What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-05 compared with 2020-11-04 · 158 added, 219 removed, 206 unchanged (65% of the section changed)

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We believe these factors include but are not limited to those described under "Part I—Item 1A.

Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as updated under "Part II.

Other Information—Item 1A.

Risk Factors" of this Quarterly Report on Form 10-Q.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere in this Quarterly Report on Form 10-Q.

Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report on Form 10-Q.

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.

COVID-19 Pandemic

During the nine months ended September 30, 2020, the COVID-19 pandemic significantly impacted the global economy and strained the hospitality industry due to travel restrictions and stay-at-home directives in place at various times during the period, resulting in cancellations and significantly reduced travel around the world.

The reduction in travel has resulted in complete and partial suspensions of hotel operations in many of the locations, where our hotels are located, for an indeterminate duration, which, outside of China, largely began in mid-March, and included approximately 20 percent of our global hotel properties for some portion of the reporting period.

As such, it had a material adverse impact on our results for the three and nine months ended September 30, 2020 and, based on the potential impact of further restrictions and health and safety concerns, we expect it to continue to have a material adverse impact on our results in future periods, as described below under "—Results of Operations."

As of November 2, 2020, 97 percent of our global hotel properties were open, while approximately 190 hotels had temporarily suspended operations.

However, in late October, certain geographic areas have re-imposed additional travel restrictions, which may result in further adverse impacts to our hotel operations.

Hotels that have reopened generally have experienced significantly lower occupancy as compared with periods before the onset of the pandemic.

In response to this global crisis, we have taken actions to prioritize the safety and security of our guests, employees and owners and support our communities.

During the summer, we launched Hilton CleanStay to deliver a new standard of cleanliness and disinfection to our properties worldwide and Hilton EventReady, which focuses on cleanliness and customer service specific to meetings and events.

We also found alternative uses for certain of our hotel properties, including providing housing for first responders and healthcare workers, and provided financial assistance to organizations helping those affected by COVID-19 through our Hilton Effect Foundation.

Additionally, we have taken several steps to help our business withstand this uncertain time, as detailed in "—Liquidity and Capital Resources."

Hilton is one of the largest hospitality companies in the world, with 6,333 properties comprising 998,282 rooms in 118 countries and territories as of September 30, 2020.

Since the beginning of 2020, the COVID-19 pandemic has significantly impacted the global economy and strained the hospitality industry due to travel restrictions and stay-at-home directives in place at various times, resulting in cancellations and significantly reduced travel around the world.

In response to the global crisis, we took actions to prioritize the safety and security of our guests, employees and owners and support our communities, as well as help our business withstand this uncertain time;

see further discussion in "—Liquidity and Capital Resources."

The reduction in travel resulted in the complete and partial suspensions of operations at certain of our hotels throughout 2020, although the majority of those properties had reopened by December 31, 2020.

During the three months ended March 31, 2021, reopenings outpaced suspensions;

however, the operations of approximately 275 hotels were suspended for some period of time during the period.

Our Asia Pacific region began experiencing the effects of the pandemic in January 2020, while the pronounced negative results and hotel suspensions in the Americas and Europe, Middle East and Africa ("EMEA") regions did not begin until mid-March 2020.

Additionally, since the beginning of the pandemic, the pervasiveness and severity of travel restrictions and stay-at-home directives have varied by country and state and have fluctuated with COVID-19 infection surges and contractions and COVID-19 vaccination distributions, which commenced in late 2020.

As such, the pandemic had a material adverse impact on our results for the three months ended March 31, 2021 and 2020 when compared to periods prior to the onset of the pandemic, and although both periods were significantly impacted by the pandemic, they are not considered comparable, and no two periods affected by the pandemic are expected to be comparable in the future.

In addition, although the distribution of effective COVID-19 vaccinations is a promising development, we are unable to predict how widely utilized the vaccines will be, whether they will be effective in preventing the spread of COVID-19 (including its variant strains) and when normal economic activity and business operations will resume.

Accordingly, given the ongoing nature of the COVID-19 pandemic, the ultimate impact that it will have on the Company’s business, financial performance and results of operations remains uncertain.

As of April 28, 2021, 97 percent of our global hotel properties were open, while the operations of approximately 175 hotels were suspended, and we expect all of our hotel properties to be open by the end of 2021.

Refer to "—Results of Operations" for further discussion on signs of recovery experienced during the period.

Hilton is one of the largest hospitality companies in the world, with 6,567 properties comprising 1,032,412 rooms in 119 countries and territories as of March 31, 2021.

Our premier brand portfolio includes:

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and our timeshare brand, Hilton Grand Vacations.

As of September 30, 2020, we had 110 million members in our award-winning guest loyalty program, Hilton Honors.

As of March 31, 2021, we had 115 million members in our award-winning guest loyalty program, Hilton Honors.

Segments and Regions

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(i) management and franchise fees charged to third-party hotel owners;

(ii) licensing fees from HGV and strategic partnerships for the right to use certain Hilton marks and IP;

and (iii) fees for managing our owned and leased hotels.

(ii) licensing fees from HGV and strategic partnerships, including co-branded credit card arrangements, for the right to use certain Hilton marks and IP;

and (iii) fees for managing properties in our ownership segment.

As a manager of hotels, we typically are responsible for supervising or operating the property in exchange for management fees.

As a franchisor of hotels, we charge franchise fees in exchange for the use of one of our brand names and related commercial services, such as our reservation system, marketing and information technology services, while a third party manages or operates such franchised hotels.

As a franchisor of hotels, we charge franchise fees in exchange for the use of one of our brand names and related commercial services, such as our reservation systems, marketing and information technology services, while a third party manages or operates such franchised hotels.

The ownership segment primarily derives earnings from providing nightly hotel room sales, food and beverage sales and other services at our owned and leased hotels.

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(i) the Americas;

(ii) Europe, Middle East and Africa ("EMEA");

and (iii) Asia Pacific.

The Americas region includes North America, South America and Central America, including all Caribbean nations.

Although the U.S.

is included in the Americas, it represents a significant portion of our system-wide hotel rooms, 72 percent as of September 30, 2020;

therefore, the U.S.

is often analyzed separately and apart from the Americas region and, as such, it is presented separately within the analysis herein.

