What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-06 compared with 2024-02-07 · 132 added, 126 removed, 372 unchanged (41% of the section changed)

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Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 7, 2024, which is incorporated herein by reference.

COVID-19 Pandemic

Although our results for the year ended December 31, 2022 included a strong recovery from the pandemic when compared to the same periods in 2020 and 2021, the Omicron variant of COVID-19 limited the recovery of certain regions and segments of our business during the beginning of that period.

As such, the results for the year ended December 31, 2023 reflect improvement in comparison to the year ended December 31, 2022, when considering the pandemic.

While certain regions and customer segments, particularly business and group travel, continue to recover from the impacts of the pandemic, our global growth when comparing 2023 to 2022 is more normalized than it was during the height of the pandemic and our subsequent recovery.

Additionally, given the impacts of the pandemic on prior periods, the improvement in our results during the year ended December 31, 2023 is not necessarily indicative of future performance or future growth patterns.

Hilton is one of the largest hospitality companies in the world, with 7,530 properties comprising 1,182,937 rooms in 126 countries and territories as of December 31, 2023.

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

As of December 31, 2023, we had 180 million members in our award-winning guest loyalty program, Hilton Honors, a 19 percent increase from December 31, 2022.

Hilton is one of the largest global hospitality companies, with 8,447 properties comprising 1,268,206 rooms in 140 countries and territories as of December 31, 2024.

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

As of December 31, 2024, we had 211 million members in our award-winning guest loyalty program, Hilton Honors, an increase of 17 percent from December 31, 2023.

Segments and Regions

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(i) management and franchise and (ii) ownership.

The management and franchise segment provides services, including hotel management and licensing of our IP.

The management and franchise segment provides services, including hotel management and licensing of our IP and/or the use of our booking channels and related programs.

Revenues from this segment include:

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

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

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

(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.

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

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

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

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

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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, we expand our business with limited or no capital investment by us

as the manager or franchisor, 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.

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, license our IP or provide access to our booking channels and related programs.

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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Development pipeline

Additions (4)

1,432 154,200

Count as of period end (5)

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(1) Rounded to the nearest hundred.

(2) Openings include 411 hotels and approximately 19,500 rooms from strategic partner hotels.

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

During 2024, 409 hotels and approximately 19,400 rooms added were from strategic partner hotels.

Net unit growth for the year ended December 31, 2024 was 7.3 percent.

(3) The hotels in our development pipeline were under development throughout 118 countries and territories, including 30 countries and territories where we had no existing hotels.

(4) Of the total rooms in our development pipeline, 216,600 were under construction and 259,800 were located outside of the U.S.

(4) Additions include 423 hotels and approximately 20,100 rooms from strategic partner hotels.

(5) The hotels in our development pipeline were under development throughout 118 countries and territories, including 25 countries and territories where we had no existing hotels, with nearly half of the rooms under construction and more than half of the rooms located outside of the U.S.

Rooms under construction include rooms for hotels under construction or operating hotels that are 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.

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• Franchise and licensing fees .

Represents fees earned in connection with licensing our IP, including our brands.

Represents fees earned in connection with licensing our IP, including our brands and/or the use of our booking channels and related programs.

Under our long-term franchise contracts with hotel owners, franchisees typically pay us franchise fees that include:

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Consideration provided to incentivize hotel owners to enter into franchise contracts with us is amortized over the life of the applicable contract as a reduction to franchise and licensing fees.

Our non-hotel license agreements, for which we receive licensing fees, are predominantly with strategic partners, including co-branded credit card providers, and HGV.

Our license agreements, for which we receive licensing fees for the use of our IP and/or the use of our booking channels and related programs, are predominantly with strategic partners, including co-branded credit card providers, strategic partner hotels and HGV.

• Base and incentive management fees.

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Outside of the U.S., our fees are often more dependent on hotel profitability measures, either because of a single management fee structure where the entire fee is an incentive management fee, or because our two-tier fee structure is more heavily weighted toward the incentive management fee than the base management fee.

Consideration provided to incentivize hotel owners to enter into

management contracts with us is amortized over the life of the applicable contract as a reduction to base and other management fees.

Consideration provided to incentivize hotel owners to enter into management contracts with us is amortized over the life of the applicable contract as a reduction to base and other management fees.

• Owned and leased hotels.

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Represents amounts that are contractually reimbursed to us by property owners, either directly as costs are incurred or indirectly through monthly program fees related to certain costs and expenses supporting the operations of the related properties.

The direct reimbursements by hotel owners are primarily for payroll and related costs if the managed hotel employees are legally employed by us.

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

The direct reimbursements by property owners are primarily for payroll and related costs if the managed hotel employees are legally employed by us.

Revenues and expenses for these direct reimbursements have no net effect on operating income (loss) or net income (loss).

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The program fees serve as reimbursement for the costs related to the operation of our marketing, sales and brand programs and shared services.

Other revenues from managed and franchised properties also includes revenues related to our Hilton Honors guest loyalty program, which are primarily derived from payments from hotel franchisees and third-party owners of hotels we manage that participate in the program, as well as strategic partners.

Hilton collects program fees from strategic partner hotels when a stay that was reserved using our booking channels is completed.

Indirect reimbursements also include revenues related to our Hilton Honors guest loyalty program, which are primarily derived from payments from hotel franchisees and third-party owners of hotels we manage that participate in the program, as well as strategic partners, including strategic partner hotels.

We are contractually required to use these fees that we collect solely for these programs.

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We believe that we generally have good relationships with our third-party hotel owners, franchisees and developers and are committed to the continued growth and development of these relationships.

These relationships

exist with a diverse group of owners, franchisees and developers and are not significantly concentrated with any one particular third party.

These relationships exist with a diverse group of owners, franchisees and developers and are not significantly concentrated with any one particular third party.

Principal Components

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(ii) depreciation and amortization of property and equipment, including our finance lease right-of-use ("ROU") assets, such as buildings and furniture and equipment that are used in corporate operations or at our consolidated owned and leased hotels;

and (iii) amortization of intangible assets that were recorded at their fair value at the time of the 2007 transaction whereby we became a wholly owned subsidiary of affiliates of Blackstone Inc.

(iii) amortization of management and franchise contracts acquired from third parties and (iv) amortization of intangible assets that were recorded at their fair value at the time of the 2007 transaction whereby we became a wholly owned subsidiary of affiliates of Blackstone Inc.

(the "Merger").

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We are contractually required to use these fees solely for these programs.

We have no legal responsibility for the employees or the liabilities associated with operating franchised properties or certain of our managed hotels, predominately those located outside of the U.S.

Other expenses from managed and franchised properties also includes expenses for the operation of our Hilton Honors guest loyalty program.

We have no legal responsibility for the employees or the liabilities associated with operating franchised properties, strategic partner hotels or certain of our managed hotels, predominately those located outside of the U.S.

Other expenses from managed and franchised properties also includes expenses for the operation of our Hilton Honors guest loyalty program as well as credit losses for estimated uncollectible Hilton Honors and program fees.

Factors Affecting our Costs and Expenses

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Additionally, the general and administrative expenses of operating a global business also include fixed personnel costs, rent, property taxes, insurance and utilities.

The effectiveness of any cost-cutting efforts related to owning and leasing hotels or corporate operations is limited by the

amount of inherent fixed costs.

However, we have taken steps to manage our fixed costs to levels we believe are appropriate to maximize profitability and respond to market conditions, while continuing to optimize value for the experiences of our customers, owners and Hilton employees, which supports the long-term sustainability of our brands and business.

The effectiveness of any cost-cutting efforts related to owning and leasing hotels or corporate operations is limited by the amount of inherent fixed costs.

However, we have taken steps to manage our fixed costs to levels we believe are

appropriate to maximize profitability and respond to market conditions, while continuing to optimize value for the experiences of our customers, owners and Hilton employees, which supports the long-term sustainability of our brands and business.

• Changes in depreciation and amortization expenses.

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As of December 31, 2024, the only remaining finite-lived intangible assets that resulted from the Merger were those related to leases, as included in other intangible assets.

We capitalize management and franchise contract intangibles acquired from third parties and amortize the amounts over their useful lives.

Additionally, changes in depreciation expense may be driven by renovations of existing hotels, acquisition or development of new hotels, the disposition of existing hotels or corporate facilities through sale, closure or lease termination, lease renewals, expenditures related to our corporate facilities or changes in estimates of the useful lives of our assets.

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When comparing our results of operations between reporting periods, there may be material portions of the changes in our revenues or expenses that are derived from fluctuations in foreign currency exchange rates experienced between those periods.

We hedge foreign currency exchange-based cash flow variability of certain of our fees using forward contracts designated as hedging instruments.

We also hold short-term forward contracts to offset exposure to fluctuations in certain of our foreign currency denominated cash balances and intercompany financing arrangements, and we have not currently elected to designate these forward contracts as hedging instruments.

We hedge foreign currency exchange-based cash flow variability of certain of our fees using foreign currency forward contracts designated as hedging instruments.

We also hold short-term foreign currency forward contracts to offset exposure to fluctuations in certain of our foreign currency denominated cash balances and intercompany financing arrangements, and we have not currently elected to designate these forward contracts as hedging instruments.

The hospitality industry is seasonal in nature.

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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 7,438 hotels in our system as of December 31, 2023, 5,906 hotels were classified as comparable hotels.

Our 1,532 non-comparable hotels as of December 31, 2023 included 359 hotels, or less than five 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 8,342 hotels in our system as of December 31, 2024, 409 hotels were strategic partner hotels and 6,050 hotels were classified as comparable hotels.

Our 1,883 non-comparable hotels as of December 31, 2024 included (i) 1,005 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) 878 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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(viii) amortization of contract acquisition costs;

(ix) the net effect of our cost reimbursement revenues and expenses included in other revenues and other expenses from managed and franchised properties;

(ix) other revenues from managed and franchised properties and other expenses from managed and franchised properties;

and (x) other items.

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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 both other revenues from managed and franchised properties and other expenses from managed and franchised properties as we contractually do not operate the related programs to generate a profit and have the contractual rights to adjust future collections to recover prior period expenditures.

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

The indirect reimbursements from property owners are typically billed and collected monthly, based on the underlying hotel's sales or usage (e.g., gross room revenue or number of reservations processed), while the associated costs are recognized as incurred by Hilton, creating timing differences, with the net effect impacting net income

(loss) in the reporting period.

These timing differences are due to our discretion to spend in excess of revenues earned or less than revenues earned in a single period to ensure that the programs are operated in the best long-term interests of our property owners.

However, over the life of the operation of these programs, the expenses incurred related to the indirect reimbursements are designed to equal the revenues earned from the indirect reimbursements over time such that, in the long term, the programs will not earn a profit or generate a loss and do not impact our economics, either positively or negatively.

Therefore, the net effect of our cost reimbursement revenues and expenses is not used by management to evaluate our operating performance, determine executive compensation or make other operating decisions, and we exclude their impact when evaluating period over period performance results.

EBITDA and Adjusted EBITDA are not recognized terms under U.S.

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RevPAR $ 76.49 1.6 %

All regions showed improvement in RevPAR during the year ended December 31, 2023 driven by both ADR, including the impact of inflation, and occupancy gains.

Additionally, our group business showed the highest percentage improvement in RevPAR during the year of all of our customer segments, with RevPAR from both business and leisure travelers also improving.

The growth in ADR and occupancy in the U.S.

and Americas (excluding U.S.) during the period was led by returning group and business travelers;

however, as travel patterns continued to normalize from the impacts of the pandemic, the growth year over year was less pronounced than prior year improvements.

Additionally, Canada removed all COVID-19 travel restrictions in the fourth quarter of 2022, which contributed to the increase in RevPAR for 2023.

Europe was led by group business and benefited from inbound travel, and our hotels in the United Kingdom drove the increase in RevPAR from business and leisure travel.

The RevPAR improvement in MEA was driven by increased ADR across all customer segments, particularly from group business in the first half of the year and steady business and leisure improvements throughout the year.

APAC led year-over-year RevPAR improvement on a regional basis, primarily due to business travelers and the removal of cross-border travel and COVID-19 restrictions since the latter half of 2022, particularly in Japan and China.

System-wide RevPAR increased during the year ended December 31, 2024 supported by improvements in system-wide ADR, which included the impact of inflation, and an increase in occupancy in all regions, which was driven by an increase in group demand, with leisure and business demand also improving modestly.

The increase in RevPAR in the U.S.

was driven by an increase in bookings due to an increase in weekday travel, primarily for groups, with consistent growth in business demand.

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

The RevPAR increase in Europe was driven by continued growth in inbound international leisure travel, which increased in several major cities that held large popular sporting events, as well as steady business demand.

The RevPAR improvement in MEA was driven by increased demand from special regional events as well as more relaxed travel policies.

The increase in Asia Pacific was due to growth in countries and territories outside of China across the region, driven by increased holiday travel, less restrictive tourism policies and special events in the region, partially offset 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 table below provides a reconciliation of net income to EBITDA and Adjusted EBITDA:

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EBITDA 2,498 2,303

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

Gain on sales of assets, net

Loss on foreign currency transactions

Loss on investments in unconsolidated affiliate (1)

Loss on debt guarantees (2)

FF&E replacement reserves 57 63

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Amortization of contract acquisition costs 50 43

Net other expenses from managed and franchised properties 337 39

Other revenues from managed and franchised properties (3)

(6,428) (5,827)

Other expenses from managed and franchised properties (3)

Other adjustments (4)

Adjusted EBITDA $ 3,429 $ 3,089

(1) Amount includes losses recognized related to equity and debt financing that we had previously provided to an unconsolidated affiliate with underlying investments in certain hotels that we currently manage or franchise;

refer to Note 6:

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

(2) Amount for the year ended December 31, 2022 was less than $1 million.

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," net losses (gains) on asset dispositions, severance and other items.

Amount for the year ended December 31, 2023 also includes expenses recognized in connection with the amendment of our senior secured term loan facilities (the "Term Loans").

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

refer to Note 20:

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

(3) Amounts include results from the operation of programs conducted for the benefit of property owners and exclude cash receipts recorded as deferred revenues on our consolidated balance sheets related to these programs.

Under the terms of the related contracts, we do not operate these programs to generate a profit and have the contractual rights to adjust future collections to recover prior period expenditures.

(4) Amount for the year ended December 31, 2024 includes losses for the full or partial settlement of certain pension plans and restructuring costs related to one of our leased properties as well as transaction costs incurred for acquisitions.

Amounts for the years ended December 31, 2024 and 2023 include transaction costs resulting from the amendments of our credit agreement governing the senior secured term loan facilities ("Term Loans") in June 2024 and November 2023, respectively.

Amounts for both periods also 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.

Year Ended December 31, Percent Change

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Total management fees $ 659 $ 616 7.0

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

During the year ended December 31, 2023, RevPAR at our comparable franchised and managed hotels increased 9.1 percent and 23.2 percent, respectively, due to increased occupancy of 3.1 percentage points and 9.6 percentage points, respectively, and increased ADR of 4.4 percent and 6.1 percent, respectively, which included increases due to inflation.

Further, as new hotels enter our system, we expect such hotels to increase our franchise and management fees.

Including new development and ownership type transfers, from January 1, 2022 to December 31, 2023, we added 664 franchised and managed properties on a net basis, providing an additional 102,100 rooms to our management and franchise segment, which also contributed to the increases in franchise and management fees.

Additionally, licensing fees increased 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 during the period, including those acquired by HGV from third-party companies.

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

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

During the year ended December 31, 2024, RevPAR at our comparable franchised and managed hotels increased 1.8 percent and 5.2 percent, respectively, contributing to currency neutral increases in franchise and management fees of $61 million and $37 million, respectively, as a result of increased occupancy of 0.4 percentage points and 2.1 percentage points, respectively, and increased ADR of 1.3 percent and 2.1 percent, respectively.

Further, franchise and management fees included net increases of $57 million and $10 million, respectively, during the year ended December 31, 2024 as a result of net hotel additions and increases of $9 million and $12 million, respectively, in termination fees.

Licensing fees increased $98 million as a result of an increase in fees from our strategic partnerships, primarily resulting from activity under our co-branded credit card arrangements, HGV and branded residential fees.

Increased fees from HGV resulted from increased timeshare revenues earned by HGV, inclusive of the impact of adding new timeshare properties to our system during the period, including those acquired by HGV from third parties.

Year Ended December 31, Percent Change

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Owned and leased hotels revenues $ 1,255 $ 1,244 0.9

The $168 million increase in owned and leased hotel revenues included a $165 million currency neutral increase and a $3 million increase resulting from favorable fluctuations in foreign currency exchange rates.

Revenues from our comparable owned and leased hotels increased $206 million, on a currency neutral basis, due to the increase in RevPAR at our comparable owned and leased hotels of 36.1 percent, which is reflective of the ongoing easing of travel restrictions in the latter half of 2022, which carried improved performance into 2023, particularly in Japan, as well as improved performance in the U.K.

The increase in RevPAR was due to increases in occupancy of 11.9 percentage points and ADR of 13.9 percent, which included an increase due to inflation.

The $41 million currency neutral decrease in revenues from our non-comparable owned and leased hotels included decreases from properties that exited our system after December 31, 2021, as well as the impact of properties undergoing renovations during the period and the business interruption that occurred at our leased hotel in Israel due to the ongoing military conflict.

The $11 million increase in owned and leased hotel revenues included a currency neutral increase of $23 million, partially offset by a $12 million decrease resulting from unfavorable fluctuations in foreign currency exchange rates.

Revenues from our comparable owned and leased hotels increased $59 million, on a currency neutral basis, due to the increase in RevPAR at our comparable owned and leased hotels of 8.1 percent.

The increase in RevPAR was due to increases in occupancy of 2.5 percentage points and ADR of 4.7 percent.

Revenues from our non-comparable owned and leased hotels decreased $36 million, on a currency neutral basis, primarily due to hotels undergoing renovations, offset by hotels that underwent renovations in the prior year, hotels that exited our system between the periods and the business disruption, caused by military conflict, that occurred at our leased hotel in Israel.

Year Ended December 31, Percent Change

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Other revenues $ 232 $ 178 30.3

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

The increase in other revenues was 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

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$ 1,126 $ 1,141 (1.3)

The $142 million increase in owned and leased hotels expenses included a $143 million increase on a currency neutral basis, which was partially offset by a $1 million decrease resulting from favorable fluctuations in foreign currency exchange rates.

Expenses from our comparable owned and leased hotels increased $137 million, on a currency neutral basis, as a result of increased occupancy and cost inflation both driving higher labor costs, utilities and other operating expenses, as well as an increase in rent expense.

The net increase in owned and leased hotels expenses from our non-comparable owned and leased hotels included increased expenses for FF&E replacement reserves related to hotels undergoing renovations and decreases from properties that exited our system after December 31, 2021, as well as from the business interruption that occurred at our leased hotel in Israel.

The $15 million decrease in owned and leased hotels expenses included a decrease of $10 million on a currency neutral basis and a $5 million decrease resulting from favorable fluctuations in foreign currency exchange rates.

Expenses from our comparable owned and leased hotels increased $37 million, on a currency neutral basis, as a result of increased occupancy and cost inflation, primarily due to increases in payroll and other compensation costs, as well as rent expense and expenses related to FF&E replacement reserves.

Operating expenses from our non-comparable owned and leased hotels decreased $47 million, on a currency neutral basis, primarily due to hotels undergoing renovations, hotels that exited our system and the business disruption, caused by military conflict, that occurred at our leased hotel in Israel.

Year Ended December 31, Percent Change

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

The decrease in depreciation and amortization expenses was primarily due to a decrease in amortization expense, driven by the full amortization of:

(i) certain intangible assets in 2023 that were recorded at the time of the Merger and (ii) certain software project costs during 2023 and 2022.

The decrease in amortization expense was partially offset by an increase related to software additions between the periods.

The decrease in depreciation and amortization expenses was primarily driven by a decrease of $32 million for certain intangible assets that became fully amortized during the year ended December 31, 2023.

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

The increase in general and administrative expenses was primarily due to an increase in costs related to payroll and other compensation costs.

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"Fair Value Measurements" in our consolidated financial statements for additional information.

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 increase in other expenses was primarily due to costs associated with higher procurement volume from our purchasing operations.

Non-operating Income and Expenses

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Interest expense $ (569) $ (464) 22.6

Gain (loss) on foreign currency transactions

(16) 5 NM (1)

Loss on foreign currency transactions

(12) (16) (25.0)

Loss on investments in unconsolidated affiliate

— (92) NM (1)

Other non-operating income, net

Other non-operating income (loss), net

(6) 39 NM (1)

Income tax expense (244) (541) (54.9)

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

In November 2023, we amended the credit agreement governing our Term Loans, which resulted in an increase to the weighted average fixed spread on the overall variable rate on the Term Loans, and increased the outstanding balance by $500 million, both of which contributed to the increase in interest expense.

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 the net effect of the amortization of gains (losses) from accumulated other comprehensive loss related to interest rate swaps that we used to mitigate floating interest rate risk, including swaps that were dedesignated in prior periods.

"Debt" in our consolidated financial statements for additional information on the interest rates on our indebtedness, which includes discussion of the Term Loans amendment.

In November 2023, we amended the credit agreement governing the Term Loans and increased borrowings by $500 million (the "November 2023 Amendment").

In addition, in both March 2024 and in September 2024 we issued $1.0 billion Senior Notes (collectively, the "March and September Senior Notes issuances") for a total aggregate principal amount of $2.0 billion for the year.

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

The increase in interest expense was primarily attributable to (i) an increase related to the Term Loans of $31 million as a result of the increase in the outstanding borrowings resulting from the November 2023 Amendment and (ii) an increase of $66 million due to the March and September Senior Notes issuances.

The net gains and losses on foreign currency transactions are a 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 included:

(i) a $44 million other-than-temporary impairment loss on our investment in one of our third-party unconsolidated affiliates (the "Fund"), which has underlying investments in certain hotels that we currently manage or franchise, and (ii) $48 million of credit losses on financing receivables provided to the Fund.

(i) a $44 million other-than-temporary impairment loss on our investment in one of our third-party unconsolidated affiliates (the "Fund"), which has underlying investments in certain hotels that we manage or franchise, and (ii) $48 million of credit losses on financing receivables provided to the Fund.

"Loss on Investments in Unconsolidated Affiliate" and Note 12:

"Fair Value Measurements" in our consolidated financial statements for additional information.

Other non-operating income, 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 decrease in other non-operating income, net included the impact of an increase in the interest cost component of our net periodic pension cost, offset by an increase in our interest income, both resulting from increases in interest rates.

Additionally, the year ended December 31, 2023 included $10 million of fees incurred in connection with the Term Loans amendment, while the year ended December 31, 2022 included an $11 million gain resulting from the remeasurement of certain investments in unconsolidated affiliates;

the loss related to our investment in the Fund is presented separately in "loss on investments in unconsolidated affiliate" in our consolidated statement of operations, as discussed above.

The increase in income tax expense was primarily attributable to increases in uncertain tax position reserves related to our guest loyalty program.

The net change in other non-operating income (loss), net during the year ended December 31, 2024 was primarily driven by an increase in losses on debt guarantees for certain hotels that Hilton manages.

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

The decrease in income tax expense was primarily attributable to the $270 million benefit for the tax claim for increased foreign tax basis for certain brand assets, as well as an increase of $64 million in uncertain tax position reserves related to our guest loyalty program in 2023 that did not recur in 2024, partially offset by a $23 million increase to income tax expense attributable to the increase in income before income taxes.

For additional information, see Note 14:

“Income Taxes” in our consolidated financial statements.

Segment Results

As of December 31, 2023, our management and franchise segment included 800 managed and 6,679 franchised properties, respectively, consisting of 1,165,446 total rooms, and our ownership segment included 51 hotels consisting of 17,491 total rooms.

As of December 31, 2024, our management and franchise segment included 831 managed and 7,566 franchised and licensed properties, which included 105 timeshare and 409 strategic partner hotels, consisting of 1,251,068 total rooms, and our ownership segment included 50 hotels consisting of 17,138 total rooms.

Refer to Note 19:

"Business Segments" in our 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 year ended December 31, 2023, refer to "—Revenues" for further discussion of the increase in our franchise and licensing fees and total management fees, which are correlated to 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 are correlated to our ownership segment revenues.

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

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

Franchise and licensing fees and total management fees including fees charged to our ownership segment and excluding amortization of contract acquisition costs reflects our management and franchise segment revenues and segment Adjusted EBITDA.

For the year ended December 31, 2024, refer to "—Revenues" for further discussion of the increase in our franchise and licensing fees and total management fees.

For the year ended December 31, 2024, refer to "—Revenues" for further discussion of the primary changes in revenues from our owned and leased hotels, which reflect our ownership segment revenues.

Our ownership segment Adjusted EBITDA reflects owned and leased hotels revenues, less (i) owned and leased hotels expenses, excluding FF&E replacement reserves expenses, share-based compensation expenses and certain other items, less (ii) fees charged by our management and franchise segment to our ownership segment, plus (iii) income (losses) from hotels owned or leased by entities in which we own a noncontrolling financial interest.

Refer to "—Operating Expenses" for further discussion of the changes in owned and leased hotels expenses.

Liquidity and Capital Resources

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• taxes and compliance costs;

• scheduled debt maturities and interest payments on our outstanding indebtedness, which, excluding finance lease liabilities, are estimated to be approximately $502 million in 2024;

• scheduled debt maturities and interest payments on our outstanding indebtedness, which, excluding finance lease liabilities, are estimated to be approximately $1.1 billion in 2025;

• lease payments under our finance and operating leases, which include minimum lease payments that are estimated to be approximately $42 million and $152 million, respectively, in 2025;

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• capital and maintenance expenditures for required renovations and maintenance at the hotels within our ownership segment;

• corporate capital and information technology expenditures;

• dividends as declared;

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• share repurchases;

• 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 program fees to operate our marketing, sales and brand programs and shared services.

• 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 brand programs and shared services.

During the year ended December 31, 2024, we repurchased approximately 13.3 million shares of our common stock for $2.9 billion.

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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.

We may from time to time issue or incur or increase our capacity to incur new debt and/or purchase our outstanding debt through underwritten offerings, open market transactions, privately negotiated transactions or otherwise.

Issuances or incurrence of new debt (or an increase in our capacity to incur new debt) and/or purchases or retirements of outstanding debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors.

Issuances or incurrence of new debt (or an increase in our capacity to incur new debt) and/or purchases or retirements of outstanding debt, if

any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors.

The amounts involved may be material.

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Net cash provided by operating activities $ 2,013 $ 1,946 3.4

Net cash used in investing activities (305) (123) NM (1)

Net cash used in investing activities (446) (305) 46.2

Net cash used in financing activities (1,045) (2,040) (48.8)

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

see additional details below.

Operating Activities

Cash flows from operating activities were primarily generated from management and franchise 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 the 12.1 percent increase in RevPAR at our comparable managed and franchised properties.

The increase in cash inflows generated by operating activities was partially offset by a $152 million increase in payments of contract acquisition costs due to the timing of certain strategic hotel developments supporting our growth, as well as an $89 million increase in the net cash outflows related to income tax payments.

In April 2020, we pre-sold Hilton Honors points to American Express and, in the second quarter of 2022, all of those points had been used by American Express.

As such, American Express resumed purchasing Hilton Honors points with cash in connection with a co-branded credit card arrangement with them, which contributed to the increase in our operating cash flows during the year ended December 31, 2023.

We expect American Express to continue to purchase points with cash under the co-branded credit card arrangement in future periods.

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 in net cash inflows during the period was primarily due to 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 net hotel additions and a $128 million decrease in payments of contract acquisition costs due to the timing of certain strategic hotel developments supporting our growth during the year ended December 31, 2023.

The increase in cash provided by operating activities was partially offset by an outflow of $77 million for debt guarantee payments and an increase in cash paid for interest of $70 million.

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;

(ii) capital expenditures for property and equipment related to corporate property and the renovation of certain hotels in our ownership segment, which increased between the periods due to the timing of certain corporate and hotel capital expenditure projects;

and (iii) equity and debt financing that we provided to unconsolidated affiliates and owners of hotels that we manage or franchise to support our strategic objectives.

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 ("GBP") to the U.S.

(i) the acquisitions of (a) the Graduate brand and the associated franchise contracts and (b) a controlling financial interest in Sydell Hotels & Resorts, LLC and Sydell Holding Company UK Ltd, both completed during the year ended December 31, 2024, (ii) capitalized software costs that were related to various systems initiatives for the benefit of both our property 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.

dollar for the years ended December 31, 2024 and 2023.

Financing Activities

Net cash used in financing activities during both the years ended December 31, 2023 and 2022 primarily related to the return of capital to stockholders, including dividends, which resumed in the second quarter of 2022, as well as share repurchases, which resumed in March 2022, after both programs were suspended in 2020.

The increase in net cash used in financing activities was partially offset by the increase in net cash inflows related to additional borrowings on the Term Loans of $500 million, as well as those related to settlements of our interest rate swap with a financing component for which we receive a variable rate and pay a fixed rate, due to the increase in the variable interest rate.

The decrease in net cash used in financing activities during the year ended December 31, 2024 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 $555 million increase in cash outflows for share repurchases and payment of the related excise taxes and additional borrowings on the Term Loans of $500 million during the year ended December 31, 2023 as part of the November 2023 Amendment.

Debt and Borrowing Capacity

As of December 31, 2024, our total indebtedness, excluding the deduction for unamortized deferred financing costs and discounts, was approximately $11.2 billion.

No debt amounts were outstanding under our senior secured revolving credit facility as of December 31, 2023, which had an available borrowing capacity of $1,913 million after considering $87 million of outstanding letters of credit.

No debt amounts were outstanding under our Revolving Credit Facility as of December 31, 2024, which had an available borrowing capacity of $1,910 million after considering $90 million of outstanding letters of credit.

For additional information on our total indebtedness and guarantees on our debt, refer to Note 10:

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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.

However, we do not have any material indebtedness outstanding that matures prior to May 2025.

We have $500 million of 5.375% Senior Notes due in May

2025 ("May 2025 Senior Notes") and have no other material indebtedness that matures prior to April 2027.

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 as well as all indebtedness that becomes due thereafter.

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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• perform a quantitative analysis to identify both the existence and the amount of an impairment loss.

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

The estimated fair value is based on internal projections of expected future cash flows and operating plans, discount rates and market conditions relative to the operations of the reporting unit or brand, as applicable.

Changes in the estimates and assumptions used in our impairment analysis, or changes in the factors that we consider that would affect these estimates and assumptions, such as those described above, could result in impairment losses, which could be material.

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The cost of the points expected to be redeemed includes further estimates of available room nights, occupancy rates, room rates and any changes to the Hilton Honors program, including devaluation or appreciation of points based on changes in the number of points required to redeem a reward.

Any amounts received related to the issuance of points that are in excess of the cost per point, as determined by an actuary, are recorded as deferred revenue in our consolidated balance sheet and recognized as revenue upon point redemption.

Any amounts received related to the issuance of points that are in excess of the cost per point, as determined with assistance from an actuary, are recorded as deferred revenue in our consolidated balance sheet and recognized as revenue upon point redemption.

We recognize revenue for point redemptions in the amount we expect to retain in excess of the cost per point, inclusive of estimated breakage, and limit the revenue recognized to an amount that is probable to not result in a significant reversal in the cumulative revenue recognized when breakage occurs.

In addition to the Hilton Honors fees we receive from hotel owners to operate the program, we earn fees from strategic partnerships, including co-branded credit card arrangements, for a license to use our IP and the issuance of Hilton Honors points.

The allocation of the overall fees from the strategic partnerships between the IP license and the Hilton Honors points is based on their estimated standalone selling prices.

In addition to the Hilton Honors fees we receive from property owners to operate the program, we earn fees from strategic partnerships, including co-branded credit card arrangements, for a license to use our IP and the issuance of points.

The allocation of the overall fees from the strategic partnerships between the IP license and the points is based on their estimated standalone selling prices.

The estimated standalone selling price of the IP license is determined using a relief-from-royalty valuation method incorporating statistical formulas based on factors that require significant judgment, including estimates of the usage of the strategic partner's goods or services, an appropriate royalty rate and a discount rate applied to the projected cash flows.

The estimated standalone selling price of the future reward redemptions of Hilton Honors points under the strategic partnerships is calculated using a discounted cash flow analysis with the same assumptions as the point redemption liability discussed above, adjusted for an appropriate margin.

Changes in our estimates and assumptions that are used to determine our estimated cost per point and the allocation of fees from strategic partnerships between the IP license fee and the Hilton Honors points could result in material changes in the balances of our liability for guest loyalty program and deferred revenues in our consolidated balance sheet.

The estimated standalone selling price of the future reward redemptions of points under the strategic partnerships is calculated using a discounted cash flow analysis with the same assumptions as the point redemption liability discussed above, adjusted for an appropriate margin.

Changes in our estimates and assumptions that are used to determine our estimated cost per point and the allocation of fees from strategic partnerships between the IP license fee and the points could result in material changes in the balances of our liability for guest loyalty program and deferred revenues in our consolidated balance sheet.

Further, the estimates and assumptions used for the allocation of fees could result in material changes to our licensing fees and other revenues from managed and franchised properties recognized in our consolidated statement of operations.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis