Item 1. Business
Item 1. Business
Overview
Hilton is one of the largest hospitality companies in the world, with 6,837 properties comprising 1,074,791 rooms in 122 countries and territories as of December 31, 2021. Founded in 1919, Hilton has been an innovator in the industry for more than 100 years, driven by the vision of founder Conrad Hilton, "to fill the earth with the light and warmth of hospitality." Our premier brand portfolio includes: our luxury hotel brands, Waldorf Astoria Hotels & Resorts, LXR Hotels & Resorts and Conrad Hotels & Resorts; our emerging lifestyle hotel brands, Canopy by Hilton, Tempo by Hilton and Motto by Hilton; our full service hotel brands, Signia by Hilton, Hilton Hotels & Resorts, Curio Collection by Hilton, DoubleTree by Hilton and Tapestry Collection by Hilton; our focused service hotel brands, Hilton Garden Inn, Hampton by Hilton and Tru by Hilton; our all-suites hotel brands, Embassy Suites by Hilton, Homewood Suites by Hilton and Home2 Suites by Hilton; and our timeshare brand, Hilton Grand Vacations. As of December 31, 2021, we had 128 million members in our award-winning guest loyalty program, Hilton Honors, a 13 percent increase from December 31, 2020; refer to "—Our Brand Portfolio" and "—Our Guest Loyalty Program" below for additional information on our brands, including Hilton Honors.
The COVID-19 pandemic has significantly impacted the global economy and strained the hospitality industry since the beginning of 2020. The pervasiveness and severity of resulting travel restrictions and stay-at-home directives, which have varied by country and state and fluctuated based on a number of factors, resulted in cancellations and significantly reduced travel around the world, particularly during 2020. This resulted in the complete and partial suspensions of hotel operations in many areas where our hotels are located throughout 2020 and during parts of 2021. As of December 31, 2021, however, nearly all of our hotels that had suspended operations for some period of time as a result of the pandemic were open. Further, during 2021, the distribution of COVID-19 vaccinations and overall easing of travel and other restrictions generated a renewed interest in travel and tourism activities around the globe. Although the economic recovery from 2020 began in 2021, the COVID-19 pandemic had a material adverse effect on our results for both the years ended December 31, 2021 and 2020, and we cannot predict when our performance and results of operations will return to the levels that we experienced prior to the onset of the pandemic.
We operate our business through: (i) a management and franchise segment and (ii) an ownership segment, each of which is reported as a segment based on (i) delivering a similar set of products and services and (ii) being managed separately given its
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distinct economic characteristics. The management and franchise segment includes all of the hotels we manage for third-party owners, as well as all franchised hotels that license our intellectual property ("IP"), including our brand names, trademarks and service marks, and where we provide other contracted services to third-party owners, but the day-to-day services of the hotels are operated or managed by someone other than us. The management and franchise segment generates its revenue from: (i) management and franchise fees charged to third-party hotel owners; (ii) licensing fees from HGV's 60 resorts, consisting of 9,378 rooms, as well as strategic partnerships, including co-branded credit card arrangements, for the right to use our IP; and (iii) fees for managing hotels in our ownership segment. The ownership segment primarily derives earnings from nightly hotel room sales, food and beverage sales and sales of other services at our consolidated owned and leased hotels. For more information regarding our segments, refer to "—Our Business—Management and Franchise" and "—Our Business—Ownership" below.
In addition to our current hotel portfolio, we are focused on the growth of our business by expanding our share of the global hospitality industry through our development pipeline. Despite the adverse effects of the COVID-19 pandemic, we continued to open new hotels and expand our development pipeline in 2020 and continuing throughout 2021, including:
As of or for the Year Ended December 31, 2021
Hotels Rooms (1)
Hotel system
Additions
414 67,100
Net additions (2)
355 55,100
Development pipeline (3)
Additions
645 96,200
Count as of period end (4)
2,668 407,900
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(1) Rounded to the nearest hundred.
(2) Represents net unit growth for the year ended December 31, 2021 of 5.6 percent.
(3) Hotels in our system are under development throughout 115 countries and territories, including 28 countries and territories where we do not currently have any existing hotels.
(4) In our development pipeline, as of December 31, 2021, 198,000 of the rooms were under construction and 249,600 of the rooms were located outside of the U.S. Nearly all of the rooms in our development pipeline are within our management and franchise segment. We do not consider any individual development project to be material to us.
Despite the challenges associated with the COVID-19 pandemic, we maintain the belief that our experience in the hospitality industry, which spans more than a century of customer service and entrepreneurship, and continues to evolve for the tastes, preferences and demands of our hotel guests; our strong, well-defined brands that operate throughout the hospitality industry chain scales; our diverse, inclusive workforce, built to focus on providing exceptional customer experiences; and our commercial service offerings will continue to drive customer loyalty, including participation in our Hilton Honors guest loyalty program. We believe that satisfied customers will generate additional business at our properties, yielding strong overall hotel performance for us and our hotel owners. Strong results at our existing properties will encourage further development of additional hotels under our brands and conversions of existing hotels to our brands with both existing and new hotel owners, which further supports our growth and future financial performance. We believe that our existing hotel system and development pipeline, which will require minimal capital investment from us, positions us to further improve our business, allocate capital effectively and meet our customers' demands and preferences in the future.
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Our Brand Portfolio
The goal of each of our brands is to deliver exceptional customer experiences and superior operating performance.
December 31, 2021
Brand (1)
Chain Scale Countries/ Territories Properties Rooms Percentage of Total Rooms Selected Competitors (1)
Luxury 15 31 8,640 0.8% Four Seasons, Mandarin Oriental, Peninsula, Ritz Carlton,
Rosewood Hotels & Resorts, St. Regis
Luxury 7 9 1,274 0.1% Leading Hotels of the World,
Legend Preferred Hotels & Resorts,
Small Luxury Hotels of The World,
The Luxury Collection
Luxury 21 42 15,085 1.4% Fairmont, Intercontinental,
JW Marriott, Park Hyatt, Sofitel
Upper Upscale 10 35 6,034 0.6% 25hours Hotels, Hyatt Centric,
Joie de Vivre, Kimpton,
Le Meridien, Renaissance
Upper Upscale 1 1 1,009 0.1% Grand Hyatt, JW Marriott
Upper Upscale 94 598 221,782 20.6% Hyatt, Hyatt Regency, Marriott,
Omni, Sheraton
Upper Upscale 28 116 23,205 2.2% Autograph Collection, Design Hotels,
Destination Hotels,
The Unbound Collection
Upscale 50 635 144,901 13.5% Courtyard by Marriott, Crowne Plaza, Delta, Holiday Inn, Radisson, Sheraton, Wyndham
Upscale 9 73 8,638 0.8% Joie de Vivre, Tribute Portfolio
Upper Upscale 5 258 59,651 5.6% Hyatt Regency, Marriott, Sheraton, Westin
Upscale — — — —% AC Hotels, Aloft, Cambria, Hotel Indigo
Upper Midscale 1 3 871 0.1% CitizenM, Freehand, Generator,
Hoxton, Moxy, tommie, Yotel
Upscale 55 940 137,867 12.8% Aloft, Courtyard by Marriott, Four Points,
Holiday Inn, Hyatt Place
Upper Midscale 33 2,765 297,830 27.7% Comfort Suites, Courtyard by Marriott,
Fairfield Inn, Holiday Inn Express, Springhill Suites
Midscale 2 214 20,843 1.9% Avid, Best Western, Comfort Inn & Suites,
La Quinta, Quality Inn, Sleep Inn, Wingate by Wyndham
Upscale 4 526 60,085 5.6% Element, Hyatt House, Residence Inn, Staybridge Suites
Upper Midscale 3 523 54,834 5.1% Candlewood Suites, Comfort Suites, TownePlace Suites
Timeshare (2)
6 60 9,378 0.9% Bluegreen Vacations, Disney Vacation Club, Holiday Inn Club Vacations,
Marriott Vacations Worldwide,
Travel & Leisure Co.
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(1) The table above excludes 8 unbranded properties with 2,864 rooms, representing approximately 0.2 percent of total rooms, and the selected competitors exclude lesser-known regional competitors.
(2) HGV has the exclusive right to use our Hilton Grand Vacations brand, subject to the terms of a license agreement with us.
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Waldorf Astoria Hotels & Resorts : What began as an iconic hotel in New York City is today an extensive portfolio of best-in-class hotels and resorts in landmark destinations around the world. Each Waldorf Astoria property provides a unique sense of place with a relentless commitment to personal service and culinary expertise, enabling guests to create truly unforgettable moments. Waldorf Astoria hotels deliver graceful service from the moment a guest books through checkout. In addition to the brand's renowned hotel offerings, Waldorf Astoria boasts a best-in-class residential portfolio that provides the comfort of a private home combined with the superior amenities and legendary service of Waldorf Astoria.
LXR Hotels & Resorts: Found in some of the world's most alluring destinations, LXR Hotels & Resorts is a collection of independent luxury properties that each represent their unique location and offer a singular travel experience native to its place, history and tradition. LXR connects legendary properties into an exclusive network of hotels that are set apart by an unrivaled commitment to personalized service and elegant, yet locally immersive experiences for their guests. Each of the hotels in the collection remains steadfastly true to its heritage and culture, providing a luxurious base of exploration for the passionate, yet discerning, adventurer.
Conrad Hotels & Resorts : Conrad is a global luxury brand offering guests service and style on their own terms—all while connecting with the local and global culture. Conrad has created a seamless connection between contemporary design, leading innovation and curated art to inspire the entrepreneurial spirit of the globally connected traveler. Properties feature convenient and relaxing wellness facilities; innovative bars and restaurants; intuitive room service; multi-purpose meeting and business facilities; and special event and concierge services. Conrad was named the World Travel Awards' "World's Leading Luxury Hotel Brand" for 2021.
Canopy by Hilton: Canopy by Hilton is an energizing lifestyle hotel in neighborhood settings. Our guests are explorers who seek uncomplicated comfort, thoughtful details, an energizing atmosphere and a uniquely local experience. Each property is designed as a natural extension of its neighborhood, with local design, food and drink and culture delivering an authentic neighborhood experience with a boutique hotel feel.
Signia by Hilton: Signia by Hilton is a new portfolio of premier hotels in highly sought-after urban and resort destinations, offering sophisticated business and leisure travelers an elevated hotel experience combined with exceptional full-service amenities and premium meetings and events spaces.
Hilton Hotels & Resorts : For more than 100 years, Hilton Hotels & Resorts, Hilton’s flagship brand and one of the most globally recognized hotel brands, has set the benchmark for hospitality around the world, providing new product innovations and services to meet guests' evolving needs. With hotels on six continents, Hilton Hotels & Resorts properties are located in the world’s most sought-after destinations and offer exceptional travel experiences to every guest. Hilton Hotels & Resorts are full service properties that offer advanced meeting and event spaces and services; trend-forward restaurants, lobby bars and grab-and-go options; mindful fitness/wellness facilities; and other services.
Curio Collection by Hilton : Curio Collection by Hilton is a global portfolio of handpicked, one-of-a-kind hotels in top urban markets and premier resort destinations. These properties offer travelers authentic, curated experiences through distinctly local offerings and elevated amenities, while providing the many benefits of Hilton and its award-winning guest loyalty program.
DoubleTree by Hilton : DoubleTree by Hilton is a fast-growing, global portfolio of upscale hotels. For more than 50 years, DoubleTree is the unpretentious brand that indulges you with a double dose of comfortable, including welcoming guests with its signature, warm DoubleTree cookie. DoubleTree by Hilton invites business and leisure travelers in key economic centers and tourist spots to experience the brand’s comfortable and contemporary accommodations and thoughtful amenities, including diverse food and beverage experiences, state-of-the-art fitness offerings and meetings and event spaces.
Tapestry Collection by Hilton : Tapestry Collection by Hilton is a global portfolio of original hotels that offers guests unique style and vibrant personality and encourages guests to explore the local destination. Every property is united by the trust and reliability that comes with the Hilton name.
Embassy Suites by Hilton : Embassy Suites by Hilton offers both leisure and business travelers an approachable, upscale experience with best-in-class customer service that anticipates travelers' needs and delivers what matters most to them. All guests are welcomed with a spacious two-room suite with separate areas to work and play, free made-to-order breakfast each morning and complimentary drinks and snacks every night.
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Tempo by Hilton: Tempo by Hilton is a new, approachable lifestyle hotel brand dedicated to exceeding the expectations of an emerging, and discerning, class of traveler: the modern achiever. Pioneering a new hospitality category, Tempo by Hilton offers accommodations thoughtfully designed to help guests relax and recharge; inspiring public spaces, including an open lobby concept with dedicated spaces to relax, work and dine; and elevated, yet approachable, culinary options, including the brand’s signature coffee & tea fuel bar, a casual breakfast café and an inviting evening bar experience with small plates and cocktails. Additional amenities include state-of-the-art fitness facilities and programs and flexible meeting and working spaces. As of December 31, 2021, Tempo by Hilton had 12 hotels in the pipeline.
Motto by Hilton : Motto by Hilton is a micro-hotel with an urban vibe in prime global locations. Motto caters to travelers looking for value and one-of-a-kind experiences by bringing together the best elements of a lifestyle hotel—efficient guest rooms, activated social spaces, centrally located destinations and locally inspired design and food and beverage. At its core, Motto delivers a flexible and innovative hospitality experience through elements like first-of-its-kind linking rooms for group travel and vibrant communal spaces for work and social use by guests and locals alike. As of December 31, 2021, Motto by Hilton had 15 hotels in the pipeline.
Hilton Garden Inn : Hilton Garden Inn is an award-winning brand where guests find an open, inviting atmosphere with warm, glowing service and simple, thoughtful touches that allow them to relax and recharge. As a recognized leader in food and beverage offerings, Hilton Garden Inn caters to guests' dining needs by serving cooked-to-order breakfast and offering handcrafted cocktails, shareable small plates and full meals at its on-site restaurants and bars. Flexible meeting space, free Wi-Fi, wireless printing and fitness centers are offered to help guests stay productive.
Hampton by Hilton : Hampton by Hilton is our largest brand and includes both Hampton Inn and Hampton Inn & Suites hotels, with properties located on four continents. Recognized as a leading upper midscale brand in the lodging industry, Hampton has been ranked the #1 lodging brand to franchise by Entrepreneur for 13 consecutive years. Hampton by Hilton hotels around the world provide guests high-quality and thoughtfully designed accommodations, friendly and authentic service and value-added amenities—like complimentary hot breakfast and free Wi-Fi—all backed by the 100% Hampton Guarantee.
Tru by Hilton: Tru by Hilton is a game-changing hotel brand where guests don't have to compromise between a consistent, fun and affordable hotel stay. Spirited, simplified and grounded in value, Tru by Hilton is designed for cross-generational appeal, with a large, reimagined public space where guests can work, play, lounge and eat. Efficiently designed modern guest rooms feature a rolling desk, oversized windows for natural light and bright, spacious bathrooms. Guests can enjoy complimentary amenities, including a build-your-own "Top It" hot breakfast, a multifunctional fitness center and fast Wi-Fi. Premium snacks, light meal options and single-serve wine and beer are available for purchase at the 24/7 Eat. & Sip. market. Tru by Hilton, only launched in 2016, had 243 hotels in the pipeline as of December 31, 2021.
Homewood Suites by Hilton : Homewood Suites by Hilton is the upscale extended-stay hotel brand that delivers the comforts of home for guests and their pets. Homewood Suites by Hilton offers inviting, generous-sized suites featuring separate living and sleeping areas and fully equipped kitchens with full-size refrigerators for guests seeking home-like accommodations when traveling for extended or quick overnight stays. Additional value-driven amenities include complimentary Wi-Fi and free breakfast.
Home2 Suites by Hilton : Home2 Suites by Hilton is a dynamic and savvy brand designed to make guests and their pets feel at home regardless of their length of stay. Our forward-thinking design strikes the perfect balance of being modern and playful, while at the same time remaining functional and comfortable. Our flexible spaces empower guests to maintain their lifestyle with just the right benefits of home and stylish nods to their spirit of adventure. We are committed to empowering our guests by supporting sustainable communities. By packaging amenities and services that enable wellness and environmental health, we create value where it matters for our guests, our communities and our planet.
Hilton Grand Vacations : A premier vacation ownership brand, Hilton Grand Vacations is known for delivering a consistently exceptional standard of service, maximum flexibility for owners and guests and elegant, family-friendly resorts in desirable locations around the world. Signature elements include spacious, well-appointed accommodations and best-in-class resorts with extensive on-site amenities. A special points-based reservation system gives owners the flexibility to vacation when, where and how they prefer.
Our Guest Loyalty Program
Hilton Honors is our award-winning guest loyalty program that supports our portfolio of 18 brands at our managed, franchised, owned and leased hotel and resort properties. The program generates significant repeat business by rewarding guests
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with points for each stay at our properties, which are then redeemable for free room nights at our properties and other goods and services. Members can also use points earned to transact with many strategic partners, including credit card providers, such as American Express, airlines, rail and car rental companies, Amazon, Lyft and others. Hilton Honors members who book through preferred Hilton channels also have access to instant benefits, including a flexible payment slider that allows members to choose nearly any combination of points and money to book a stay, an exclusive member discount and free standard Wi-Fi. Members also have access to contactless technology exclusively through the Hilton Honors app, where members can check in, choose their room and access their room using Digital Key. The program provides targeted marketing, promotions and customized guest experiences to 128 million members. Affiliation with our loyalty programs encourages members to allocate more of their travel spend to our hotels. The percentage of travel spend we capture from loyalty members increases as they move up the tiers of our program. The program is funded by contributions from eligible revenues generated by Hilton Honors members and collected from properties in our system, as well as our strategic partnerships. The funds collected by the Hilton Honors program are subsequently applied to reimburse hotels and strategic partners for Hilton Honors points redemptions by loyalty members and to pay for administrative expenses and marketing initiatives that support the program.
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Our Business
As of December 31, 2021, our system included the following properties and rooms, by type, brand and region:
Owned / Leased (1)
Managed Franchised Total
Properties Rooms Properties Rooms Properties Rooms Properties Rooms
Waldorf Astoria Hotels & Resorts
U.S. — — 12 4,535 — — 12 4,535
Americas (excluding U.S.) — — 2 261 — — 2 261
Europe 2 463 4 898 — — 6 1,361
Middle East and Africa — — 5 1,224 — — 5 1,224
Asia Pacific — — 6 1,259 — — 6 1,259
LXR Hotels & Resorts
U.S. — — — — 3 426 3 426
Americas (excluding U.S.) — — — — 1 76 1 76
Europe — — 2 383 — — 2 383
Middle East and Africa — — 1 41 1 234 2 275
Asia Pacific — — — — 1 114 1 114
Conrad Hotels & Resorts
U.S. — — 6 2,211 1 1,496 7 3,707
Americas (excluding U.S.) — — 3 787 — — 3 787
Europe — — 4 1,155 — — 4 1,155
Middle East and Africa 1 614 3 1,569 — — 4 2,183
Asia Pacific 1 164 22 6,430 1 659 24 7,253
Canopy by Hilton
U.S. — — — — 23 3,908 23 3,908
Americas (excluding U.S.) — — 2 272 — — 2 272
Europe — — 1 123 4 917 5 1,040
Middle East and Africa — — 1 200 — — 1 200
Asia Pacific — — 4 614 — — 4 614
Signia by Hilton
U.S. — — 1 1,009 — — 1 1,009
Hilton Hotels & Resorts
U.S. — — 59 44,137 187 59,017 246 103,154
Americas (excluding U.S.) 1 405 28 10,682 26 7,826 55 18,913
Europe 39 11,514 45 15,388 43 11,268 127 38,170
Middle East and Africa 5 1,992 37 12,659 3 1,565 45 16,216
Asia Pacific 5 2,999 113 39,481 7 2,849 125 45,329
Curio Collection by Hilton
U.S. — — 7 3,272 59 12,578 66 15,850
Americas (excluding U.S.) — — 2 99 12 1,750 14 1,849
Europe — — 4 360 20 2,827 24 3,187
Middle East and Africa — — 4 741 2 557 6 1,298
Asia Pacific — — 4 773 2 248 6 1,021
DoubleTree by Hilton
U.S. — — 34 11,450 339 76,905 373 88,355
Americas (excluding U.S.) — — 3 587 34 6,745 37 7,332
Europe — — 14 3,741 108 18,286 122 22,027
Middle East and Africa — — 17 4,599 5 568 22 5,167
Asia Pacific — — 76 20,625 5 1,395 81 22,020
(continued on next page)
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Owned / Leased (1)
Managed Franchised Total
Properties Rooms Properties Rooms Properties Rooms Properties Rooms
Tapestry Collection by Hilton
U.S. — — — — 63 7,543 63 7,543
Americas (excluding U.S.) — — 1 138 4 354 5 492
Europe — — — — 3 162 3 162
Asia Pacific — — 1 266 1 175 2 441
Embassy Suites by Hilton
U.S. — — 40 10,585 210 47,063 250 57,648
Americas (excluding U.S.) — — 3 667 5 1,336 8 2,003
Motto by Hilton
U.S. — — — — 3 871 3 871
Hilton Garden Inn
U.S. — — 4 425 728 100,542 732 100,967
Americas (excluding U.S.) — — 11 1,571 51 7,664 62 9,235
Europe — — 19 3,642 60 9,727 79 13,369
Middle East and Africa — — 16 3,400 3 474 19 3,874
Asia Pacific — — 47 10,245 1 177 48 10,422
Hampton by Hilton
U.S. — — 27 3,519 2,281 224,999 2,308 228,518
Americas (excluding U.S.) — — 13 1,644 109 13,305 122 14,949
Europe — — 16 2,697 96 14,795 112 17,492
Middle East and Africa — — 4 1,238 — — 4 1,238
Asia Pacific — — — — 219 35,633 219 35,633
Tru by Hilton
U.S. — — — — 212 20,664 212 20,664
Americas (excluding U.S.) — — — — 2 179 2 179
Homewood Suites by Hilton
U.S. — — 10 1,172 489 55,819 499 56,991
Americas (excluding U.S.) — — 3 406 24 2,688 27 3,094
Home2 Suites by Hilton
U.S. — — 2 210 512 53,596 514 53,806
Americas (excluding U.S.) — — — — 7 753 7 753
Asia Pacific — — — — 2 275 2 275
Other — — 2 1,250 6 1,614 8 2,864
Total hotels 54 18,151 745 234,640 5,978 812,622 6,777 1,065,413
Hilton Grand Vacations — — — — 60 9,378 60 9,378
Total system 54 18,151 745 234,640 6,038 822,000 6,837 1,074,791
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(1) Includes hotels owned or leased by entities in which we own a noncontrolling financial interest.
Management and Franchise
We manage hotels and license our brands through our management and franchise segment, which included 745 managed hotels and 5,978 franchised hotels consisting of 1,047,262 total rooms, as of December 31, 2021. This segment generates its revenue primarily from fees charged to hotel owners under management and franchise contracts, as well as from fees associated with license agreements. We grow our management and franchise business by attracting owners to become a part of our system and participate in our commercial services to support their properties. These contracts require little or no capital investment to initiate on our part and provide significant return on investment for us as fees are earned and paid.
Hotel Management
Our core management services consist of operating hotels under management contracts for the benefit of third parties who either own or lease the hotels and the associated personal property. Often, particularly in the U.S., we employ the individuals working at these locations. Terms of our management contracts vary, but our fees generally consist of a base management fee, which is generally based on a percentage of the hotel’s monthly gross revenue, and, when applicable, an incentive management
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fee, which is generally based on a percentage of the hotel's operating profits, normally over a one-year calendar period, and, in some cases, may be subject to a stated return threshold to the hotel owner. In general, the owner pays all operating and other expenses and reimburses our out-of-pocket expenses. In turn, our managerial discretion typically is subject to approval by the owner in certain major areas, including the approval of annual operating and capital expenditure budgets and the appointment of certain key personnel. Additionally, the owners generally pay a monthly program fee based on the underlying hotel's sales or usage, as reimbursement for the costs related to our: (i) advertising and marketing programs; (ii) internet, technology and reservation systems; and (iii) quality assurance programs. Owners are also responsible for various other fees and charges, including payments for participation in our Hilton Honors guest loyalty program, training, consultation and procurement of certain goods and services. As of December 31, 2021, we managed 745 hotels with 234,640 rooms, which does not include hotels in our ownership segment.
The initial terms of our management contracts are typically 20 to 30 years. In certain cases, we are both the franchisor and manager of the hotel, when we enter into a franchise contract in addition to the management contract, and, in these cases, we classify the hotel as managed in our system. Extension options for our management contracts are negotiated and vary, but typically are more prevalent in full service hotels. Generally, these contracts contain one or two extension options that are for either five or 10 years and can be exercised at our or the hotel owner's option or by mutual agreement, as specified by the contract.
Some of our management contracts provide early termination rights to hotel owners upon certain events, including the failure to meet certain financial or performance criteria. Performance test measures typically are based upon the hotel’s performance individually and/or in comparison to specified competitive hotels. We often have an optional cure right to pay an amount equal to the performance shortfall over a specified period, although in some cases our cure rights are limited.
Franchising
We license our IP, including our brand names, trademarks and service marks, and our operating systems to hotel owners under franchise contracts. We do not own, manage or operate franchised properties and do not employ the individuals working at these locations. We conduct periodic inspections of our franchised hotels to ensure that brand standards that we establish are maintained. For newly franchised hotels, including both new construction and conversions of existing hotels outside of our system, we approve the location, as well as the plans for the facilities, to ensure the hotels meet our brand standards. For existing franchised hotels, we provide franchisees with property improvement plans that must be completed to keep the hotels in compliance with our brand standards, so that they can remain in our hotel system. We also earn license fees from license agreements with HGV and strategic partners, including co-branded credit card providers, for the use of our IP.
Each franchisee pays us an application, initiation or other fee in conjunction with the inception of a franchise contract. Franchisees also pay a royalty fee, generally based on a percentage of the hotel’s monthly gross room revenue and, in some cases, may also include a percentage of gross food and beverage revenues and other revenues, as applicable. Additionally, the franchisees generally pay a monthly program fee based on the underlying hotel's sales or usage, which covers the costs of: (i) advertising and marketing programs; (ii) internet, technology and reservation systems; and (iii) quality assurance programs. Franchisees are also responsible for various other fees and charges, including payments for participation in our Hilton Honors guest loyalty program, training, consultation and procurement of certain goods and services. As of December 31, 2021, we franchised 6,038 hotels and resorts, including timeshare properties, with 822,000 rooms.
Our franchise contracts typically have initial terms of approximately 20 years for new hotels and approximately 10 to 20 years for hotels converting from hotels outside of our system. At the expiration of the initial term, we may have a contractual right or obligation to relicense the hotel to the franchisee for an additional term generally ranging from 10 to 15 years. We have the right to terminate a franchise contract upon specified events of default, including nonpayment of fees or noncompliance with brand standards. If a franchise contract is terminated by us because of a franchisee’s default, the franchisee is contractually required to pay us liquidated damages. We have no legal responsibility for the employees or the liabilities associated with operating franchised properties.
Ownership
As a hotel owner and lessee, we focus on maximizing cost efficiency and profitability of the owned and leased portfolio by, among other things, maximizing hotel revenues, implementing cost-effective labor management practices and systems and reducing fixed costs. Through our disciplined approach to hotel and asset management, we develop and execute on strategic plans for each of our hotels to enhance their competitive position and, at many of our hotels, we invest in renovating guest rooms and public spaces and adding or enhancing meeting and retail space to improve profitability. As of December 31, 2021,
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the ownership segment included 54 hotels totaling 18,151 rooms, comprising 46 hotels that we leased, one hotel owned by a consolidated non-wholly owned entity, two hotels that were each leased by a consolidated variable interest entity ("VIE") and five hotels owned or leased by unconsolidated affiliates.
Environmental, Social and Governance ("ESG")
Hilton strives to create long-term value for all of our stakeholders through: (i) our resilient business model; (ii) our ESG efforts to support the viability of our business for the long-term; and (iii) our 101-year history of filling the earth with the light and warmth of hospitality and making the world a better place through travel and connection.
As one of the world’s largest hospitality companies, we recognize Hilton has a responsibility to protect the planet and support the communities we serve to ensure our hotel destinations remain vibrant and resilient for generations of travelers to come. Hilton drives positive environmental and social change across our corporate and hotel property operations, our global supply chain and the communities where our hotels are located through our ESG strategy, Travel with Purpose. We remain committed to our efforts to drive responsible travel and tourism globally and believe that the need for responsible leadership commensurate with our global scale will be greater than ever following the COVID-19 pandemic.
The components of our ESG platform include environmental impact, including climate action and destination stewardship; social and community impact, with a focus on human capital management, diversity, equity and inclusion ("DE&I") and human rights, and robust, transparent governance, ethics and regulatory compliance practices.
In 2018, we established our 2030 Goals to double our investment in social impact and cut our environmental footprint in half by 2030 at the hotels that we manage, including our owned and leased hotels. Our 2030 Goals, which align with the global Sustainable Development Goals ("SDGs") adopted by the United Nations in 2015, are guided by our evaluation of the social and environmental issues that are critical to our business and our long-term success. As our business recovers from the global pandemic, we have reaffirmed our commitment to these goals and taken further action to support these objectives, including reducing single use plastics at our hotels, supporting opportunity for youth through the launch of our new Passport to Success Concierge skill-building program and offering customers the opportunity to make their meetings and events at Hilton properties carbon neutral. In 2021, Hilton was named to the Dow Jones Sustainability Indices ("DJSI") for the fifth consecutive year, scoring in the 100th percentile in our industry, reflecting Hilton's continuous investment in building a leading ESG strategy.
Our ESG efforts are supported by a robust governance structure, designed to ensure our ESG objectives are an important part of our business priorities as we work towards our 2030 Goals. Our executive committee receives at least quarterly updates on our ESG programs and progress towards our 2030 Goals. The Nominating & ESG Committee, one of the three standing committees of Hilton's board of directors, reviews and assesses our ESG strategy and makes recommendations to the board and management as appropriate. The board also receives annual updates on progress towards our 2030 Goals.
Significant ESG risks, including risks related to climate change, environmental impact, social impact, health and safety, human rights and ethics, fraud and corruption, are integrated in Hilton's Enterprise Risk Management program as part of Hilton's annual Enterprise Risk assessment process. The results of this process are reviewed by our executive committee and our board of directors, including the Audit Committee, to inform enterprise-wide strategic planning. We also engage with stakeholders on an ongoing basis to continuously refine and enhance our strategy, to ensure we are aligning our programs with the issues that matter the most to our business and stakeholders. As part of this effort, we completed a thorough ESG materiality assessment in 2020, leveraging guidance from the Global Reporting Initiative ("GRI"), Sustainability Accounting Standards Board ("SASB") and the World Economic Forum. Of the more than 200 ESG issues considered, our stakeholders remain most focused on the following: climate action; employee development and well-being; DE&I; employee and guest health, safety and security; human rights; and ethical business practices and regulatory compliance. We used the results of this materiality assessment to ensure that our Travel with Purpose strategy remains aligned with these issues, inform management of ESG risks and drive long-term value for our business and our stakeholders.
The health, safety and security of our employees and guests have always been a priority, but due to increased risk exposure driven by the pandemic, growing threats from domestic and foreign violent extremists, increased conflicts and political instability in many developing countries, as well as escalating intensity of natural disasters, it has become one of our primary focuses. During the early months of the pandemic, we were successful in the launch of Hilton CleanStay, a program 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 continue to adapt the programs as local mandates evolve and recovery from the pandemic continues to control the risk of viral outbreaks and provide assurance to guests. Additionally, we track and respond to travel restrictions and local mandates, such as face mask and vaccination requirements. To help ensure the
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safety and security of our employees and guests, we constantly monitor threats and incidents around the world through online tools and external networks and partnerships; support our properties globally with crisis alert communications, crisis plans and area crisis teams; provide employees with safety and security training resources; and conduct safety and security audits annually using a risk-based approach.
Like our stakeholders, Hilton recognizes the significant impact that our environmental and social efforts have on our business, and we consider environmental sustainability and climate change to be among our key enterprise risks. As such, we remain committed to reducing our carbon and other greenhouse gas emissions in line with climate science. We were the first hospitality company to set science-based carbon reduction targets, which were verified by the Science Based Targets initiative ("SBTi"), a partnership of several worldwide environmental organizations, in May 2018. We also evaluate our climate change risks and report annually on our ESG performance, with our reporting prepared in accordance with the GRI Standards, while integrating the recommendations of the SASB and the Task Force on Climate-related Financial Disclosures ("TCFD").
LightStay, our proprietary and award-winning ESG management system that was launched in 2009, is aligned with the criteria of the Global Sustainable Tourism Council ("GSTC") and is used to measure, manage and report some of Hilton's key environmental and social performance metrics, including, but not limited to, carbon emissions, energy, water, waste, volunteer hours, in-kind donations and local partnerships. Our hotels and corporate offices use LightStay to track environmental and social data, assess performance and leverage the data collected to make business decisions and establish future goals and objectives relating to these areas.
We recognize that achieving meaningful progress towards our 2030 Goals and the SDGs requires deep collaboration across a wide range of partners and external stakeholders, including the Sustainable Hospitality Alliance ("SHA"), an organization that uniquely represents the hotel industry’s collective efforts to ensure destinations and communities are being supported and protected for future generations. Hilton leaders continue to actively engage with SHA and its membership and have participated in the development of SHA's Principles on Forced Labor, the Hotel Carbon Measurement Initiative and the Hotel Water Measurement Initiative methodologies to consistently measure and report on carbon emissions and water consumption in hotels.
The Hilton Effect Foundation (the "Foundation") supports mission-aligned nonprofits and local community organizations that serve as partners to amplify our environmental and social impact around the world. Launched in 2019, the Foundation is our primary global philanthropic arm and is registered as a U.S.-based 501(c)(3) charitable organization.
The Foundation is dedicated to creating a better world to travel, and in 2021, awarded nearly $2 million in grants to organizations globally supporting recovery, restoration and rebuilding in response to the COVID-19 pandemic, particularly for the populations and locations most severely impacted. Since its inception in 2019, the Foundation has awarded more than $5 million in grants to more than 70 nongovernmental and community-based organizations.
Environmental Impact
We are committed to cutting our environmental footprint in half by 2030, with 2008 as our baseline, through energy and carbon management, water stewardship, waste reduction and responsible sourcing. In 2021, we maintained our system-wide certification to ISO 9001 (Quality Management), ISO 14001 (Environmental Management) and ISO 50001 (Energy Management) standards, one of the largest ISO certified portfolios of buildings in the world.
In alignment with our science-based targets, we continue to take steps to increase our sourcing of renewable energy at our hotels around the world. In the EMEA region, one-third of the hotels we operate, including owned, leased and managed hotels, as well as our Watford and Glasgow offices, were supplied with 100 percent renewable energy during the year ended December 31, 2021, and, in the U.S., we continued to have a renewable energy option for our managed hotels. Further, we continued our focus on our food waste reduction and food donation initiatives, with all of our managed hotels in the U.S. and Canada required to have food donation programs in place. We also operate the industry’s largest soap recycling program, with over 5,500 of our hotels partnered with soap recycling organizations to donate new soap bars and other unused supplies from our hotels to those in need, consistent with our effort to reduce waste. Further, in 2021, we began to shift our hotels to bulk bath amenities in an effort to reduce plastic waste. Hotels have already begun switching to bulk products, with compliance required at all hotels by 2023. We also continue to work with our environmental partner, the World Wildlife Fund, to evolve our environmental strategy and implement our programs globally.
Our primary source of carbon emissions is from the operation of our hotels. In 2020, as a result of the COVID-19 pandemic, we experienced a significant decrease in utility consumption across our global portfolio, primarily as a result of reduced occupancy and the complete or partial suspensions of hotel operations. During 2021, we began to recover from the
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negative impacts of the pandemic and, while some hotels were suspended for some period of time during the year, the majority of hotels that had suspended operations for some time during 2020 were reopened before or during 2021. As such, we experienced a year-over-year increase in consumption of energy, water and waste in 2021 as occupancy rates increased. However, consumption remained below 2019 levels, and we remain on track to achieve our 2030 Goals. As we implement ongoing efforts to optimize efficiency at our hotels, we are making significant efforts to support our hotels to keep consumption below pre-pandemic levels.
We have achieved the following reductions in environmental impact since 2008:
Percent Reduction Achieved Since 2008 (1)
Reduction in water consumption per square meter (2)
39 %
Reduction in landfilled waste per square meter (2)
70
Reduction in carbon dioxide emissions per square meter (2)
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Energy consumption per square meter (2)
40
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(1) Reflects data as of December 31, 2021 that has been reviewed by an independent third party. Continued progress in these measures during the year ended December 31, 2021 is attributable to occupancy fluctuations during the ongoing COVID-19 pandemic. Although consumption and waste generation were higher in 2021 than in 2020, correlated with the increase in occupancy, they remain below 2019 levels.
(2) Reflects performance across Hilton's managed, owned and leased properties, which totaled approximately 27.5 million square meters as of December 31, 2021.
The data in the following tables, which have been reviewed by an independent third party, reflect the key sustainability metrics for our managed, owned and leased properties, as well as recommendations of the SASB within their Hotel & Lodging and Restaurant Standards:
Year Ended December 31,
Metric 2021 (1)
2020 (1)
2019
Energy management
Total energy consumed, in gigajoules per square meter 0.81 0.72 1.03
Percent total energy from grid electricity 56.3 % 56.3 % 53.8 %
Carbon emissions
Total emissions (Scope 1 and 2), in metric tons CO 2 e per square meter (2)
0.079 0.069 0.101
Water management
Amount withdrawn, in cubic meters per square meter 1.79 1.55 2.35
Amount consumed, in cubic meters per square meter 0.447 0.388 0.586
Percent in regions with high or extremely high baseline water stress (3)
37 % 37 % 32 %
Waste management
Amount generated, in metric tons per square meter 0.0042 0.0039 0.0080
Percent diverted from landfills 32.0 % 33.9 % 34.8 %
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Year Ended December 31,
Absolute Consumption (4)
2021 (1)
2020 (1)
2019
Total energy consumed, in million gigajoules 22.2 17.8 24.6
Direct emissions (Scope 1), in million metric tons CO 2 e
0.42 0.33 0.48
Indirect emissions (Scope 2), in million metric tons CO 2 e (2)
1.76 1.39 1.93
Water withdrawn, in million cubic meters (m 3 )
49.1 38.7 56.1
Water consumed, in million cubic meters (m 3 )
12.3 9.7 14.0
Waste generated, in million metric tons 0.110 0.097 0.192
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(1) The decreases in consumption reflected in these measures during the year ended December 31, 2020 and then the increases in consumption reflected in these measures, if applicable, during the year ended December 31, 2021 were primarily attributable to the reduction in occupancy as a result of the COVID-19 pandemic during 2020, followed by Hilton's recovery from the impact of the pandemic during 2021 and the increase in occupancy. During the year ended December 31, 2020, the hotel operations at approximately 380 of our managed, owned and leased hotels were completely or partially suspended for some period of time, while only approximately 120 had suspended operations for some period of time during 2021. The changes in occupancy and the number of hotel suspensions were directly correlated with and impacted the consumption of energy, water and waste at our hotels around the world.
(2) Scope 2 market-based emissions as defined by The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (Revised Edition).
(3) As defined by the World Resources Institute ("WRI").
(4) Total floor area of Hilton's managed, owned and leased properties, for which absolute consumption is reflected, was 27.5 million square meters, 24.9 million square meters and 23.9 million square meters as of December 31, 2021, 2020 and 2019, respectively. Absolute consumption increased during the year ended December 31, 2021 due to our increased floor area and increased occupancy, as described above.
Social Impact
With a presence in 122 countries and territories, we use our global scale as an engine of opportunity, focusing on supporting our communities, creating career opportunities and ensuring responsible and compliant business practices across our entire value chain, all with deep consideration for human rights and diversity and inclusion. As part of our 2030 Goals, we committed to doubling our investment in social impact.
In addition to collaboration across our industry and within the business community, we are focused on achieving change by leveraging the scale of our value chain. We remain committed to doubling our sourcing from small, local and diverse-owned businesses globally, with a particular focus on helping these businesses recover from the economic impacts of the pandemic. We continue to engage women-, minority-, veteran-, disabled- and LGBTQ+- owned businesses through our award-winning Supplier Diversity Program.
Hilton also remains committed to combating human trafficking, and we require all hotel-based employees to complete an annual training on identifying signs of trafficking. We partner with expert organizations, including Vital Voices, It’s a Penalty and ECPAT, to help prevent and mitigate such risks, including at an industry level through the Sustainable Hospitality Alliance, World Travel and Tourism Council, American Hotel & Lodging Association and United Kingdom ("U.K.") Stop Slavery Hotel Industry Network.
We are focused on creating opportunities for youth and empowering potential future employees. In 2019, we achieved our goal of preparing and employing 1 million young people in underserved communities worldwide and we continue to invest in the development of soft skills and hospitality experience creating career and life-enriching experiences for young people. Further, during 2021, we achieved a new milestone in our partnership with the International Youth Foundation, launching Passport to Success Concierge, an online soft skills course that is free to youth around the globe who are interested in building the core skills for a career in travel and tourism. We also continued to support organizations such as Jobs for America’s Graduates and established a Pathways Program focused on career opportunities for youth and other target groups, such as refugees, minorities and veterans. We have reached over 25,000 refugees since 2015 through volunteering, in-kind donations, purchasing, training and employment. In 2021, we made progress on our 2020 pledge to directly mentor at least 50 LGBTQ+ refugees, by providing direct mentorship to 14 refugees and expanding the commitment to the U.K. We also joined the Tent Coalition for Afghan Refugees, a coalition of companies committed to training and hiring Afghans displaced by the humanitarian crisis in the country. The Foundation made a grant to The Memorial Foundation, which aims to support the next generation of social justice by teaching leadership and advocacy skills, personal development, community volunteerism and instilling Dr. Martin Luther King Jr.'s vision for our shared humanity.
During 2021, Hilton and the Foundation supported our hotel teams and surrounding communities through disasters and crises, including Hurricane Ida, flooding in Malaysia, evacuations of Afghan refugees and the COVID-19 pandemic. This approach included donating to organizations at the frontlines of the crises, supporting the delivery of meals, medical care and other basic needs, as well as support for the families of impacted employees through Hilton's third-party operated Team
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Member Assistance Fund ("TMAF"). Hilton employees, as well as employees of franchised hotels who are not employed by Hilton, can apply for financial aid when impacted by disaster and extreme hardship. The TMAF provided more than $750,000 in financial aid to individuals in 2021, more than 95 percent of which was for individuals directly impacted by the COVID-19 pandemic.
Our employees around the world remain dedicated to creating a positive impact in their communities. This year, our employees continued to volunteer in their communities, including virtually, and, in December 2021, we held our annual Hilton Effect Week to drive further acts of service. During 2021, our employees around the world volunteered over 190,000 hours in their local communities.
Human Capital Management
As of December 31, 2021, we employed approximately 142,000 people at our managed, owned and leased properties and at our corporate locations. An additional 223,000 people were employed by third-party owners and franchisees of our properties.
Our founder, Conrad Hilton, believed that travel had the power to open minds and hearts and promote peace and understanding around the world and that belief has driven the vision for our enterprise. Now, over a century later, that dream lives on through the employees at our hotels and guides our actions every day. We strive to be the most hospitable company in the world, and we believe that an effective human capital management strategy is an essential component of that effort. Our strategy focuses on attracting, developing and retaining the best talent in the industry, and our executive committee reviews talent strategy and succession plans on a quarterly basis to assess current and future talent needs.
We have built and continue to cultivate a strong employee-centered culture that creates connectivity, camaraderie and trust among all employees, which then delivers positive experiences to guests at our hotels. Additionally, for our employees, guests, owners and the communities where we live, work and travel, we are committed to the following:
• Create the best, most inclusive home for our employees at their place of work;
• Deliver the most reliable and friendly experience each time our guests stay with us;
• Drive value to our owners while having a positive impact; and
• Make our communities better for those who live and travel there.
Even in one of our most challenging years, we chose to make strategic investments to continue to expand and enhance programs and initiatives that strengthen these commitments to our stakeholders.
DE&I
At Hilton, we are diverse by nature and inclusive by choice. We focus on a "for all" culture where diverse ideas and backgrounds are welcomed and celebrated. We know that a great place to work creates a sense of belonging and acceptance, regardless of background, ethnicity, age, ability, gender or sexual orientation. Guided by our values, we strive to make Hilton one of the world’s most inclusive workplaces. Over the last decade, and, in particular, the last year, we have been on an important journey to create inclusion at every point in our employees' experiences. As part of this journey, we announced new commitments to ensure our workforce truly represents the communities where we live and work. Hilton is committed to achieving global gender parity and 25 percent U.S. ethnic representation at our corporate leadership levels by the end of 2027. Our leaders are committed to our diversity and inclusion efforts, and we hold them accountable through our organizational objectives that measure their performance against our commitments.
Just as our guests represent significant diversity, so do our employees, representing over 170 nationalities, speaking more than 40 different languages, representing 122 countries and territories and spanning five generations. As of December 31, 2021, our global workforce, only including persons employed by Hilton, was 44 percent women. Globally, corporate leadership was 39 percent women and hotel leadership was 24 percent women. As of December 31, 2021, in the U.S., our workforce was 71 percent ethnically diverse, with U.S. corporate leadership being 19 percent ethnically diverse and U.S. hotel leadership being 21 percent ethnically diverse. As of December 31, 2021, our board of directors, excluding management directors, was 50 percent women and 25 percent ethnically diverse.
Hilton has a long legacy of supporting the military dating back to our founder, Conrad Hilton, a proud World War I veteran. Over the last six years, we have hired over 35,000 veterans, spouses, caregivers and dependents, whose shared values like leadership, integrity and teamwork are a natural fit with Hilton.
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As part of our commitment to an inclusive environment, we offer the following resources to our employees:
• Team Member Resource Groups ("TMRG") – Our nine TMRGs have global reach and each one is sponsored by an executive committee leader. They provide members with opportunities for career development and the chance to share their unique perspectives and viewpoints with leadership and other colleagues to drive important conversations about inclusion and equity across the enterprise.
• Courageous Conversations – Launched in 2020, with eight conversations held through 2021, leaders throughout our business and experts in the fields of the relevant topics engage in tough conversations on topics including racism, allyship, mental health and women leaving the workforce. With a focus on transparency around difficult topics, these workshops are a safe place for employees to create their own personal reflection plan and speak out while driving awareness of the need for lasting change and helping us build a culture that creates a genuine sense of inclusion for employees.
• Annual trainings – We require all employees to complete training as part of our Inclusive and Respectful Workplace curriculum, which is based on the underlying principles of our Code of Conduct. This annual requirement includes training on unconscious bias, DE&I, preventing human trafficking and anti-harassment. Our Code of Conduct states that we do not tolerate any form of discrimination or harassment on the basis of any characteristic protected by applicable law. For our guest-facing employees, our mandatory DE&I training is scenario-driven training designed to promote positive, inclusive behaviors. Guided by thoughtful questions and real-life situations, employees examine how guests feel when subjected to unconscious bias and how they can ensure all guests feel welcome.
Thrive at Hilton
Thrive at Hilton is our value proposition that enables all employees to grow and flourish in both their professional and personal lives. To make that happen, we offer an entire ecosystem of programs throughout their career with Hilton to ensure they have the tools they need to excel in their roles. Their total well-being – mind, body and spirit – is central to our growth and continued success. At Hilton, we know that when we take care of our employees, they thrive and, in turn, create meaningful experiences for our guests and each other.
We offer a range of innovative benefits and programs that ensure our employees thrive in every aspect of their lives. Such benefits and programs include paid time off, parental leave, adoption assistance, subsidized health insurance, education assistance and flexible work arrangements, including remote work opportunities for our corporate employees, and Go Hilton Travel programs, which make discounted rooms available to hotel and corporate employees, as well as their families and friends.
Our employees are at the core of our success and we strive to provide medical and mental health care that is convenient, accessible and affordable for our employees; our programs include:
• Amazon Care – Hilton is proud to be the first hospitality company to partner with Amazon Care, which aims to increase access to care, allowing for more timely treatment of acute conditions and better management of chronic conditions for eligible U.S. employees beginning in 2022.
• Employee Assistance Program – Offers free and confidential services, such as counseling and recommending resources to find services such as child and eldercare, legal advice and apartment hunting and relocation.
• Thrive at Hilton - Mental Wellness – Our global initiative to grow and amplify our mental health support services provides employees with access to a dedicated counselor in the U.S. and features a global internal hub with a variety of mental health resources, including leader testimonials, tips on normalizing conversations around mental health, messages encouraging employees to manage their mental health and ways to seek clinical support if needed.
We also have various programs to show our appreciation and celebrate our employees, including our two largest programs: the CEO Light & Warmth Award and the Hospitality Heroes Award, both of which we expanded in 2021. The CEO Light & Warmth Award is our company’s highest honor, recognizing employees who have brought the light and warmth of hospitality to life through sustained, significant and life-changing actions for our guests, business, employees and the community. The Hospitality Heroes Award recognizes hotel and call center employees who go above and beyond to bring Hilton hospitality to life for guests or their Hilton teammates.
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We also want our employees to share in our success and, as a result of employee feedback, we introduced an employee stock purchase plan ("ESPP") in 2019. Through our ESPP, eligible U.S. employees can purchase Hilton stock through after-tax payroll deductions at a 15 percent discount from the market stock price and benefit from the hard work they put into making Hilton a success.
We regularly survey our employees to gauge the level of job satisfaction and effective relationships with management, among other things. We strive to maximize employee retention and minimize attrition with these and other measures. Approximately 40 percent of our U.S. employees have been a part of the Hilton family for at least 10 years.
Compensation and Benefits
Hilton offers competitive pay and benefits to its employees, including a variety of compensation programs and comprehensive benefit programs. Hilton has hired consulting firms to independently evaluate the effectiveness of executive compensation and benefit programs and utilized their feedback to further our commitment to deliver competitive levels of compensation and benefits. We regularly review gender and diversity pay parity among our employees as part of our ongoing talent processes.
As of December 31, 2021, approximately 30 percent of our employees worldwide and approximately 45 percent of our employees in the U.S. were covered by various collective bargaining agreements that generally address pay rates, working hours, other terms and conditions of employment, certain employee benefits and orderly settlement of labor disputes.
Development and Training
Our focus on career development recognizes that each of our employees has unique talents, dreams and goals. Rather than a one-size-fits-all approach, we create custom-curated experiences so that employees can learn, develop, lead and thrive at Hilton by following a training and career path best suited to their goals and aspirations. Hilton University, our global learning platform, gives employees access to a robust library of learning resources to help them succeed. We partner with best-in-class educational institutions and content providers across the globe to deliver high-quality, relevant content to our employees, including a wide array of general business, industry or function-specific technical skills and leadership development courses and programs. We have invested in modernizing our approach to learning, positioning us to continue to deliver content virtually throughout the pandemic and across our growing global footprint. Our Hilton University platform provides flexible, accessible learning to help our employees learn and grow. Our new Job Skills Hubs and LinkedIn Learning Playlists help make it easy to find specific learnings that employees may be looking for, whenever they need them.
Our employees have the opportunity to grow their leadership skills and careers through our Lead@Hilton framework, which develops leaders throughout their careers and features the Hilton Leaders Teaching Leaders video series, as well as content from partners such as Cornell University and Harvard University. Curriculums were curated for each level of experience to provide employees with the foundational tools to start as learners and the coaching, mentoring and wellness resources to grow as leaders. To continue to grow and support our top hotel leaders, we launched GM Academy, which is centered on nine core General Manager ("GM") business capabilities including leadership and people management, asset management, customer engagement and commercial performance. With partners such as Cornell University, Harvard University and LinkedIn, we have curated learning paths for each core capability. GMs and their leaders can map their custom development plan with an online learning assessment. In addition to the information included as part of the Lead@Hilton framework, the GM Academy curriculum also includes resources such as executive reading recommendations and regional specific programming.
Awards and Recognition
We have consistently been recognized for our Hilton culture, and our awards for 2021 included: #1 in the DiversityInc Top 50 Companies for Diversity, Military Times Best for Vets #9 (Overall) and #1 (Hospitality), Military Friendly Employer with Gold distinction, Veteran Magazine Best of the Best Veteran Friendly Company, Great Place to Work Institute ("GPTW") #3 World’s Best Workplace, GPTW & Fortune #3 Best Place to Work in the U.S. and #1 Best Big Companies to Work For List, GPTW & Fortune #1 Best Place to Work for Women in the U.S. (for the third consecutive year) and recipient of the Secretary of Defense Employer Support Freedom Award (one of approximately 300 companies honored since 1996), which is the highest Department of Defense honor for employers of National Guard and Reserve Service Members. Additionally, we received a 100 percent rating in the Corporate Equality Index from the Human Rights Campaign for our commitment to corporate policies, practices and benefits pertinent to LGBTQ+ employees for the eighth consecutive year.
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Governance, Ethics and Regulatory Compliance
As a core underpinning of our entire organization, our ethics and compliance program is overseen by our board of directors, which expects all Hilton employees to conduct themselves to a high standard. Our Code of Conduct establishes a set of global business principles, with our compliance organization, training, risk management and monitoring activities tailored to address unique risks by geography, business line, function and level. Our Code of Conduct is supported by a robust set of compliance policies addressing risk areas such as corruption, trade sanctions, insider trading, privacy, confidential information, antitrust and escalation of concerns. Our legal and compliance training program, which is an annual requirement for all of our employees, provides the ability to convey a consistent set of compliance standards across the organization in formats designed to target different knowledge levels, learning styles and functional needs. Our annual training calendar includes mandatory training and supplemental training that is supported by company-wide awareness campaigns highlighting Hilton-specific risks and scenarios. We also use passive communication channels, including electronic bulletin board screens in the employee break room areas of our hotels, and internal newsletters, including a publication that highlights real Hilton Compliance Hotline matters and their resolutions.
Our legal compliance team administers a third-party risk management program so that we understand the qualifications, reputation and associations of third parties with whom we transact, particularly third parties who interface with government officials and third parties who act in Hilton’s name, such as owners of our hotels. The third-party risk management program includes due diligence, education materials for third parties, ongoing monitoring of relationships and appropriate contract audit and termination rights. The Audit Committee of our board of directors receives regular updates from our compliance team.
Competition
We encounter active and robust competition as a hotel and resort manager, franchisor, owner and lessee. Competition in the hospitality industry is based on several criteria, generally including: the attractiveness of the facility; location; level of service; quality of accommodations; amenities; food and beverage options and outlets; public and meeting spaces and other guest services; consistency of service; room rate; brand reputation; and the ability to earn and redeem loyalty program points through a global system. Our properties and brands compete with other hotels, resorts, motels, inns and other accommodation rental services in their respective geographic markets or customer segments, including facilities owned by local interests, individuals, national and international chains, institutions, investment and pension funds and real estate investment trusts ("REITs"). We believe that our position as a multi-branded manager, franchisor, owner and lessee of hotels with an associated global, system-wide guest loyalty and commercial platform helps us continue to maintain our position as one of the largest and most geographically diverse hospitality companies in the world.
Our principal competitors include other branded and independent hotel operating companies, national and international hotel brands and ownership companies. While local and independent brand competitors vary, on a global scale, our primary competitors are Accor S.A., Choice Hotels International, Hongkong and Shanghai Hotels, Hyatt Hotels Corporation, Intercontinental Hotel Group, Marriott International, Radisson Hotel Group and Wyndham Hotels & Resorts.
Seasonality
The hospitality industry is seasonal in nature. The periods during which our properties experience higher or lower levels of demand vary from property to property, depending principally upon their location, type of property and competitive mix within the specific location. Based on historical results, we generally expect our revenues to be lower in the first quarter of each year than in each of the three subsequent quarters.
Cyclicality
The hospitality industry is cyclical, and demand generally follows, on a lagged basis, key macroeconomic indicators. There is a history of increases and decreases in the development and supply of and demand for hotel rooms, occupancy levels and room rates realized by hotel owners through economic cycles. The combination of changes in economic conditions and in the supply of hotel rooms can result in significant volatility in results for owners and managers of hotel properties. The costs of running a hotel, including personnel costs, rent, property taxes, insurance and utilities, tend to be more fixed than variable. As a result of such fixed costs, in a negative economic environment, the rate of decline in earnings can be higher than the rate of decline in revenues. In 2020, we and our hotel owners experienced a downturn in the current industry cycle driven by the COVID-19 pandemic, which continued into 2021. However, the level of travel in 2021 recovered substantially when compared to that of 2020.
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Intellectual Property
In the highly competitive hospitality industry in which we operate, trademarks, service marks, trade names, logos and patents are very important to the success of our business. We have a significant number of trademarks, service marks, trade names, logos, patents and pending registrations and expend significant resources each year on surveillance, registration and protection of our IP, which we believe have become synonymous in the hospitality industry with a reputation for excellence in service and authentic hospitality.
Government Regulation
Our business is subject to various foreign and U.S. federal and state laws and regulations, including laws and regulations that govern the offer and sale of franchises, many of which impose substantive requirements on franchise contracts and require that certain materials be registered before franchises can be offered or sold in a particular jurisdiction.
In addition, a number of states regulate the activities of hospitality properties and restaurants, including safety and health standards, as well as the sale of liquor at such properties, by requiring licensing, registration, disclosure statements and compliance with specific standards of conduct. Operators of hospitality properties also are subject to laws governing their relationship with employees, including minimum wage requirements, overtime, working conditions and work permit requirements. Our franchisees are responsible for their own compliance with laws, including with respect to their employees, minimum wage requirements, overtime, working conditions and work permit requirements. Compliance with, or changes in, these laws could reduce the revenue and profitability of our properties and could otherwise adversely affect our operations.
We also manage hotels with casino gaming operations as part of or adjacent to the hotels. However, with the exception of casinos at certain properties in Puerto Rico and Egypt, third parties manage and operate the casinos. We hold and maintain the casino gaming license and manage the casinos located in Puerto Rico and Egypt and employ third-party compliance consultants and service providers. As a result, our business operations at these facilities are subject to the licensing and regulatory control of the local regulatory agency responsible for gaming licenses and operations in those jurisdictions.
For additional information on government regulation, including environmental regulations and requirements, refer to "Part I—Item 1A. Risk Factors."
Insurance
U.S. hotels that we manage are permitted to participate in certain of our insurance programs by mutual agreement with our hotel owners. If not participating in our programs, hotel owners must purchase insurance programs consistent with our requirements. Generally, U.S. franchised hotels are not permitted to participate in our insurance programs, but rather must purchase insurance programs consistent with our requirements. Foreign managed and franchised hotels are required to participate in certain of our insurance programs. In addition, our management and franchise contracts typically include provisions requiring the owner of any hotel to indemnify us against losses arising from the design, development and operation of such hotel.
Most of our insurance policies are written with self-insured retentions or deductibles that are common in the insurance market for similar risks, and we believe such risks are prudent for us to assume. Our third-party insurance policies provide coverage for claim amounts that exceed our self-insurance retentions or deductible obligations. We maintain insurance coverage for general liability, property, business interruption, terrorism and other risks with respect to our business for all of our owned and leased hotels, and we maintain workers' compensation or equivalent coverage for all of our employees. We also are self-insured for health coverage for some of our U.S. employees, which include those working at our corporate operations and managed hotels. In general, our insurance provides coverage related to any claims or losses arising out of the design, development and operation of our hotels.
Where You Can Find More Information
We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the internet at the SEC's website at www.sec.gov. Our SEC filings are also available free of charge on our website at newsroom.hilton.com as soon as reasonably practicable after they are filed with or furnished to the SEC. Our website and the information contained on or connected to that site are not incorporated into this Annual Report on Form 10-K.
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