Investor - Hiltonir.hilton.com/.../investor-presentation-february-2018.pdf · Investor....

Conrad Bora Bora Nui, French Polynesia

February 2018

InvestorPRESENTATION

(a) Source: STR (12 months ended 12/31/2017). RevPAR or Revenue per Available Room represents hotel room revenue divided by room nights available to guests for a given period.

1

HLT VALUE PROPOSITION

Leading Brands serving

virtually any lodging need

anywhere

Satisfied, Loyal

Customers

Premium, Growing

Market ShareSatisfiedOwners

Leading Hotel

Supply & Pipeline

HLT Financial Performance

Award-winning brands that serve guests for virtually any lodging need they have anywhere in the world

Leads to satisfied customers, including over 71 million Hilton Honors loyalty members

Creates a network effect that drives a strong global RevPAR premium of 14%(a)

These premiums drive strong financial returns for the company and our hotel owners

Satisfied owners continue to invest in growing Hiltons brands, driving leading organic net unit growth with de minimis use of our capital

We believe the reinforcing nature of these activities will allow Hilton to outperform the competition

Hilton's scale, global presence and leading brands at multiple price points drive a network effect delivering industry-leading performance

2018 Hilton Proprietary

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

Investment Thesis


3

(a) Source: STR (12 months ended 12/31/2017). 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.

14 Industry-leading, clearly defined, global brands that drive a 14% global RevPAR premium(a)

Luxury & Lifestyle Full Service All Suites Focused Service Timeshare


Strong commercial engines support $40 billion in annual system revenue(b)

~71M members, 57% system occupancy

Loyalty Program

Online & Mobile

~250M uniquesite visits/year

Revenue Management

Pricing and yield systems

Worldwide Sales

~$9B in annual revenue

Reservations & Customer Care

+45 million interactions/yr.

Supply Management

~$5B of annual spend influenced

Information Technology

Proprietary platform

With ~5,300 properties & ~856,000 rooms in 105 countries and territories, Hilton is one of the worlds largest hotel companies


AT 2,700+ PROPERTIES

YE 2017

AT ~5,100 PROPERTIESGLOBALLY

4

We are the most innovative hotel company, leading in delivering personalized experiences to our guests

DIGITAL CHECK-IN ROOM SELECTION DIGITAL KEY

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



Members

5

Hilton Honors loyalty program enables a better, more personalized hotel stay, driving incremental value to the system


57%Share of system

Occupancy(b)

INNOVATIVE NEW FEATURES & PARTNERSHIPS

POINTS & MONEY 2.0

HILTON HONORS IS OFFERING MORE VALUE TO MORE MEMBERS

Can choose any combination of Points and money to pay

for a stay, using an interactive Slider.

SHOP WITH POINTSThe first hotel loyalty

program to enable members to use their Points on

Amazon.com.

POINTS POOLINGCan pool Points into a single account (for free), generating incremental reward stays and

increasing engagement.

(a) As of December 31, 2017.(b) For the year ended December 31, 2017.

+15% CAGR2012

36M

71M

2017(a)

+160 BPS YOY


(a) Based on year ended 12/31/2017. For Adjusted EBITDA, excludes corporate and other.(b) Net Unit Growth (NUG) based on year ended 12/31/2017.(c) As of or for the year ended 12/31/2017.(d) Room count as of 12/31/2017. Other includes HGV.

Upper Upscale

33%

Upscale33%

Upper Midscale

30%

Luxury3%

Other1%

U.S.71%

Europe12%

Asia Pacific

10%

Americas Non-U.S.

4%

Middle East & Africa

3%

+11% CAGR

Adj. EBITDA from fees, 90% revenue driven(a)90% 6.5% NUG(b)

2009 2017(a)

of total fees franchisedriven(a)70%

Majority Franchise Fees

$814M

$1,940M

Meaningful Fee GrowthMANAGEMENT & FRANCHISE FEES

Capital Efficient Growth

4.8% in-place rate vs. 5.6%

published rate(c)~$160M annual

Adj. EBITDA

+/- 1% of RevPAR growth is roughly

+/- 1% of Adjusted EBITDA growth

Increasing franchise fees as contracts roll over at higher published rates $200M Total HLT

investment in pipeline, with over 50% under construction and average contract term of 19 yrs

Diversified Across Geographies and Chain ScalesADJ. EBITDA BY GEOGRAPHY(a) ROOMS BY CHAIN SCALE(d)

Top-Line Driven

6

2. A RESILENT, FEE-BASED BUSINESS

No single U.S. market accounts for more than 3% of

Adj. EBITDA


(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.