Although the U.S., which represented 71 percent of our system-wide hotel rooms as of March 31, 2021, is included in the Americas region, it is often analyzed separately and apart from the Americas region and, as such, it is presented separately within the analysis herein.

The EMEA region includes Europe, which represents the western-most peninsula of Eurasia stretching from Iceland in the west to Russia in the east, and the Middle East and Africa ("MEA"), which represents the Middle East region and all African nations, including the Indian Ocean island nations.

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While these objectives have not changed as a result of the COVID-19 pandemic, the current economic environment has posed certain challenges to the execution of our strategy, which have included and may continue to include delays in openings and new development.

See further discussion on our cash management policy, as detailed in "—Liquidity and Capital Resources."

As of September 30, 2020, we had approximately 2,640 hotels in our development pipeline that we expect to add as open hotels in our system, representing more than 408,000 rooms under construction or approved for development throughout 120 countries and territories, including 33 countries and territories where we do not currently have any open hotels.

Despite the adverse effects of the COVID-19 pandemic, we added nearly 70 hotels, on a net basis, to our development pipeline during the nine months ended September 30, 2020.

During the three months ended March 31, 2021, we added over 100 hotels, consisting of 16,500 rooms, to our system, contributing to over 13,100 net additional hotel rooms.

As of March 31, 2021, we had over 2,570 hotels in our development pipeline that we expect to add to our system in the future, representing nearly 399,000 rooms under construction or approved for development throughout 114 countries and territories, including 31 countries and territories where we do not currently have any existing hotels.

Nearly all of the rooms in the development pipeline are within our management and franchise segment.

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In June 2016, the United Kingdom ("U.K.") held a referendum in which voters approved an exit from the European Union ("E.U.") (commonly referred to as "Brexit").

The U.K.'s withdrawal from the E.U.

occurred on January 31, 2020, beginning the implementation period, which is set to end on December 31, 2020.

The effects of Brexit will depend on the final terms that will be negotiated during the implementation period, including the terms of any trade agreements that will dictate the U.K.’s access to E.U.

While our results as of and for the nine months ended September 30, 2020 were not materially affected by Brexit, the final outcomes are not yet certain.

Brexit measures could potentially disrupt the markets we serve and cause tax and foreign currency volatility, which could have adverse effects on our business.

In December 2020, the U.K.

reached a new bilateral trade and cooperation deal governing their future relationship (the "EU-UK Trade and Cooperation Agreement"), which has now been approved by all parties and will be fully implemented from May 1, 2021.

While our results as of and for the three months ended March 31, 2021 were not materially affected by Brexit specifically, the final outcomes are not yet certain.

In addition, while the EU-UK Trade and Cooperation Agreement provides clarity in respect of the intended future relationship between the U.K.

and some detailed matters of trade and cooperation, it remains unclear what general long-term economic, financial, trade and legal implications the U.K.

withdrawal from the E.U.

will have and how it will ultimately affect our business.

Brexit measures could potentially disrupt the markets we serve and cause tax and foreign currency exchange rate volatility, which could have adverse effects on our business.

We will continue to monitor the potential impact of Brexit on our business in future periods.

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and (iii) have not sustained substantial property damage, business interruption, undergone large-scale capital projects or for which comparable results were not available.

Of the 6,278 hotels in our system as of September 30, 2020, 4,996 hotels were classified as comparable hotels.

Our 1,282 non-comparable hotels included 152 hotels, or approximately two percent of the total hotels in our system, that were removed from the comparable group during the last twelve months because they sustained substantial property damage, business interruption, underwent large-scale capital projects or comparable results were otherwise not available.

When considering business interruption in the context of our definition of comparable hotels, any hotel that had completely or partially suspended operations on a temporary basis at any point during the nine months ended September 30, 2020 as a result of the COVID-19 pandemic was considered to be part of the definition of comparable hotels.

Despite these temporary suspensions of hotel operations, we believe that including these hotels within occupancy, average daily rate and revenue per available room reflects the underlying results of our business for the three and nine months ended September 30, 2020.

Of the 6,511 hotels in our system as of March 31, 2021, 5,642 hotels were classified as comparable hotels.

Our 869 non-comparable hotels included 48 hotels, or less than one percent of the total hotels in our system, that were removed from the comparable group during the last twelve months because they sustained substantial property damage, business interruption, underwent large-scale capital projects or comparable results were otherwise not available.

When considering business interruption in the context of our definition of comparable hotels, any hotel that had completely or partially suspended operations on a temporary basis at any point as a result of the COVID-19 pandemic was considered to be part of the definition of comparable hotels.

Despite these temporary suspensions of hotel operations, we believe that including these hotels within our hotel operating statistics of occupancy, average daily rate ("ADR") and revenue per available room ("RevPAR") reflects the underlying results of our business for the three months ended March 31, 2021 and 2020.

Occupancy represents the total number of room nights sold divided by the total number of room nights available at a hotel or group of hotels for a given period.

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Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period.

Occupancy levels also help us determine achievable average daily rate pricing levels as demand for hotel rooms increases or decreases.

Average Daily Rate ("ADR")

Occupancy levels also help us determine achievable ADR pricing levels as demand for hotel rooms increases or decreases.

ADR represents hotel room revenue divided by the total number of room nights sold for a given period.

ADR measures average room price attained by a hotel, and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels.

ADR is a commonly used performance measure in the industry, and we use ADR to assess pricing levels that we are able to generate by type of customer, as changes in rates charged to customers have a different effect on overall revenues and incremental profitability than changes in occupancy, as described above.

Revenue per Available Room ("RevPAR")

ADR is a commonly used performance measure in the industry, and we use ADR to assess pricing levels that we are able to generate by type of customer, as changes in rates charged to customers have different effects on overall revenues and incremental profitability than changes in occupancy, as described above.

RevPAR is calculated by dividing hotel room revenue by the total number of room nights available to guests for a given period.

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References to RevPAR, ADR and occupancy are presented on a comparable basis, and references to RevPAR and ADR are presented on a currency neutral basis, unless otherwise noted.

As such, comparisons of these hotel operating statistics for the three and nine months ended September 30, 2020 and 2019 use the exchange rates for the three and nine months ended September 30, 2020, respectively.

As such, comparisons of these hotel operating statistics for the three months ended March 31, 2021 and 2020 use the exchange rates for the three months ended March 31, 2021.

EBITDA and Adjusted EBITDA

EBITDA reflects net income (loss), excluding interest expense, income tax benefit (expense) and depreciation and amortization.

EBITDA reflects net income (loss), excluding interest expense, a provision for income tax benefit (expense) and depreciation and amortization.

Adjusted EBITDA is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including gains, losses, revenues and expenses in connection with:

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(iv) furniture, fixtures and equipment ("FF&E") replacement reserves required under certain lease agreements;

(v) reorganization, severance, relocation and other related expenses;

(vi) share-based compensation;

(v) share-based compensation;

(vi) reorganization, severance, relocation and other expenses;

(vii) non-cash impairment;

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(i) FF&E replacement reserves for leased hotels to be consistent with the treatment of FF&E for owned hotels, where it is capitalized and depreciated over the life of the FF&E;

(ii) share-based compensation expense (benefit), as this could vary widely among companies due to the different plans in place and the usage of them;

(ii) share-based compensation, as this could vary widely among companies due to the different plans in place and the usage of them;

(iii) the net effect of our cost reimbursement revenues and reimbursed expenses, as we contractually do not operate the related programs to generate a profit over the terms of the respective contracts;

and (iv) other items, including reorganization and related severance costs, that are not core to our operations and are not reflective of our operating performance.

and (iv) other items, such as amounts related to debt restructurings and retirements and reorganization and related severance costs, that are not core to our operations and are not reflective of our operating performance.

EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with GAAP.

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• EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

• EBITDA and Adjusted EBITDA do not reflect income tax expenses or benefits or the cash requirements to pay our taxes;

• EBITDA and Adjusted EBITDA do not reflect income tax expenses or the cash requirements to pay our taxes;

• EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

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The hotel operating statistics by region for our system-wide comparable hotels were as follows:

Three Months Ended Variance Nine Months Ended Variance

September 30, 2020 2020 vs.

2019 September 30, 2020 2020 vs.

Three Months Ended Change

March 31, 2021 2021 vs.

Occupancy 47.7 % (9.9) % pts.

42.5 % (34.6) % pts.

ADR $ 107.23 (23.4) %

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Occupancy 30.3 % (21.3) % pts.

29.9 % (40.1) % pts.

ADR $ 94.43 (22.7) %

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Occupancy 19.3 % (32.7) % pts.

30.6 % (46.0) % pts.

ADR $ 81.59 (35.0) %

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Occupancy 42.6 % (15.7) % pts.

34.1 % (34.0) % pts.

ADR $ 124.56 (6.9) %

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Occupancy 43.7 % 6.5 % pts.

40.0 % (29.8) % pts.

ADR $ 97.60 (20.5) %

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Occupancy 43.9 % (11.0) % pts.

40.4 % (35.4) % pts.

ADR $ 105.38 (23.0) %

RevPAR $ 46.23 (38.4) %

During the three and nine months ended September 30, 2020, we experienced significant declines in RevPAR in all regions compared to the same periods in 2019, due to both occupancy and ADR decreases resulting from the COVID-19 pandemic.

Our Asia Pacific region experienced the effects of the pandemic early in 2020, with suspensions of hotel operations beginning in late January.

Pronounced negative results in the Americas and EMEA regions lagged the Asia Pacific region, with hotel suspensions in those regions beginning in mid-March.

Of the approximately 1,270 properties that had suspended hotel operations at some point during the nine months ended September 30, 2020, approximately 44 percent were in the U.S., 9 percent were in the Americas (excluding U.S.), 26 percent were in Europe, 5 percent were in MEA and 16 percent were in Asia Pacific.

As of November 2, 2020, the operations at approximately 190 hotels, primarily located in the U.S., were temporarily suspended.

However, properties that have reopened have experienced significantly lower occupancy compared with periods prior to the onset of the pandemic as business and transient demand remains lower and travel restrictions and stay-at-home directives are still in place in many areas.

On a global level, the pervasiveness of the COVID-19 impact began in late March, with its most significant adverse impact on occupancy and RevPAR seen in April.

Since April, system-wide occupancy has increased month over month, with the most notable recoveries in Asia Pacific, the U.S.

and Europe, with comparable hotel occupancy levels up approximately 32 percentage points, 32 percentage points and 31 percentage points, respectively, from April to September.

During the three months ended March 31, 2021, the COVID-19 pandemic continued to negatively impact our business and our hotel operating statistics.

As a result of the pandemic, certain hotels suspended operations at various times throughout 2020 and, although the majority of those hotels were reopened by 2021, new suspensions and re-suspensions continued during the three months ended March 31, 2021.

The operations of approximately 275 properties, which are primarily located in the U.S.

and Europe, were suspended for some period of time during the three months ended March 31, 2021, as compared to approximately 730 properties during the three months ended March 31, 2020.

While approximately 97 percent of our global hotel properties were open as of March 31, 2021, most properties, including those that reopened following suspensions of their operations, experienced significantly lower occupancy as compared to prior to the pandemic, as business and transient demand was lower due to factors related to the pandemic, such as travel restrictions and health and safety concerns.

The negative impact of the COVID-19 pandemic affected the Asia Pacific region in January 2020, before spanning to the U.S., Americas (excluding the U.S.), Europe and MEA regions in mid-March 2020.

Therefore, the results for the three months ended March 31, 2021 and 2020 for the U.S., Americas (excluding the U.S.), Europe and MEA regions are less comparable than the Asia Pacific region and reflect more pronounced declines in RevPAR between the two periods.

However, overall, signs of recovery are evident as our properties continue to reopen and, although we historically expect our revenues to be lowest in the first quarter given the seasonality of our industry, we had sequential monthly improvement in occupancy, ADR and RevPAR on a system-wide basis from December 2020 through March 2021, with a 23.2 percent improvement in system-wide RevPAR for the month of March 2021 as compared to the month of March 2020.

The table below provides a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA:

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Three Months Ended

(in millions)

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Interest expense 103 94

Income tax expense (benefit) (33) 131 (80) 291

Depreciation and amortization 90 86 269 256

Income tax benefit (35) (35)

Depreciation and amortization expenses 51 91

EBITDA 10 168

Gain on sale of assets, net — (81) — (81)

Loss (gain) on foreign currency transactions 12 (7) 16 (4)

Gain on foreign currency transactions (2) (9)

Loss on debt extinguishment 69 —

FF&E replacement reserves 4 14

Share-based compensation expense 25 42 37 123

Reorganization costs — — 38 —

Share-based compensation expense (benefit) 39 (12)

Impairment losses — 112

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Net other expenses from managed and franchised properties

Other adjustment items (1)

Other adjustments (1)

Adjusted EBITDA $ 198 $ 363

(1) Includes severance not related to the reorganization and other items.

The three and nine months ended September 30, 2020 also include costs recognized for the settlement of a dispute with an owner of a managed hotel.

Additionally, the nine months ended September 30, 2020 includes losses related to the disposal of an investment and a loan guarantee for a franchised hotel.

The three and nine months ended September 30, 2019 also include expenses recognized in connection with the refinancings and repayments of our senior secured credit facilities.

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2020 2019 2020 vs.

(1) Includes severance and other items.

Three Months Ended Percent

March 31, Change

2021 2020 2021 vs.

(in millions) (in millions)

(in millions)

Franchise and licensing fees $ 242 $ 339 (28.6)

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Incentive management fees

7 54 (87.0) 25 167 (85.0)

Total management fees $ 38 $ 83 (54.2)

The COVID-19 pandemic and the related reduction in global travel and tourism resulted in the complete or partial suspensions of hotel operations at approximately 1,235 of our managed and franchised properties at some point during the nine months ended September 30, 2020.

Of these hotels, all but approximately 200 had reopened as of September 30, 2020.

On a comparable basis, decreases in occupancy and ADR led to reduced RevPAR, resulting in decreases in franchise fees and management fees from our comparable managed and franchised properties.

For the three months ended September 30, 2020, RevPAR decreased 55.1 percent at our comparable franchised properties and 72.0 percent at our comparable managed properties, resulting from reduced occupancy of 32.8 percentage points and 44.8 percentage points, respectively, and reduced ADR of 23.1 percent and 33.2 percent, respectively.

For the nine months ended September 30, 2020, RevPAR decreased 52.8 percent at our comparable franchised properties and 63.1 percent at our comparable managed properties, resulting from reduced occupancy of 33.3 percentage points and 41.1 percentage points, respectively, and reduced ADR of 16.1 percent and 17.7 percent, respectively.

Incentive fees decreased during the periods as they are based on hotels' operating profits, which have declined compared with prior year results as a result of the COVID-19 pandemic.

Additionally, licensing and other fees decreased $22 million and $75 million during the three and nine months ended September 30, 2020, respectively, primarily due to decreased licensing fees from both our strategic partnerships and HGV as a result of the COVID-19 pandemic.

Including new development and ownership type transfers, from January 1, 2019 to September 30, 2020, we added 653 managed and franchised properties on a net basis, providing an additional 86,673 rooms to our management and franchise segment.

While we have historically experienced increases to management and franchise fees as new hotels are a part of our system for full periods, the impact of the COVID-19 pandemic has outweighed the impact of these property additions in 2020.

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2020 2019 2020 vs.

The COVID-19 pandemic began to significantly impact our franchise and licensing fees and management fees in March 2020.

As a result of the pandemic, during the three months ended March 31, 2021 and 2020, the operations of certain of our franchised and managed hotels were suspended for some period of time.

As of March 31, 2021, all but approximately 200 of these hotels were open.

In addition to the suspensions of hotel operations, the related reduction in global travel and tourism led to decreases in our hotel operating statistics during the three months ended March 31, 2021, compared to the same period in the prior year, and, ultimately, decreases in our franchise fees and management fees.

For the three months ended March 31, 2021, RevPAR decreased 33.3 percent at our comparable franchised properties and 50.2 percent at our comparable managed properties, as a result of decreases in occupancy of 8.9 percentage points and 16.5 percentage points, respectively, and reduced ADR of 20.8 percent and 25.8 percent, respectively.

The decreases in RevPAR during the period were primarily attributable to decreases in January 2021 and February 2021 when compared to the same period in the prior year, as March 2021 showed RevPAR improvement at both comparable franchised properties and managed properties of 25.7 percent and 17.6 percent, respectively, when compared to the same period in the prior year.

Including new development and ownership type transfers, from January 1, 2020 to March 31, 2021, we added 460 managed and franchised properties on a net basis, providing an additional 61,700 rooms to our management and franchise segment.

While we have historically experienced increases to franchise fees and management fees as new hotels are a part of our system for full periods, the impact of the COVID-19 pandemic outweighed the positive impact of these property additions on our franchise fees and management fees from non-comparable hotels.

Additionally, licensing and other fees decreased $19 million during the three months ended March 31, 2021, primarily due to decreases in licensing fees from HGV and our strategic partnerships, which were the result of reductions in timeshare revenues and lower co-branded credit cardholder spend, respectively, both resulting from the COVID-19 pandemic.

Incentive fees decreased during the period as they are based on hotels' operating profits, which have declined from the prior year as a result of decreased demand due to the COVID-19 pandemic.

Three Months Ended Percent

March 31, Change

2021 2020 2021 vs.

(in millions) (in millions)

(in millions)

Owned and leased hotels

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Owned and leased hotel revenues decreased primarily due to the COVID-19 pandemic and the related reduction in global travel and tourism.

As a result of the COVID-19 pandemic, approximately 35 hotels in our ownership segment had temporarily suspended operations at some point in time during the nine months ended September 30, 2020.

All of these hotels have reopened as of September 30, 2020.

On a comparable basis, decreases in occupancy and ADR led to reduced RevPAR, resulting in decreases in revenues from our comparable owned and leased hotels.

For the three and nine months ended September 30, 2020, RevPAR decreased 78.8 percent and 72.2 percent, respectively, resulting from reduced occupancy of 58.2 percentage points and 49.8 percentage points, respectively, and reduced ADR of 28.1 percent and 20.1 percent, respectively.

Additionally, owned and leased hotel revenues decreased $8 million and $36 million during the three and nine months ended September 30, 2020, respectively, due to properties being sold or lease agreements terminated and the hotels being transferred to our managed and franchised segment during 2019.

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2020 2019 2020 vs.

As a result of the COVID-19 pandemic, the operations of approximately 15 of our owned and leased hotels, all of which are located in Europe, were suspended for some period of time during the three months ended March 31, 2021, and five remained suspended as of March 31, 2021.

Although the operations of some of our owned and leased hotels were suspended for some period of time during the three months ended March 31, 2020, the suspensions began in late March, when our owned and leased hotels began to be significantly impacted by the pandemic.

