment items (b) 35 27
Adjusted EBITDA $ 2,155 $ 2,101
As of
As of December
March 31, 2019 31, 2018
Long-term debt, including current maturities $ 7,365 $ 7,282
Add: unamortized deferred financing costs and discount 76 79
Long-term debt, including current maturities and excluding unamortized deferred financing costs and discount 7,441 7,361
Add: Hilton's share of unconsolidated affiliate debt, excluding unamortized deferred financing costs 13 15
Less: cash and cash equivalents (382) (403)
Less: restricted cash and cash equivalents (79) (81)
Net debt $ 6,993 $ 6,892
Net debt/Adjusted EBITDA ratio 3.2 3.3
(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 and other items.
© 2019 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, 2018, 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.
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.
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, 2019. 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.
© 2019 Hilton Proprietary 16© 2019 Hilton Confidential and Proprietary
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