BEST PERFORMING BRANDS

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

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

~55% of pipeline ~20% of pipeline ~25% of pipeline

Resulting in: Record pipelines across all brand segments with minimal HLT capital investment

7

Illustrative Value Creation(a)

$9,500M

Under Construction

174K% Pipeline Outside U.S.

53%HLT Investment

$200M345KPipeline rooms

$700MStabilized Adj. EBITDA


3rd Party Investment

$50B


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

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Development focused on balanced global growth - brand portfolio drives high quality, high return, industry-leading organic growth

enabled by demand patterns around the world

Existing Room

SupplyRooms Under Construction

% of Total % of Total

United States 12% 26%

Americas ex. U.S. 3% 15%

Europe 2% 16%

Middle East, Africa 3% 19%

Asia Pacific 1% 22%

Global System 5% 21%

LEADING SHARE OF FUTURE DEVELOPMENT IN EVERY REGION(a)

GLOBAL SHARE OF ROOMS UNDER CONSTRUCTION/EXISTING SHARE(a)

4.3x

2.8x2.4x

DEVELOPMENT MARKET SHARE IS ~4.3X LARGER THAN CURRENT SHARE



(a) 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: 9/30/17 for Accor, and 12/31/17 for HLT and other peers.(b) Reflects MAR acquisition of HOT in both periods.(c) Excl. timeshare properties due to lack of 2007 data availability for WYN. (d) Accor data reflects sale of Motel 6 and Studio 6 brands and the acquisition of Fairmont Raffles Hotels International Group.(e) As a % of gross room openings.

GLOBAL SYSTEM ROOM GROWTH 2007-TODAY(a)

HLT NET UNIT GROWTH (000s of rooms)

73%

67%

56%

40%

31%

24%

18%

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(b)

(d)

(c)

Industry-leading growth with great sight lines into future development

9

40% 57% 49% 43%47% 43% 31% 34%

39%60%43%

51%57%

53%57% 69%

66%61%

18.823.6

18.325.4

36.243.1 45.1

51.6 55.0

2010 2011 2012 2013 2014 2015 2016 2017 2018E

International U.S.


This page contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this presentation are, to our knowledge, the property of their respective owners.Source: Company filings.

% Conversions(e)23% 46% 38% 35% 26% 29% 22% 20% 23%


2x Last 20 years,double again next 20 yearsGLOBAL TOURIST

ARRIVALS

+1BNIncremental annual trips expected over next 20 years

15.8

1.7

UN

ITED

STA

TES

CH

INA

1.2

BR

AZI

L0.2

IND

IA

GROWING CUSTOMER BASE THAT CAN & WANTS TO TRAVEL

HOTEL UNDER-PENETRATION IN HIGH GROWTH MARKETS

GLOBAL MIDDLE CLASS

10

(hotel rooms per 1,000 people)

Source: STR, UNWTO, World Bank, OECD.

4. SUPPORTED BY STRONG FUNDAMENTALS


Performance-driven, purpose-led culture based on common vision, mission, values and key strategic priorities

ALIGN CULTURE & ORGANIZATION

STRENGTHEN BRANDS &

COMMERCIAL SERVICES

PLATFORM

EXPAND GLOBAL FOOTPRINT

MAXIMIZE PERFORMANCE

Maximize relevance of existing brands, strategically add new brands Build on leading commercial capabilities to maximize revenues Lead in digital and personalization capabilities Drive deeper loyalty and more direct relationships with guests through

Hilton Honors

Deliver industry-leading, high-quality organic net unit growth Fill market gaps with the right brand in the right location at the right

time Expand luxury portfolio; execute China growth strategy

Grow market share Grow free cash flow per share, preserve strong balance sheet, and

accelerate return of capital

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AND A DISCIPLINED STRATEGY


(a) Outlook as of 02/14/2018(b) Effective franchise fee rate is 4.8% for the year ended 12/31/2017, 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.

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5. GENERATING SIGNIFICANT FREE CASH FLOW AND CAPITAL RETURN POTENTIAL

SAME STORE NET UNIT FEE RATE

GROWTH(Y/Y % chg.)

Annual Adj. EBITDA Sensitivity(c)

Corporate Expense

Adj. EBITDA

Available for shareholder returns

Share repurchases

+1% to +3% + 6.5% Effective Franchise Rate(b) = 4.8%

$2,030M to $2,080M+7.5% Y/Y at midpoint

$400-425M

$1.2B to $1.6B

$1.0B to $1.4B

1 Pt. = ~$20-25M 10K rooms = ~$20M steady-state 10 bps = ~$20M

2018 OUTLOOK(a)


Waldorf Astoria Resort Boca Raton, Florida

Appendix

(a) Excludes capital lease obligations and other debt of our consolidated variable interest entities. As of December 31, 2017.(b) Ratio of net debt as of 12/31/2017 to year ended 12/31/2017 Adjusted EBITDA.

$40 $40 $40 $40 $40

$3,729

$1,000$900

$0

$600

$0

$1,000

$2,000

$3,000

$4,000

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Weighted average term: 6.5 years

CAPITAL STRUCTURE OVERVIEW

DEBT BREAKDOWN / SCHEDULED AMORTIZATION AND MATURITIES(a)

$6.0BNet debt

3.1xNet leverage(b)

4.1%WACD(a)

75%% fixed

39%% unsecured

61%% freely

prepayable

14

FLEXIBLE CAPITAL STRUCTURE WITH SIGNIFICANT LIQUIDITY

($ in millions)


15

(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, impairment loss and other items.

FY 2017 FY 2016 (a)

Income from continuing operations, net of taxes $1,264 $127Interest expense 408 394 Income tax expense (benefit) (334) 647 Depreciation and amortization 347 364

EBITDA 1,685 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) 55 55 Share-based compensation expense 121 83 Other adjustment items (c) 47 85

Adjusted EBITDA $1,965 $1,763

As of December 31,

2017

As of December 31,

2016 (a)

Long-term debt, including current maturities $6,602 $6,616Add: unamortized deferred financing costs and discount 81 90 Long-term debt, including current maturities and excluding unamortized deferred financing costs and discount 6,683 6,706

Add: Hilton's share of unconsolidated affiliate debt, excluding unamortized deferred financing costs 13 12 Less: cash and cash equivalents (570) (1,062) Less: restricted cash and cash equivalents (100) (121)

Net debt $6,026 $5,535

Net debt/Adjusted EBITDA 3.1x 3.1x

($ in millions)RECONCILIATIONS


Slide 68

Hilton Worldwide Holdings Inc.

Pro Forma Financial Information

In millions

FY 2016

Operating income$ 1,170

Interest expense(394)

Loss on foreign currency transactions(16)

Other non-operating income, net14

Income before income taxes774

Income tax expense(647)

Net income attributable to noncontrolling interests(10)

Net income attributable to Hilton stockholders, before special items117

Diluted EPS, before special items$ 0.36

Special items421

Income tax expense on special items(22)

Net income, adjusted for special items516

Diluted EPS, adjusted for special items$ 1.57

Slide 70

FY 2017FY 2016 (a)

Income from continuing operations, net of taxes$1,264$127

Interest expense408394

Income tax expense (benefit)(334)647

Depreciation and amortization347364

EBITDA1,6851,532

Gain on sales of assets, net-(8)

Loss (gain) on foreign currency transactions(3)16

Loss on debt extinguishment60-

FF&E replacement reserve (b)5555

Share-based compensation expense12183

Other adjustment items (c)4785

Adjusted EBITDA$1,965$1,763

As of December 31, 2017As of December 31, 2016 (a)

Long-term debt, including current maturities$6,602$6,616

Add: unamortized deferred financing costs and discount8190

Long-term debt, including current maturities and excluding unamortized deferred financing costs and discount6,6836,706

Add: Hilton's share of unconsolidated affiliate debt, excluding unamortized deferred financing costs1312

Less: cash and cash equivalents(570)(1,062)

Less: restricted cash and cash equivalents(100)(121)

Net debt$6,026$5,535

Net debt/Adjusted EBITDA3.1x3.1x

16

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, 2017, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SECs 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 year then ended 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 year ended December 31, 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.

DISCLAIMER


Hilton Phuket Arcadia Resort, Thailand

It has been, and continues to be, our responsibility to fill the earth with the light and warmth of hospitality.

CONRAD HILTON

Slide Number 1HLT VALUE PROPOSITIONSlide Number 3THE BEST-PERFORMING PORTFOLIO OF BRANDS IN THE BUSINESSTHE BEST-PERFORMING PORTFOLIO OF BRANDS IN THE BUSINESSTHE BEST-PERFORMING PORTFOLIO OF BRANDS IN THE BUSINESSSlide Number 7Slide Number 8Slide Number 9Slide Number 10Slide Number 11Slide Number 12Slide Number 13Slide Number 14Slide Number 15Slide Number 16Slide Number 17Slide Number 18

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