What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-07 compared with 2023-02-09 · 343 added, 385 removed, 993 unchanged (42% of the section changed)

7 unchanged sentences

Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), cash flows and stockholders' equity (deficit) for each of the three years in the period ended December 31, 2022 and the related notes, and our report dated February 9, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, cash flows and stockholders' equity (deficit) for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 7, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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We have audited the accompanying consolidated balance sheets of Hilton Worldwide Holdings Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), cash flows and stockholders’ equity (deficit) for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements").

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, cash flows and stockholders’ equity (deficit) for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

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Accounting for the Loyalty Program

Description of the Matter The Company recognized $457 million of revenues during the year ended December 31, 2022 and had deferred revenues of $631 million and a liability for guest loyalty program of $2,395 million as of December 31, 2022 associated with the Hilton Honors guest loyalty and marketing program (the “Loyalty Program”).

Description of the matter

The Company recognized $474 million of revenues during the year ended December 31, 2023 and had deferred revenues of $769 million and a liability for guest loyalty program of $2,732 million as of December 31, 2023 associated with the Hilton Honors guest loyalty and marketing program (the “Loyalty Program”).

As discussed in Note 2 to the consolidated financial statements, the Company has a performance obligation to provide or arrange for the provision of goods or services, for free or at a discount, to Hilton Honors members in exchange for the redemption of points earned through participation in the Loyalty Program.

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Such amounts are recognized as revenue when the related point obligation is satisfied based upon the estimated standalone selling price per point in excess of the related cost per point.

Auditing Loyalty Program results is complex due to:

(1) the complexity of models and high volume of data used to monitor and account for the Loyalty Program results, and (2) the complexity of estimating the standalone selling price per Loyalty Program point, including the estimated breakage rate of Loyalty Program points.

Such estimates are complex given the significant estimation associated with expected future redemption activity.

For example, we tested controls over management’s review of the assumptions and data inputs utilized by third-party actuaries to assist the Company in determining the fair value of the future award redemption obligation and breakage rate of Loyalty Program points and management’s review of activity and data inputs to their accounting model.

To test the recognition of revenues and costs associated with the Loyalty Program, we involved specialists on our team and performed audit procedures that included, among others, testing the clerical accuracy and consistency with U.S.

generally accepted accounting principles of the accounting model developed by the Company to recognize revenue and costs associated with the Loyalty Program.

We tested significant inputs into the accounting model, including the estimated standalone selling price and recognition of points earned and redeemed during the period.

We involved our actuarial professionals to assist in our testing procedures with respect to the estimate of the breakage of Loyalty Program points and the ultimate estimated redemption cost.

We evaluated management’s methodology for estimating the breakage of Loyalty Program points, as well as tested underlying data and assumptions used in estimating the breakage rate.

Further, the Company earns licensing fees from its co-branded credit card arrangement, which are recognized as revenue when the points for Hilton Honors are issued, generally as spend with the co-branded credit card provider occurs.

Auditing the Loyalty Program is complex due to:

(1) the complexity of models and high volume of data used to monitor and account for the Loyalty Program results, and (2) the complexity of estimating the standalone selling price of the performance obligations in the co-branded credit card arrangement.

How we addressed the matter in our audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for the Loyalty Program during the year.

For example, we tested controls over the accounting model and data used in recording revenue when Hilton Honors points are redeemed, as well as management’s review of the assumptions and data inputs utilized in estimating the stand-alone selling price of the performance obligations identified in the co-branded credit card arrangement.

To test the recognition of revenue associated with the Loyalty Program, we performed audit procedures that included, among others, testing the clerical accuracy and consistency with US generally accepted accounting principles of the accounting model developed by the Company to recognize revenue associated with the Loyalty Program and testing significant inputs into the accounting model.

As it relates to the co-branded credit card arrangement, we involved valuation professionals with specialized skills and knowledge and performed audit procedures that included, among others, testing the clerical accuracy and consistency with US generally accepted accounting principles of the valuation model used by the Company in estimating the standalone selling price of the identified performance obligations, testing significant inputs into the valuation model, and performing sensitivity analysis over the inputs to assess its impact on the determined standalone selling price.

Accounting for Income Taxes

Description of the Matter The Company recognized income tax expense of $477 million during the year ended December 31, 2022, and unrecognized tax benefits of $337 million as of December 31, 2022.

Description of the matter

The Company recognized income tax expense of $541 million during the year ended December 31, 2023, and unrecognized tax benefits of $555 million as of December 31, 2023.

As discussed in Note 2 to the consolidated financial statements, for all tax positions taken in a tax return, the Company will first determine whether it is more likely than not that a tax position will be sustained upon examination.

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Auditing the accounting for income taxes is complex as a result of:

(1) operations in multiple foreign tax jurisdictions and international restructuring transactions, (2) the judgment and estimation associated with both the identification and measurement of the Company's unrecognized tax benefits, including its evaluation of the technical merits related to matters for which no reserves or partial reserves have been recorded, and (3) the significant estimation associated with the measurement of unrecognized tax benefits outstanding as of the balance sheet date.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for income taxes, including unrecognized tax benefits, during the year.

(1) the judgment and estimation associated with both the identification and measurement of the Company's unrecognized tax benefits, including its evaluation of the technical merits related to matters for which no reserves or partial reserves have been recorded, and (2) the significant estimation associated with the measurement of unrecognized tax benefits outstanding as of the balance sheet date.

How we addressed the matter in our audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for income taxes, including unrecognized tax benefits, during the year.

For example, we tested management’s controls over the review of tax positions taken by the Company to determine whether they met the threshold for recognition within the consolidated financial statements.

To test the recognition of the Company’s unrecognized tax benefits and measurement of unrecognized tax benefits, we involved tax professionals with specialized skills and knowledge to assess the technical merits of the Company’s tax positions and performed audit procedures that included, among others, evaluation of communications with relevant taxing authorities, evaluation of whether management appropriately considered new information that could significantly change the recognition, measurement or disclosure of the unrecognized tax benefits, and testing the assumptions used by management in estimating the valuation of any associated liability.

Accounting for Other Expenses from Managed and Franchised Properties and General and Administrative Expenses

Description of the Matter The Company recognized Other expenses from managed and franchised properties of $5,076 million and General and administrative expenses of $382 million during the year ended December 31, 2022.

As discussed in Note 2 to the consolidated financial statements, the Company incurs certain direct and indirect expenses that are for the benefit of, and contractually reimbursable from, hotel owners.

Such amounts (“Cost Reimbursements”) are recorded in the peri od in which the expense is incurred as Other expenses from managed and franchised properties, and the accounting for indirect cost reimbursements includes judgment with respect to the allocation of certain costs between reimbursable and non-reimbursable.

Auditing the classification of indirect reimbursements recognized within Other expenses from managed and franchised properties and General and administrative expenses is complex as a result of:

(1) judgment associated with testing management’s conclusions regarding the allocation of costs between reimbursable and non-reimbursable expenses, presented as Other expenses from managed and franchised properties and General and administrative expenses, respectively, and (2) the complexity associated with allocating indirect expenses due to the high volume of data utilized by management in establishing and maintaining allocations for indirect expenses.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for Cost Reimbursements, General and administrative expenses, and the process for allocating indirect reimbursement expenses during the year.

For example, we tested management’s controls over the review of the allocation of certain indirect costs to determine if they were appropriately classified.

To test the recognition of Cost Reimbursements for appropriate classification, we performed audit procedures that included, among others:

testing a sample of transactions that were classified within Other expenses from managed and franchised properties in order to evaluate the appropriate accounting treatment and reasonableness of classification;

comparing budgeted amounts and initial allocations to actual activity and evaluating the reasonableness of any resulting material changes to allocations of indirect expenses;

performing analytical procedures over Other expenses from managed and franchised properties and General and administrative expenses in order to identify indicators of material errors in the classification of expenses based on established trends and expectations;

and testing material manual journal entries made to Other expenses from managed and franchised properties and General and administrative expenses.

/s/ Ernst & Young LLP

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Owned and leased hotels

1,141 999 679

Depreciation and amortization 147 162 188

General and administrative 408 382 405

Reorganization costs — — 41

Impairment losses

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Loss on sales of assets, net

Operating income (loss) 2,094 1,010 ( 418 )

Operating income

2,225 2,094 1,010

Interest expense ( 464 ) ( 415 ) ( 397 )

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( 16 ) 5 ( 7 )

Loss on debt extinguishments — ( 69 ) ( 48 )

Other non-operating income (loss), net

Income (loss) before income taxes 1,734 560 ( 924 )

Income tax benefit (expense) ( 477 ) ( 153 ) 204

Net income (loss) 1,257 407 ( 720 )

Loss on debt extinguishment

Loss on investments in unconsolidated affiliate ( 92 ) — —

Other non-operating income, net

Income before income taxes

1,692 1,734 560

Income tax expense

( 541 ) ( 477 ) ( 153 )

1,151 1,257 407

Net loss (income) attributable to noncontrolling interests ( 10 ) ( 2 ) 3

Net income (loss) attributable to Hilton stockholders $ 1,255 $ 410 $ ( 715 )

Earnings (loss) per share:

Net income attributable to Hilton stockholders

$ 1,141 $ 1,255 $ 410

Earnings per share:

Basic $ 4.36 $ 4.56 $ 1.47

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HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

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2023 2022 2021

Net income (loss) $ 1,257 $ 407 $ ( 720 )

$ 1,151 $ 1,257 $ 407

Other comprehensive income (loss), net of tax benefit (expense):

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Total other comprehensive income (loss)

Comprehensive income (loss) 1,330 489 ( 740 )

Comprehensive income

1,125 1,330 489

Comprehensive loss (income) attributable to noncontrolling interests ( 9 ) ( 2 ) 2

Comprehensive income (loss) attributable to Hilton stockholders $ 1,328 $ 491 $ ( 735 )

Comprehensive income attributable to Hilton stockholders

$ 1,116 $ 1,328 $ 491

See notes to consolidated financial statements.

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Operating Activities:

Net income (loss) $ 1,257 $ 407 $ ( 720 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

$ 1,151 $ 1,257 $ 407

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of contract acquisition costs 43 38 32

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Loss (gain) on foreign currency transactions 16 ( 5 ) 7

Loss on debt extinguishments — 69 48

Loss on debt extinguishment

Loss on investments in unconsolidated affiliate 92 — —

Share-based compensation expense 169 162 193

Amortization of deferred financing costs and discount 16 16 17

Amortization of deferred financing costs and discounts

Deferred income taxes ( 264 ) 34 ( 4 )

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Issuance of financing receivables ( 22 ) ( 46 ) ( 3 )

Undesignated derivative financial instruments 79 ( 5 ) ( 3 )

Proceeds from (payments for) undesignated derivative financial instruments

( 26 ) 79 ( 5 )

Proceeds from asset dispositions 5 — 6

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Repayment of debt ( 183 ) ( 48 ) ( 3,230 )

Debt issuance costs and redemption premiums — ( 76 ) ( 71 )

Debt issuance costs and redemption premium

( 20 ) — ( 76 )

Dividends paid ( 158 ) ( 123 ) —

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Settlements of interest rate swap with financing component 53 2 —

Net cash provided by (used in) financing activities ( 1,765 ) ( 1,793 ) 2,032

Net cash used in financing activities

( 2,040 ) ( 1,765 ) ( 1,793 )

Effect of exchange rate changes on cash, restricted cash and cash equivalents ( 12 ) ( 19 ) ( 10 )

Net increase (decrease) in cash, restricted cash and cash equivalents ( 226 ) ( 1,751 ) 2,633

Net decrease in cash, restricted cash and cash equivalents

( 411 ) ( 226 ) ( 1,751 )

Cash, restricted cash and cash equivalents, beginning of period 1,286 1,512 3,263

Cash, restricted cash and cash equivalents, end of period $ 875 $ 1,286 $ 1,512

Supplemental Disclosures:

Cash paid during the period:

Interest $ 383 $ 359 $ 433

Income taxes, net of refunds 389 181 79

See notes to consolidated financial statements.

For supplemental disclosures, see Note 20:

"Supplemental Disclosures of Cash Flow Information."

HILTON WORLDWIDE HOLDINGS INC.

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Balance as of December 31, 2020 277.6 $ 3 $ ( 4,453 ) $ 10,552 $ ( 6,732 ) $ ( 860 ) $ 4 $ ( 1,486 )

Net loss — — — — ( 715 ) — ( 5 ) ( 720 )

Net income (loss)

— — — — 410 — ( 3 ) 407

Other comprehensive income (loss),

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— — — — — 31 — 31

Other comprehensive loss

— — — — — ( 20 ) — ( 20 )

— — — — ( 42 ) — — ( 42 )

Repurchases of common stock

Other comprehensive income

— — — — — 81 1 82

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1.5 — 10 168 — — — 178

Distributions — — — — — — ( 1 ) ( 1 )

Cumulative effect of the adoption of ASU 2016-13 (1)

— — — — ( 10 ) — — ( 10 )

Balance as of December 31, 2021 279.1 3 ( 4,443 ) 10,720 ( 6,322 ) ( 779 ) 2 ( 819 )

Net income (loss) — — — — 410 — ( 3 ) 407

— — — — 1,255 — 2 1,257

Other comprehensive income (loss),

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— — — — — 73 — 73

Dividends — — — — ( 123 ) — — ( 123 )

Repurchases of common stock

( 12.3 ) — ( 1,608 ) — — — — ( 1,608 )

Share-based compensation

1 unchanged sentence

Balance as of December 31, 2022 (2)

267.9 3 ( 6,040 ) 10,831 ( 5,190 ) ( 706 ) 4 ( 1,098 )

Net income — — — — 1,141 — 10 1,151

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— — — — — ( 31 ) — ( 31 )

Other comprehensive income

Other comprehensive loss

— — — — — ( 25 ) ( 1 ) ( 26 )

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253.5 $ 3 $ ( 8,393 ) $ 10,968 $ ( 4,207 ) $ ( 731 ) $ 13 $ ( 2,347 )

(1) Relates to Accounting Standards Update ("ASU") No.

2016-13 ("ASU 2016-13"), Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , that was adopted on January 1, 2020.

(2) As of December 31, 2022, 3.0 billion shares of preferred stock with a par value of $ 0.01 were authorized with no such shares issued.

(1) Amount related to noncontrolling interests was less than $1 million.

(2) As of December 31, 2023 and 2022, 3.0 billion shares of preferred stock with a par value of $ 0.01 were authorized with no such shares issued.

(3) Beginning January 1, 2023, amount includes excise tax as imposed by the Inflation Reduction Act of 2022.

See notes to consolidated financial statements.

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Hilton Worldwide Holdings Inc.

(the "Parent," or together with its subsidiaries, "Hilton," "we," "us," "our" or the "Company"), a Delaware corporation, is one of the largest hospitality companies in the world and is engaged in managing, franchising, owning and leasing hotels and resorts, and licensing its intellectual property ("IP"), including brand names, trademarks and service marks.

As of December 31, 2022, we managed, franchised or leased 7,165 hotels and resorts, including timeshare properties, totaling 1,127,430 rooms in 123 countries and territories.

(the "Parent," or together with its subsidiaries, "Hilton," "we," "us," "our" or the "Company"), a Delaware corporation, is one of the largest global hospitality companies and is engaged in managing, franchising, owning and leasing hotels and resorts, and licensing its intellectual property ("IP"), including brand names, trademarks and service marks.

Basis of Presentation and Summary of Significant Accounting Policies

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If the entity is considered to be a VIE, we evaluate whether we are the primary beneficiary and then consolidate those VIEs for which we have determined we are the primary beneficiary.

If the entity in which we hold an interest does not meet the definition of a VIE, we evaluate whether we have a controlling financial interest through our voting shares in the entity, and, if we do, we consolidate the entity.

If the entity in which we hold an interest does not meet the definition of a VIE, we evaluate whether we have a controlling financial interest through our voting interest in the entity, and, if we do, we consolidate the entity.

We hold interests in VIEs, for which we are not the primary beneficiary, that may provide us with the option to acquire an additional interest in such an entity at a predetermined amount, if certain contingent events occur.

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Use of Estimates

The preparation of financial statements in conformity with United States ("U.S.") generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates.

In particular, the coronavirus ("COVID-19") pandemic (the "COVID-19 pandemic" or the "pandemic") had an adverse impact on certain of our results for the years ended December 31, 2022, 2021 and 2020;

however, our results experienced significant recovery during the years ended December 31, 2022 and 2021 when compared to the year ended December 31, 2020, the period most impacted by the pandemic.

The years ended December 31, 2022, 2021 and 2020, as well as upcoming periods, may not be comparable to periods prior to the onset of the COVID-19 pandemic or to other periods affected by the pandemic, and are not indicative of future performance.

Management has made estimates and judgments in light of these circumstances.

The preparation of financial statements in conformity with United States ("U.S.") generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates.

Summary of Significant Accounting Policies

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The majority of our performance obligations are promises to provide a series of distinct goods or services, for which we receive variable consideration through our management and franchise fees or fixed consideration through our owned and leased hotels.

We allocate the variable fees to the distinct services to which they relate applying the prescribed variable consideration allocation guidance, and we allocate fixed consideration to the related performance obligations based on their estimated standalone selling prices.

We do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised good or service to a customer and when the customer pays for that good or service will be twelve months or less.

We allocate the variable fees to the distinct

services to which they relate applying the prescribed variable consideration allocation guidance, and we allocate fixed consideration to the related performance obligations based on their estimated standalone selling prices.

We do not adjust the promised amount of consideration for the effects of a significant financing component when it is our expectation, at contract inception, that the period between our transfer of a promised good or service to a customer and when the customer pays for that good or service will be twelve months or less, which it is in substantially all cases.

Additionally, we do not typically include extended payment terms in our contracts with customers.

However, in response to cash flow deficiencies experienced by certain hotel owners, such as those resulting from the COVID-19 pandemic, we may amend certain contracts with customers to provide short-term payment relief, expecting that we will collect most amounts outstanding in twelve months or less.

Management and franchise revenues

We identified the following performance obligations in connection with our management and franchise contracts:

• IP licenses grant the right to access our hotel system IP, including brand IP, reservations systems and property management systems.

• IP licenses grant the licensee the right to access our IP, including brand IP, reservations systems and property management systems.

• Hotel management services include providing day-to-day management services in the operation of the hotels for the hotel owners.

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• Rewards from Hilton Honors, our guest loyalty program, provide substantive rights for free or discounted goods or services to Hilton Honors members.

Each of the identified performance obligations is considered to be a series of distinct services transferred over time, except for the performance obligation related to Hilton Honors rewards, which is satisfied at the point in time when the Hilton Honors point is redeemed by the Hilton Honors member.

While the underlying activities may vary from day to day, the nature of the commitments are the same each day, and the property owner can independently benefit from each day's services.

Each of the identified performance obligations is considered to be a series of distinct services transferred over time, except for the performance obligation related to rewards from Hilton Honors, which is satisfied at the point in time when a Hilton Honors point is redeemed by the Hilton Honors member.

For the performance obligations other than the one related to rewards from the Hilton Honors program, while the underlying activities may vary from day to day, the nature of the commitments are the same each day, and the property owner can independently benefit from each day's services.

Management and franchise fees are typically based on the sales or usage of the underlying hotel, with the exception of fixed upfront fees, which usually represent an insignificant portion of the transaction price.

Franchise and licensing fees represent fees earned in connection with the licensing of one of our brands, usually under long-term contracts with the hotel owner, and may also include fees from licensing agreements for the use of our IP, and include the following:

Franchise and licensing fees represent fees earned in connection with the licensing of one of our brands, usually under a long-term contract with a hotel owner, as well as fees from license agreements for the use of our IP, and include the following:

• Royalty fees are 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.

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These fees are typically fixed and collected upfront and are recognized as revenue over the term of the franchise contract.

We do not consider this advance consideration to include a significant financing component, since it is used to protect us from the hotel owner

failing to adequately complete some or all of its obligations under the contract, including establishing and maintaining the hotel in accordance with our standards.

• Licensing fees are earned from:

(i) strategic partnerships, including from co-branded credit card arrangements, which are recognized as revenue when points for Hilton Honors are issued, generally as spend with the strategic partner or co-branded credit card provider occurs (see further discussion below under "Hilton Honors") and (ii) a license agreement with HGV to use our IP in its timeshare business, which are typically billed monthly, and revenue is generally recognized at the same time the fees are billed.

Management fees represent fees earned from hotels that we manage, usually under long-term contracts with the hotel owner, and include the following:

• Base management fees are generally based on a percentage of the hotel's monthly gross revenue.

Base fees are typically billed and collected monthly, and revenue is generally recognized as services are provided.

We do not consider this advance consideration to include a significant financing component, since it is used to protect us from the hotel owner failing to adequately complete some or all of its obligations under the contract, including establishing and maintaining the hotel in accordance with our standards.

• Licensing fees for the use of our IP are earned from:

(i) strategic partnerships, including from co-branded credit card arrangements, which are recognized as revenue when points for Hilton Honors are issued, generally as spend with the strategic partner or co-branded credit card provider occurs (see further discussion below under "Hilton Honors") and (ii) a license agreement with HGV for its timeshare business, which are typically billed monthly and recognized as revenue at the same time the fees are billed.

Management fees represent fees earned from hotels that we manage, usually under a long-term contract with a hotel owner, and include the following:

• Base management fees are generally based on a percentage of the hotel's monthly gross operating revenue.

Base management fees are typically billed and collected monthly, and revenue is generally recognized as services are provided.

• Incentive management fees are generally based on a percentage of the hotel's operating profits, normally over a one-calendar year period (the "incentive period"), and, in some cases, may be subject to a stated return threshold to the hotel owner.

Incentive fee revenue is recognized on a monthly basis, but only to the extent the cumulative fee earned does not exceed the probable fee for the incentive period.

Incentive fee payment terms vary, but they are generally billed and collected monthly or annually upon completion of the incentive period.

Incentive management fee revenue is recognized on a monthly basis, but only to the extent the cumulative fee earned does not exceed the probable fee for the incentive period.

Incentive management fee payment terms vary, but they are generally billed and collected monthly or annually upon completion of the incentive period.

Consideration paid or anticipated to be paid to incentivize hotel owners to enter into management and franchise contracts with us is amortized over the life of the applicable contract, generally including any extension periods that are at our sole option, as a reduction to base and other management fees and franchise and licensing fees, respectively.

We do not estimate revenues expected to be recognized related to our unsatisfied performance obligations for our:

(i) royalty fees, since they are considered sales-based royalty fees recognized as hotel room sales occur in exchange for licenses of our IP over the terms of the franchise contracts and (ii) other licensing fees and base management fees and incentive management fees since they are allocated entirely to the wholly unsatisfied promise to transfer IP or provide management services, respectively, which form part of a single performance obligation in a series, over the term of the individual contract.

(i) royalty fees, since they are considered sales-based royalty fees recognized as hotel room sales occur in exchange for licenses of our IP over the terms of the franchise contracts and (ii) other licensing fees, base management fees and incentive management fees since they are allocated entirely to the wholly unsatisfied promise to transfer IP or provide management services, respectively, which form part of a single performance obligation in a series, over the term of the individual contract.

Other revenues from managed and franchised properties represent amounts that are contractually reimbursed to us by property owners, either directly as costs are incurred or indirectly through monthly program fees related to certain costs and expenses supporting the operations of the related properties, and include the following:

• Direct reimbursements include payroll and related costs and certain other operating costs of the managed and franchised properties' operations, which are contractually reimbursed to us by the property owners as expenses are incurred.

• Direct reimbursements primarily include payroll and related costs of managed hotels, if the managed hotel employees are legally employed by us.

Direct reimbursements are contractually reimbursed to us by the hotel owners as expenses are incurred.

We have no legal responsibility for the employee liabilities related to certain of our managed properties, predominately those located outside of the U.S., where we are not the legal employer, as well as the employees or the liabilities associated with operating franchised properties.

Revenue is recognized based on the amount of expenses incurred by Hilton, which are presented as other expenses from managed and franchised properties in our consolidated statement of operations, that are then reimbursed to us by the property owner typically on a monthly basis, which results in no net effect on operating income (loss) or net income (loss).

• Indirect reimbursements include marketing expenses and other expenses associated with our brand programs and shared services, which are paid from program fees collected by Hilton from our managed and franchised properties.

Indirect reimbursements are typically billed and collected monthly, based on the underlying hotel's sales or usage (such as gross room revenue or number of reservations processed), and revenue is generally recognized as services are provided.

• Indirect reimbursements include marketing and sales expenses and other expenses associated with our brand programs and shared services, which are paid from program fees collected by Hilton from our managed and franchised properties.

Indirect reimbursements are typically billed and collected monthly, based on the underlying hotel's sales or usage (e.g., gross room revenue or number of reservations processed), and revenue is generally recognized as services are provided.

System implementation fees charged to property owners are deferred and recognized as revenue over the term of the management or franchise contract.

The expenses incurred by Hilton to operate the marketing and brand programs and shared services are recognized as incurred and presented as other expenses from managed and franchised properties in our consolidated statement of operations and are expected to equal the revenues earned from indirect reimbursements over time.

The expenses incurred by Hilton to operate the marketing, sales and brand programs and shared services are recognized as incurred and are presented as other expenses from managed and franchised properties in our consolidated statement of operations.

The management and franchise fees and reimbursements from third-party property owners are allocated to the performance obligations and the distinct services to which they relate using their estimated standalone selling prices.

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Using time as the measure of progress, we recognize fee revenue and indirect reimbursements in the period earned per the terms of the contract and revenue related to direct reimbursements in the period in which the cost is incurred .

Our accounts receivable primarily consist of amounts due from the hotel owners with whom we have management and franchise contracts, including the reimbursements that we have incurred on behalf of our managed and franchised properties.

Owned and leased hotels revenues

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• Components of package reservations for which each component could be sold separately to other hotel guests are considered separate performance obligations and are satisfied as set forth above.

Owned and leased hotels revenues primarily consist of hotel room sales, revenue from accommodations sold in conjunction with other services (e.g., package reservations), food and beverage sales and sales of other ancillary goods and services (e.g., parking) related to consolidated owned and leased hotels.

Revenue is recognized when rooms are occupied or goods and services have been delivered or rendered, respectively.

Owned and leased hotels revenues primarily consist of hotel room sales, revenues from accommodations sold in conjunction with other services (e.g., package reservations), food and beverage sales and sales of other ancillary goods and services (e.g., parking) related to consolidated owned and leased hotels.

Revenue is recognized when a room stay occurs or goods and services have been provided.

Payment terms typically align with when the goods and services are provided.

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Other revenues

Other revenues include revenues generated by the incidental support of hotel operations for owned, leased, managed and franchised hotels, including purchasing operations, and other operating income.

Purchasing revenues include any amounts received for vendor rebate arrangements that we participate in on behalf of the hotels in our system.

Other revenues primarily includes revenues generated by our purchasing operations for our owned, leased, managed and franchised hotels, as well as from properties outside of our system that participate in our purchasing programs.

Purchasing revenues include any amounts we expect to retain for vendor rebate arrangements related to purchases made directly by managed and franchised properties, as well as properties outside of our system, through our purchasing programs.

Taxes and fees collected on behalf of governmental agencies

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Allowance for Credit Losses

An allowance for credit losses is provided on our financial instruments, primarily accounts receivable.

Our expected credit losses are based on historical collection activity, the nature of the financial instrument, geographic considerations and current and forecasted business conditions.

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

An allowance for credit losses is provided on our financial instruments, primarily accounts receivable and notes receivable, which are included in other current assets and other assets in our consolidated balance sheet.

Expected credit losses are also recorded on off-balance-sheet commitments, such as guarantees, letters of credit and financing commitments.

Our expected credit losses are based on historical collection activity, the nature of the financial instrument, geographic considerations, current and forecasted business conditions and, in the case of off-balance-sheet commitments, the probability that funding will be required.

Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized.

In connection with the 2007 transaction whereby we became a wholly owned subsidiary of affiliates of Blackstone Inc.

(the "Merger"), we recorded goodwill representing the excess purchase price over the fair value of the other identified assets and liabilities.

(the "Merger"), we recorded goodwill representing the excess purchase price over the fair value of the identified assets and liabilities.

We do not amortize goodwill, but rather evaluate goodwill for potential impairment on an annual basis or at other times during the year if indicators of impairment exist.

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The quantitative analysis is used to identify both the existence of impairment and the amount of the impairment loss by comparing the estimated fair value of a reporting unit to its carrying value, including goodwill.

The estimated fair value is based on internal projections of expected future cash flows and operating plans, as well as market conditions relative to the operations of our reporting units.

If the carrying value of the reporting unit exceeds its estimated fair value, an impairment loss would be recognized in our consolidated statement of operations in an amount equal to the excess of the carrying value over the fair value, limited to the total amount of goodwill allocated to that reporting unit.

Certain brand intangible assets were initially recorded at their fair value at the time of the Merger, using the relief-from-royalty valuation approach or the excess earnings method, depending on the contract type.

At the time of the Merger, our portfolio of brands, and those for which we recorded intangible assets, consisted of Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Hilton Hotels & Resorts, DoubleTree by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Homewood Suites by Hilton and our timeshare brand, Hilton Grand Vacations.

The estimated fair value is based on forward-looking estimates of performance and cash flows of our reporting units, which are based on historical operating results, adjusted for current and expected future market conditions, as well as various internal projections and external sources.

If the carrying value of the reporting unit exceeds its estimated fair value, an impairment loss would be recognized in our consolidated statement of operations in an amount equal to the excess of the carrying value over the estimated fair value, limited to the total amount of goodwill allocated to that reporting unit.

As of December 31, 2023 and 2022, our goodwill balance was only attributable to our management and franchise reporting unit, which had no accumulated impairment losses as of either date.

The changes in our goodwill balances during the years ended December 31, 2023 and 2022 were due to foreign currency translation.

Brands intangible assets were initially recorded at their fair value at the time of the Merger for the portfolio of brands that existed at the time of the Merger, using the relief-from-royalty valuation approach for owned and leased hotels and the excess earnings method for managed and franchised hotels.

There are no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of these brands, and, accordingly, the useful lives of these brands are considered to be indefinite.

A portion of our brands intangible assets are denominated in foreign currencies and, as such, a period over period change in these assets is attributable to fluctuations in foreign currency exchange rates.

All brands that were launched subsequent to the Merger, which, as of December 31, 2022, included LXR Hotels & Resorts, Canopy by Hilton, Signia by Hilton, Curio Collection by Hilton, Tapestry Collection by Hilton, Tempo by Hilton, Motto by Hilton, Tru by Hilton and Home2 Suites by Hilton, were not assigned fair values, and we do not have any intangible assets for these brands recorded in our consolidated balance sheets.

We have not recorded any intangible assets for brands that were launched subsequent to the Merger.

We evaluate our indefinite-lived brands intangible assets for impairment on an annual basis or at other times during the year if indicators of impairment exist.

When we evaluate our brands intangible assets for potential impairment, generally, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the asset is less than its carrying value.

If we determine qualitatively that the fair value of an asset is more likely than not less than its carrying value,

or if we decide to bypass the qualitative assessment, we perform a quantitative analysis.

The estimated fair value of the brand is based on internal projections of expected future cash flows.

If a brand intangible asset's estimated fair value is less than its respective carrying value, the excess of the carrying value over the estimated fair value is recognized in our consolidated statement of operations as an impairment loss.

When we evaluate our brands intangible assets for potential impairment, generally, we

first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the asset is less than its carrying value.

If we determine qualitatively that the fair value of the asset is more likely than not less than its carrying value, or if we decide to bypass the qualitative assessment, we perform a quantitative analysis.

The estimated fair value of the brand intangible asset is based on internal projections of expected future cash flows generated by the brand.

If the carrying value of the brand intangible asset exceeds its estimated fair value, an impairment loss would be recognized in our consolidated statement of operations in an amount equal to the excess of the carrying value over the estimated fair value.

Intangible Assets with Finite Useful Lives

Certain finite-lived intangible assets were initially recorded at their fair value at the time of the Merger.

These intangible assets consisted of management contracts, franchise contracts, leases, certain proprietary technologies and our Hilton Honors guest loyalty program.

The intangible assets related to the franchise contracts, U.S.

management contracts and certain proprietary technologies were fully amortized as of December 31, 2020.

Additionally, we capitalize consideration paid to incentivize hotel owners to enter into management and franchise contracts with us as contract acquisition costs and the incremental costs to obtain the contracts as development commissions and other, both of which are generally fixed.

We capitalize consideration paid to incentivize hotel owners to enter into management and franchise contracts with us as contract acquisition costs and the incremental costs to obtain the contracts as development commissions and other, both of which are generally fixed.

We also capitalize costs incurred to develop internal-use computer software and costs to acquire software licenses, as well as internal and external costs incurred in connection with the development of upgrades or enhancements that result in additional information technology functionality.

Additionally, certain finite-lived intangible assets were initially recorded at their fair value at the time of the Merger.

As of January 1, 2021 the only remaining finite-lived intangible assets resulting from the Merger related to leases, international management contracts and our Hilton Honors guest loyalty program.

The assets related to the international management contracts and Hilton Honors, which both had useful lives of 16 years, were fully amortized during the year ended December 31, 2023.

Intangible assets with finite useful lives are amortized using the straight-line method over their respective estimated useful lives, which for contract acquisition costs and development commissions and other is the contract term, generally including any extension periods that are at our sole option.

These estimated useful lives are generally as follows:

international management contracts recorded at the Merger ( 16 years);

management contract acquisition costs and development commissions and other ( 20 to 30 years);

franchise contract acquisition costs and development commissions and other ( 10 to 20 years);

leases ( 16 to 35 years);

Hilton Honors ( 16 years);

and capitalized software costs ( 3 years).

The estimated useful lives of our finite-lived intangible assets are generally as follows:

(i) management contract acquisition costs and development commissions and other ( 20 to 30 years);

(ii) franchise contract acquisition costs and development commissions and other ( 10 to 20 years);

(iii) leases ( 16 to 35 years);

and (iv) capitalized software costs ( 3 years).

In our consolidated statement of operations, the amortization of these intangible assets, excluding contract acquisition costs, is included in depreciation and amortization expenses and the amortization of contract acquisition costs is recognized as a reduction to franchise and licensing fees or base and other management fees, depending on the contract type.

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Costs for normal repairs and maintenance are expensed as incurred.

Right-of-use ("ROU") assets of finance leases are included in property and equipment, net in our consolidated balance sheets;

Right-of-use ("ROU") assets of finance leases are included in property and equipment, net in our consolidated balance sheet;

refer to "Leases" below for additional information.

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We allocate the impairment loss related to the asset group among the various assets within the asset group pro rata based on the relative carrying values of the respective assets.

If sufficient information exists to reasonably estimate the fair value of a conditional asset retirement obligation, including environmental remediation liabilities, we recognize the fair value of the obligation when the obligation is incurred, which is generally upon acquisition, construction or development or through the normal operation of the asset.

We determine if a contract is or contains a lease at the inception of the contract, and we classify that lease as a finance lease if it meets certain criteria or as an operating lease when it does not.

We reassess if a contract is or contains a lease upon modification of the contract.

We have elected to account for the components in contracts in which we are the lessee, that contain fixed payments for both lease and non-lease components, as a single lease component.

For contracts in which we are the lessee that contain fixed payments for both lease and non-lease components, we have elected to account for these components as a single lease component.

At the commencement date of a lease, we recognize a lease liability for future fixed lease payments and a ROU asset representing our right to use the underlying asset during the lease term.

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The future fixed lease payments are discounted using the rate implicit in the lease, if available, or our incremental borrowing rate.

Current and long-term portions of operating lease liabilities are classified as accounts payable, accrued expenses and other and operating lease liabilities, respectively, and current and long-term portions of finance lease liabilities are classified as current maturities of long-term debt and long-term debt, respectively, in our consolidated balance sheets.

The ROU asset is measured as the amount of the lease liability with adjustments, if applicable, for lease prepayments made prior to or at lease commencement, initial direct costs incurred by us, deferred rent and lease incentives.

In our consolidated balance sheets, ROU assets of operating leases are included in operating lease right-of-use assets and ROU assets of finance leases are included in property and equipment, net.

In our consolidated balance sheet, ROU assets of operating leases are included in operating lease right-of-use assets and ROU assets of finance leases are included in property and equipment, net.

We evaluate the carrying value of our ROU assets for indicators of impairment, and, if such indicators exist, we perform an analysis to determine the recoverability of the asset group by comparing the estimated undiscounted future cash flows to the net carrying value of the asset group.

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(i) fixed lease payments, or minimum payments, as contractually stated in the lease agreement;

(ii) variable lease payments, which, for our hotels, are generally based on a percentage of the underlying asset's revenues or profits or result from changes in inflationary indices;

and/or (iii) lease payments equal to the greater of the fixed or variable lease payments.

(ii) variable lease payments, which, for our hotels, are generally based on a percentage of the hotel's revenues or profits or result from changes in inflationary indices;

or (iii) lease payments equal to the greater of the fixed or variable lease payments.

In addition, during the term of our hotel leases, we may be required to pay some, or all, of the capital costs for FF&E and leasehold improvements in the hotel property.

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For operating leases for which the ROU asset has been impaired, the lease expense is determined as the sum of the amortization of the ROU asset remaining after impairment, if any, on a straight-line basis over the remaining term of the lease and the accretion of the lease liability based on the discount rate applied to the lease liability.

For finance leases, the amortization of the asset is recognized over the shorter of the lease term or useful life of the underlying asset within depreciation and amortization expenses and other expenses from managed and franchised properties in our consolidated statement of operations.

For finance leases, the amortization of the ROU asset is recognized over the shorter of the lease term or useful life of the underlying asset within depreciation and amortization expenses and other expenses from managed and franchised properties in our consolidated statement of operations.

The interest expense related to finance leases, including any variable lease payments, is recognized in interest expense in our consolidated statement of operations.

Contract Liabilities

Contract liabilities relate to:

(i) advance consideration received from hotel owners at contract inception for services considered to be part of the contract's performance obligations, such as application, initiation and other fees;

(ii) advance consideration received for certain indirect reimbursements, such as system implementation fees;

(iii) amounts received when points are issued under Hilton Honors, but for which revenue is not yet recognized, since the related points are not yet redeemed;

and (iv) as of December 31, 2021, a portion of the consideration received for the pre-sale of Hilton Honors points.

Contract liabilities related to advance consideration received for fees and certain indirect reimbursements are recognized ratably as revenue over the term of the related contract.

Contract liabilities related to amounts received for Hilton Honors, excluding the

pre-sale of Hilton Honors points, are recognized as revenue when the points are redeemed for a free or discounted good or service by the Hilton Honors member.

For the contract liabilities related to the pre-sale of Hilton Honors points, a portion is recognized as revenue from licensing fees when the related points are awarded to customers, and the remainder is recognized when customers redeem the Hilton Honors points.

Contract liabilities are included in current and long-term deferred revenues in our consolidated balance sheets, with the current portion based on our estimates of the amounts that will be recognized in the next twelve months.

Contract liabilities primarily relate to:

(i) amounts received when points are issued for the Hilton Honors program, but for which revenue is not yet recognized, since the related points are not yet redeemed;

and (ii) advance consideration received from hotel owners for services considered to be part of the contract's performance obligations, such as application, initiation and other fees and system implementation fees.

Contract liabilities related to amounts received for points issued for the Hilton Honors program are recognized as revenue when the points are redeemed for a free or discounted good or service by the Hilton Honors program member.

Contract liabilities related to advance consideration received from hotel owners are recognized ratably as revenue over the term of the related contract.

Contract liabilities are included in current and long-term deferred revenues in our consolidated balance sheet, with the current portion based on our estimates of the amounts that will be recognized in the next twelve months.

Hilton Honors

Hilton Honors is our guest loyalty program provided to our hotel and resort properties.

Hilton Honors is our guest loyalty program provided to our properties.

All of our managed, franchised, owned and leased properties participate in the Hilton Honors program.

Hilton Honors members earn points based on their spend at our participating properties and through participation in affiliated strategic partner programs, including co-branded credit card arrangements.

When points are earned by Hilton Honors members, they are provided with a substantive right to free or discounted goods or services in the future upon accumulation of the required level of Hilton Honors points.

Points may be redeemed for the right to stay at participating properties, as well as for other goods and services from third parties, including, but not limited to, airlines, car rentals, cruises, vacation packages, shopping and dining.

As points are issued to a Hilton Honors member, the property or strategic partner pays Hilton Honors based on an estimated cost per point equal to the cost of operating the program, which includes marketing, promotion, communication and administrative expenses, as well as the estimated cost of reward redemptions.

When the payments that are related to the issuance of points are received, we record amounts equal to the estimated cost per point of the future redemption obligation within liability for guest loyalty program and any amounts received in excess of the estimated cost per point within deferred revenues in our consolidated balance sheets.

As points are issued to a Hilton Honors member, the property or strategic partner pays Hilton based on an estimated cost per point equal to the cost of operating the program, which includes marketing, promotion, communication and administrative expenses, as well as the estimated cost of reward redemptions.

When we receive payments related to the issuance of points, we record amounts equal to the estimated cost per point of the future redemption obligation within liability for guest loyalty program and any amounts received in excess of the estimated cost per point within deferred revenues in our consolidated balance sheet.

For the Hilton Honors fees that are charged to the participating properties, we allocate such fees to the substantive right created by the Hilton Honors points that are issued using the variable consideration allocation guidance, since the fees are directly related to the issuance of Hilton Honors points to the Hilton Honors member and Hilton's efforts to satisfy the future redemption of those Hilton Honors points.

We engage third-party actuaries annually to assist in determining the fair value of the future reward redemption obligation using a discount rate and statistical formulas that project future point redemptions based on factors that include historical experience, an estimate of points that will eventually be redeemed, which includes an estimate of breakage (i.e., points that will never be redeemed), an expectation of when such points are expected to be redeemed and the cost of reimbursing properties and other third parties with respect to other redemption opportunities available to Hilton Honors members.

We engage third-party actuaries annually to assist in determining the estimated cost per point of the future reward redemption obligation using a discount rate and statistical formulas that project future point redemptions based on our historical experience and future expectations.

Factors used in the estimate include:

(i) an estimate of points that will eventually be redeemed, which includes an estimate of breakage (i.e., points that will never be redeemed), (ii) an estimate of when such points will be redeemed and (iii) an estimate of the cost of reimbursing managed and franchised properties and other third parties for redemptions.

When points are issued as a result of a stay by a Hilton Honors member at an owned or leased hotel, we recognize a reduction in owned and leased hotels revenues, since we are also the program sponsor.

We estimate the current portions of our liability for guest loyalty program and Hilton Honors deferred revenues based on the total point redemptions and breakage expected to occur within the next 12 months;

these amounts are presented as current portion of liability for guest loyalty program and current portion of deferred revenues in our consolidated balance sheets.

The transaction prices for the Hilton Honors points issued are reduced by the expected payments to the properties and other third parties that will provide the free or discounted good or service using the actuarial projection of the cost per point.

We estimate the current portions of our liability for guest loyalty program and Hilton Honors deferred revenues based on the total point redemptions and, for the liability for guest loyalty program, also breakage that is expected to occur within the next 12 months;

these amounts are presented as current portion of liability for guest loyalty program and current portion of deferred revenues in our consolidated balance sheet.

The transaction prices for the Hilton Honors points issued are reduced by the expected payments to the managed and franchised properties and other third parties that will provide the free or discounted good or service using the actuarial projection of the cost per point.

The remaining transaction price is then further allocated to the points that are expected to be redeemed, adjusting the points that are issued for estimated breakage, and recognized when those points are redeemed.

While the points are outstanding, both the estimate of the expected payments to third parties (i.e., cost per point redeemed) and the estimated breakage are reevaluated.

The combined estimate that yields the amount of revenue recognized when our point obligation is satisfied is adjusted so that the final amount allocated to the substantive right of the Hilton Honors member to redeem their points for free or discounted goods and services is reflective of the amount retained by Hilton after the cost of providing the free or discounted goods and services.

As a result of the COVID-19 pandemic, we temporarily suspended the expiration of Hilton Honors points, and, as a result, our estimates of breakage for both the determination of our liability for guest loyalty program and the amount of revenue

recognized when our point obligation is satisfied included the anticipated point expirations that occurred at the end of the

suspension, which was December 31, 2022.

The combined estimate yields the amount of revenue that will be recognized when our point obligation is satisfied and is adjusted so that the final amount allocated to the substantive right of the Hilton Honors member to redeem their points for free or discounted goods and services is reflective of the amount retained by Hilton after the cost of providing the free or discounted goods and services.

We also earn licensing fees from strategic partnerships, including co-branded credit card arrangements (see "Management and franchise revenues" within the "Revenue Recognition" section above).

The consideration received is allocated between two performance obligations based on their estimated standalone selling prices:

The consideration received is allocated based on the estimated standalone selling prices between two performance obligations:

(i) an IP license using the relief-from-royalty valuation method;

and (ii) substantive rights for free or discounted goods or services to the Hilton Honors members using a cost plus method based on an evaluation of other third-party administrators.

We satisfy our performance obligation related to points issued under Hilton Honors when points are redeemed for a free or discounted good or service by the Hilton Honors member, and we satisfy our performance obligation related to the IP license over time as the strategic partner simultaneously receives and consumes the benefits of the goods or services provided.

Hilton reimburses participating properties and applicable third parties when points are redeemed by Hilton Honors members for stays

at the participating properties or for other goods or services from the third-party providers, at which time the redemption obligation is reduced and the related deferred revenue is recognized in other revenues from managed and franchised properties in our consolidated statement of operations.

and (ii) substantive rights for free or discounted goods or services to the Hilton Honors members using a discounted cash flow analysis adjusted for an appropriate margin.

We satisfy our performance obligation related to the IP license over time as the strategic partner simultaneously receives and consumes the benefits of the goods or services provided, and we satisfy our performance obligation related to points issued under the Hilton Honors program when points are redeemed for a free or discounted good or service by the Hilton Honors members.

Hilton reimburses managed and franchised properties and other third parties when points are redeemed by Hilton Honors members for stays at the participating properties or for other goods or services from the third-party providers, respectively, at which time the redemption obligation is reduced and the related deferred revenue is recognized in other revenues from managed and franchised properties in our consolidated statement of operations.

Additionally, when Hilton Honors members redeem points for a free or discounted stay at our owned and leased hotels, we recognize room revenue, included in owned and leased hotels revenues in our consolidated statement of operations.

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Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources.

Unobservable inputs are inputs that reflect our own assumptions about the data market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The three-tier hierarchy of inputs is summarized below:

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On the date the derivative contract is entered into, we may designate the derivative as a hedging instrument, and, if so, we formally document all relationships between hedging activities, including the risk management objective and strategy for undertaking various hedge transactions.

We generally enter into cash flow hedges (i.e., a hedge of a specific forecasted transaction or the variability of cash flows to be paid), and, in the past, we entered into net investment hedges (i.e., a hedge of an investment in a foreign operation).

We generally enter into cash flow hedges (i.e., a hedge of a specific forecasted transaction or the variability of cash flows to be paid), and, in the past, we also entered into net investment hedges (i.e., a hedge of an investment in a foreign operation).

Changes in the fair value of a derivative that is qualified and designated as a cash flow hedge or net investment hedge are recorded in other comprehensive income (loss) in our consolidated statement of comprehensive income (loss) until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

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Ineffectiveness results when the cumulative change in the fair value of the hedging instrument exceeds the cumulative change in the fair value of the hypothetical hedging instrument.

We discontinue hedge accounting prospectively when the derivative is no longer highly effective as a hedge, the underlying hedged transaction is no longer probable or the hedging instrument expires, is sold, terminated or exercised.

We would discontinue hedge accounting prospectively if we

voluntarily choose to do so, when the derivative is no longer highly effective as a hedge, the underlying hedged transaction is no longer probable or the hedging instrument expires, is sold, terminated or exercised.

Currency Translation

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The functional currency for our entities operating outside of the U.S.

is the currency of the primary economic environment in which the respective entity operates, unless it is considered a highly inflationary economy in which case the functional currency of that entity is USD.

Assets and liabilities measured in foreign currencies are translated into USD at the prevailing foreign currency exchange rates in effect as of the financial statement date and the related gains and losses, net of applicable deferred income taxes, are reflected in accumulated other comprehensive income (loss) in our consolidated balance sheets.

Income and expense accounts are translated at the average foreign currency exchange rate for the period.

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Where certain specific evidence indicates intercompany receivables and payables will not be settled in the foreseeable future and are of a long-term nature, gains and losses from foreign currency exchange rate changes are recognized as currency translation adjustment within other comprehensive income (loss) in our consolidated statement of comprehensive income (loss).

We are self-insured for losses up to our third-party insurance deductibles for domestic general liability, auto liability, workers' compensation, employment practices liability and crime insurance at our leased and managed hotels that participate in our insurance programs, in addition to other corporate related coverages.

We are self-insured for losses up to our third-party insurance deductibles for domestic general liability, auto liability, workers' compensation, employment practices liability and crime insurance at our owned, leased and managed hotels that participate in our insurance programs, in addition to other corporate related coverages.

We are also self-insured for health coverages for some of our U.S.

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These obligations and reinsurance arrangements can cause timing differences in the recognition of assets, liabilities, gains and losses between reporting periods, although we expect these amounts to ultimately offset when the related claims are settled.

Our insurance reserves are accrued based on our deductibles related to the estimated ultimate cost of claims that occurred during the covered period, which includes claims incurred but not reported, for which we will be responsible.

Our insurance reserves are accrued based on the estimated ultimate cost to us of claims that occurred during the covered period, which includes claims incurred but not reported, for which we will be responsible.

These estimates are prepared with the assistance of third-party actuaries and consultants.

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Share-Based Compensation

Under the Hilton 2017 Omnibus Incentive Plan (the "2017 Plan"), we award time-vesting restricted stock units ("RSUs"), nonqualified stock options ("options") and performance-vesting RSUs ("performance shares") to our eligible employees:

Our share-based compensation primarily consists of awards that we grant to eligible employees under the Hilton 2017 Omnibus Incentive Plan (the "2017 Plan") and includes time-vesting restricted stock units ("RSUs"), nonqualified stock options ("options") and performance-vesting RSUs ("performance shares") to our eligible employees:

• RSUs vest in equal annual installments over two or three years from the date of grant.

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The grant date fair value per share is equal to the closing stock price on the date of grant.

• Options vest over three years from the date of grant in equal annual installments and terminate 10 years from the date of grant or earlier if the individual’s service terminates under certain circumstances.

The exercise price is equal to the closing stock price on the date of grant.

• Options vest in equal annual installments over three years from the date of grant and terminate 10 years from the date of grant or earlier if the individual’s service terminates under certain circumstances.

The grant date fair value per share is estimated using the Black-Scholes-Merton option-pricing model.

The exercise price is equal to the closing stock price on the date of grant.

Upon the exercise of stock options, new shares of our common stock are issued.

• Performance shares vest three years from the date of grant based on a set of specified performance measures over a defined performance period.

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The total number of performance shares that vest related to each performance measure is based on an achievement factor that ranges from zero percent to 200 percent, with 100 percent being the target.

We recognize these share-based payment transactions when services from the employees are rendered and recognize either a corresponding increase in additional paid-in capital or accounts payable, accrued expenses and other in our consolidated balance sheets, depending on whether the instruments granted satisfy the equity or liability classification criteria, respectively.

balance sheet, depending on whether the instruments granted satisfy the equity or liability classification criteria, respectively.

The measurement objective for these equity awards is the estimated fair value at the date of grant of the equity instruments that we are obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments.

The compensation expense for an award classified as an equity instrument is recognized ratably over the requisite service period, which is the period during which an employee is required to provide service in exchange for an award.

Liability awards are measured based on the award’s fair value, and the fair value is remeasured at each reporting date until the date of settlement.

Compensation expense for each period until settlement is based on the change (or a portion of the change, depending on the percentage of the requisite service that has been rendered as of the reporting date) in the fair value of the instrument for each reporting period for such liability awards.

Compensation expense for awards with a performance condition is dependent on the expected achievement percentage of such awards, which is reassessed each reporting period from the date of grant through the vesting of such performance awards, and is recognized over the requisite service period if it is probable that the performance condition will be satisfied.

If such performance conditions are not or are no longer considered probable, no compensation expense for these awards is recognized, and any previously recognized expense related to awards that are determined to be improbable of achievement is reversed.

Additionally, we have a retirement provision whereby we recognize total compensation expense of the awards for eligible participants through the date their awards are fully vested.

Liability awards are measured based on the award’s estimated fair value, and the fair value is remeasured at each reporting date until the date of settlement.

For such liability awards, compensation expense for each period until settlement is based on the change (or a portion of the change, depending on the percentage of the requisite service that has been rendered as of the reporting date) in the fair value of the instrument for each reporting period.

Compensation expense for awards with a performance condition is dependent on the expected achievement percentage of such awards, which is reassessed each reporting period from the date of grant through the vesting date of such performance awards, and is recognized over the requisite service period if it is probable that the performance condition will be satisfied.

If such performance conditions are not or are no longer considered probable to be satisfied, no compensation expense for these awards is recognized, and any previously recognized expense related to awards that are determined to be improbable of achievement is reversed.

Additionally, we have a retirement provision whereby the vesting date for eligible participants is accelerated based on certain criteria, and we recognize total compensation expense for these awards through the accelerated vesting date.

We recognize forfeitures of share-based compensation awards as they occur.

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The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and to recognize the deferred tax assets and liabilities that relate to tax consequences in future years, which result from differences between the respective tax basis of assets and liabilities and their financial reporting amounts and tax attribute carryforwards.

Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which the respective temporary differences or operating loss or tax credit carryforwards are expected to be recovered or settled.

The realization of deferred tax assets and tax loss and tax credit carryforwards is contingent upon the generation of future taxable income and other restrictions that may exist under the tax laws of the jurisdiction in which a deferred tax asset exists.

Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which the respective temporary differences or tax attribute carryforwards are expected to be recovered or settled.

The realization of deferred tax assets is contingent upon the generation of future taxable income and other restrictions that may exist under the tax laws of the jurisdiction in which a deferred tax asset exists.

Valuation allowances are provided to reduce such deferred tax assets to amounts more likely than not to be ultimately realized.

We are taxed on global intangible low-tax income ("GILTI") earned by certain foreign subsidiaries, and our foreign derived intangible income ("FDII") is taxed at a lower effective rate than the statutory rate by allowing a tax deduction against the income.

We are taxed on global intangible low-tax income ("GILTI") earned by certain foreign subsidiaries.

We recognize the current tax on GILTI as an expense in the period the tax is incurred.

We include the current tax impact of both GILTI and the FDII deduction in our effective tax rate.

We use a prescribed recognition threshold for the financial statement recognition and measurement of a tax position taken in a tax return.

We use a prescribed more-likely-than-not recognition threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return if there is uncertainty in income taxes recognized in the consolidated financial statements.

For all income tax positions, we first determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of each evaluated tax position and the amounts we would ultimately accept in a negotiated settlement with tax authorities.

If it is determined that a position meets the more-likely-than-not recognition threshold, the benefit recognized in the financial statements is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement.

In August 2022, the Inflation Reduction Act of 2022 (the "IRA") was signed into law in the U.S.

We do not expect the IRA to have a material impact on our consolidated financial statements, including our annual estimated effective tax rate during interim periods.

Loss Contingencies

We are involved in various claims and lawsuits arising in the ordinary course of business, the outcomes of which are subject to significant uncertainty.

We also provide various types of guarantees and other assistance in the form of letters of

credit and financing to owners of certain hotels that we currently or in the future will manage or franchise, with varying degrees of certainty with respect to the ultimate timing and amount of cash flows that might be expended under such agreements.

An estimated loss from a loss contingency will be accrued as a charge to income if it is probable a loss has been incurred and the amount of the loss can be reasonably estimated.

Recently Issued Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board issued ASU No.

2021-10 ("ASU 2021-10"), Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance , which requires entities to provide annual disclosures about the nature of material existing government assistance agreements and the impact of such agreements on the entity's financial statements.

The provisions of ASU 2021-10 are effective for fiscal years beginning after December 15, 2021 and the amendments should be applied either:

(i) prospectively to all in scope transactions that are reflected in the financial statements at the date of initial application and new transactions that are entered into after that date;

or (ii) retrospectively to those transactions.

Hilton adopted this ASU on January 1, 2022 on a prospective basis and it had no material impact on our consolidated financial statements as of and for the year ended December 31, 2022.

If, at any point in time, such amounts are deemed to be material, we will present the required disclosures as applicable .

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2023-07 ("ASU 2023-07"), Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures which requires, among other things, the following:

(i) enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included in a segment's reported measure of profit or loss;

(ii) disclosure of the amount and description of the composition of other segment items, as defined in ASU 2023-07, by reportable segment;

and (iii) reporting the disclosures about each reportable segment's profit or loss and assets on an annual and interim basis.

The provisions of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods

within fiscal years beginning after December 15, 2024;

early adoption is permitted.

We expect ASU 2023-07 to require additional disclosures in the notes to our consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09 ("ASU 2023-09"), Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires, among other things, the following for public business entities:

(i) enhanced disclosures of specific categories of reconciling items included in the rate reconciliation, as well as additional information for any of these items meeting certain qualitative and quantitative thresholds;

(ii) disclosure of the nature, effect and underlying causes of each individual reconciling item disclosed in the rate reconciliation and the judgment used in categorizing them if not otherwise evident;

and (iii) enhanced disclosures for income taxes paid, which includes federal, state, and foreign taxes, as well as for individual jurisdictions over a certain quantitative threshold.

The amendments in ASU 2023-09 eliminate the requirement to disclose the nature and estimate of the range of the reasonably possible change in unrecognized tax benefits for the 12 months after the balance sheet date.

The provisions of ASU 2023-09 are effective for annual periods beginning after December 15, 2024;

early adoption is permitted.

We expect ASU 2023-09 to require additional disclosures in the notes to our consolidated financial statements.

Revenues from Contracts with Customers

7 unchanged sentences

(1) Primarily related to Hilton Honors, including co-branded credit card arrangements.

(2) Revenue recognized during the year ended December 31, 2022 included a net increase in revenue of $ 11 million for Hilton Honors points redeemed in prior periods, as a result of a change to the estimated breakage of Hilton Honors points for which point expirations were temporarily suspended through December 31, 2022.

(3) Represents changes in estimated transaction prices for our performance obligations related to the issuance of Hilton Honors points, which had no effect on revenues during the period, and was primarily due to the expiration of Hilton Honors points on December 31, 2022 following the program's temporary suspension of such points.

(2) Represents changes in estimated transaction prices for our performance obligations related to the issuance of Hilton Honors points, which had no effect on revenues.

Performance Obligations

As of December 31, 2022, we had deferred revenues for unsatisfied performance obligations consisting of:

As of December 31, 2023, deferred revenues for unsatisfied performance obligations consisted of:

(i) $ 769 million related to Hilton Honors that will be recognized as revenue over approximately the next two years ;

(ii) $ 674 million related to advance consideration received from hotel owners for application, initiation and other fees and certain indirect reimbursements;

(ii) $ 733 million related to advance consideration received from hotel owners for application, initiation and other fees and system implementation fees;

and (iii) $ 19 million related to other obligations.

7 unchanged sentences

Cash and cash equivalents $ 46 $ 29

Accounts receivable, net

Property and equipment, net 37 45

3 unchanged sentences

Long-term debt (1)(2)

Other long-term liabilities 14 16

(1) Includes finance lease liabilities of $ 86 million and $ 115 million as of December 31, 2023 and 2022, respectively.

During the year ended December 31, 2022, our consolidated VIEs borrowed an aggregate of 2.7 billion Japanese yen ("JPY"), of which 0.3 billion JPY was repaid during the year ended December 31, 2022, resulting in 2.4 billion JPY (equivalent to $ 18 million) of those borrowings remaining outstanding as of December 31, 2022.

As of December 31, 2022, these remaining borrowings were included in long-term debt in our consolidated balance sheet and had a weighted average interest rate of 1.04 percent and maturity dates ranging from August 2025 to February 2029.

As of December 31, 2021, one of our consolidated VIEs had drawn 500 million JPY (equivalent to $ 4 million) under a revolving credit facility, which was fully repaid by July 2022;

these borrowings were included in long-term debt in our consolidated balance sheet as of December 31, 2021.

Goodwill and Intangible Assets

During the year ended December 31, 2020, we fully impaired the goodwill attributable to our ownership reporting unit, recognizing impairment losses of $ 104 million in our consolidated statement of operations;

(2) Includes current maturities of $ 19 million and $ 22 million as of December 31, 2023 and 2022, respectively.

During the year ended December 31, 2023, our consolidated VIEs made payments on borrowings that were outstanding as of December 31, 2022, including partial prepayments of JPY 1.5 billion (approximately $ 10 million) on borrowings that have a maturity date in 2026 and full repayments of JPY 2.0 billion (approximately $ 14 million) on borrowings that had original maturity dates in 2028 and 2029.

Loss on Investments in Unconsolidated Affiliate

We provide equity and debt financing to certain unconsolidated affiliates with an objective of supporting the growth of our network.

The assets relating to these investments are classified as other current assets or other non-current assets in our consolidated balance sheet based on the expected maturity date of the respective investment.

In March 2023, as a result of the rise in market-based interest rates, one of our third-party unconsolidated affiliates (the "Fund"), which has underlying investments in certain hotels that we currently manage or franchise, failed to comply with certain requirements of its debt agreements.

As a result, we determined that:

(i) our investment in the Fund was fully impaired and (ii) short-term subordinated financing receivables due to us from the Fund were uncollectible.

As such, we recognized an other-than-temporary impairment loss on our investment of $ 44 million and credit losses of $ 48 million to fully reserve the financing receivables, such that their net carrying values were zero.

These losses were recognized in loss on investments in unconsolidated affiliate in our consolidated statement of operations for the year ended December 31, 2023.

"Fair Value Measurements" for additional information.

As such, as of December 31, 2022 and 2021, our goodwill balance was only attributable to our management and franchise reporting unit, which had no accumulated impairment losses as of either date.

The changes in our goodwill balances during the years ended December 31, 2022 and 2021 were due to foreign currency translation.

Intangible Assets

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Management and franchise contracts:

International management contracts recorded at Merger (1)

$ 293 $ ( 278 ) $ 15

Contract acquisition costs

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Capitalized software costs $ 712 $ ( 576 ) $ 136

124 ( 80 ) 44

Hilton Honors (1)

Leases (1)(2)

126 ( 89 ) 37

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(1) Represents intangible assets that were initially recorded at fair value at the time of the Merger.

During the year ended December 31, 2020 we recognized $ 15 million and $ 46 million of impairment losses related to contract acquisition costs and our leases intangible assets, respectively, in our consolidated statement of operations;

see Note 10 :

(2) During the year ended December 31, 2023 we recognized $ 4 million of impairment losses related to our leases intangible assets in our consolidated statement of operations;

"Fair Value Measurements" for additional information.

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was $ 199 million and $ 169 million, respectively, most significantly in the United Kingdom ("U.K.") and Japan.

During the year ended December 31, 2020 we recognized $ 28 million of impairment losses in our consolidated statement of operations related to property and equipment, net, of which $ 4 million related to finance lease ROU assets;

During the year ended December 31, 2023, we recognized $ 1 million of impairment losses in our consolidated statement of operations related to property and equipment, net;

"Fair Value Measurements" for additional information.

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(in millions)

Senior secured term loan facility due 2026

Senior secured term loan facility with a rate of 7.21 %, due 2028

$ 2,619 $ 2,619

Senior secured term loan facility with a rate of 7.46 %, due 2030

Senior notes with a rate of 5.375 %, due 2025 (1)

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Other debt of consolidated VIEs with a weighted average rate of 1.01 %, due 2024 to 2026 (2)

unamortized deferred financing costs and discount ( 73 ) ( 87 )

unamortized deferred financing costs and discounts

( 71 ) ( 73 )

current maturities of long-term debt (3)

1 unchanged sentence

$ 9,157 $ 8,708

(1) These notes are collectively referred to as the Senior Notes and are jointly and severally guaranteed on a senior unsecured basis by the Parent and substantially all of its direct and indirect wholly owned domestic restricted subsidiaries, except for Hilton Domestic Operating Company Inc.

("HOC"), an indirect wholly owned subsidiary of the Parent and the issuer of all of the series of Senior Notes.

1 unchanged sentence

Refer to Note 4:

"Consolidated Variable Interest Entities" for additional information.

(3) Represents current maturities of finance lease liabilities and borrowings of one consolidated VIE.

"Consolidated Variable Interest Entities" for additional information on debt payments that were made by our consolidated VIEs during the year ended December 31, 2023.

(3) Represents current maturities of finance lease liabilities and borrowings of consolidated VIEs.

Senior Secured Credit Facilities

Our senior secured credit facilities consist of a senior secured revolving credit facility (the "Revolving Credit Facility") and a senior secured term loan facility.

The obligations of our senior secured credit facilities are unconditionally and irrevocably guaranteed by the Parent and substantially all of its direct and indirect wholly owned domestic restricted subsidiaries, except for HOC, the named borrower on the senior secured credit facilities.

In December 2022, we amended the credit agreement that governs our senior secured credit facilities to reference the Secured Overnight Financing Rate as the primary benchmark rate for our variable-rate indebtedness under this agreement in lieu of the London Interbank Offered Rate.

We applied the practical expedient as prescribed in ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting that allowed us to consider this amendment as though the modification was not substantial.

As of December 31, 2022, our Revolving Credit Facility had a total borrowing capacity of $ 1.75 billion and, of the $ 250 million available in the form of letters of credit, $ 60 million letters of credit were outstanding, resulting in an available borrowing capacity of $ 1,690 million.

No borrowings were outstanding under the Revolving Credit Facility as of December 31, 2022 and 2021.

In January 2023, we amended the credit agreement governing our Revolving Credit Facility to increase the borrowing capacity to $ 2.0 billion, $ 250 million of which is available in the form of letters of credit, and, based on the terms of the agreement, we expect the extended maturity date to be January 2028.

In connection with this amendment, we incurred approximately $ 9 million of debt issuance costs.

As of February 3, 2023, after considering $ 60 million letters of credit outstanding and no borrowings outstanding, we had an available borrowing capacity on the Revolving Credit Facility of $ 1,940 million .

During 2021 and 2020, we completed financing transactions, whereby we issued senior unsecured notes and used the net proceeds from those issuances, together with available cash, to redeem outstanding senior unsecured notes.

In connection with

the redemptions, we paid redemption premiums of $ 55 million and $ 31 million during the years ended December 31, 2021 and 2020, respectively, and accelerated the recognition of the unamortized deferred financing costs on the redeemed notes of $ 14 million and $ 17 million, respectively.

These amounts were included in loss on debt extinguishments in our consolidated statements of operations for the years ended December 31, 2021 and 2020.

During 2020, we also issued in aggregate $ 1.0 billion of senior unsecured notes.

Our senior secured credit facilities consist of a senior secured revolving credit facility (the "Revolving Credit Facility") and senior secured term loan facilities (the "Term Loans").

The obligations under our senior secured credit facilities are unconditionally and irrevocably guaranteed by the Parent and substantially all of its direct and indirect wholly owned domestic restricted subsidiaries, other than HOC, the named borrower of the senior secured credit facilities.

In November 2023, we amended the credit agreement governing our Term Loans pursuant to which $ 1.0 billion of outstanding Term Loans were converted into a new tranche of Term Loans due June 2028 with an interest rate of SOFR plus 185 basis points and $ 1.6 billion of outstanding Term Loans were converted into a new tranche, which was also increased by $ 500 million of aggregate principal amount, due November 2030 with an interest rate of SOFR plus 210 basis points.

In connection with the amendment of the Term Loans, we incurred $ 21 million of original issue discounts and fees, of which $ 11 million was recognized as a reduction to the outstanding debt balance in our consolidated balance sheet and will be amortized to interest expense through the respective maturity dates of the Term Loans.

The remaining $ 10 million was recognized in other non-operating income, net in our consolidated statement of operations for the year ended December 31, 2023.

In January 2023, we amended the credit agreement governing our Revolving Credit Facility to increase the borrowing capacity from $ 1.75 billion to $ 2.0 billion, $ 250 million of which is available in the form of letters of credit, and extended the maturity date to January 2028.

In connection with this amendment, we incurred approximately $ 9 million of debt issuance costs, which were recognized in other non-current assets in our consolidated balance sheet and will be amortized to interest expense through the maturity date of the Revolving Credit Facility.

No debt amounts were outstanding under the Revolving Credit Facility as of December 31, 2023, which had an available borrowing capacity of $ 1,913 million after considering $ 87 million of outstanding letters of credit.

During the year ended December 31, 2021, we completed financing transactions, whereby we issued senior unsecured notes and used the net proceeds from the issuance, together with available cash, to redeem outstanding senior unsecured notes.

In connection with the redemption, we paid a redemption premium of $ 55 million and accelerated the recognition of the unamortized deferred financing costs on the redeemed notes of $ 14 million.

These amounts were included in loss on debt extinguishment in our consolidated statement of operations for the year ended December 31, 2021.

Debt Maturities

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(in millions)

Cash equivalents $ 338 $ — $ 338 $ —

Interest rate swap

$ 75 $ — $ 75 $ —

Long-term debt (2)

5 unchanged sentences

(in millions)

Cash equivalents $ 622 $ — $ 622 $ —

Interest rate swaps

$ 108 $ — $ 108 $ —

Long-term debt (2)

8,619 5,292 — 2,616

Interest rate swaps (2)

(1) The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values.

(2) Interest rate swaps are included in other non-current assets or other long-term liabilities in our consolidated balance sheet depending on their value to us as of the balance sheet date.

During the year ended December 31, 2022, one of the interest rate swaps that was outstanding as of December 31, 2021 matured.

The remaining interest rate swap outstanding as of December 31, 2022 will mature in March 2026.

(3) The carrying value and fair values exclude the deduction for unamortized deferred financing costs and any applicable discounts, as well as all finance lease liabilities and other debt of consolidated VIEs;

(1) The fair values of cash equivalents and restricted cash equivalents approximate their carrying values due to their short-term maturities.

The fair values of all other financial instruments not included in these tables are estimated to be equal to their carrying values.

(2) The carrying values and fair values exclude the deduction for unamortized deferred financing costs and any applicable discounts, as well as all finance lease liabilities and other debt of consolidated VIEs;

refer to Note 9:

"Debt" for additional information.

We measure our interest rate swaps at fair value, which was determined using a discounted cash flow analysis that reflects the contractual terms of the interest rate swaps, including the period to maturity, and uses observable market-based inputs of similar instruments, including interest rate curves, as applicable.

Our nonfinancial assets that were measured at fair value on a non-recurring basis during the year ended December 31, 2020, and for which we recorded impairment losses as a result of the COVID-19 pandemic, were primarily related to certain hotel properties under operating and finance leases and goodwill, all of which were part of our ownership reporting unit.

"Goodwill and Intangible Assets," Note 6:

"Property and Equipment" and Note 11:

"Leases" for additional information on these impairment losses.

For the quantitative analysis of goodwill that was performed during the year ended December 31, 2020, we estimated the fair value of the ownership reporting unit using discounted cash flow analyses and significant level 3 unobservable inputs, which included an estimate of the impact of the COVID-19 pandemic on the reporting unit's expected future cash flows, a stabilized growth rate after recovery and the present value of the reporting unit's terminal value.

The expected future cash flows were discounted using a discount rate that reflected the market rate of return.

As a result of the non-recurring fair value measurement, we fully impaired the goodwill attributable to our ownership reporting unit, recognizing impairment losses of $ 104 million in our consolidated statement of operations for the year ended December 31, 2020.

During the year ended December 31, 2020, we estimated the fair value of assets related to certain hotel properties under operating and finance leases, including related lease intangible assets, operating and finance lease ROU assets and property and equipment, using discounted cash flow analyses and significant level 3 unobservable inputs, which included an estimate of the impact of the COVID-19 pandemic on each leased property based on the expected recovery term, stabilized growth rates after recovery and discount rates reflecting the risk profile of the underlying cash flows and the individual markets where the assets are located.

As a result of these non-recurring fair value measurements, we recognized impairment losses on these assets of $ 139 million in our consolidated statement of operations during the year ended December 31, 2020.

We lease hotel properties, land, corporate office space and equipment used at hotels and corporate offices, with our most significant lease liabilities related to hotel properties.

We measured our interest rate swaps at fair value, which was determined using a discounted cash flow analysis that reflects the contractual terms of the interest rate swaps, including the period to maturity, and uses observable market-based inputs of similar instruments, including interest rate curves, as applicable.

During the year ended December 31, 2023, we measured a financial asset at fair value on a non-recurring basis and recognized an other-than-temporary impairment loss of $ 44 million in "Loss on investments in unconsolidated affiliate" in our consolidated statement of operations.

In March 2023, the financial asset, an equity method investment in the Fund, which derives its market value from the underlying hotel assets it owns, failed to comply with its debt agreements, as discussed in Note 5:

"Loss on Investments in Unconsolidated Affiliate." Given the lack of an active market or observable inputs for the fair value of the Fund, we determined that at March 31, 2023 our investment had a fair value of zero using Level 3 valuation inputs.

During the year ended December 31, 2023, the forecasted operating results of certain leased hotels caused us to evaluate the carrying value of the affected properties for impairment.

We estimated the fair value of the related assets using discounted cash flow analyses and Level 3 valuation inputs including growth rates and discount rates that reflected the risk profile of the underlying cash flows and the individual markets where the assets are located.

Estimations of the stabilized growth rates approximated 1.8 percent and of the discount rates ranged from 8.0 percent to 11.3 percent, with the weighted average, based on relative impairment losses, being at the lower end of the range.

As a result of these non-recurring fair value measurements, we recognized impairment losses on these assets, all of which are in our ownership segment, of $ 38 million during the year ended December 31, 2023.

The fair values of these assets as of December 31, 2023, the date of measurement, were as follows:

(in millions)

Other intangible assets, net $ 3

Operating lease right-of-use assets 69

Property and equipment, net 1

We lease hotel properties, land, corporate office space and equipment used at hotels and corporate offices, with our most significant lease liabilities relating to hotel properties.

As of December 31, 2023, we leased 41 hotels under operating leases and five hotels under finance leases, two of which were the liabilities of consolidated VIEs, which are non-recourse to us.

Our hotel leases expire at various dates, with varying renewal and termination options.

During the year ended December 31, 2020, we recognized $ 65 million and $ 4 million of impairment losses related to certain operating lease and finance lease ROU assets, respectively;

During the year ended December 31, 2023, we recognized $ 33 million of impairment losses in our consolidated statement of operations related to certain operating lease ROU assets;

"Fair Value Measurements" for additional information.

15 unchanged sentences

Finance leases 6.01 % 5.90 %

(1) Operating lease ROU assets attributed to U.S.

operations was $ 78 million and $ 37 million as of December 31, 2022 and 2021, respectively, and to operations outside the U.S.

was $ 584 million and $ 657 million, respectively, most significantly in the U.K.

(1) Includes $ 73 million and $ 78 million attributable to U.S.

operations as of December 31, 2023 and 2022, respectively, and $ 545 million and $ 584 million to operations outside the U.S., respectively, most significantly in the U.K.

and Germany for both years.

The components of lease expense were as follows:

26 unchanged sentences

Total lease liabilities $ 924 $ 139

Income Tax Provision (Benefit)

The domestic and foreign components of income (loss) before income taxes were as follows:

Income Tax Provision

The domestic and foreign components of income before income taxes were as follows:

Year Ended December 31,

1 unchanged sentence

(in millions)

income (loss) before income taxes $ 1,320 $ 631 $ ( 267 )

income before income taxes

$ 1,301 $ 1,320 $ 631

Foreign income (loss) before income taxes 391 414 ( 71 )

Income (loss) before income taxes $ 1,734 $ 560 $ ( 924 )

The components of our provision (benefit) for income taxes were as follows:

Income before income taxes

$ 1,692 $ 1,734 $ 560

The components of our provision for income taxes were as follows:

Year Ended December 31,

9 unchanged sentences

Total deferred ( 264 ) 34 ( 4 )

Total provision (benefit) for income taxes $ 477 $ 153 $ ( 204 )

Reconciliations of the provision (benefit) for income taxes at the U.S.

statutory rate to the provision (benefit) for income taxes were as follows:

Total provision for income taxes

$ 541 $ 477 $ 153

Reconciliations of the provision for income taxes at the U.S.

statutory rate to the provision for income taxes were as follows:

Year Ended December 31,

2 unchanged sentences

Statutory U.S.

federal income tax provision (benefit) $ 364 $ 118 $ ( 194 )

federal income tax provision

$ 355 $ 364 $ 118

State income taxes, net of U.S.

1 unchanged sentence

Impact of foreign operations 33 35 8

Goodwill impairment losses — — 22

Tax rate differential on U.S.

federal net operating loss carryback — — ( 14 )

Changes in deferred tax asset valuation allowances 40 ( 5 ) 34

Income tax rate changes

( 9 ) — ( 45 )

Provision for uncertain tax positions 69 14 15

Other, net 8 4 1

Provision (benefit) for income taxes $ 477 $ 153 $ ( 204 )

(1) Income tax rate changes resulted in the remeasurement of our deferred tax assets and liabilities and other tax liabilities to the new tax rates, resulting in a $ 49 million deferred tax benefit and a $ 4 million current tax expense, respectively.

Provision for income taxes

$ 541 $ 477 $ 153

Deferred Income Taxes

15 unchanged sentences

Brands ( 1,143 ) ( 1,151 )

Finite-lived intangible assets ( 40 ) ( 61 )

Investment in foreign subsidiaries ( 22 ) ( 24 )

Operating and finance lease ROU assets ( 195 ) ( 206 )

5 unchanged sentences

Approximately $ 26 million of our deferred tax assets as of December 31, 2023 related to loss carryforwards that will expire between 2024 and 2043 with less than $ 1 million of that amount expiring in 2024.

Approximately $ 600 million of our deferred tax assets as of December 31, 2022 resulted from loss carryforwards that are not subject to expiration.

Approximately $ 578 million of our deferred tax assets as of December 31, 2023 related to loss carryforwards that are not subject to expiration.

We believe that it is more likely than not that the benefit from certain U.S.

2 unchanged sentences

As of December 31, 2023, we also had deferred tax assets for U.S.

tax credit carryforwards of $ 49 million that will expire between 2029 and 2032, for which we have provided valuation allowances.

tax credit carryforwards of $ 63 million that will expire between 2029 and 2033, for which we have provided full valuation allowances.

Tax Uncertainties

1 unchanged sentence

We are under regular and recurring audit by the Internal Revenue Service ("IRS") and other taxing authorities on open tax positions.

The timing of the resolution of tax audits is highly uncertain, as are the amounts, if any, that may ultimately be paid upon such resolution.

The timing of the resolution of tax audits is highly uncertain, as are the amounts, if any, that may ultimately be paid upon such

Changes may result from the conclusion of ongoing audits, appeals or litigation in federal, state, local and foreign tax jurisdictions or from the resolution of various proceedings between the U.S.

14 unchanged sentences

Balance at end of year $ 555 $ 337 $ 375

As of December 31, 2021, we had entered into a tentative agreement with the IRS, subject to approval by the Joint Committee on Taxation, to settle our federal examination through the 2010 tax year, and the settlement was approved by the Joint Committee on Taxation during the year ended December 31, 2022.

As a result, the extended federal statute of limitations for tax years from 2005 through 2010 is set to expire in 2023.

The assets and liabilities relating to the settlement were previously recognized as of December 31, 2021, and no adjustments were necessary as a result of the settlement approval.

We recognize interest and penalties accrued related to uncertain tax positions in income tax benefit (expense) in our consolidated statements of operations.

During the years ended December 31, 2022, 2021 and 2020, we recognized income tax expense related to interest and penalties of $ 17 million, $ 16 million and $ 13 million, respectively, in our consolidated statements of operations.

In October 2023, the U.S.

Tax Court issued an opinion deciding that a third-party taxpayer was not entitled to apply the method of accounting provided for in Treasury Regulation Section 1.451-4 to its hotel loyalty program.

We currently apply this method of accounting to our guest loyalty program for federal income tax purposes.

Based on this decision, we reassessed our uncertain tax positions and increased our total uncertain tax position reserves related to our guest loyalty program to $ 263 million as of December 31, 2023.

In June 2023, we received a draft of proposed adjustments from the IRS regarding our 2016 transfer of certain IP to a foreign jurisdiction that would increase taxable income for the tax years under audit from 2016 through 2018.

If the IRS's proposed adjustments are upheld, future periods beyond the years currently under audit would be similarly impacted.

We disagree with the proposed adjustments, intend to vigorously contest them and are currently evaluating action, which could include litigation to dispute the adjustments.

We previously recorded reserves of $ 73 million related to this matter.

We evaluated the amount of benefit more-likely-than-not to be realized related to this issue based on this draft notice, and we have determined that our existing reserves for unrecognized tax benefits accurately reflect the estimated benefit that we do not expect to realize related to this issue.

We recognize interest and penalties accrued related to uncertain tax positions in income tax benefit (expense) in our consolidated statement of operations.

During the years ended December 31, 2023, 2022 and 2021, we recognized income tax expense related to interest and penalties of $ 72 million, $ 17 million and $ 16 million, respectively.

As of December 31, 2023 and 2022, we had accrued approximately $ 150 million and $ 79 million, respectively, for interest and penalties related to our unrecognized tax benefits in our consolidated balance sheets.

Included in the balances of unrecognized tax benefits as of December 31, 2023 and 2022 were $ 314 million and $ 337 million, respectively, associated with positions that, if favorably resolved, would provide a benefit to our effective income tax rate.

As a result of the expected resolution of examination issues with foreign tax authorities, we believe it is reasonably possible that during the next 12 months, the amount of unrecognized tax benefits will decrease by up to $ 32 million.

We believe resolutions of examinations with tax authorities are reasonably possible within the next 12 months.

We are unable to estimate the amount of unrecognized tax benefits that will increase or decrease during the next 12 months, as this estimate could change depending on the nature and timing of settlements.

Employee Benefit Plans

9 unchanged sentences

Plan"), which was frozen to further service accruals in 2013 and (ii) a number of smaller plans that cover employees in various countries around the world (the "International Plans").

We do not consider the International Plans to be material to our consolidated financial statements.

The annual measurement date for all of our plans is December 31.

We are required to recognize the funded status of our pension plans, which is the difference between the fair value of plan assets and the projected benefit obligations, in our

consolidated balance sheets and make corresponding adjustment s for changes in the difference between the fair value of plan assets and the projected benefit obligations through accumulated other comprehensive income (loss), net of taxes.

The following table presents the projected benefit obligation, fair value of plan assets, funded status and accumulated benefit obligation for the Domestic Plan, the U.K.

Plan and the International Plans:

We are required to recognize the funded status of our pension plans, which is the difference between the fair value of plan assets and the projected benefit obligations, in our consolidated balance sheet and make corresponding adjustment s for changes in the difference between the fair value of plan assets and the projected benefit obligations through accumulated other comprehensive income (loss), net of taxes.

The following table presents the projected benefit obligation, fair value of plan assets, funded status and accumulated benefit obligation for the Domestic Plan and the U.K.

Domestic Plan U.K.

Plan International Plans

2023 2022 2023 2022

4 unchanged sentences

Interest cost 15 8 14 8

Actuarial gain (1)

Actuarial loss (gain) (1)

5 ( 71 ) 4 ( 152 )

Settlements — — — — — ( 1 )

Effect of foreign currency exchange rates — — 16 ( 49 )

5 unchanged sentences

Employer contributions 5 — 9 21

Settlements — — — — — ( 1 )

Effect of foreign currency exchange rates — — 15 ( 50 )

4 unchanged sentences

Accumulated benefit obligation $ 281 $ 284 $ 309 $ 286

(1) The actuarial gains during the year ended December 31, 2022 were primarily related to increases in the discount rate assumptions.

Amounts recognized in our consolidated balance sheets consisted of the following:

Domestic Plan U.K.

Plan International Plans

2022 2021 2022 2021 2022 2021

(in millions)

Other non-current assets $ — $ 4 $ — $ 15 $ 14 $ 15

Other liabilities ( 13 ) — ( 9 ) — ( 18 ) ( 25 )

Net amount recognized $ ( 13 ) $ 4 $ ( 9 ) $ 15 $ ( 4 ) $ ( 10 )

(1) The actuarial gain during the year ended December 31, 2022 was primarily related to increases in the discount rate assumptions.

(2) The underfunded amounts are recognized in other long-term liabilities in our consolidated balance sheets.

Amounts recognized in accumulated other comprehensive loss consisted of the following:

Domestic Plan U.K.

Plan International Plans

2023 2022 2021 2023 2022 2021

6 unchanged sentences

Domestic Plan U.K.

Plan International Plans

2023 2022 2021 2023 2022 2021

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Amortization of prior service cost (2)

4 4 4 — — — — — —

Amortization of net loss (2)

3 5 4 3 5 4 1 1 1

Net periodic pension cost (credit)

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(1) Recognized in owned and leased hotels expenses and general and administrative expenses, as applicable, in our consolidated statements of operations.

(2) Recognized in other non-operating income (loss), net in our consolidated statements of operations.

(2) Recognized in other non-operating income, net in our consolidated statements of operations.

The weighted average assumptions used to determine benefit obligations were as follows:

Domestic Plan U.K.

Plan International Plans

2023 2022 2023 2022

4 unchanged sentences

Domestic Plan U.K.

Plan International Plans

2023 2022 2021 2023 2022 2021

6 unchanged sentences

Asset allocations are reviewed periodically by the investment managers.

Expected long-term returns on plan assets are determined using historical performance for debt and equity securities held by our plans, actual performance of plan assets and current and expected market conditions.

Expected long-term returns on plan assets are determined using historical performance for return-seeking assets and liability-driven investments held by our plans, actual performance of plan assets and current and expected market conditions.

Expected returns are formulated based on the target asset allocation.

As of December 31, 2022 and 2021, the target asset allocation, as a percentage of total plan assets, for the Domestic Plan was 70 percent and 75 percent, respectively, in funds that invest in equity securities and 30 percent and 25 percent, respectively, in funds that invest in debt securities.

As of December 31, 2022 and 2021, the target asset allocation, as a percentage of total plan assets, for the U.K.

Plan and International Plans was 75 percent in funds that invest in equity and debt securities and 25 percent in bond funds.

As of December 31, 2023 the target asset allocations for the Domestic Plan and U.K.

Plan were 70 percent and 75 percent, respectively, in return-seeking assets, and 30 percent and 25 percent, respectively, in liability-driven investments and cash.

The following tables present the fair value hierarchy of total plan assets measured at fair value by asset category:

December 31, 2022

Domestic Plan U.K.

Plan International Plans

(in millions)

$ — $ 13 $ 12

Net asset value (1)

Cash equivalents

Common collective trusts

Alternative investments

Domestic Plan

2023 2022 2023 2022

December 31, 2021

Domestic Plan U.K.

Plan International Plans

(in millions)

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Domestic Plan U.K.

Plan International Plans

Year (in millions)

1 unchanged sentence

2029-2033 107 81

$ 245 $ 144 $ 37

In 2007, the Domestic Plan and plans maintained for certain domestic hotels currently or formerly managed by us were merged into a multiple employer plan.

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We recognized share-based compensation expense of $ 169 million, $ 162 million and $ 193 million during the years ended December 31, 2023, 2022 and 2021, respective ly, which included amounts reimbursed by hotel owners, and the related tax benefit recognized was $ 48 million , $ 48 million and $ 54 million, respectively .

Share-based compensation expense recognized during the year ended December 31, 2020 included the reversal of expense recognized in prior years as a result of the determination that the performance conditions of our then-outstanding performance shares were no longer probable of achievement.

Further, in December 2020, we modified our then-outstanding performance shares in response to the COVID-19 pandemic to reward for results achieved prior to the pandemic and incentivize our recovery efforts, with a portion of the awards modified to vest based on continued service and the remaining portion of the awards to vest based on new performance measures.

As a result of this modification, our share-based compensation expense for the years ended December 31, 2022, 2021 and 2020 includes incremental share-based compensation of $ 25 million, $ 70 million and $ 44 million, respectively.

In December 2020, we modified our then-outstanding performance shares in response to the COVID-19 pandemic to reward for results achieved prior to the pandemic and incentivize our recovery efforts, with a portion of the awards modified to vest based on continued service and the remaining portion of the awards to vest based on new performance measures.

As a result of this modification, our share-based compensation expense for the years ended December 31, 2022 and 2021 includes incremental share-based compensation expense of $ 25 million and $ 70 million, respectively.

As of December 31, 2023, unrecognized compensation costs for unvested awards under the 2017 Plan were approximately $ 123 million, which are expected to be recognized over a weighted average period of 1.7 years on a straight-line basis.

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Weighted average grant date fair value per share $ 52.27 $ 51.15 $ 41.15

The weighted average grant date fair value per share of the option grants for each year was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:

The weighted average grant date fair value per share of the option grants for each year was determined using the Black-Scholes-Merton option-pricing model with the following weighted-average assumptions:

Year Ended December 31,

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(1) Estimated using a blended approach of historical and implied volatility.

Historical volatility is based on the historical movement of Hilton's stock price for a look back period that corresponds to the expected term of the option.

(2) For options granted during the year ended December 31, 2020, dividend yield was estimated based on our historical quarterly dividends.

However, after the 2020 options were granted, we suspended the declaration and payment of dividends, and, at the time of grant for the 2021 options, we could not estimate when the payment of dividends would resume.

For the options granted during the year ended December 31, 2022, dividend yield was estimated based on the expectation, at the date of grant, of the resumption of a quarterly $ 0.15 per share dividend, which occurred in the second quarter of 2022.

For option grants made during the years ended December 31, 2022 and 2020, the three month average stock price at the date of grant was also utilized in the dividend yield calculation.

Historical volatility is based on the historical movement of Hilton's stock price for a period that corresponds to the expected terms of the options.

(2) At the time of grant for the 2021 options, the declaration and payment of dividends was suspended and we could not estimate when the payment of dividends would resume.

For the options granted during the years ended December 31, 2023 and 2022, dividend yield was estimated based on the expected quarterly dividend and the three month average stock price at the dates of grant.

(3) Based on the yields of U.S.

Department of Treasury instruments with similar expected terms at the date of grant.

(4) Estimated using the midpoint of the vesting period and the contractual term of the options.

Department of Treasury instruments with similar expected terms of the options at the dates of grant.

(4) Estimated using the midpoint of the vesting periods and the contractual terms of the options as we do not have sufficient historical share option exercise data to estimate the term of our option grants.

The following table summarizes the activity of our options during the year ended December 31, 2023:

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Exercised ( 252 ) 80.34

Forfeited or expired

Outstanding as of December 31, 2023 (1)

3 unchanged sentences

Performance Shares

As of December 31, 2022, we determined that all of the performance measures for the outstanding performance shares were probable of achievement, with the average of the applicable achievement factors estimated to be between the target and maximum achievement percentages.

As of December 31, 2023, we determined that all of the performance measures for the outstanding performance shares were probable of achievement, with the average of the applicable achievement factors estimated to be at the maximum achievement percentage for the 2021 performance shares and between the target and maximum achievement percentages for the 2022 and 2023 performance shares.

The following table provides information about our performance share grants for the last three years:

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Aggregate intrinsic value of shares vested (in millions) $ 42 $ 42 $ 36

(1) In December 2020, 288,000 performance shares from the 2020 grant were modified with a modification date fair value per share of $ 102.95 .

The following table summarizes the activity of our performance shares in aggregate for all of our performance measures during the year ended December 31, 2023, with the performance shares reflected at the target achievement percentage until completion of the performance period:

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(1) Reflects the number of shares achieved above target, based on actual performance as determined at the completion of the respective three-year performance period.

Earnings (Loss) Per Share

The following table presents the calculation of basic and diluted earnings (loss) per share ("EPS"):

Earnings Per Share

The following table presents the calculation of basic and diluted earnings per share ("EPS"):

Year Ended December 31,

1 unchanged sentence

(in millions, except per share amounts)

Net income (loss) attributable to Hilton stockholders

Net income attributable to Hilton stockholders

$ 1,141 $ 1,255 $ 410

1 unchanged sentence

Basic EPS $ 4.36 $ 4.56 $ 1.47

Net income (loss) attributable to Hilton stockholders

Net income attributable to Hilton stockholders

$ 1,141 $ 1,255 $ 410

2 unchanged sentences

$ 4.33 $ 4.53 $ 1.46

(1) Certain shares related to share-based compensation were excluded from the calculation of diluted EPS because their effect would have been anti-dilutive under the treasury stock method, including less than 1 million shares for the years ended December 31, 2022 and 2021 and 4 million shares for the year ended December 31, 2020.

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of taxes, were as follows:

The changes in the components of accumulated other comprehensive loss, net of taxes, were as follows:

Currency Translation Adjustment (1)

6 unchanged sentences

Amounts reclassified from accumulated other comprehensive loss

Net other comprehensive income (loss)

Net other comprehensive income (loss) for the period

( 29 ) 79 31 81

3 unchanged sentences

Amounts reclassified from accumulated other comprehensive loss

Net other comprehensive income (loss)

Net other comprehensive income (loss) for the period

( 8 ) ( 49 ) 130 73

1 unchanged sentence

Other comprehensive income (loss) before reclassifications

( 9 ) ( 57 ) 114 48

Amounts reclassified from accumulated other comprehensive loss

Net other comprehensive income (loss)

— 8 ( 40 ) ( 32 )

Net other comprehensive income (loss) for the period

9 ( 3 ) ( 31 ) ( 25 )

Balance as of December 31, 2023 $ ( 539 ) $ ( 262 ) $ 70 $ ( 731 )

(1) Includes net investment hedge gains and intra-entity foreign currency transactions that are of a long-term investment nature.

Amounts reclassified relate to the liquidation of investments in foreign entities which were recognized in our consolidated statements of operations in gain (loss) on foreign currency transactions during the years ended December 31, 2022 and 2020 and in loss on sales of assets, net during the year ended December 31, 2021.

(2) Amounts reclassified relate to the amortization of prior service cost and amortization of net loss and were recognized in other non-operating income (loss), net in our consolidated statements of operations.

Amounts reclassified relate to the liquidation of investments in foreign entities which were recognized in our consolidated statements of operations in gain on foreign currency transactions during the year ended December 31, 2022 and in loss on sales of assets, net during the year ended December 31, 2021.

(2) Amounts reclassified relate to the amortization of prior service cost and amortization of net loss and were recognized in other non-operating income, net in our consolidated statements of operations.

(3) Amounts reclassified were the result of hedging instruments, including:

(a) interest rate swaps, inclusive of interest rate swaps that were dedesignated, with related amounts recognized in interest expense in our consolidated statements of operations and (b) forward contracts that hedge our foreign currency denominated fees, with related amounts recognized in various revenue line items, as applicable, in our consolidated statements of operations.

(a) interest rate swaps, inclusive of interest rate swaps that were dedesignated in prior periods, with related amounts recognized in interest expense in our consolidated statements of operations and (b) forward contracts that hedge our foreign currency denominated fees, with related amounts recognized in various revenue line items, as applicable, in our consolidated statements of operations.

Business Segments

We are a hospitality company with operations organized in two distinct operating segments:

(i) management and franchise and (ii) ownership, each of which is reported as a segment based on (a) delivering a similar set of products and services;

and (b) being managed separately given its 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 IP 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.

(i) management and franchise and (ii) ownership, each of which is reported as a segment based on (a) delivering a similar set of products and services and (b) being managed separately given its 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 IP and where we provide other contracted services, but the day-to-day services of the hotels are operated or managed by someone other than us.

Revenues from this segment include:

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

(ii) licensing fees from our strategic partners, including co-branded credit card providers, and HGV for the right to use our IP;

(ii) licensing fees from our strategic partners, including co-branded credit card providers, and HGV;

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

As of December 31, 2022, this segment included 778 managed hotels and 6,255 franchised hotels consisting of 1,096,115 total rooms.

As of December 31, 2022, our ownership segment included 52 properties totaling 17,612 rooms.

The segment comprised 45 hotels that we leased, two hotels that were each leased by a consolidated VIE and five hotels owned or leased by unconsolidated affiliates.

In December 2022, one non-wholly owned consolidated hotel and one of our leased hotels exited our system, and, therefore, they are not included in the number of owned and leased hotels as of December 31, 2022, although the results of operations of the hotels are consolidated in our financial statements for the year ended December 31, 2022 for the period prior to their exit.

As a result of the COVID-19 pandemic, the operations of certain of our hotels were suspended for some period of time.

However, substantially all of the hotels in our management and franchise segment had re-opened by the end of 2021 and have remained open and operating since then.

All of the hotels in our ownership segment that had suspended operations at some point in time as a result of the pandemic were open as of December 31, 2021.

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

The performance of our operating segments is evaluated primarily on operating income (loss), without allocating amortization of contract acquisition costs, other revenues and other expenses, other revenues and other expenses from managed and franchised properties, depreciation and amortization expenses or general and administrative expenses, and does not include equity in earnings (losses) from unconsolidated affiliates.

Our chief operating decision maker does not use assets by operating segment when assessing performance or making operating segment resource allocations.

Our CODM does not use assets by operating segment when assessing performance or making operating segment resource allocations.

The following table presents revenues for our reportable segments, reconciled to consolidated amounts:

10 unchanged sentences

Other revenues 178 102 79

Direct reimbursements from managed and franchised properties (2)

2,441 1,503 1,375

Indirect reimbursements from managed and franchised properties (2)

Other revenues from managed and franchised properties

5,827 5,037 3,344

3 unchanged sentences

(1) Includes management, royalty and IP fees charged to consolidated hotels in our ownership segment by our management and franchise segment, which were eliminated in our consolidated statements of operations.

(2) Included in other revenues from managed and franchised properties in our consolidated statements of operations.

The following table presents operating income (loss) for each of our reportable segments, reconciled to consolidated income (loss) before income taxes:

The following table presents operating income (loss) for each of our reportable segments, reconciled to consolidated income before income taxes:

Year Ended December 31,

4 unchanged sentences

Ownership (1)

54 ( 91 ) ( 202 )

Segment operating income 3,132 2,673 1,718

4 unchanged sentences

General and administrative expenses ( 408 ) ( 382 ) ( 405 )

Reorganization costs — — ( 41 )

Impairment losses

Loss on sales of assets, net

Operating income (loss) 2,094 1,010 ( 418 )

Operating income

2,225 2,094 1,010

Interest expense ( 464 ) ( 415 ) ( 397 )

Gain (loss) on foreign currency transactions ( 16 ) 5 ( 7 )

Loss on debt extinguishments — ( 69 ) ( 48 )

Other non-operating income (loss), net 50 23 ( 2 )

Income (loss) before income taxes $ 1,734 $ 560 $ ( 924 )

Loss on debt extinguishment

Loss on investments in unconsolidated affiliate

Other non-operating income, net

Income before income taxes

$ 1,692 $ 1,734 $ 560

9 unchanged sentences

Commitments and Contingencies

We provide performance guarantees to certain owners of hotels that we operate under management contracts.

Most of these guarantees do not require us to fund shortfalls, but allow for termination of the contract, if specified operating performance levels are not achieved.

However, in limited cases, we are obligated to fund performance shortfalls, creating variable interests in the ownership entities of the hotels, of which we are not the primary beneficiary.

As of December 31, 2022, we had performance guarantees with expirations ranging from 2025 to 2043 and possible cash outlays totaling approximately $ 7 million.

Our obligations under these guarantees in future periods are dependent on the operating performance level of the related hotel over the remaining term of the performance guarantee for that particular hotel.

As of December 31, 2022, we had extended debt guarantees and letters of credit with expirations ranging from 2023 to 2031 and potential cash outlays totaling $ 124 million to owners of certain hotels that we currently or in the future will manage or franchise.

We receive fees from managed and franchised properties that we are contractually required to use to operate our marketing, sales and brand programs on behalf of hotel owners.

We include performance clauses in certain of our management contracts, however, most of these clauses do not require us to fund shortfalls, but instead allow for termination of the contract if specified operating performance levels are not achieved.

In limited cases, we are obligated to fund performance shortfalls and our obligations under these guarantees in future periods are dependent on the operating performance level of the related hotel over the remaining term of the performance guarantee for that particular hotel.

As of December 31, 2023, we had performance guarantees with expirations ranging from 2025 to 2043 and possible cash outlays totaling $ 9 million.

Additionally, as of December 31, 2023, we had extended debt guarantees and letters of credit with expirations ranging from 2025 to 2033 and possible cash outlays totaling $ 140 million to owners of certain hotels that we currently or in the future will manage or franchise.

The performance and debt guarantees create variable interests in the ownership entities of the hotels, of which we are not the primary beneficiary.

We receive fees from managed and franchised properties that we are contractually required to use to operate our marketing, sales and brand programs and shared services on behalf of hotel owners.

If we collect amounts in excess of amounts expended, we have a commitment to spend these amounts on the related programs.

As of December 31, 2022 and 2021, amounts expended on behalf of these programs exceeded the amounts collected.

As of December 31, 2023 and 2022, the amounts expended on behalf of these programs exceeded the amounts collected.

We are involved in various claims and lawsuits arising in the ordinary course of business, some of which include claims for substantial sums.

While the ultimate results of claims and litigation cannot be predicted with certainty, we expect that the ultimate resolution of all pending or threatened claims and litigation as of December 31, 2022 will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

While the ultimate results of claims and litigation cannot be predicted with certainty, we expect that the

ultimate resolution of all pending or threatened claims and litigation as of December 31, 2023 will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Supplemental Disclosures of Cash Flow Information

Cash interest paid included within operating activities in our consolidated statements of cash flows was $ 492 million, $ 385 million and $ 359 million during the years ended December 31, 2023, 2022 and 2021, respectively.

For the years ended December 31, 2023 and 2022, these amounts exclude $ 53 million and $ 2 million of cash receipts, respectively, related to settlements of our interest rate swap with a financing component, which are separately disclosed within financing activities in our consolidated statements of cash flows.

Income tax payments, net of refunds received, were $ 478 million, $ 389 million and $ 181 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data