What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-23 compared with 2024-08-07 · 104 added, 100 removed, 263 unchanged (44% of the section changed)

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macroeconomic factors beyond our control, such as inflation, changes in interest rates, challenges due to labor shortages or disputes and supply chain disruptions;

the loss of key senior management personnel;

competition for hotel guests and management and franchise contracts;

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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 7,780 properties comprising 1,216,308 rooms in 126 countries and territories as of June 30, 2024.

Hilton is one of the largest global hospitality companies, with 8,301 properties comprising 1,250,506 rooms in 138 countries and territories as of September 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 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.

As of September 30, 2024, we had 203 million members in our award-winning guest loyalty program, Hilton Honors, an increase of 17 percent from September 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 hotels that are not managed or franchised hotels that use our booking channels, and HGV;

(ii) licensing fees from our strategic partners, including co-branded credit card providers and strategic partner hotels, 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 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.

Although the U.S., which represented 66 percent of our system-wide hotel rooms as of September 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 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.

System Growth and Development Pipeline

Our strategic objectives include the continued expansion of our global hotel network, in particular our fee-based business.

As we enter into new management and franchise contracts and enter into strategic agreements to complement our hotel portfolio, we expand our business with limited or no capital investment by us as the manager, franchisor or licensor, since the capital required to build, renovate and maintain hotels is typically provided by the third-party owners with whom we contract to provide management services or license our IP.

Prior to approving the addition of new hotels to our management and franchise development pipeline, we evaluate the economic viability of the hotel based on its geographic location, the credit quality of the third-party owner and other factors.

By increasing the number of management and franchise contracts with third-party owners, over time we expect to increase revenues, overall return on invested capital and cash available to support our business needs.

See further discussion on our cash management policy in "—Liquidity and Capital Resources." The current economic environment, including elevated levels of inflation and interest rates, has posed certain challenges to the execution of our growth strategy, which have included and may continue to include delays in openings and new development.

By increasing the number of management and franchise contracts with third-party owners, over time we expect to increase revenues, overall return on invested capital and free cash flow.

See further discussion on our cash management policy in "—Liquidity and Capital Resources." The current economic environment, including elevated levels of inflation and interest rates, has posed certain challenges to the execution of our growth strategy, which in some cases have included and may continue to include delays in openings and new development.

In addition to our current hotel portfolio, we are focused on the growth of our business by expanding our global hotel network through our development pipeline, which represents hotels that we expect to add to our system in the future.

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As of or for the

Six Months Ended

June 30, 2024

Nine Months Ended

September 30, 2024

Hotels Rooms (1)

2 unchanged sentences

Additions (4)

1,166 120,000

Count as of period end (5)

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(1) Rounded to the nearest hundred.

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

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.

(2) Openings include 400 hotels and over 18,800 rooms from strategic partner hotels.

(3) Represents room additions, net of rooms removed from our system, 400 hotels and over 18,800 rooms of which were from strategic partner hotels.

Net unit growth from September 30, 2023 to September 30, 2024 was 7.8 percent.

(4) Additions include 411 hotels and over 19,300 rooms related to strategic partner hotels.

(5) The hotels in our development pipeline were under development throughout 120 countries and territories, including 28 countries and territories where we had no existing hotels, with 235,400 rooms under construction and 280,700 rooms located outside of the U.S.

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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 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.

Of the 8,200 hotels in our system as of September 30, 2024, 400 hotels were strategic partner hotels and 6,150 hotels were classified as comparable hotels.

Our 1,650 non-comparable hotels as of September 30, 2024 included (i) 844 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) 806 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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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 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.

References to occupancy, ADR and RevPAR are presented on a comparable basis, based on the comparable hotels as of September 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 nine months ended September 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 nine months ended September 30, 2024, respectively.

EBITDA and Adjusted EBITDA

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

Three Months Ended Change Six Months Ended Change

June 30, 2024 2024 vs.

Three Months Ended Change Nine Months Ended Change

September 30, 2024 2024 vs.

2023 September 30, 2024 2024 vs.

Occupancy 75.3 % 0.3 % pts.

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RevPAR $ 78.97 (3.4) % $ 75.69 1.5 %

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.

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

The increases in RevPAR in the U.S.

were driven by the timing of holidays.

were driven by increases in weekday travel, primarily for groups, with consistent growth in business.

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 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 events.

MEA continued to benefit from increased demand driven by special regional events as well as more relaxed travel policies.

The decrease in Asia Pacific during the three months ended September 30, 2024 was driven by tougher year-over-year comparisons in China, after the reacceleration in the prior year as a result of the removal of cross-border travel restrictions.

The increase in Asia Pacific for the nine months ended September 30, 2024 was due to growth in countries outside of China across the region, as the result of less restrictive tourism policies and special events in the region, particularly in leisure travel.

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

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EBITDA 668 701 1,966 1,872

Gain on sales of assets, net

Loss (gain) on sales of assets, net

Loss on foreign currency transactions

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Net other expenses from managed and franchised properties

163 51 323 97

Other adjustments (3)

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

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

(2) Amount includes 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) 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.

(3) Amount for the nine months ended September 30, 2024 primarily relates to restructuring costs related to one of our leased properties as well as transaction costs resulting from the amendment of our Term Loans and 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

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

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Total management fees $ 154 $ 144 6.9 $ 491 $ 444 10.6

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

The increases in franchise and management fees were largely attributable to increases in RevPAR at our comparable franchised and managed hotels.

During the three months ended September 30, 2024, RevPAR at our comparable franchised and managed hotels increased 1.0 percent and 2.7 percent, respectively, contributing to currency neutral increases in franchise and management fees of $14 million and $7 million, respectively.

The increases in RevPAR at our comparable franchised and managed hotels for the three months ended September 30, 2024 were due to increased occupancy of 1.3 percentage points at our managed hotels, and increased ADR of 0.9 percent at both our franchised and managed hotels.

During the nine months ended September 30, 2024, RevPAR at our comparable franchised and managed hotels increased 1.4 percent and 5.4 percent, respectively, contributing to currency neutral increases in franchise and management fees of $43 million and $28 million, respectively.

The increases in RevPAR at our comparable franchised and managed hotels for the nine months ended September 30, 2024 were due to increased occupancy of 0.2 percentage points and 2.4 percentage points, respectively, and increased ADR of 1.2 percent and 1.8 percent, respectively.

Further, franchise and management fees included net increases of $15 million and $4 million, respectively, during the three months ended September 30, 2024, and $40 million and $10 million, respectively, during the nine months ended September 30, 2024 as a result of net hotel additions between the periods.

During the nine months ended September 30, 2024, franchise and management fees also increased as a result of increases of $8 million and $21 million, respectively, in termination fees received from hotels that exited our system.

Licensing fees increased $23 million and $95 million during the three and nine months ended September 30, 2024, respectively, as a result of increases in fees from our strategic partnerships, primarily resulting from activity under our co-branded credit card arrangements, and branded residential fees.

The increase for the nine months ended September 30, 2024 also included increased license fees from HGV timeshare revenues, inclusive of the impact of adding new timeshare properties to our system between the periods, including those acquired by HGV from third parties.

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

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$ 330 $ 335 (1.5) $ 922 $ 924 (0.2)

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

Owned and leased hotels revenues decreased $5 million for the three months ended September 30, 2024 on a currency neutral basis.

The $2 million decrease in owned and leased hotels revenues for the nine months ended September 30, 2024 included a $13 million decrease resulting from unfavorable fluctuations in foreign currency exchange rates, partially offset by a currency neutral increase of $11 million.

Revenues from our comparable owned and leased hotels increased $8 million and $48 million, on a currency neutral basis, during the three and nine months ended September 30, 2024, respectively, due to increases in RevPAR at our comparable owned and leased hotels of 6.7 percent and 9.0 percent, respectively.

The increases in RevPAR for the three and nine months ended September 30, 2024 were due to increases in occupancy of 2.5 percentage points and 3.1 percentage points, respectively, and ADR of 3.4 percent and 4.5 percent, respectively.

The currency neutral decreases in revenues from our non-comparable owned and leased hotels of $13 million and $37 million for the three and nine months ended September 30, 2024, respectively, included decreases related to hotels undergoing renovations during the periods, a hotel that exited our system and the business disruption that occurred at our leased hotel in Israel due to the ongoing military conflict.

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

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Other revenues $ 58 $ 45 28.9 $ 179 $ 126 42.1

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.

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

Operating Expenses

Three Months Ended Percent Six Months Ended Percent

June 30, Change June 30, Change

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

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$ 288 $ 301 (4.3) $ 833 $ 849 (1.9)

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

Owned and leased hotels expenses decreased $13 million for the three months ended September 30, 2024 on a currency neutral basis.

The $16 million decrease in owned and leased hotels expenses for the nine months ended September 30, 2024 included a $10 million decrease on a currency neutral basis and a decrease of $6 million from favorable fluctuations in foreign currency exchange rates.

Expenses from our comparable owned and leased hotels increased $6 million and $23 million, on a currency neutral basis, during the three and nine months ended September 30, 2024, respectively, as a result of increased occupancy and cost inflation, primarily due to increases in payroll and other compensation costs.

The $19 million and $33 million net decreases in owned and

leased hotels expenses, on a currency neutral basis, from our non-comparable owned and leased hotels during the three and nine months ended September 30, 2024, respectively, include decreases related to hotels undergoing renovations, a hotel that exited our system and the business disruption that occurred at our leased hotel in Israel due to the ongoing military conflict.

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

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Other expenses 26 26 — 93 80 16.3

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 decreases in depreciation and amortization expenses during the three and nine months ended September 30, 2024 were primarily due to decreases in amortization expense, driven by decreases of $10 million and $29 million for the three and nine months ended September 30, 2024, respectively, for certain intangible assets that became fully amortized during the three months ended December 31, 2023.

These decreases 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.

The increase in other expenses for the nine months ended September 30, 2024 was primarily due to costs associated with higher procurement volume from our purchasing operations.

Non-operating Income and Expenses

Three Months Ended Percent Six Months Ended Percent

June 30, Change June 30, Change

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

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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 increases in interest expense during the three and nine months ended September 30, 2024 were primarily attributable to (i) increases related to the Term Loans of $8 million and $37 million for the three and nine months ended September 30, 2024, respectively, as a result of the modifications from the November 2023 Amendment, and for the nine months ended September 30, 2024, also as a result of increases in one-month SOFR for the comparable periods, and (ii) increases of $19 million and $36 million for the three and nine months ended September 30, 2024, respectively, due to the March Senior Notes issuance and the September Senior Notes issuance.

The increase in interest expense for the nine months ended September 30, 2024 also included an increase of $11 million in variable rent for our hotels subject to finance leases, which is generally based on a percentage of hotel revenues or profits, which increased for our comparable hotels as discussed in "— Revenues." The increase for the nine months ended September 30, 2024 was partially offset by a decrease in interest expense of $16 million due to interest rate swaps used to mitigate floating interest rate risk, including an increase in the amortization of net swap gains released from accumulated other comprehensive loss from a designated interest rate swap to offset interest expense and a decrease in the amount of the net swap losses released from accumulated other comprehensive loss to interest expense 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 six months ended June 30, 2023 included:

The loss on investments in unconsolidated affiliate for the nine months ended September 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.

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.

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

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

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.

The decrease in income tax expense for the three months ended September 30, 2024 was primarily attributable to the decrease in income before income taxes.

The decrease in income tax expense for the nine months ended September 30, 2024 was primarily attributable to increased excess tax benefits from share-based compensation, partially offset by an increase in income before income taxes.

Segment Results

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.

As of September 30, 2024, our management and franchise segment included 820 managed and 7,431 franchised and licensed properties, which included 101 timeshare and 400 strategic partner hotels, consisting of 1,233,343 total rooms, and our ownership segment included 50 hotels consisting of 17,163 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 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).

For the three and nine months ended September 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 decreases 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 decreases 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 June 30, 2024, we had total cash and cash equivalents of $802 million, including $71 million of restricted cash and cash equivalents.

As of September 30, 2024, we had total cash and cash equivalents of $1,655 million, including $75 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.

19 unchanged sentences

(vii) share repurchases;

and (viii) commitments to owners in our management and franchise segment made in the normal course of business for which we are reimbursed by these owners through Hilton Honors and program fees to operate our Hilton Honors program, marketing, sales and brands programs and shared services.

and (viii) commitments to owners in our management and franchise segment made in the normal course of business for which we are reimbursed by these

owners through Hilton Honors and program fees to operate our Hilton Honors program, marketing, sales and brands programs and shared services.

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.

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%.

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 $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%.

In September 2024, we issued $1.0 billion of 2033 Senior Notes and intend to use the proceeds for general corporate purposes.

Refer to Note 6:

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

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.

Except for the March and September Senior Notes issuances 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 nine months ended September 30, 2024, we repurchased approximately 10.2 million shares of our common stock for $2,113 million.

As of September 30, 2024, approximately $1.7 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 June 30, 2024.

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

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The following table summarizes our net cash flows:

Six Months Ended Percent

June 30, Change

Nine Months Ended Percent

September 30, Change

2024 2023 2024 vs.

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Net cash provided by operating activities $ 1,431 $ 1,481 (3.4)

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

Net cash used in investing activities (367) (228) 61.0

Net cash used in financing activities (274) (1,744) (84.3)

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

Operating Activities

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 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.

The decrease in net cash inflows during the period was primarily due to a

$50 million increase in the net cash outflows related to income tax payments, primarily due to income tax refunds received during the nine months ended September 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 $77 million decrease in payments of contract acquisition costs due to the timing of certain strategic hotel developments supporting our growth during the nine months ended September 30, 2023.

Investing Activities

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

(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.

(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 nine months ended September 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 Pound Sterling to the U.S.

dollar for the nine months ended September 30, 2023.

Financing Activities

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.

The decrease in net cash used in financing activities was primarily attributable to a $2.0 billion increase in cash inflows from the March and September Senior Notes issuances.

This increase in cash inflows was partially offset by a $532 million increase in cash outflows for share repurchases.

Debt and Borrowing Capacity

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.

As of September 30, 2024, our total indebtedness, excluding the deduction for unamortized deferred financing costs and discounts, was approximately $11.3 billion.

No debt amounts were outstanding under the Revolving Credit Facility as of September 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 at or prior to its maturity date.

We do not have any material indebtedness outstanding that matures prior to 2027 other than the May 2025 Senior Notes due in May 2025, and we believe that we have sufficient sources of liquidity and access to debt financing to address the repayment of the May 2025 Senior Notes at or prior to their 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 six months ended June 30, 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 nine months ended September 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