Investor PRESENTATION - November 2017 - Hilton - Investor Relations
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Investor
PRESENTATION
November 2017
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
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
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 Proprietary1. 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 31. 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 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 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 52. 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 Proprietary3. 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 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) ~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 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.
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 94. 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 115. 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 $900M
(a) Outlook as of 10/26/2017
(b) Effective franchise fee rate is 4.8% in Q3 2017, up 83 bps since FY2007, moving towards published rate of 5.6%, Effective franchise rate calculated as total Franchise fee revenue divided by total Franchise room revenue. Published Franchise rates calculated as the weighted average of
current published brand Franchise fee rates.
(c) Sensitivity within the ranges given.
© 2017 Hilton Confidential and Proprietary 12Appendix
Waldorf Astoria Resort Boca Raton, FloridaFLEXIBLE CAPITAL STRUCTURE WITH
SIGNIFICANT LIQUIDITY
CAPITAL STRUCTURE DEBT BREAKDOWN / SCHEDULED AMORTIZATION
OVERVIEW AND MATURITIES(a)
Net debt % fixed ($ 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 $0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
(a) Excludes capital lease obligations and other debt of our consolidated variable interest entities. As of September 30, 2017.
(b) Ratio of net debt as of 9/30/2017 to LTM 9/30/2017 pro forma Adjusted EBITDA.
© 2017 Hilton Confidential and Proprietary 14RECONCILIATIONS
($ 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 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 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
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