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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-04-24 · 134 added, 111 removed, 229 unchanged (52% of the section changed)

19 unchanged sentences

We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Hilton is one of the largest global hospitality companies, with 7,626 properties comprising 1,197,329 rooms in 126 countries and territories as of March 31, 2024.

Hilton is one of the largest global hospitality companies, with 7,780 properties comprising 1,216,308 rooms in 126 countries and territories as of June 30, 2024.

Our premier brand portfolio includes luxury, lifestyle, full service, focused service and all-suites hotel brands, as well as timeshare brands.

As of March 31, 2024, we had 188 million members in our award-winning guest loyalty program, Hilton Honors, an increase of 18 percent from March 31, 2023.

As of June 30, 2024, we had 195 million members in our award-winning guest loyalty program, Hilton Honors, an increase of 18 percent from June 30, 2023.

Segments and Regions

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(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;

(ii) licensing fees from our strategic partners, including co-branded credit card providers and hotels that are not managed or franchised hotels that use our booking channels, and HGV;

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

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

Although the U.S., which represented 67 percent of our system-wide hotel rooms as of March 31, 2024, is included in the Americas region, it is often analyzed separately and apart from the Americas region and, as such, it is presented separately within our hotel operating statistics in "—Results of Operations." The EMEA region includes Europe, which represents the western-most peninsula of Eurasia stretching from Iceland in the west to Russia in the east, and the Middle East and Africa ("MEA"), which represents the Middle East region and all African nations, including the Indian Ocean island nations.

Europe and MEA are often analyzed separately and, as such, are presented separately within our hotel operating

statistics in "—Results of Operations." The Asia Pacific region includes the eastern and southeastern nations of Asia, as well as India, Australia, New Zealand and the Pacific Island nations.

Although the U.S., which represented 67 percent of our system-wide hotel rooms as of June 30, 2024, is included in the Americas region, it is often analyzed separately and apart from the Americas region and, as such, it is presented separately within our hotel operating statistics in "—Results of Operations." The EMEA region includes Europe, which represents the western-most peninsula of Eurasia stretching from Iceland in the west to Russia in the east, and the Middle East and Africa ("MEA"), which represents the Middle East region and all African nations, including the Indian Ocean island

Europe and MEA are often analyzed separately and, as such, are presented separately within our hotel operating statistics in "—Results of Operations." The Asia Pacific region includes the eastern and southeastern nations of Asia, as well as India, Australia, New Zealand and the Pacific Island nations.

System Growth and Development Pipeline

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As of or for the

Three Months Ended

March 31, 2024

Six Months Ended

June 30, 2024

Hotels Rooms (1)

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Development pipeline

Additions (3)

Count as of period end (3)(4)(5)

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(2) Represents room additions, net of rooms removed from our system.

Net unit growth from March 31, 2023 to March 31, 2024 was 5.6 percent.

(3) The hotels in our development pipeline were under development throughout 119 countries and territories, including 31 countries and territories where we had no existing hotels.

(4) Of the total rooms in the development pipeline, 229,700 were under construction and 267,900 were located outside of the U.S.

Net unit growth from June 30, 2023 to June 30, 2024 was 6.2 percent.

(3) Additions include 385 hotels and approximately 18,200 rooms related to strategic partner hotels;

count as of period end includes 379 hotels and approximately 17,700 rooms related to strategic partner hotels.

(4) The hotels in our development pipeline were under development throughout 136 countries and territories, including 39 countries and territories where we had no existing hotels, with 251,800 rooms under construction and 298,800 rooms located outside of the U.S.

Rooms under construction include rooms for hotels under construction or in the process of conversion to our system.

Nearly all of the rooms in our development pipeline will be in our management and franchise segment upon opening.

We do not consider any individual development project to be material to us.

(5) Excluding strategic partner hotels, the development pipeline would have totaled 3,491 hotels and 490,600 rooms as of June 30, 2024.

Key Business and Financial Metrics Used by Management

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We define our comparable hotels as those that:

(i) were active and operating in our system for at least one full calendar year as of the end of the current period, and open January 1st of the previous year;

(ii) have not undergone a change in brand or ownership type during the current or comparable periods reported;

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

Of the 7,532 hotels in our system as of March 31, 2024, 6,347 hotels were classified as comparable hotels.

Our 1,185 non-comparable hotels as of March 31, 2024 included 421 hotels, or less than six percent of the total hotels in our system, that were removed from the comparable group during the last twelve months because they underwent large-scale capital projects, sustained substantial property damage, encountered business interruption or comparable results were otherwise not available.

(i) were active and operating in our system for at least one full calendar year, have not undergone a change in brand or ownership type during the current or comparable periods and were open January 1st of the previous year;

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

We exclude strategic partner hotels from our comparable hotels.