The decrease in owned and leased hotel revenues was primarily attributable to the $114 million decrease in revenues from our comparable owned and leased hotels, due to reduced RevPAR of 79.6 percent, resulting from decreases in occupancy and ADR of 37.1 percentage points and 27.1 percent, respectively.

Three Months Ended Percent

March 31, Change

2021 2020 2021 vs.

(in millions) (in millions)

(in millions)

Other revenues $ 17 $ 23 (26.1)

The decreases in other revenues during the three and nine months ended September 30, 2020 were primarily due to decreases in revenues from our purchasing operations related to delayed hotel improvement projects and lower volume purchasing based on reduced hotel demand as a result of the COVID-19 pandemic.

Other revenues decreased primarily due to decreased revenues from our purchasing operations, which predominately related to lower volume purchasing based on reduced hotel demand as a result of the COVID-19 pandemic.

Operating Expenses

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2020 2019 2020 vs.

Three Months Ended Percent

March 31, Change

2021 2020 2021 vs.

(in millions) (in millions)

(in millions)

Owned and leased hotels

$ 110 $ 239 (54.0)

Owned and leased hotel expen ses decreased primarily due to decreases in occupancy resulting from the COVID-19 pandemic and approximately 35 hotels temporarily suspending operations at some point in time during the nine months ended September 30, 2020.

Further, as a result of declining performance, variable rent expense was reduced at most leased hotels with a variable rent structure.

However, certain fixed costs of maintaining these hotels, such as fixed rent and certain minimum maintenance and utility costs, even while temporarily closed or operating with very low occupancy, could not be reduced at the same rate as the hotel revenue decreases during the periods.

Additionally, owned and leased hotel expenses decreased $10 million and $35 million during the three and nine months ended September 30, 2020, respectively, related to properties being sold or lease agreements terminated and the hotels being transferred to our managed and franchised segment during 2019.

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2020 2019 2020 vs.

Owned and leased hotel expen ses decreased primarily due to a decrease in occupancy and certain hotels having suspended operations for some period of time as a result of the COVID-19 pandemic, which led to reduced variable operating costs and food and beverage expenses.

Further, as a result of declining performance, variable rent, which is generally based on a percentage of hotel revenues or profits, decreased at most leased hotels that have a variable rent structure .

However, certain fixed costs of maintaining these hotels, such as fixed rent and certain minimum maintenance and utility costs, even with suspended operations or operating with very low occupancy, could not be reduced at the same rate as the hotel revenue decreases during the period.

Three Months Ended Percent

March 31, Change

2021 2020 2021 vs.

(in millions) (in millions)

Depreciation and amortization $ 90 $ 86 4.7 $ 269 $ 256 5.1

General and administrative 66 107 (38.3) 189 327 (42.2)

Reorganization costs — — NM (1)

Impairment losses 9 — NM (1)

(in millions)

Depreciation and amortization expenses $ 51 $ 91 (44.0)

General and administrative expenses 97 60 61.7

Impairment losses — 112 (100.0)

Other expenses 10 14 (28.6)

(1) Fluctuation in terms of percentage change is not meaningful.

The increases in depreciation and amortization expense were primarily due to increases in amortization expense resulting from additions to capitalized software costs during 2020 and 2019, partially offset by reduced amortization expense due primarily to impairment losses on other intangible assets related to our leased properties that were recognized during the nine months ended September 30, 2020.

General and administrative expenses decreased primarily as a result of actions taken by the Company during the nine months ended September 30, 2020 to reduce or eliminate certain corporate costs in response to the COVID-19 pandemic, which included workforce reductions, temporary furloughs and salary reductions of corporate employees;

refer to "—Liquidity and Capital Resources" for additional information.

These actions are expected to also reduce costs in future periods.

In addition, share-based compensation expense decreased due to the determination that the performance conditions of our outstanding performance shares were no longer probable of achievement, resulting in a reversal of previously recognized expense for the outstanding 2020 performance awards during the three months ended September 30, 2020 and for all outstanding performance awards during the nine months ended September 30, 2020;

The decrease in depreciation and amortization expenses was primarily due to a decrease in amortization expense, which was largely the result of certain management and franchise contract intangible assets recorded at the Merger becoming fully amortized during 2020.

The increase in general and administrative expenses was primarily due to increased share-based compensation expense as a result of a benefit recognized during the three months ended March 31, 2020 due to the reversal of previously recognized expense resulting from the determination that the performance conditions of certain then-outstanding performance shares were no longer probable of achievement, while compensation expense was recognized during the three months ended March 31, 2021 for all of the outstanding performance shares, which were probable of achievement.

"Share-Based Compensation" in our unaudited condensed consolidated financial statements for additional information.

During the nine months ended September 30, 2020, we recognized reorganization costs related to activities undertaken in response to the COVID-19 pandemic, primarily relating to reductions in our workforce and associated costs.

During the three months ended September 30, 2020, we recognized impairment losses of $3 million and $6 million on property and equipment related to our leased properties and management contract acquisition costs, respectively.

During the nine months ended September 30, 2020, we recognized impairment losses of $51 million, $24 million, $15 million and $46 million on hotel operating lease ROU assets, property and equipment related to our leased properties, management contract acquisition costs and other intangible assets related to our leased hotel properties, respectively.

These impairment losses were due to a decline in results and expected future performance at the related hotels as a result of the COVID-19 pandemic, as well as actual and expected early terminations of management contracts.

Other expenses increased primarily as a result of costs recognized for the settlement of a dispute with an owner of a managed hotel and increases in amounts accrued related to our performance guarantees during the three and nine months ended September 30, 2020, partially offset by decreases in expenses from our purchasing operations, resulting from reduced demand.

Gain on Sale of Assets, Net

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2020 2019 2020 vs.

2019 2020 2019 2020 vs.

(in millions) (in millions)

Gain on sale of assets, net $ — $ 81 (100.0) $ — $ 81 (100.0)

In September 2019, we recognized a gain upon completion of the sale of the Hilton Odawara.

"Disposal" in our unaudited condensed consolidated financial statements for additional information.

This increase was partially offset by a decrease in corporate costs associated with the reorganization initiated by the Company in June 2020, in response to the COVID-19 pandemic.

During the three months ended March 31, 2020, we recognized impairment losses of $45 million, $21 million and $46 million for operating lease ROU assets, property and equipment and other intangible assets, respectively, related to our leased hotel properties.

These impairment losses were due to a decline in results and expected future performance at the related hotels as a result of the COVID-19 pandemic.

Other expenses decreased primarily as a result of a decrease in expenses from our purchasing operations, resulting from reduced hotel demand, as well as a decrease in expenses related to a performance guarantee that was recognized during the three months ended March 31, 2020.

Non-operating Income and Expenses

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2020 2019 2020 vs.

Three Months Ended Percent

March 31, Change

2021 2020 2021 vs.

(in millions) (in millions)

(in millions)

Interest expense $ (103) $ (94) 9.6

Gain (loss) on foreign currency transactions

(12) 7 NM (1)

(16) 4 NM (1)

Other non-operating income (loss), net

(20) (8) NM (1)

Income tax benefit (expense)

33 (131) NM (1)

80 (291) NM (1)

Gain on foreign currency transactions

Loss on debt extinguishment (69) — NM (1)

Other non-operating income, net

Income tax benefit

(1) Fluctuation in terms of percentage change is not meaningful.

The increases in interest expense for the three and nine months ended September 30, 2020 were primarily due to the full draw down on the Revolving Credit Facility in March 2020, the issuances of the 5.375% 2025 Senior Notes and the 2028 Senior Notes in April 2020 and, for the nine months ended September 30, 2020, the issuance of the 4.875% Senior Notes due 2030 in June 2019.

The increases were partially offset by a decrease in interest expense on our Term Loans due to a 2019 principal repayment of $500 million and a decline in variable interest rate, as well as decreased variable interest expense of certain finance leases for our hotels that resulted from a decline in operating performance.

The gains and losses on foreign currency transactions included changes in foreign currency exchange rates on certain intercompany financing arrangements, including short-term cross-currency intercompany loans.

The changes were the result of various currencies, but primarily in the euro and the Australian dollar.

Additionally, during the three and nine months ended September 30, 2020, we recognized losses related to the liquidation of investments in foreign entities that were reclassified out of accumulated other comprehensive loss.

Other non-operating loss, net for the nine months ended September 30, 2020 primarily included losses related to a loan guarantee for a franchised hotel and the disposal of an investment.

Other non-operating loss, net for the nine months ended September 30, 2019 primarily included a loss on the disposal of an unconsolidated real estate investment and expenses recognized in connection with the refinancings and repayments of our senior secured credit facilities.

The changes in the income tax provisions were primarily attributable to decreases in income before income taxes, offset by reductions in the tax benefits recognized for the expected NOLs generated in 2020 in certain foreign jurisdictions.

The increase in interest expense was primarily due to the issuances of the 2025 Senior Notes and the 2028 Senior Notes in April 2020.

These increases were partially offset by a decrease resulting from the issuances of new senior unsecured notes and extinguishments of existing senior unsecured notes in December 2020 and February 2021, which reduced the weighted average interest rate on our outstanding senior unsecured notes, as well as a decrease in interest expense on our Term Loan due to a decline in its variable interest rate that was applicable for the period.

"Debt" in our unaudited condensed consolidated financial statements for additional information on our indebtedness.

The gains on foreign currency transactions included changes in foreign currency exchange rates on certain intercompany financing arrangements, including short-term cross-currency intercompany loans.

The changes for both periods were the result of various currencies, but primarily the Australian dollar and the euro.

Loss on debt extinguishment for the three months ended March 31, 2021 related to the redemption of the 2026 Senior Notes and included a redemption premium of $55 million and the accelerated recognition of unamortized deferred financing costs of $14 million.

"Debt" in our unaudited condensed consolidated financial statements for additional information.

The income tax benefit was flat during the three months ended March 31, 2021, as the increase in loss before income taxes was partially offset by a decrease in tax benefits recognized for losses in certain jurisdictions.

Further, during the three months ended March 31, 2020, we recognized a tax benefit for impairment losses that were recognized during the period.

For additional information, see Note 8:

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Refer to Note 12:

"Business Segments" in our unaudited condensed consolidated financial statements for reconciliations of revenues for our reportable segments to consolidated amounts and of segment operating income to consolidated income (loss) before income taxes.

We evaluate our business segment operating performance using segment operating income (loss), without allocating other revenues and expenses or general and administrative expenses.

Refer to "—Revenues" for further discussion of the decreases in revenues from our managed and franchised properties, which are correlated to our management and franchise segment revenues and segment operating income.

Refer to "—Revenues" and "—Operating Expenses" for further discussion of the decreases in revenues and operating expenses at our owned and leased hotels, which are correlated with our ownership segment revenues and segment operating income (loss).

Refer to "—Revenues" for further discussion of the decrease in revenues from our managed and franchised properties, which is correlated to our management and franchise segment revenues and segment operating income.

Liquidity and Capital Resources

As of September 30, 2020, we had total cash and cash equivalents of $3,468 million, including $63 million of restricted cash and cash equivalents.

The majority of our restricted cash and cash equivalents balance related to cash collateral on our self-insurance programs and cash held for FF&E reserves.

Although we cannot presently estimate the ultimate and total financial impact of the unprecedented COVID-19 pandemic, which is highly dependent on the severity and duration of the pandemic, we expect it will continue to have a significant adverse

impact on our results of operations in future periods.

As such, due to the uncertainties associated with the COVID-19 pandemic and the indeterminate length of time it will affect the hospitality industry, we have taken certain proactive measures to secure our liquidity position to be able to meet our obligations for the foreseeable future, which have included:

(i) fully drawing down on our $1.75 billion Revolving Credit Facility;

(ii) suspending dividend payments and share repurchases;

(iii) implementing strict cost management measures, such as temporarily halting certain marketing programs, temporarily eliminating non-essential expenses, including capital expenditures, and reducing payroll and related costs through workforce reductions, furloughs and temporary salary reductions;

(iv) consummating the Honors Points Pre-Sale;

and (v) issuing $1.0 billion aggregate principal amount of senior notes.

Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating and other expenditures, including costs associated with the management and franchising of hotels, corporate expenses, payroll and compensation costs, taxes and compliance costs, interest payments on our outstanding indebtedness, contract acquisition costs and capital expenditures for renovations and maintenance at the hotels within our ownership segment.

While our accounts receivable balance as of September 30, 2020 is less than periods prior to the start of the pandemic, we are generally experiencing slower payment of certain fees due to us.

As of March 31, 2021, we had total cash and cash equivalents of $2,447 million, including $45 million of restricted cash and cash equivalents.

The majority of our restricted cash and cash equivalents are related to cash collateral on our self-insurance programs and cash held for FF&E reserves.

As such, due to these uncertainties, and the indeterminate length of time the pandemic will affect the hospitality industry, we took certain proactive measures in 2020 to implement strict cost management and to secure our liquidity position to be able to meet our obligations for the foreseeable future, including issuing senior notes, drawing down on our Revolving Credit Facility and consummating the Honors Points Pre-Sale.

Further, in February 2021, we issued the 2032 Senior Notes to continue to extend debt maturities and reduce our cost of debt by repaying the 2026 Senior Notes.

Based on our ability to manage our liquidity position during the COVID-19 pandemic, we repaid an aggregate of $500 million of the outstanding debt balance on our Revolving Credit Facility during the three months ended March 31, 2021.

Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating and other expenditures, including costs associated with the management and franchising of hotels, corporate expenses, payroll and compensation costs, taxes and compliance costs, interest payments on our outstanding indebtedness, contract acquisition costs and capital expenditures for required renovations and maintenance at the hotels within our ownership segment.

While our accounts receivable balance as of March 31, 2021 is less than periods prior to the start of the pandemic, we are generally experiencing slower payment of certain fees due to us.

As such, we have considered the implications of these delayed payment trends in developing our estimates of expected future credit losses.

Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, capital improvements to the hotels within our ownership segment, commitments to owners in our management and franchise segment and corporate capital and information technology expenditures.

We have currently suspended dividend payments and share repurchases, but expect that these activities will result in uses of liquidity in future periods.

We have a long-term investment policy that is focused on the preservation of capital and maximizing the return on new and existing investments and returning available capital to stockholders through dividends and share repurchases.

However, the COVID-19 pandemic has caused us to temporarily change our cash management strategy as described above.

Within the framework of our long-term investment policy, we currently intend to continue to finance our business activities primarily with cash on our balance sheet as of September 30, 2020 and cash generated from our operations.

After considering our approach to liquidity and accessing our available sources of cash, we believe that our cash position will be adequate to meet anticipated requirements for operating and other expenditures, including corporate expenses, payroll and related benefits, taxes and compliance costs and other commitments for the foreseeable future based on current conditions.

We have currently suspended dividend payments and share repurchases, but expect that these activities will be reinstated in future periods and result in uses of liquidity.

Although the COVID-19 pandemic has caused us to temporarily change our cash management strategy, we have a long-term investment policy that is focused on the preservation of capital and maximizing the return on new and existing investments and returning available capital to stockholders through dividends and share repurchases, which we expect to reimplement in the future.

Within the framework of our investment policy, we currently intend to continue to finance our business activities

primarily with cash on our balance sheet as of March 31, 2021, cash generated from our operations and, as needed, the use of the available capacity of our Revolving Credit Facility.

After considering our approach to liquidity and accessing our available sources of cash, we believe that our cash position and sources of liquidity will be adequate to meet anticipated requirements for operating and other expenditures, including corporate expenses, payroll and related benefits, taxes and compliance costs and other commitments for the foreseeable future based on current conditions.

The objectives of our cash management policy are to maintain the availability of liquidity while minimizing operational costs.

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The amounts involved may be material.

We formally suspended share repurchases given the current economic environment and our efforts to preserve cash, and no share repurchases have been made since March 5, 2020.

We formally suspended share repurchases in 2020 given the economic environment and our efforts to preserve cash, and no share repurchases have been made since March 2020.

The stock repurchase program remains authorized by the board of directors, and we may resume share repurchases in the future at any time, depending on market conditions, our capital needs and other factors.

Prior to the suspension, during the nine months ended September 30, 2020, we repurchased 2.6 million shares of our common stock under our stock repurchase program for $279 million, which we funded principally with available cash.

As of September 30, 2020, approximately $2.2 billion remained available for share repurchases under the program.

As of March 31, 2021, approximately $2.2 billion remained available for share repurchases under the program.

Sources and Uses of Our Cash and Cash Equivalents

The following table summarizes our net cash flows:

Nine Months Ended Percent

September 30, Change

Three Months Ended Percent

March 31, Change

2021 2020 2021 vs.

(in millions)

Net cash provided by operating activities $ 846 $ 1,182 (28.4)

Net cash provided by (used in) operating activities $ (171) $ 129 NM (1)

Net cash used in investing activities (16) (47) (66.0)

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Operating Activities

The decrease in net cash provided by operating activities was primarily the result of decreases in cash inflows generated from our management and franchise properties and our owned and leased hotels, largely as a result of decreases in system-wide RevPAR due to the COVID-19 pandemic, as further discussed in "—Revenues." The decrease in net cash provided by operating activities was partially offset by $1.0 billion of cash received in connection with the Honors Points Pre-Sale and a decrease in cash paid for taxes of $171 million, primarily resulting from decreases in income before income taxes, as well as NOLs that were generated in 2020 in many foreign tax jurisdictions that had taxable income in 2019.

The change in cash flows from operating activities was primarily the result of decreases in cash inflows generated from our management and franchise properties and our owned and leased hotels, largely as a result of decreases in system-wide RevPAR due to the COVID-19 pandemic, as further discussed in "—Revenues," as well as an increase in contract acquisition costs of $32 million.

The decrease was only partially offset by decreases in cash paid for taxes and interest of $25 million and $22 million, respectively.

Investing Activities

Net cash used in investing activities primarily related to capital expenditures for property and equipment and capitalized software costs.

Beginning in March 2020, we took steps to temporarily eliminate non-essential expenses, including capital expenditures, in response to the COVID-19 pandemic.

While we do not expect to be able to fully eliminate such expenditures, we expect to materially reduce our spending on an annual basis, when compared to the prior year.

Our capital expenditures for property and equipment primarily consisted of expenditures related to our corporate facilities and the renovation of hotels in our ownership segment, and our capitalized software costs related to various systems initiatives, for the benefit of both our hotel owners and our overall corporate operations.

During the nine months ended September 30, 2019, we received cash proceeds of $120 million relating to the sale of the Hilton Odawara that partially offset capital expenditures for property and equipment, capitalized software costs and other uses of cash for investing activities.

Net cash used in investing activities primarily related to capitalized software costs that were related to various systems initiatives for the benefit of both our hotel owners and our overall corporate operations and, during the three months ended March 31, 2020, also capital expenditures for property and equipment.

These capital expenditures were incurred before we took steps in March 2020 to temporarily reduce such expenditures in response to the COVID-19 pandemic and were related to our corporate facilities and the renovation of hotels in our ownership segment .

Financing Activities

The change in cash flows related to financing activities was primarily attributable to a $1.5 billion increase in cash inflows from net borrowings and repayments under our Revolving Credit Facility, a $500 million decrease in cash outflows from net borrowings and repayments under our Term Loans and an $878 million decrease in share repurchases and dividend payments.

The change in cash flows from financing activities was primarily attributable to our Revolving Credit Facility, which we fully drew down during the three months ended March 31, 2020 in response to the COVID-19 pandemic, resulting in net cash inflows of $1.5 billion, while we repaid $500 million of the outstanding debt balance during the three months ended March 31, 2021.

Additionally, cash outflows decreased $338 million as a result of decreases in share repurchases and dividend payments, as both programs remained suspended during the three months ended March 31, 2021.

Debt and Borrowing Capacity

As of September 30, 2020, our total indebtedness, excluding unamortized deferred financing costs and discount, was approximately $10.6 billion.

For additional information on our total indebtedness, including fully drawing down our Revolving Credit Facility, our issuance of $1.0 billion aggregate principal amount of senior notes and guarantees on our debt, refer to Note 7:

As of March 31, 2021, our total indebtedness, excluding unamortized deferred financing costs and discount, was approximately $10.1 billion.

For additional information on our total indebtedness, including our recent financing transactions, availability under our Revolving Credit Facility and guarantees on our debt, refer to Note 5:

"Debt" in our unaudited condensed consolidated financial statements.

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The COVID-19 pandemic negatively impacted our cash flows from operations during the period, and will continue to do so for an indeterminate period of time.

Although our operating activities provided cash during the nine months ended September 30, 2020, it was primarily a result of the Honors Points Pre-Sale.

We have taken precautions to secure our cash position, as discussed above, and expect to be able to meet our current obligations.

During 2020, we took precautions to secure our cash position, as discussed above, and we expect to be able to meet our current obligations.

Furthermore, we do not have any material indebtedness outstanding that matures prior to June 2024.

Contractual Obligations

During the nine months ended September 30, 2020, we fully drew down $1.69 billion under our Revolving Credit Facility, after giving effect to the letters of credit outstanding, which matures in 2024 and is repayable by us at any time.

Further, we issued $500 million aggregate principal amount of senior notes due 2025 and $500 million aggregate principal amount of senior notes due 2028.

Other than these borrowings, there were no material changes to our contractual obligations from what we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Off-Balance Sheet Arrangements

"Commitments and Contingencies" in our unaudited condensed consolidated financial statements for a discussion of our off-balance sheet arrangements.

During the three months ended March 31, 2021, we issued the 2032 Senior Notes, redeemed the 2026 Senior Notes and repaid $500 million of the outstanding debt balance on our Revolving Credit Facility.

Otherwise, there were no other material changes to our contractual obligations from what we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Summarized Guarantor Financial Information

HOC is the issuer of the Senior Notes and is 100 percent owned by Hilton Worldwide Parent LLC ("HWP"), which, in turn, is 100 percent owned directly by the Parent.

HOC is the issuer of the Senior Notes and is 100 percent owned directly by Hilton Worldwide Parent LLC ("HWP"), which, in turn, is 100 percent owned directly by the Parent.

The Senior Notes are guaranteed jointly and severally on a senior unsecured basis by the Parent, HWP and substantially all of the Parent's direct and indirect wholly owned domestic restricted subsidiaries, except for HOC, the issuer (together, the "Guarantors").

The indentures that govern the Senior Notes provide that any subsidiary of the Company that provides a guarantee of our senior secured credit facilities will guarantee the Senior Notes.

As of September 30, 2020, none of our foreign subsidiaries or domestic subsidiaries owned by foreign subsidiaries or conducting foreign operations or our non-wholly owned subsidiaries guaranteed the Senior Notes.

As of March 31, 2021, none of our foreign subsidiaries or domestic subsidiaries owned by foreign subsidiaries or our non-wholly owned subsidiaries guaranteed the Senior Notes.

The guarantees are full and unconditional, subject to certain customary release provisions.

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The following tables present summarized financial information for HOC, along with the Parent and all other Guarantors, on a combined basis:

September 30, 2020

March 31, 2021

(in millions)

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TOTAL ASSETS 10,037

LIABILITIES AND DEFICIT

LIABILITIES AND EQUITY (DEFICIT)

Total current liabilities

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Total Hilton stockholders' deficit (5,325)

TOTAL LIABILITIES AND DEFICIT 10,137

Nine Months Ended September 30, 2020

TOTAL LIABILITIES AND EQUITY (DEFICIT) 10,037

Three Months Ended March 31, 2021

(in millions)

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The preparation of our unaudited condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures.

As a result of the impact of the COVID-19 pandemic on our business, we have had to reevaluate certain estimates and assumptions that affect our reported amounts.

In particular, we extended the expected redemption rate of our Hilton Honors points over the next year, which, due to the re-evaluation at March 31, 2020, resulted in reclassifications of the liabilities for guest loyalty program and deferred revenues from current to long-term of $221 million and $50 million, respectively.

We continued to use the revised methodology subsequent to March 31, 2020.

Changes to the Hilton Honors program may affect the estimated cost per point for our future redemption obligation and the expected redemption pattern, which may result in changes to the amounts recorded for the liabilities for guest loyalty program and deferred revenues and the classification of such liabilities between current and long-term.

Additionally, we recognized impairment losses of $9 million and $136 million during the three and nine months ended September 30, 2020, respectively, which required the use of significant judgments and estimates.

"Fair Value Measurements" and Note 6:

"Finite-Lived Intangible Assets" in our unaudited condensed consolidated financial statements for additional information on the impairment losses.

We have discussed the policies and estimates that we believe are critical and require the use of complex judgment in their application in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and, during the three months ended March 31, 2021, there were no material changes to those previously disclosed.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis