investor - hilton/media/files/h/hilton-worldwide... · 2018-05-08 · •award-winning brands that...

Conrad Bora Bora Nui, French Polynesia

May 2018

InvestorPRESENTATION

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 74 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 Hilton’s brands, driving leading organic net unit growth with de minimis use of 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

(a) Source: STR (3 months ended 3/31/2018). “RevPAR” or “Revenue per Available Room” represents hotel room revenue divided by room nights available to guests for a given period.

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

© 2018 Hilton Proprietary 2

Investment Thesis

3

(a) Source: STR (3 months ended 3/31/2018). “RevPAR” or “Revenue per Available Room” represents hotel room revenue divided by room nights available to guests for a given period.(b) System revenue includes estimated revenues of franchised properties in addition to revenues from properties owned, leased or managed by Hilton.

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)

~74M members, 59% system occupancy

Loyalty Program

Online & Mobile

~250M unique site visits/year

Revenue Management

Pricing and yield systems

Worldwide Sales

~$10B in annual revenue

Reservations & Customer Care

+45M interactions/year

Supply Management

~$5B of annual spend influenced

Information Technology

Proprietary platform

With ~5,300 properties & ~863,000 rooms in 106 countries and territories, Hilton is one of the world’s largest hotel companies


AT 3,200+ PROPERTIES

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



5

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



59%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 March 31, 2018(b) For the three months ended March 31, 2018

+15% CAGR

2012

36M

74M

2018(a)

+220 BPS YOY

Members

Upper Upscale

32%

Upscale34%

Upper Midscale

30%

Luxury3%

Other1%

U.S.71%

Europe11%

Asia Pacific

11%

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(e) LTM(a)

of total fees franchisedriven(a)70%

Majority Franchise Fees

$814M

$1,939M

Meaningful Fee GrowthMANAGEMENT & FRANCHISE FEES(d)

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 ~$185M Total HLT

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

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

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 last twelve months (“LTM”) 3/31/2018 calculated as the three months ended 3/31/2018 plus the year ended 12/31/2017 less the three months ended 3/31/2017. For Adjusted EBITDA, excludes corporate and other.(b) Net Unit Growth (NUG) based on year-end 12/31/2017.(c) As of or for the three months ended 3/31/2018. Effective franchise rate is up 85 bps since FY 2007 and is calculated as the total franchise fee revenue divided by total franchise room revenue. Published franchise rate is calculated as the weighted average of current published brand

franchise fee rates.(d) Excludes amortization of contract acquisition costs recorded as contra-revenue.(e) Does not include the effect of the new revenue recognition accounting standard.(f) Room count as of 3/31/2018. Other includes HGV.

BEST PERFORMING BRANDS

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

White space: Urban Micro, 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© 2018 Hilton Proprietary

Illustrative Value Creation(a)

$9,500M

Under Construction

184K% Pipeline Outside U.S.

53%HLT Investment

$185M355KPipeline rooms

$700MStabilized 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.


3rd Party Investment

$50B


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% 25%

Americas ex. U.S. 3% 15%

Europe 2% 13%

Middle East, Africa 3% 17%

Asia Pacific 1% 22%

Global System 5% 20%

LEADING SHARE OF FUTURE DEVELOPMENT IN EVERY REGION(a)

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

4.1x

2.9x2.2x

DEVELOPMENT MARKET SHARE IS ~4X LARGER THAN CURRENT SHARE


(a) Source: STR Global Census, April (adjusted to March 2018) and STR Global New Development Pipeline, March 2018.

GLOBAL SYSTEM ROOM GROWTH2007-TODAY(a)

HLT NET UNIT GROWTH (000s of rooms)

74%

69%

58%

42%

33%

27%

18%


(a) Note: “2007” metrics are as of 6/30/07, except for H which is as of 12/31/07; “Today” metrics are as of most recent reporting: 12/31/2017 for MAR and CHH, and 3/31/2018 for HLT and other peers.(b) Reflects MAR acquisition of HOT in both periods. (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.

(b)

(d)

(c)

Industry-leading growth with great sight lines into future development

9

40% 57% 49% 43% 47% 43% 31% 34% 42%60%43%

51%57%

53%57% 69%

66%58%

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% 21%

2x Last 20 years,double again next 20 years

GLOBAL TOURIST ARRIVALS

+1BNIncremental annual trips expected over next 20 years

15.8

1.5

UN

ITED

STA

TES

CH

INA

1.1

BR

AZI

L

0.2

IND

IA

GROWING CUSTOMER BASE THAT CAN & WANT TO TRAVEL

HOTEL UNDER-PENETRATION IN HIGH GROWTH MARKETS

GLOBAL MIDDLE CLASS


(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 gaps with the right brand in the right location at the right time• Expand luxury portfolio; execute international growth strategy

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

accelerate return of capital

© 2018 Hilton Proprietary 11

… AND A DISCIPLINED STRATEGY

12

5. GENERATING SIGNIFICANT FREE CASH FLOW AND CAPITAL RETURN POTENTIAL

SAME STORE NET UNIT FEE RATE

GROWTH(Y/Y % chg.)

Annual Adj. EBITDA Sensitivity(b)

General and Administrative Expense

Adj. EBITDA

Available for shareholder returns

Share repurchases

+2% to +4% + 6.5% Effective Franchise Rate = 4.8%

$2,060M to $2,100M+9% Y/Y at midpoint

$400-425M

$1.7B to $1.9B

$1.5B to $1.7B

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

2018 OUTLOOK(a)


(a) Outlook as of 4/26/2018.(b) Sensitivity within the ranges given.

Waldorf Astoria Resort Boca Raton, Florida

Appendix

$0 $0 $0 $90 $0

$3,419

$1,000$900

$1,500

$600

$0

$1,000

$2,000

$3,000

$4,000

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Weighted average term: 6.6 years

CAPITAL STRUCTURE OVERVIEW(a)

DEBT BREAKDOWN / SCHEDULED AMORTIZATION AND MATURITIES(a)(b)

$7.2BNet debt

3.5xNet leverage(c)

4.3%WACD

85%% fixed

53%% unsecured

47%% freely

prepayable

14

FLEXIBLE CAPITAL STRUCTURE WITH SIGNIFICANT LIQUIDITY


($ in millions)

(a) Represents pro forma information to include the effect of the stock buyback from HNA Tourism Group Co., Ltd. (“HNA”) and the senior notes offering and use of proceeds therefrom, each of which occurred in April 2018, as if they occurred on March 31, 2018.(b) Excludes capital lease obligations and other debt of our consolidated variable interest entities.(c) Ratio of pro forma net debt as of 3/31/2018 to the midpoint of FY 2018 Adjusted EBITDA outlook range as of 4/26/2018. Ratio of pro forma net debt as of 3/31/2018 to LTM 3/31/2018 Adjusted EBITDA was 3.7x.

15

(a) Represents furniture, fixture & equipment (“FF&E”) replacement reserves established for the benefit of lessors for requisition of capital assets under certain lease agreements.(b) Includes adjustments for severance, transaction costs and other items.(c) Includes the effect of the stock buyback from HNA and the senior notes offering and use of proceeds therefrom, each of which occurred in April 2018, as if they occurred on March 31, 2018.(d) Ratio of pro forma net debt as of 3/31/2018 to the midpoint of our FY 2018 Adjusted EBITDA guidance range as of 4/26/2018.


($ in millions)RECONCILIATIONS

Q1 2018 FY 2017Net income 163$ 1,089$

Interest expense 83 351 Income tax expense (benefit) 58 (336) Depreciation and amortization 82 336

EBITDA 386 1,440 Gain on foreign currency transactions (11) (3) Loss on debt extinguishment - 60 FF&E replacement reserve (a) 12 55 Share-based compensation expense 28 121 Amortization of contract acquisition costs 7 17 Net other expenses from managed and franchised properties 21 172 Other adjustment items (b) 2 47

Adjusted EBITDA 445$ 1,909$

As of Mar. 31, 2018

As of Dec. 31, 2017

Long-term debt, including current maturities 6,605$ 6,602$ Add: unamortized deferred financing costs and discount 78 81 Long-term debt, including current maturities and excluding unamortized deferred financing costs and discount 6,683 6,683 Add: Hilton's share of unconsolidated affiliate debt, excluding unamortized deferred financing costs 15 13 Less: cash and cash equivalents (610) (570) Less: restricted cash and cash equivalents (73) (100) Net debt 6,015$ 6,026$

Pro forma adjustments (c) 1,190 Pro forma net debt (c) 7,205$

Net debt/Adjusted EBITDA ratio 3.1x 3.2xPro forma net debt/Adjusted EBITDA ratio (d) 3.5x NA

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This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources and other non-historical statements. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks inherent to the hospitality industry, macroeconomic factors beyond our control, competition for hotel guests and management and franchise contracts, risks related to doing business with third-party hotel owners, performance of our information technology systems, growth of reservation channels outside of our system, risks of doing business outside of the United States and our indebtedness, as well as those described under the section entitled “Risk Factors” in Hilton Worldwide Holdings Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017, as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (“SEC”), which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this presentation and in our filings with the SEC. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

All results herein, including prior year, reflect the adoption of new accounting standards, including Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), unless otherwise noted. This presentation includes certain financial measures, including adjusted earnings before interest expense, taxes, depreciation and amortization (“Adj. EBITDA”), Net Debt, and Net Debt to Adj. EBITDA ratio, that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP financial measures should be considered only as supplemental to, and not as a substitute for or superior to, financial measures prepared in accordance with U.S. GAAP. Please refer to the Appendix and footnotes of this presentationfor a reconciliation of the historical non-GAAP financial measures included in this presentation to the most directly comparable financial measures prepared in accordance with U.S. GAAP. In addition, this presentation includes Pro Forma Net Debt and Pro Forma Net Leverage as of March 31, 2018. Please refer to Hilton Worldwide Holding Inc.’s Current Report on Form 8-K dated April 26, 2018 for additional information on the stock buyback from HNA and the senior notes offering and use of proceeds therefrom, and the effect of the adoption of new accountings standards..

Slides in this presentation include certain Adj. EBITDA amounts that are used only for illustrative purposes to present illustrative Adj. EBITDA amounts by applying assumptions to existing rooms pipeline, increases of in-place rates and increases in RevPAR, as applicable, in each case based on information for the LTM ended March 31, 2018. These amounts do not represent projections of future results and may not be realized. Value information on such slides that is derived from such illustrative Adj. EBITDA amounts is indicative only, based upon a number of assumptions, and does not reflect actual valuation. Please review carefully the detailed footnotes in this presentation.

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

investor - hilton/media/files/h/hilton-worldwide... · 2018-05-08 · •award-winning brands that...

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