Of the 7,682 hotels in our system as of June 30, 2024, six hotels were strategic partner hotels and 6,296 hotels were classified as comparable hotels.

Our 1,380 non-comparable hotels as of June 30, 2024 included (i) 702 hotels that were added to our system after January 1, 2023 or that have undergone a change in brand or ownership type during the current or comparable periods reported and (ii) 678 hotels that were removed from the comparable group for the current or comparable periods reported because they underwent or are undergoing large-scale capital projects, sustained substantial property damage, encountered business interruption or comparable results were otherwise not available.

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

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

Occupancy levels also

help management determine achievable Average Daily Rate ("ADR") pricing levels as demand for hotel rooms increases or decreases.

Occupancy levels also help management determine achievable Average Daily Rate ("ADR") pricing levels as demand for hotel rooms increases or decreases.

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

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RevPAR is also a useful indicator in measuring performance over comparable periods for comparable hotels.

References to occupancy, ADR and RevPAR are presented on a comparable basis, based on the comparable hotels as of March 31, 2024, and references to ADR and RevPAR are presented on a currency neutral basis, unless otherwise noted.

As such, comparisons of these hotel operating statistics for the three months ended March 31, 2024 and 2023 use the foreign currency exchange rates used to translate the results of the Company's foreign operations within its unaudited condensed consolidated financial statements for the three months ended March 31, 2024.

References to occupancy, ADR and RevPAR are presented on a comparable basis, based on the comparable hotels as of June 30, 2024, and references to ADR and RevPAR are presented on a currency neutral basis, unless otherwise noted.

As such, comparisons of these hotel operating statistics for the three and six months ended June 30, 2024 and 2023 use the foreign currency exchange rates used to translate the results of the Company's foreign operations within its unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024, respectively.

EBITDA and Adjusted EBITDA

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and (iii) other items that are not reflective of our operating performance, such as amounts related to debt restructurings and debt retirements and reorganization and related severance costs, to enhance period-over-period comparisons of our ongoing operations.

Further, Adjusted EBITDA excludes the net effect of our cost reimbursement revenues and expenses, as we contractually do not operate the related programs to generate a profit over the terms of the respective contracts.

The direct reimbursements from hotel owners are typically reimbursed as the costs are incurred and have no net effect on net income (loss).

The fees we recognize related to the indirect reimbursements may be recognized before or after the related expenses are incurred, causing timing differences between the costs incurred and the related reimbursement from hotel owners, with the net effect impacting net income (loss) in the reporting period.

However, the expenses incurred related to the indirect reimbursements are expected to equal the revenues earned from the indirect reimbursements over time, and, therefore, the net

effect of our cost reimbursement revenues and expenses is not used by our management team to evaluate our operating performance or make day-to-day operating decisions.

Further, Adjusted EBITDA excludes the net effect of our cost reimbursement revenues and expenses, classified in other revenues from managed and franchised properties and other expenses from managed and franchised properties, respectively, as we contractually do not operate the related programs to generate a profit or loss over the

life of these programs.

The direct reimbursements from hotel owners are billable and reimbursable as the costs are incurred and have no net effect on net income (loss).

The fees we recognize related to the indirect reimbursements may be recognized before or after the related expenses are incurred, causing timing differences between the recognition of the costs incurred and the related reimbursement from hotel owners, with the net effect impacting net income (loss) in the reporting period.

However, the expenses incurred related to the indirect reimbursements are expected to equal the revenues earned from the indirect reimbursements over time, and, therefore, the net effect of our cost reimbursement revenues and expenses is not used by management to evaluate our operating performance or make operating decisions.

EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as alternatives, either in isolation or as a substitute, for net income (loss) or other measures of financial performance or liquidity, including cash flows, derived in accordance with GAAP.

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

Three Months Ended Change

March 31, 2024 2024 vs.

Three Months Ended Change Six Months Ended Change

June 30, 2024 2024 vs.

Occupancy 75.3 % 1.3 % pts.

71.3 % 0.7 % pts.

ADR $ 163.70 1.7 % $ 159.37 1.7 %

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Occupancy 76.8 % 1.1 % pts.

72.3 % 0.3 % pts.

ADR $ 172.36 1.4 % $ 167.11 1.0 %

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Occupancy 71.2 % 1.7 % pts.

68.6 % 1.5 % pts.

ADR $ 154.34 4.0 % $ 155.54 4.6 %

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Occupancy 77.4 % 2.4 % pts.

71.2 % 2.7 % pts.

ADR $ 173.38 3.4 % $ 159.07 3.7 %

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Occupancy 68.3 % 2.4 % pts.

70.8 % 2.4 % pts.

ADR $ 185.55 6.8 % $ 190.27 8.9 %

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Occupancy 69.5 % 0.8 % pts.

67.3 % 1.1 % pts.

ADR $ 105.20 (0.2) % $ 109.93 2.7 %

RevPAR $ 73.08 0.9 % $ 74.03 4.4 %

System-wide RevPAR increased during the three months ended March 31, 2024, primarily due to an increase in ADR in all regions, which included the impact of inflation, and increases in occupancy across international regions.

The decrease in RevPAR in the U.S.

was driven by challenging comparisons due to weather and timing of holidays.

The Americas region, excluding the U.S., saw improvement resulting from an increase in inbound leisure travel in Mexico and the Caribbean and Latin America.

The RevPAR increase in Europe was driven by continued growth in international travel.

Both MEA and Asia Pacific benefited from increased holiday travel, conferences and special events in the regions.

System-wide RevPAR increased during the three and six months ended June 30, 2024, supported by improvements in system-wide ADR, which included the impact of inflation, and increases in occupancy, which were driven by increases in group demand.

The increases in RevPAR in the U.S.

were driven by the timing of holidays.

The Americas region, excluding the U.S., continued to see improvement resulting from increases in inbound leisure travel in Mexico and the Caribbean and Latin America.

The RevPAR increases in Europe were driven by continued growth in inbound international travel, which, during the periods, increased in several major cities that held large popular sporting and concert events.

Both MEA and Asia Pacific benefited from increased travel due to less restrictive tourism policies and special events in the regions.

The increases in Asia Pacific were partially offset by decreases in China, as travel and tourism continues to normalize from the removal of cross-border travel restrictions.

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2024 2023 2024 2023

(in millions)

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"Loss on Investments in Unconsolidated Affiliate" in our unaudited condensed consolidated financial statements for additional information.

(2) Amount includes losses on debt guarantees for certain hotels that we manage;

(2) Amounts include losses on debt guarantees for certain hotels that we manage;

refer to Note 13:

"Commitments and Contingencies" in our unaudited condensed consolidated financial statements for additional information.

(3) Amount for the three months ended March 31, 2024 primarily relates to transaction costs incurred for acquisitions.

Amounts for both periods include net losses (gains) related to certain of Hilton's investments in unconsolidated affiliates, other than the loss included separately in "loss on investments in unconsolidated affiliate," severance and other items.

Three Months Ended Percent

March 31, Change

(3) Amounts for the three and six months ended June 30, 2024 primarily relate to restructuring costs related to one of our leased properties and transaction costs resulting from the amendment of our Term Loans.

Amount for the six months ended June 30, 2024 also includes transaction costs incurred for acquisitions.

Amounts for all periods include net losses (gains) related to certain of our investments in unconsolidated affiliates, other than the loss included separately in "loss on investments in unconsolidated affiliate," severance and other items.

Three Months Ended Percent Six Months Ended Percent

June 30, Change June 30, Change

2024 2023 2024 vs.

(in millions)

2023 2024 2023 2024 vs.

(in millions) (in millions)

Franchise and licensing fees $ 689 $ 618 11.5 $ 1,260 $ 1,126 11.9

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Total management fees $ 161 $ 155 3.9 $ 337 $ 300 12.3

Franchise and licensing fees increased due to an increase in license fees from our strategic partnerships, primarily attributable to new cardholder acquisitions and increased cardholder spend under our co-branded credit card arrangements.

Licensing fees from HGV also increased as a result of increased timeshare revenues, inclusive of the impact of adding new timeshare properties to our system between the periods, including those acquired by HGV from third-party companies.

During the three months ended March 31, 2024, RevPAR at our comparable franchised hotels decreased 0.2 percent due to a decrease in occupancy of 0.7 percentage points, which was partially offset by an increase in ADR of 0.8 percent.

However, franchise fees increased during the period due to the addition of 417 franchised hotels on a net basis, resulting in an additional 58,100 rooms from new development and ownership type transfers between January 1, 2023 to March 31, 2024.

The increase in management fees was primarily the result of an increase in RevPAR at our comparable managed hotels as well as termination fees received from hotels that exited our system.

During the three months ended March 31, 2024, RevPAR at our comparable managed hotels increased 8.2 percent, due to increased occupancy of 3.1 percentage points, and increased ADR of 3.3 percent.

The increase in managed hotels in our system between the periods also contributed to the increase in management fees.

Including new development and ownership type transfers, from January 1, 2023 to March 31, 2024, we added 31 managed hotels on a net basis, providing an additional 9,300 rooms to our management hotel portfolio.

Incentive management fees increased as they are based on hotels' operating profits, which generally have improved from the prior period as increased consumer demand drove higher revenues, elevated margins and, ultimately, higher managed hotel profits.

Three Months Ended Percent

March 31, Change

The increases in franchise and management fees were primarily the result of increases in RevPAR at our comparable franchised and managed hotels.

During the three months ended June 30, 2024, RevPAR at our comparable franchised and managed hotels increased 2.8 percent and 5.4 percent, respectively, contributing to currency neutral increases in franchise and management fees of $19 million and $9 million, respectively.

The increases in RevPAR at our comparable franchised and managed hotels for the three months ended June 30, 2024 were due to increased occupancy of 0.9 percentage points and 2.7 percentage points, respectively, and increased ADR of 1.7 percent and 1.4 percent, respectively.

During the six months ended June 30, 2024, RevPAR at our comparable franchised and managed hotels increased 1.4 percent and 6.8 percent, respectively, contributing to currency neutral increases in franchise and management fees of $27 million and $25 million, respectively.

The increases in RevPAR at our comparable franchised and managed hotels for the six months ended June 30, 2024 were due to increased occupancy of 0.1 percentage points and 2.9 percentage points, respectively, and increased ADR of 1.3 percent and 2.3 percent, respectively.

Further, franchise and management fees included net increases of $14 million and $3 million, respectively, during the three months ended June 30, 2024, and $23 million and $4 million, respectively, during the six months ended June 30, 2024 as a result of net hotel additions between the periods.

During the six months ended June 30, 2024, franchise and management fees also increased as a result of increases of $9 million and $20 million, respectively, in termination fees received from hotels that exited our system.

Licensing fees increased $34 million and $72 million during the three and six months ended June 30, 2024, respectively, as a result of increases in fees from our strategic partnerships and HGV.

Increased fees from our strategic partnerships primarily resulted from new cardholder acquisitions and increased cardholder spend under our co-branded credit card arrangements.

Increased fees from HGV resulted from increased timeshare revenues, inclusive of the impact of adding new timeshare properties to our system between the periods, including those acquired by HGV from third-party companies.

Three Months Ended Percent Six Months Ended Percent

June 30, Change June 30, Change

2024 2023 2024 vs.

(in millions)

2023 2024 2023 2024 vs.

(in millions) (in millions)

Owned and leased hotels revenues

$ 337 $ 341 (1.2) $ 592 $ 589 0.5

The $7 million increase in owned and leased hotels revenues included a $9 million currency neutral increase, partially offset by a $2 million decrease resulting from unfavorable fluctuations in foreign currency exchange rates.

Revenues from our comparable owned and leased hotels increased $20 million, on a currency neutral basis, due to the increase in RevPAR at our comparable owned and leased hotels of 12.4 percent.

The increase in RevPAR was due to increases in occupancy of 3.9 percentage points and ADR of 6.0 percent.

The $11 million currency neutral decrease in revenues from our non-comparable owned and leased hotels included decreases related to hotels undergoing renovations during the period and the business interruption that occurred at our leased hotel in Israel due to the ongoing military conflict.

Three Months Ended Percent

March 31, Change

The $4 million decrease in owned and leased hotels revenues for the three months ended June 30, 2024 was driven by a decrease of $11 million due to unfavorable fluctuations in foreign currency partially offset by a currency neutral increase of $7 million.

The $3 million increase in owned and leased hotels revenues for the six months ended June 30, 2024, included a $16 million currency neutral increase partially offset by a decrease of $13 million resulting from unfavorable fluctuations in foreign currency exchange rates.

Revenues from our comparable owned and leased hotels increased $19 million and $40 million, on a currency neutral basis, during the three and six months ended June 30, 2024, respectively, due to increases in RevPAR at our comparable owned and leased hotels of 8.2 percent and 10.1 percent, respectively.

The increases in RevPAR were due to increases in occupancy of 2.8 percentage points and 3.4 percentage points, respectively, and ADR of 4.4 percent and 5.0 percent, respectively.

The currency neutral decreases in revenues from our non-comparable owned and leased hotels of $12 million and $24 million for the three and six months ended June 30, 2024, respectively, included decreases related to hotels undergoing renovations during the periods and the business interruption that occurred at our leased hotel in Israel due to the ongoing military conflict.

Three Months Ended Percent Six Months Ended Percent

June 30, Change June 30, Change

2024 2023 2024 vs.

(in millions)

2023 2024 2023 2024 vs.

(in millions) (in millions)

Other revenues $ 71 $ 46 54.3 $ 121 $ 81 49.4

The increase in other revenues was primarily due to increased procurement volume and vendor rebates for purchases made by properties that participate in our purchasing programs, including properties outside of our system.

The increases in other revenues were primarily due to increased procurement volume and associated vendor rebates for purchases made by properties that participate in our purchasing programs, including properties outside of our system.

Operating Expenses

Three Months Ended Percent

March 31, Change

Three Months Ended Percent Six Months Ended Percent

June 30, Change June 30, Change

2024 2023 2024 vs.

(in millions)

2023 2024 2023 2024 vs.

(in millions) (in millions)

Owned and leased hotels expenses

$ 298 $ 297 0.3 $ 545 $ 548 (0.5)

Expenses from our comparable owned and leased hotels increased $5 million, on a currency neutral basis, as a result of increased occupancy and cost inflation both driving higher labor costs and other operating expenses, partially offset by decreases in utilities and property taxes.

The $9 million net decrease in owned and leased hotels expenses, on a currency neutral basis, from our non-comparable owned and leased hotels is primarily driven by the business interruption that occurred at our leased hotel in Israel.

Three Months Ended Percent

March 31, Change

Owned and leased hotels expenses increased $8 million and $4 million, on a currency neutral basis, during the three and six months ended June 30, 2024, respectively, which were offset by decreases of $7 million in both periods, resulting from favorable fluctuations in foreign currency exchange rates.

Expenses from our comparable owned and leased hotels increased $18 million and $23 million, on a currency neutral basis, during the three and six months ended June 30, 2024, respectively, as a result of increased occupancy and cost inflation, primarily due to increases in payroll and other compensation costs.

The $10 million and $19 million net decreases in owned and leased hotels expenses, on a currency neutral basis, from our non-comparable owned and leased hotels were primarily driven by the business interruption that occurred at our leased hotel in Israel during the periods.

Three Months Ended Percent Six Months Ended Percent

June 30, Change June 30, Change

2024 2023 2024 vs.

(in millions)

2023 2024 2023 2024 vs.

(in millions) (in millions)

Depreciation and amortization expenses $ 34 $ 37 (8.1) $ 70 $ 74 (5.4)

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Other expenses 37 33 12.1 67 54 24.1

The decrease in depreciation and amortization expenses during three months ended March 31, 2024 was primarily due to a decrease in amortization expense, driven by certain intangible assets that became fully amortized during the three months ended December 31, 2023.

This decrease in amortization expense was mostly offset by an increase related to software and corporate and hotel assets placed in service between the periods.

The increase in general and administrative expenses was primarily due to increases in costs related to payroll and other compensation costs, as well as transaction costs incurred for acquisitions.

The increase in other expenses was primarily due to costs associated with higher procurement volume from our purchasing operations, including for properties outside of our system that participate in our purchasing programs.

The decreases in depreciation and amortization expenses during the three and six months ended June 30, 2024 were primarily due to decreases in amortization expense, driven by decreases of $9 million and $19 million for the three and six months ended June 30, 2024, respectively, for certain intangible assets that became fully amortized during the three months ended December 31, 2023.

The decreases in amortization expense were mostly offset by increases related to software and corporate and hotel assets placed in service between the periods.

The increases in general and administrative expenses were primarily due to increases in costs related to payroll and other compensation costs.

The increases in other expenses were primarily due to costs associated with higher procurement volume from our purchasing operations.

Non-operating Income and Expenses

Three Months Ended Percent

March 31, Change

Three Months Ended Percent Six Months Ended Percent

June 30, Change June 30, Change

2024 2023 2024 vs.

(in millions)

2023 2024 2023 2024 vs.

(in millions) (in millions)

Interest expense $ (141) $ (111) 27.0 $ (272) $ (227) 19.8

Loss on foreign currency transactions

(1) (6) (83.3) (2) (6) (66.7)

Loss on investments in unconsolidated affiliate — — — — (92) NM (1)

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

In November 2023, we amended the credit agreement governing the Term Loans to convert $1.0 billion of the outstanding Term Loans to a new tranche with an interest rate of the Secured Overnight Financing Rate ("SOFR") plus 185 basis points and $1.6 billion of the outstanding Term Loans, along with $500 million of new aggregate principal amount, into a new tranche with an interest rate of SOFR plus 210 basis points.

The increase in interest expense was primarily driven by both the increase to the weighted average fixed spread on the overall variable rate on the Term Loans and the increase in the outstanding balance by $500 million.

The increase in interest expense also resulted from an increase in one-month SOFR, the benchmark for the Term Loans' interest rate, as well as an increase in variable rent for our finance leases, which is generally based on a percentage of hotel revenues or profits, which increased as discussed in "— Revenues." These increases were partially offset by a decrease in interest expense due to interest rate swaps used to mitigate floating interest rate risk, including an increase in the amortization of net gains from accumulated other comprehensive loss from a designated interest rate swap and a decrease in the release of net losses from accumulated other comprehensive loss related to a previous interest rate swap that was dedesignated in a prior period.

In November 2023, we amended the credit agreement governing the Term Loans to convert $1.0 billion of the outstanding Term Loans to a new tranche with an interest rate of SOFR plus 1.85% and $1.6 billion of the outstanding Term Loans, along with $500 million of new aggregate principal amount, into a new tranche with an interest rate of SOFR plus 2.10% (the "November 2023 Amendment").

The credit agreement was subsequently further amended in June 2024 whereby we replaced $1.0 billion Term Loans due June 2028 with $1.0 billion of incremental Term Loans due November 2030 and repriced the entire balance of the Term Loans to an interest rate of SOFR plus 1.75%.

The increases in interest expense during the three and six months ended June 30, 2024 were primarily attributable to increases related to the Term Loans of $12 million and $29 million for the three and six months ended June 30, 2024, respectively, as a result of the modifications from the November 2023 Amendment and June 2024 Amendment, as well as increases in one-month SOFR for the comparable periods, and increases of $15 million and $16 million for the three and six months ended June 30, 2024, respectively, due to the issuance of the 5.875% 2029 Senior Notes and the 6.125% 2032 Senior Notes in March 2024.

These increases were partially offset by decreases in interest expense of $1 million and $15 million for the three and six months ended June 30, 2024, respectively, due to interest rate swaps used to mitigate floating interest rate risk, including increases in the amortization of net gains from accumulated other comprehensive loss from a designated interest rate swap and, for the six months ended June 30, 2024, decreases in the release of net losses from accumulated other comprehensive loss related to a previous interest rate swap that was dedesignated in a prior period.

The net gains and losses on foreign currency transactions are the result of changes in foreign currency exchange rates, including on certain intercompany financing arrangements, such as short-term cross-currency intercompany loans, as well as transactions denominated in foreign currencies.

The loss on investments in unconsolidated affiliate for the three months ended March 31, 2023 included:

The loss on investments in unconsolidated affiliate for the six months ended June 30, 2023 included:

(i) a $44 million other-than-temporary impairment loss on our investment in the Fund and (ii) $48 million of credit losses on financing receivables provided to the Fund.

"Loss on Investments in Unconsolidated Affiliate" in our unaudited condensed consolidated financial statements for additional information.

Other non-operating income (loss), net consists of interest income, equity in earnings (losses) from unconsolidated affiliates, certain components of net periodic pension cost or credit related to our employee defined benefit pension plans and other non-operating gains and losses.

The net change during the period was primarily driven by an increase in losses on debt guarantees for hotels that Hilton manages.

The net change in other non-operating income (loss), net during the six months ended June 30, 2024 was primarily driven by an increase in losses on debt guarantees for hotels that Hilton manages.

"Commitments and Contingencies" in our unaudited condensed consolidated financial statements for additional information.

The increase in income tax expense was primarily attributable to the increase in income before income taxes, partially offset by a valuation allowance provided on a deferred tax asset during the three months ended March 31, 2023.

The increases in income tax expense during the three and six months ended June 30, 2024 were primarily attributable to the increases in income before income taxes.

Segment Results

As of March 31, 2024, our management and franchise segment included 809 managed and 6,766 franchised properties consisting of 1,179,837 total rooms, and our ownership segment included 51 hotels consisting of 17,492 total rooms.

As of June 30, 2024, our management and franchise segment included 815 managed and 6,914 franchised and licensed properties, which included 98 timeshare and six strategic partner hotels, consisting of 1,198,816 total rooms, and our ownership segment included 51 hotels consisting of 17,492 total rooms.

Refer to Note 12:

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

For the three months ended March 31, 2024, refer to "—Revenues" for further discussion of the increases in our franchise and licensing fees and total management fees, which reflect our management and franchise segment revenues and segment operating income, as well as for further discussion of the increase in revenues from our owned and leased hotels, which reflect our ownership segment revenues.

In addition, refer to "—Operating Expenses" for further discussion of the decrease in operating expenses at our owned and leased hotels, which, when netted with ownership segment revenues and management fees charged by our management and franchise segment, results in our ownership segment operating income (loss).

For the three and six months ended June 30, 2024, refer to "—Revenues" for further discussion of the increases in our franchise and licensing fees and total management fees, which reflect our management and franchise segment revenues and segment operating income, as well as for further discussion of the changes in revenues from our owned and leased hotels, which reflect our ownership segment revenues.

In addition, refer to "—Operating Expenses" for further discussion of the changes in operating expenses at our owned and leased hotels, which, when netted with ownership segment revenues and management fees charged by our management and franchise segment, results in our ownership segment operating income (loss).

Liquidity and Capital Resources

As of March 31, 2024, we had total cash and cash equivalents of $1,420 million, including $74 million of restricted cash and cash equivalents.

As of June 30, 2024, we had total cash and cash equivalents of $802 million, including $71 million of restricted cash and cash equivalents.

The majority of our restricted cash and cash equivalents is related to cash collateral and cash held for FF&E reserves.

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(x) dividends as declared;

(xi) share repurchases;

and (xii) costs related to the acquisition of the Graduate Hotels brand and the associated contracts and the acquisition of a controlling financial interest in the Sydell Group.

and (xi) share repurchases.

Our known long-term liquidity requirements primarily consist of funds necessary to pay for:

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In March 2024, we issued a total of $1.0 billion of 5.875% 2029 Senior Notes and 6.125% 2032 Senior Notes and used $200 million of the net proceeds to repay the outstanding balance under the Revolving Credit Facility.

We intend to use the remaining net proceeds for general corporate purposes, which may include investments and acquisitions.

In June 2024, we amended the credit agreement governing our Term Loans pursuant to which (i) $1.0 billion of outstanding Term Loans due June 2028 were replaced with the $1.0 billion of incremental Term Loans due November 2030, aligning their maturity with the outstanding $2.1 billion tranche of Term Loans due November 2030 and (ii) the entire balance of the Term Loans was repriced with an interest rate of SOFR plus 1.75%.

Refer to Note 6:

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

We expect that interest payments on our outstanding indebtedness will increase compared to the prior year as a result of the amendment and increase to the amount outstanding under the Term Loans in November 2023 and the issuance of the 5.875% 2029 Senior Notes and the 6.125% 2032 Senior Notes in March 2024.

Except for the issuance of the 5.875% 2029 Senior Notes and the 6.125% 2032 Senior Notes, there were no material changes to our contractual obligations from what we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

During the three months ended March 31, 2024, we repurchased approximately 3.4 million shares of our common stock for $662 million.

As of March 31, 2024, approximately $3.1 billion remained available for share repurchases under our stock repurchase program.

Except for the issuance of the 5.875% 2029 Senior Notes and the 6.125% 2032 Senior Notes in March 2024 and the amendment to the credit agreement governing our Term Loans in June 2024, there were no

material changes to our contractual obligations from what we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

During the six months ended June 30, 2024, we repurchased approximately 6.9 million shares of our common stock for $1,386 million.

As of June 30, 2024, approximately $2.4 billion remained available for share repurchases under our stock repurchase program.

In circumstances where we have the opportunity to support our strategic objectives, we may provide guarantees or other commitments, as necessary, to owners of hotels that we currently or in the future will manage or franchise or other third parties.

"Commitments and Contingencies" in our unaudited condensed consolidated financial statements for additional information on our commitments that were outstanding as of March 31, 2024.

"Commitments and Contingencies" in our unaudited condensed consolidated financial statements for additional information on our commitments that were outstanding as of June 30, 2024.

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

Within the framework of our investment policy, we intend to finance our business activities primarily with cash on our balance sheet as of March 31, 2024, cash generated from our operations and, as needed, the use of the available capacity of our Revolving Credit Facility.

Within the framework of our investment policy, we intend to finance our business activities primarily with cash on our balance sheet as of June 30, 2024, cash generated from our operations and, as needed, the use of the available capacity of our Revolving Credit Facility.

Additionally, we have continued access to debt markets and expect to be able to obtain financing as a source of liquidity as required and to extend maturities of existing borrowings, if necessary.

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

After considering our approach to liquidity and our available sources of cash, we believe that our cash position and sources of liquidity will meet anticipated requirements for operating and other expenditures, including corporate expenses, payroll and other compensation costs, taxes and compliance costs, current maturities of long-term debt and other commitments for the foreseeable future based on current conditions.

The objectives of our cash management policy are maintaining the availability of liquidity and minimizing operational costs.

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The following table summarizes our net cash flows:

Three Months Ended Percent

March 31, Change

Six Months Ended Percent

June 30, Change

2024 2023 2024 vs.

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Net cash provided by operating activities $ 767 $ 794 (3.4)

Net cash used in investing activities (27) (85) (68.2)

Net cash provided by (used in) financing activities 238 (547) NM (1)

Net cash used in investing activities (318) (154) NM (1)

Net cash used in financing activities (506) (1,031) (50.9)

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

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Cash flows from operating activities were primarily generated from management, franchise and licensing fee revenue and operating income from our owned and leased hotels.

The increase during the period was primarily due to the increase in cash inflows generated from our management and franchise segment, largely as a result of a net increase in the number of hotels in our system between the periods and an increase in RevPAR at our comparable managed hotels, and a $68 million decrease in payments of contract acquisition costs due to the timing of certain strategic hotel developments supporting our growth.

The increase in cash provided by operating activities were partially offset by a $43 million increase in the net cash outflows related to income tax payments, due to income tax refunds received during the three months ended March 31, 2023, and an outflow of $62 million for debt guarantee payments during the three months ended March 31, 2024.

The decrease in net cash inflows during the period was primarily due to a $35 million increase in the net cash outflows related to income tax payments, primarily due to income tax refunds received during the six months ended June 30, 2023 and an outflow of $77 million for debt guarantee payments.

The decrease in cash provided by operating activities was partially offset by the increase in cash inflows generated from our management and franchise segment, discussed in "—Revenues," largely as a result of an increase in RevPAR at our comparable managed and franchised hotels as well as revenues from new hotels added, net of hotels removed, and a $62 million decrease in payments of contract acquisition costs due to the timing of certain strategic hotel developments supporting our growth during the six months ended June 30, 2023.

Investing Activities

Net cash used in investing activities primarily included cash flows related to:

(i) capitalized software costs that were related to various systems initiatives for the benefit of both our hotel owners and our overall corporate operations and (ii) capital expenditures for property and equipment related to corporate property and the renovation of certain hotels in our ownership segment, which decreased between the periods due to the timing of certain corporate and hotel capital expenditure projects.

Additionally, our investing activities include the net cash inflows and outflows related to our undesignated derivative financial instruments that we have in place to hedge against the impact of fluctuations in foreign currency exchange rates on certain of our intercompany loan and cash balances, which were primarily the result of changes in the exchange rates for the Pound Sterling to the U.S.

dollar during the three months ended March 31, 2023.

(i) the acquisitions of (a) the Graduate brand and the associated franchise contracts and (b) a controlling financial interest in the Sydell Group, both completed during the six months ended June 30, 2024, (ii) capitalized software costs that were related to various systems initiatives for the benefit of both our hotel owners and our overall corporate operations, and (iii) capital expenditures for property and equipment related to corporate property and the renovation of certain hotels in our ownership segment, which decreased between the periods due to the timing of certain corporate and hotel capital expenditure projects.

Additionally, our investing activities include the net cash inflows and outflows related to our undesignated derivative financial instruments that we have in place to hedge against the impact of fluctuations in foreign currency exchange rates on certain of our intercompany loan and cash balances, which, were primarily the result of changes in the exchange rates for the Euro and Australian dollar to the U.S.

dollar during the six months ended June 30, 2024 and the Pound Sterling to the U.S.

dollar during the six months ended June 30, 2023.

Financing Activities

The increase in cash provided by financing activities was primarily attributable to a $1.0 billion increase in cash inflows from the issuances of the 5.875% 2029 Senior Notes and the 6.125% 2032 Senior Notes.

These increases were partially offset by a $214 million increase in cash outflows for the return of capital to shareholders, which includes dividends and share repurchases.

The decrease in net cash used in financing activities was primarily attributable to a $1.0 billion increase in cash inflows from the issuances of the 5.875% 2029 Senior Notes and the 6.125% 2032 Senior Notes.

This increase in cash inflows was partially offset by a $482 million increase in cash outflows for share repurchases.

Debt and Borrowing Capacity

As of March 31, 2024, our total indebtedness, excluding the deduction for unamortized deferred financing costs and discounts, was approximately $10.3 billion.

No debt amounts were outstanding under the Revolving Credit Facility as of March 31, 2024, which had an available borrowing capacity of $1,913 million after considering $87 million of outstanding letters of credit.

As of June 30, 2024, our total indebtedness, excluding the deduction for unamortized deferred financing costs and discounts, was approximately $10.3 billion.

No debt amounts were outstanding under the Revolving Credit Facility as of June 30, 2024, which had an available borrowing capacity of $1,913 million after considering $87 million of outstanding letters of credit.

For additional information on our total indebtedness and guarantees on our debt, refer to Note 6:

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If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to reduce capital expenditures or issue additional equity securities.

We do not have any material indebtedness outstanding that matures prior to May 2025, and we believe that we have sufficient sources of liquidity and access to debt financing to address the debt maturing in May 2025 prior to its maturity date.

Our ability to make scheduled principal payments and to pay interest on our debt depends on our future operating performance, which is subject to general conditions in or affecting the hospitality industry that may be beyond our control.

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

We have discussed the estimates and assumptions that we believe are critical because they involve a higher degree of judgment in their application and are based on information that is inherently uncertain in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and, during the three months ended March 31, 2024, there were no material changes to those critical accounting estimates that were previously disclosed.

We have discussed the estimates and assumptions that we believe are critical because they involve a higher degree of judgment in their application and are based on information that is inherently uncertain in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and, during the six months ended June 30, 2024, there were no material changes to those critical accounting estimates that were previously disclosed.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis