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Item 8. Financial Statements and Supplementary Data

2025-02-06 compared with 2024-02-07 · 324 added, 189 removed, 1147 unchanged (31% of the section changed)

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Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022

Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Noncont rolling Interests and Stockholders' Equity (Deficit) for the years ended December 31, 2024, 2023 and 2022

Notes to Consolidated Financial Statements

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, cash flows and noncontrolling interests and stockholders' equity (deficit) for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 6, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

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

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

(the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, cash flows and noncontrolling interests and stockholders’ equity (deficit) for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S.

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Description of the Matter

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

The Company had deferred revenues of $1,032 million and a liability for guest loyalty program of $2,974 million as of December 31, 2024 associated with the Hilton Honors guest loyalty and marketing program (the “Loyalty Program”).

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

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

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

Auditing the Loyalty Program is complex due to:

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

Auditing the Loyalty Program is complex due to the complexity of models and high volume of data used to monitor and account for the Loyalty Program results.

How We Addressed the Matter in Our Audit

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

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

For example, we tested controls over the accounting model and data used in recording revenue when Hilton Honors points are redeemed.

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

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

Accounting for Income Taxes

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TOTAL ASSETS $ 16,522 $ 15,401

LIABILITIES AND EQUITY (DEFICIT)

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY (DEFICIT)

Current Liabilities:

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Commitments and contingencies – see Note 20

Redeemable Noncontrolling Interests 17 —

Equity (Deficit):

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Total deficit ( 3,706 ) ( 2,347 )

TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 15,401 $ 15,512

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY (DEFICIT) $ 16,522 $ 15,401

See notes to consolidated financial statements.

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Total expenses 8,809 8,010 6,679

Loss on sales of assets, net

Gain on sales of assets, net

Operating income

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( 12 ) ( 16 ) 5

Loss on debt extinguishment

Loss on investments in unconsolidated affiliate — ( 92 ) —

Other non-operating income, net

Other non-operating income (loss), net

Income before income taxes

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1,539 1,151 1,257

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

Net income attributable to redeemable and nonredeemable noncontrolling interests ( 4 ) ( 10 ) ( 2 )

Net income attributable to Hilton stockholders

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Total other comprehensive income (loss)

( 52 ) ( 26 ) 73

Comprehensive income

1,487 1,125 1,330

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

Comprehensive income attributable to redeemable and nonredeemable noncontrolling interests ( 3 ) ( 9 ) ( 2 )

Comprehensive income attributable to Hilton stockholders

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Impairment losses — 38 —

Loss on sales of assets, net — — 7

Gain on sales of assets, net

Loss (gain) on foreign currency transactions 12 16 ( 5 )

Loss on debt extinguishment

Loss on investments in unconsolidated affiliate — 92 —

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Accounts payable, accrued expenses and other 155 181 198

Change in operating lease right-of-use assets 73 105 96

Change in operating lease liabilities ( 98 ) ( 113 ) ( 123 )

Change in deferred revenues 330 215 174

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( 96 ) ( 151 ) ( 39 )

Cash paid for acquisitions, net of cash acquired ( 236 ) — —

Issuance of financing receivables ( 15 ) ( 22 ) ( 46 )

Proceeds from (payments for) undesignated derivative financial instruments

( 26 ) 79 ( 5 )

Payments received on financing receivables

Settlements of undesignated derivative financial instruments ( 7 ) ( 26 ) 79

Proceeds from asset dispositions 8 5 —

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Repayment of debt ( 330 ) ( 183 ) ( 48 )

Debt issuance costs and redemption premium

Debt issuance costs

( 32 ) ( 20 ) —

Dividends paid ( 150 ) ( 158 ) ( 123 )

Repurchases of common stock ( 2,338 ) ( 1,590 ) —

Repurchases of common stock, including excise tax payments

( 2,893 ) ( 2,338 ) ( 1,590 )

Share-based compensation tax withholdings

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Effect of exchange rate changes on cash, restricted cash and cash equivalents ( 21 ) ( 12 ) ( 19 )

Net decrease in cash, restricted cash and cash equivalents

Net increase (decrease) in cash, restricted cash and cash equivalents

501 ( 411 ) ( 226 )

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HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY (DEFICIT)

(in millions)

Equity (Deficit) Attributable to Hilton Stockholders

Redeemable Noncontrolling Interests Additional

Capital Accumulated

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

Net income (loss)

— — — — 410 — ( 3 ) 407

Net income — — — — — 1,255 — 2 1,257

Other comprehensive income (loss),

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— — — — — — 73 — 73

Dividends — — — — — ( 123 ) — — ( 123 )

Repurchases of common stock — ( 12.3 ) — ( 1,608 ) — — — — ( 1,608 )

Share-based compensation

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Balance as of December 31, 2022 — 267.9 3 ( 6,040 ) 10,831 ( 5,190 ) ( 706 ) 4 ( 1,098 )

— — — — 1,255 — 2 1,257

Net income — — — — — 1,141 — 10 1,151

Other comprehensive income (loss),

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— — — — — — ( 31 ) — ( 31 )

Other comprehensive income (1)

Other comprehensive loss

— — — — — — ( 25 ) ( 1 ) ( 26 )

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

Net income — — — — 1,141 — 10 1,151

Acquisition date fair value of redeemable noncontrolling interests 22 — — — — — — — —

Net income (loss) ( 5 ) — — — — 1,535 — 9 1,544

Other comprehensive income (loss),

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$ 17 241.8 $ 3 $ ( 11,256 ) $ 11,130 $ ( 2,822 ) $ ( 782 ) $ 21 $ ( 3,706 )

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

(1) Amounts include excise tax of $ 25 million and $ 22 million for the years ended December 31, 2024 and 2023, respectively, as imposed by the Inflation Reduction Act of 2022.

(2) As of December 31, 2024 and 2023, 3.0 billion shares of preferred stock with a par value of $ 0.01 were authorized with no such shares issued.

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

See notes to consolidated financial statements.

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Our consolidated financial statements include the accounts of our wholly owned subsidiaries and other non-wholly owned entities in which we have a controlling financial interest, including variable interest entities ("VIEs") for which we are the primary beneficiary.

Non-wholly owned entities in which we have a controlling financial interest generally comprise majority owned entities that own or lease real estate.

Non-wholly owned entities in which we have a controlling financial interest primarily comprise majority owned entities that own or lease real estate.

The determination of a controlling financial interest is based upon the terms of the governing agreements of the respective entities, including the evaluation of rights held by third-party ownership interests.

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All material intercompany transactions and balances have been eliminated in consolidation.

References in these financial statements to net income (loss) attributable to Hilton stockholders and Hilton stockholders' equity (deficit) do not include noncontrolling interests, which represent the third-party ownership interests of our consolidated, non-wholly owned entities and are reported separately.

References in these financial statements to net income (loss) attributable to Hilton stockholders and Hilton stockholders' equity (deficit) do not include redeemable and nonredeemable noncontrolling interests, which represent the third-party ownership interests of our consolidated, non-wholly owned entities and are reported separately.

Use of Estimates

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(i) fees earned from management and franchise contracts with third-party hotel owners;

(ii) fees earned from license agreements with strategic partners, including co-branded credit card providers, and Hilton Grand Vacations Inc.

(ii) fees earned from license agreements with strategic partners, including co-branded credit card providers, third-party hotels we do not manage or franchise but that use our booking channels and related programs ("strategic partner hotels"), and Hilton Grand Vacations Inc.

and (iii) our owned and leased hotels.

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

We allocate the variable fees to the distinct

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

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

We allocate the variable fees to the

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

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

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

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

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

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

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

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

• Royalty fees are generally based on a percentage of the hotel's monthly gross room revenue and, in some cases, may also include a percentage of gross food and beverage revenues and other revenues, as applicable.

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

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

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

• Licensing fees for the use of our IP and/or booking channels and related programs are earned from:

(ii) strategic partner hotels, which are recognized as revenue in the period when the room stay occurs;

and (iii) a license agreement with HGV for its timeshare business, which are typically billed monthly and recognized as revenue at the same time the fees are billed.

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

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

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

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

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

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

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

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

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

Revenue is recognized based on the amount of expenses incurred by Hilton, which are presented as other expenses from managed and franchised properties in our consolidated statement of operations, and results in no net effect on operating income (loss) or net income (loss).

These amounts are reimbursed to us by the property owner at least on a monthly basis.

• Indirect reimbursements include reimbursements received by us for marketing and sales expenses and other expenses associated with our brand programs and shared services, which are reimbursed by program fees billed and collected from our managed and franchised properties and strategic partner hotels.

Indirect reimbursements also include reimbursements for expenses incurred to operate the Hilton Honors program (see the "—Hilton Honors" below for additional information).

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

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

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

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

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

Additionally, if we expend in excess of amounts collected, we have a contractual right to adjust future collections to recover prior period expenditures.

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

The terms of the fees earned under the contract relate to a specific outcome of providing the services (e.g., hotel room sales) or to Hilton's efforts (e.g., costs) to satisfy the performance obligations.

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

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

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

For discussion on revenue recognition for point redemptions, refer to the "—Hilton Honors" below.

Owned and leased hotels revenues

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

Owned and leased hotels revenues are reduced upon issuance of Hilton Honors points for Hilton Honors members' paid stay transactions and are recognized when Hilton Honors points are redeemed for a free or discounted stay at an owned or leased hotel (see the "Hilton Honors" section below for additional information).

A portion of owned and leased hotels revenues are deferred upon issuance of Hilton Honors points for Hilton Honors members' paid stay transactions, and revenue is recognized when Hilton Honors points are redeemed for a free or discounted stay at an owned or leased hotel (see "—Hilton Honors" below for additional information).

Although the transaction prices of hotel room sales, goods and other services are generally fixed and based on the respective room reservation or other agreement, an estimate to reduce the transaction price is required if a discount is expected to be provided to the customer.

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On occasion, the hotel may also provide the customer with a substantive right to a free or discounted good or service in conjunction with a room reservation or banquet contract (e.g., free breakfast or free room night for every four room nights reserved).

This substantive right is considered a separate performance obligation to which a portion of the transaction price is allocated based on the estimated standalone selling price of the good or service, adjusted for the likelihood the hotel guest will exercise such right, and it is recognized as revenue when the good or service is redeemed.

Revenue is recognized when the substantive right to a free or discounted good or service is redeemed.

Other revenues

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Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with original maturities, when purchased, of three months or less.

Cash and cash equivalents include all highly liquid investments with maturities of three months or less at the date of purchase.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents include cash balances established as collateral for certain guarantees and insurance, including self-insurance and furniture, fixtures and equipment replacement ("FF&E") reserves required under certain lease agreements.

Accounts Receivable

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

Allowance for Credit Losses

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

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

Expected credit losses on off-balance-sheet commitments, such as guarantees, letters of credit and financing commitments are typically included in other long-term liabilities in our consolidated balance sheet.

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

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Our reporting units are the same as our operating segments as described in Note 19:

"Business Segments." We evaluate goodwill for potential impairment by comparing the carrying value of the reporting unit to its fair value.

When we evaluate goodwill for potential impairment, generally, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

"Business Segments." When we evaluate goodwill for potential impairment, generally, we first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value.

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

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The changes in our goodwill balances during the years ended December 31, 2024 and 2023 were due to foreign currency translation.

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

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

During the year ended December 31, 2024, we recorded brands intangible assets related to the acquisition of the Graduate brand and NoMad brand (refer to Note 3:

"Acquisitions" for additional information).

The fair value of the Graduate brand intangible asset was determined on a relative fair value basis and

the fair value of the NoMad brand intangible asset was determined using the multi-period excess earnings method.

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

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

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

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

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

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

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

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

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

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

The estimated fair value of the brands intangible assets are based on forward-looking estimates of performance and cash flows of each respective brand, which are based on historical operating results, adjusted for current and expected future market conditions as well as various internal projections and external sources.

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

Intangible Assets with Finite Useful Lives

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

During the year ended December 31, 2024, we recorded franchise contract intangible assets and management contract intangible assets related to the acquisitions of the Graduate brand and NoMad brand, respectively (refer to Note 3:

"Acquisitions" for additional information).

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

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(iii) leases ( 17 to 35 years);

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

(iv) Graduate brand franchise contract intangible assets and NoMad brand management contract intangible assets acquired in 2024 ( 9 to 15 years);

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

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

Costs incurred prior to the acquisition of a contract, such as external legal costs, are expensed as incurred and included in general and administrative expenses in our consolidated statement of operations.

Cash flows for contract acquisition costs and development commissions and other are included as operating activities in our consolidated statement of cash flows, and cash flows for capitalized software costs are included as investing activities.

We evaluate the carrying value of all finite-lived intangible assets for indicators of impairment, and, if such indicators exist, we perform an analysis to determine the recoverability of the asset group by comparing the expected undiscounted future cash flows to the net carrying value of the asset group.

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Capitalized costs are depreciated over their estimated useful lives.

Costs for normal repairs and maintenance are expensed as incurred.

Costs for normal repairs and

maintenance are expensed as incurred.

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

refer to "Leases" below for additional information.

see "—Leases" below for additional information.

Depreciation is recorded using the straight-line method over the assets’ estimated useful lives, which are generally:

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Depending on the individual agreement, our operating leases may require:

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

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

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

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For operating leases, lease expense relating to fixed payments is recognized on a straight-line basis over the lease term, and lease expense related to variable payments is expensed as incurred, with amounts recognized in owned and leased hotels expenses, general and administrative expenses and other expenses from managed and franchised properties in our consolidated statement of operations.

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

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

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

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

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

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

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

Redeemable Noncontrolling Interests

Noncontrolling interests with redemption features that are not solely within our control are considered redeemable noncontrolling interests.

The redeemable noncontrolling interests are a component of temporary equity and are reported between liabilities and equity (deficit) in our consolidated balance sheet.

At each reporting period, the redeemable noncontrolling interests are recognized at the higher of (i) the initial carrying amount, adjusted for accumulated earnings (losses), contributions and distributions, or (ii) the redemption value as of the balance sheet date.

We include both the earnings (losses) for the period attributable to redeemable noncontrolling interests and any adjustment to the carrying value of redeemable noncontrolling interests as a result of a change in the redemption value in net income attributable to redeemable and nonredeemable noncontrolling interests in our consolidated statement of operations.

Hilton Honors

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

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

Hilton Honors is our guest loyalty program, and substantially all of our properties participate in the program.

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

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

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

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

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

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

As points are issued to a Hilton Honors member, the property or strategic partner pays Hilton based on the member's spend at the property or with the strategic partner.

The amounts charged are equal to the estimated cost of operating the program, which includes marketing, promotion, communication and administrative expenses, as well as the estimated cost of reward redemptions.

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

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

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

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

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

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

When a Hilton Honors member stays and earns points at an owned or leased hotel, we recognize a portion of the revenues associated with that stay in owned and leased hotels revenues, with the remaining portion recorded in liability for guest loyalty program and deferred revenues until the points are redeemed.

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

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

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

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

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

While the points are outstanding, both the estimate of the expected payments to third parties (i.e., cost per point

redeemed) and the estimated breakage are reevaluated.

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

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

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

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

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

During the year ended December 31, 2023, we recognized an aggregate of $ 474 million of revenue related to Hilton Honors, including amounts related to point redemptions, which were recognized in other revenues from managed and franchised properties, and amounts related to licensing fees, which were recognized in franchise and licensing fees.

Fair Value Measurements – Valuation Hierarchy

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We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates and foreign currency exchange rates.

We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments.

We do not enter into derivative financial instruments for speculative purposes.

We regularly monitor the financial stability and credit standing of the counterparties to our derivatives.

We do not enter into derivatives for speculative purposes.

We record all derivatives at fair value.

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

management objective and strategy for undertaking various hedge transactions.

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

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

If we do not specifically designate the derivative as a cash flow hedge or another type of hedging instrument, changes in the fair value of the undesignated derivative instrument are reported in current period earnings.

Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged in the consolidated statement of cash flows, while cash flows from undesignated derivative financial instruments are included as an investing activity.

If we do not specifically designate a derivative as a cash flow hedge or another type of hedging instrument, changes in the fair value of the undesignated derivative are reported in current period earnings.

Cash flows from designated derivatives are classified within the same category as the item being hedged in the consolidated statement of cash flows, while cash flows from undesignated derivatives are included as an investing activity.

We perform an initial prospective assessment of hedge effectiveness on a quantitative basis between the inception date and the earlier of the first quarterly hedge effectiveness date or the issuance of the financial statements that include the hedged transaction.

On a quarterly basis, we assess the effectiveness of our designated hedges in offsetting the variability in the cash flows using a statistical method.

This method compares the cumulative change in fair value of each hedging instrument to the cumulative change in fair value of a hypothetical hedging instrument, which has terms that identically match the critical terms of the respective hedged transactions.

Thus, the hypothetical hedging instrument is presumed to perfectly offset the hedged cash flows.

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

We would discontinue hedge accounting prospectively if we

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

On a quarterly basis, we assess the effectiveness of our designated derivatives in offsetting the variability in the cash flows using a statistical method.

This method compares the cumulative change in fair value of each designated derivative to the cumulative change in fair value of a hypothetical derivative, which has terms that identically match the critical terms of the respective hedged transactions, and therefore is presumed to perfectly offset the hedged cash flows.

Ineffectiveness results when the cumulative change in the fair value of the designated derivative exceeds the cumulative change in the fair value of the hypothetical derivative.

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

Currency Translation

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

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

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

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

Vested performance shares generally will be settled for the Company's common stock, with the exception of certain awards that will be settled in cash.

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

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

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

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

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

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

We make certain judgments to determine whether a transaction should be accounted for as a business combination or an asset acquisition.

These judgments include the assessment of the inputs, processes and outputs associated with an acquired set of activities and whether the fair value of total assets acquired is concentrated to a single identifiable asset or group of similar assets.

We account for a transaction as a business combination when the assets acquired include inputs and one or more substantive processes that, together, significantly contribute to the ability to create outputs and substantially all of the total fair value of the assets acquired is not concentrated to a single identifiable asset or group of similar assets.

Otherwise, we account for the transaction as an asset acquisition.

We account for acquisitions that meet the definition of a business combination using the acquisition method of accounting whereby the identifiable assets acquired and liabilities assumed, as well as any noncontrolling interests in the acquired business, are recorded at their estimated fair values at the acquisition date, with any excess purchase price over the fair value of the net assets acquired recorded as goodwill.

In business combinations, the purchase price allocations may be based on preliminary estimates and assumptions and, accordingly, during the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed.

Any such measurement period adjustments are recognized during the period in which the amount of the adjustment is determined generally with a corresponding offset to goodwill or gain on bargain purchase.

We recognize any adjustments subsequent to the measurement period in our consolidated statement of operations.

We expense transaction costs related to business combinations as incurred.

We record the net assets and results of operations of an acquired entity in our consolidated financial statements from the acquisition date.

In determining the fair values of assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods including present value modeling and referenced market values, where available.

Further, we make assumptions within certain valuation methods including discount rates and timing of future cash flows.

Valuations are performed by external valuation professionals with skills and qualifications under management's supervision.

We believe the estimated fair values assigned to the assets acquired and liabilities assumed are based on assumptions that market participants would use.

However, such assumptions are inherently uncertain and actual results may differ from those estimates.

Acquisitions that do not meet the definition of a business combination are accounted for as asset acquisitions.

We allocate the cost of the acquisition, including direct and incremental transaction costs, to the individual assets acquired and liabilities assumed based on their relative fair values.

We do not recognize any goodwill in an asset acquisition.

Recently Issued Accounting Pronouncements

Adopted Accounting Standards

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

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

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

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

within fiscal years beginning after December 15, 2024;

early adoption is permitted.

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

(iii) disclosure about how the CODM uses segment profitability measures to make resource allocation decisions;

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

adopted the provisions of ASU 2023-07 as of January 1, 2024, which resulted in additional disclosures in the notes to our consolidated financial statements that we applied retrospectively to all prior periods presented.

Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU No.

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

In November 2024, the FASB issued ASU No.

2024-03 ("ASU 2024-03"), Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which requires, among other things, the following for public business entities:

(i) tabular disclosure of amounts for the following categories that are included in each expense caption within continuing operations on the statement of operations, with each expense caption that includes one of these expense categories deemed a relevant expense caption:

(a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization and (e) depreciation, depletion, and amortization recognized as part of oil-and gas-producing activities;

(ii) disclosure of certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements;

(iii) qualitative description of the amount remaining in relevant expense captions that are not separately disaggregated quantitatively;

and (iv) disclosure of the total amount of selling expenses and, in annual reporting periods, an entity's definition of selling expenses.

The provisions of ASU 2024-03 are effective for annual periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027;

early adoption is permitted.

Entities must apply the updates in ASU 2024-03 prospectively and are permitted to apply the updates retrospectively.

We expect ASU 2024-03 to require additional disclosures in the notes to our consolidated financial statements.

Graduate by Hilton

In May 2024, we completed the acquisition of the Graduate brand for a total purchase price of $ 210 million, $ 200 million of which we paid in cash upon closing.

The remaining amount was included in accounts payable, accrued expenses and other in our consolidated balance sheet as of December 31, 2024 and will be paid upon the satisfaction of certain conditions by the seller, which are expected to occur within the next 12 months.

We accounted for the transaction as an asset acquisition.

On the date of the acquisition, we added 32 existing properties located in the U.S.

and United Kingdom ("U.K.") to our franchise portfolio.

We allocated the cost of the acquisition, including transaction costs, to the assets acquired on a relative fair value basis.

As a result, we recorded an indefinite-lived brand intangible asset of approximately $ 122 million and franchise contract intangible assets of approximately $ 91 million.

The franchise contract intangible assets will be amortized over an estimated useful life of 15 years to depreciation and amortization expenses in our consolidated statements of operations.

The results of operations related to the Graduate brand, which did not have a material impact on our operating results for the year ended December 31, 2024, were included in the consolidated financial statements for the period from the date of acquisition to December 31, 2024.

In April 2024, we acquired a controlling financial interest in both Sydell Hotels & Resorts, LLC and Sydell Holding Company UK Ltd (collectively, the "Sydell Group"), which owns the NoMad brand.

We accounted for the transaction as a business combination and recognized the fair value, which included measurement period adjustments made subsequent to the acquisition date, of an indefinite-lived brand intangible asset of approximately $ 48 million and management contract intangible

assets, with an aggregate fair value of approximately $ 8 million.

The management contract intangible assets will be amortized over a weighted average estimated useful life of approximately 14 years to depreciation and amortization expenses in our consolidated statements of operations.

We measured the net assets acquired at fair value as of the date of acquisition.

The fair values of the respective net assets acquired were determined by management with assistance from external valuation specialists.

We developed our estimate of the fair value of the brand intangible asset and contract intangible assets by applying the multi-period excess earnings method.

The multi-period excess earnings method uses unobservable inputs for projected cash flows, including projected financial results and a discount rate, which are considered Level 3 inputs within the fair value measurement valuation hierarchy.

Our redeemable noncontrolling interests relate to our interest in the Sydell Group.

The Sydell Group's governing documents contain put options that give the noncontrolling interest holders the right to sell their equity interests to us beginning in the second quarter of 2030, as well as call options that give us the right to purchase the remaining equity interests beginning in the second quarter of 2032.

The exercise price of the put and call options is based on a multiple of the Sydell Group's earnings as of the date that such option would be exercised.

The redeemable noncontrolling interests were recorded at a fair value of $ 22 million as of the acquisition date.

The results of operations of the Sydell Group were included in the consolidated financial statements for the period from the date of acquisition to December 31, 2024.

The acquisition of a controlling financial interest in the Sydell Group did not have a material impact on the Company's consolidated financial statements for the year ended December 31, 2024, and, as such, historical and pro forma results are not disclosed.

Revenues from Contracts with Customers

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

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

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

Performance Obligations

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Consolidated Variable Interest Entities

As of December 31, 2023 and 2022, we consolidated two VIEs that each lease one hotel property, both of which are located in Japan.

As of December 31, 2024 and 2023, we consolidated two VIEs that each lease one hotel property, both of which are located in Japan, and for which the assets are only available to settle the obligations of the respective entities and the liabilities of the respective entities are non-recourse to us.

We consolidated these VIEs since we are the primary beneficiary, having the power to direct the activities that most significantly affect their economic performance.

Additionally, we have the obligation to absorb losses and the right to receive benefits that could be significant to each of the VIEs individually.

The assets of our consolidated VIEs are only available to settle the obligations of the respective entities, and the liabilities of the consolidated VIEs are non-recourse to us.

Our consolidated balance sheets include the assets and liabilities of these entities, including the effect of foreign currency translation, which primarily comprised the following:

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Long-term debt (1)(2)

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

(1) Represents and includes finance lease liabilities of $ 65 million and $ 86 million, respectively, as of December 31, 2024 and 2023, respectively.

(2) Includes current maturities of $ 13 million and $ 19 million as of December 31, 2024 and 2023, respectively.

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

Loss on Investments in Unconsolidated Affiliate

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

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

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

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

As a result, we determined that:

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$ 1,289 $ ( 289 ) $ 1,000

Development commissions and other 162 ( 37 ) 125

281 ( 46 ) 235

$ 1,570 $ ( 335 ) $ 1,235

Other intangible assets:

Capitalized software costs $ 754 $ ( 590 ) $ 164

Leases (1)(2)

$ 842 $ ( 648 ) $ 194

$ 838 $ ( 665 ) $ 173

December 31, 2023

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Management and franchise contracts:

International management contracts recorded at Merger (1)

$ 293 $ ( 278 ) $ 15

Contract acquisition costs

$ 1,183 $ ( 244 ) $ 939

Development commissions and other 149 ( 32 ) 117

162 ( 37 ) 125

$ 1,345 $ ( 281 ) $ 1,064

Other intangible assets:

Capitalized software costs $ 712 $ ( 576 ) $ 136

124 ( 80 ) 44

Hilton Honors (1)

Leases (2)(3)

126 ( 89 ) 37

$ 838 $ ( 665 ) $ 173

(1) Includes development commissions and other intangible assets.

Amount for the year ended December 31, 2024 also includes management and franchise contract intangible assets acquired from third parties.

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

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Recognized as a reduction of franchise and licensing fees and base and other management fees

(1) Includes amortization expense of $ 37 million, $ 45 million and $ 47 million for the years ended December 31, 2023, 2022 and 2021, respectively, associated with assets that were initially recorded at fair value at the time of the Merger, some of which fully amortized during 2023.

(1) Includes amortization expense of $ 5 million, $ 37 million and $ 45 million for the years ended December 31, 2024, 2023 and 2022, respectively, associated with assets that were initially recorded at fair value at the time of the Merger, some of which fully amortized during the year ended December 31, 2023.

As of December 31, 2024, w e estimate future amortization expense of our finite-lived intangible assets that will be recognized in depreciation and amortization expenses to be as follows:

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operations was $ 208 million and $ 183 million as of December 31, 2024 and 2023, respectively, and to operations outside the U.S.

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

was $ 203 million and $ 199 million, respectively, most significantly in the U.K.

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

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Senior secured term loan facility with a rate of 6.09 %, due 2030

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

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

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Senior notes with a rate of 4.000 %, due 2031 (1)

Senior notes with a rate of 3.625 %, due 2032 (1)

Senior notes with a rate of 6.125 %, due 2032 (1)

Senior notes with a rate of 5.875 %, due 2033 (1)

Finance lease liabilities with a weighted average rate of 6.03 %, due 2025 to 2030 (2)

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

Other debt of consolidated VIEs (2)

unamortized deferred financing costs and discounts

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

(2) Long-term debt of our consolidated variable interest entities is included in finance lease liabilities and other debt of consolidated VIEs as applicable.

(2) Long-term debt of our consolidated VIEs is included in finance lease liabilities and other debt of consolidated VIEs as applicable.

Refer to Note 5:

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

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

"Consolidated Variable Interest Entities" for additional information.

(3) Represents current maturities of finance lease liabilities and the 5.375 % Senior Notes due 2025 as of December 31, 2024 and current maturities of finance lease liabilities and borrowings of consolidated VIEs as of December 31, 2023.

We believe that we have sufficient sources of liquidity and access to debt financing to address the current maturities of long-term debt at or prior to the respective maturity dates.

Senior Secured Credit Facilities

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

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

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

In June 2024, we amended the credit agreement governing our Term Loans pursuant to which $ 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.

Additionally, the entire balance of the Term Loans was repriced with an interest rate of the Secured Overnight Financing Rate ("SOFR") plus 1.75 % (collectively, the "June 2024 Amendment").

In connection with the June 2024 Amendment, we incurred $ 3 million of debt issuance costs, which were recognized in other non-operating loss, net in our consolidated statement of operations for the year ended December 31, 2024.

In March 2024, we borrowed and subsequently repaid $ 200 million under the Revolving Credit Facility.

In November 2023, we amended the credit agreement governing our Term Loans pursuant to which $ 1.0 billion of outstanding Term Loans were converted into a new tranche of Term Loans due June 2028 with an interest rate of SOFR plus 1.85 % and $ 1.6 billion of outstanding Term Loans were converted into a new tranche, which was also increased by $ 500 million of aggregate principal amount, due November 2030 with an interest rate of SOFR plus 2.10 %.

In connection with

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

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

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

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

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

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

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

No borrowings were outstanding under the 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.

In September 2024, we issued $ 1.0 billion aggregate principal amount of 5.875 % Senior Notes due 2033 (the "2033 Senior Notes") and incurred an aggregate $ 15 million of debt issuance costs which were recognized as a reduction to the outstanding debt balance in our consolidated balance sheet and will be amortized to interest expense through the maturity date of the 2033 Senior Notes.

Interest on the 2033 Senior Notes is payable semi-annually in arrears on March 15 and September 15 of each year, beginning March 15, 2025.

In March 2024, we issued $ 550 million aggregate principal amount of 5.875 % Senior Notes due 2029 (the " 5.875 % 2029 Senior Notes") and $ 450 million aggregate principal amount of 6.125 % Senior Notes due 2032 (the " 6.125 % 2032 Senior Notes") (collectively, the "March Senior Notes issuance") and incurred an aggregate $ 15 million of debt issuance costs which were recognized as a reduction to the outstanding debt balance in our consolidated balance sheet and will be amortized to interest expense through the respective maturity dates of the 5.875 % 2029 Senior Notes and the 6.125 % 2032 Senior Notes.

Interest on the 5.875 % 2029 Senior Notes and the 6.125 % 2032 Senior Notes is payable semi-annually in arrears on April 1 and October 1 of each year, beginning October 1, 2024.

We used a portion of the net proceeds from the March Senior Notes issuance to repay $ 200 million borrowed under our Revolving Credit Facility earlier in March 2024.

Debt Maturities

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

During the year ended December 31, 2024, we measured the net assets acquired in the acquisition of the Sydell Group at fair value on a non-recurring basis;

"Acquisitions" for additional information.

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

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

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

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

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

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Variable lease expense (1)

(1) Includes amounts related to variable rent expense for operating leases and variable interest expense for finance leases.

(1) Includes amounts related to both operating leases and finance leases.

Supplemental cash flow information related to leases was as follows:

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$ 1,237 $ 1,301 $ 1,320

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

Foreign income before income taxes

Income before income taxes

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State ( 15 ) ( 83 ) 6

Foreign 69 12 ( 41 )

( 181 ) 69 12

Total deferred ( 247 ) ( 264 ) 34

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$ 244 $ 541 $ 477

(1) Includes a $ 29 million tax benefit from the release of valuation allowances as the Company concluded it is more likely than not to realize the benefit of certain foreign deferred tax assets.

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

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Income tax rate changes

( 9 ) — ( 45 )

Provision for uncertain tax positions 26 69 14

Claim for increased foreign tax basis (1)

Excess tax benefits related to share-based compensation ( 22 ) ( 6 ) ( 8 )

Other, net 14 14 12

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$ 244 $ 541 $ 477

(1) Includes tax benefit for claim for increased foreign tax basis, net of $ 547 million tax expense for related valuation allowance increase as of December 31, 2024.

During the year ended December 31, 2024, we filed an affirmative claim with a foreign taxing authority to increase the tax basis of certain brand assets that were part of a prior-year intercompany transfer that is subject to ongoing tax audits in relevant jurisdictions.

We have evaluated this claim in accordance with the more-likely-than-not recognition threshold for the financial statement recognition and measurement of this tax position and have recognized a deferred tax asset representing the greatest amount of benefit that is more than 50 percent likely to be realized upon settlement.

We also increased our valuation allowances related to the portion of this deferred tax asset that we believe will ultimately not be realized.

Deferred Income Taxes

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Net tax loss carryforwards and carrybacks $ 525 $ 604

Foreign brands

Compensation 118 124

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Deferred tax liabilities:

Brands ( 1,143 ) ( 1,151 )

( 1,124 ) ( 1,123 )

Foreign brands

Operating and finance lease ROU assets ( 200 ) ( 195 )

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

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

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

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

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Balance at end of year $ 849 $ 555 $ 337

In October 2023, the U.S.

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

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

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

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

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

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

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

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

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

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Interest cost 14 15 14 14

Actuarial loss (gain) (1)

Actuarial loss (gain), net of expenses

( 8 ) 5 ( 32 ) 4

Settlements (1)

Effect of foreign currency exchange rates — — ( 2 ) 16

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Employer contributions 4 5 9 9

Settlements (1)

Effect of foreign currency exchange rates — — ( 2 ) 15

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Accumulated benefit obligation $ 223 $ 281 $ 275 $ 309

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

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

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

(1) During the year ended December 31, 2024, the Company purchased a group annuity contract (the "annuity purchase") and transferred $ 41 million of its pension plan assets and related benefit obligations related to its Domestic Plan to a third-party insurer.

(2) Funded amounts are recognized in other long-term assets and underfunded amounts are recognized in other long-term liabilities in our consolidated balance sheets, as applicable.

Changes in amounts recorded in accumulated other comprehensive loss consisted of the following:

Domestic Plan U.K.

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Net actuarial loss (gain) (1)

$ ( 3 ) $ ( 3 ) $ 25 $ 3 $ 27 $ 39

Amortization of prior service cost ( 4 ) ( 4 ) ( 4 ) — — —

Amortization of net loss ( 1 ) — ( 3 ) ( 8 ) ( 6 ) ( 3 )

Settlement losses (2)

( 10 ) — — — — —

Net amount recognized $ ( 18 ) $ ( 7 ) $ 18 $ ( 5 ) $ 21 $ 36

(1) Amounts for the U.K.

Plan include the impact of foreign currency exchange.

(2) Amount for the year ended December 31, 2024 includes a loss for a settlement related to the Company's Domestic Plan as a result of the annuity purchase, which was recognized in other non-operating loss, net in our consolidated statement of operations.

The net periodic pension cost (credit) was as follows:

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Amortization of net loss (2)

Settlement losses (3)

Net periodic pension cost (credit)

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

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

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

(3) During the year ended December 31, 2024, as a result of the annuity purchase, we recognized a non-cash pension settlement loss in other non-operating loss, net in our consolidated statement of operations.

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

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

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

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

As of December 31, 2024, unrecognized compensation costs for unvested awards under the 2017 Plan were approximately $ 132 million, which are expected to be recognized over a weighted average period of 1.7 years on a straight-line basis.

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Weighted average grant date fair value per share $ 203.98 $ 146.19 $ 150.58

Aggregate intrinsic value of shares vested (in millions) $ 84 $ 97 $ 94

Aggregate fair value of shares vested (in millions)

$ 107 $ 84 $ 97

The following table summarizes the activity of our RSUs during the year ended December 31, 2024:

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Weighted average grant date fair value per share $ 71.25 $ 52.27 $ 51.15

Aggregate intrinsic value of options exercised (in millions)

$ 90 $ 18 $ 9

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

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

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

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

(2) Estimated based on the expected quarterly dividend and the three-month average stock price at the date of each grant.

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

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

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

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

The following table summarizes the activity of our options during the year ended December 31, 2024:

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Exercised ( 648 ) 73.99

Forfeited or expired

Outstanding as of December 31, 2024 (1)

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Performance Shares

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

As of December 31, 2024, we determined that all of the performance measures for the outstanding performance shares granted in 2022, 2023, and 2024 were probable of achievement, with the average of the applicable achievement factors estimated to be between the target and maximum achievement percentages for performance shares granted in each year.

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

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Weighted average grant date fair value per share $ 204.31 $ 146.18 $ 150.67

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

Aggregate fair value of shares vested (in millions)

$ 47 $ 42 $ 42

The following table summarizes the activity of our performance shares in aggregate for all of our performance measures during the year ended December 31, 2024, with the performance shares reflected at the target achievement percentage until completion of the performance period:

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$ 6.14 $ 4.33 $ 4.53

(1) Certain shares related to share-based compensation were excluded from the calculation of diluted EPS because their effect would have been anti-dilutive under the treasury stock method, including less than 1 million shares for all periods.

(1) Amounts for all periods include less than 1 million shares related to share-based compensation that were excluded from the calculations of diluted EPS because their effect would have been anti-dilutive under the treasury stock method.

Accumulated Other Comprehensive Loss

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Other comprehensive income (loss) before reclassifications

( 9 ) ( 57 ) 114 48

Amounts reclassified from accumulated other comprehensive loss

— 8 ( 40 ) ( 32 )

Net other comprehensive income (loss) for the period

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Other comprehensive income (loss) before reclassifications

( 54 ) 4 30 ( 20 )

Amounts reclassified from accumulated other comprehensive loss

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

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

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

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

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

Amounts reclassified relate to the liquidation of investments in foreign entities which were recognized in gain (loss) on foreign currency transactions in our consolidated statements of operations during the years ended December 31, 2024 and 2022.

(2) Amount reclassified for the year ended December 31, 2024 includes losses for the full or partial settlement of certain pension plans and were recognized in other non-operating loss, net in our consolidated statement of operations.

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

(3) Amounts reclassified were the result of hedging instruments, primarily comprising interest rate swaps, inclusive of interest rate swaps that were dedesignated in prior periods, with related amounts recognized in interest expense in our consolidated statements of operations.

Amounts reclassified also related to foreign currency forward contracts that hedge our foreign currency denominated fees, with related amounts recognized in various revenue line items, as applicable, in our consolidated statements of operations.

Business Segments

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(i) management and franchise and (ii) ownership, each of which is reported as a segment based on (a) delivering a similar set of products and services and (b) being managed separately given its distinct economic characteristics.

The management and franchise segment includes all of the hotels we manage for third-party owners, as well as all franchised hotels that license our IP and where we provide other contracted services, but the day-to-day services of the hotels are operated or managed by someone other than us.

The management and franchise segment includes all of the hotels we manage for third-party owners, as well as all properties that license our IP, and/or use our booking channels and related programs, and where we provide other contracted services, but the day-to-day services of the hotels are operated or managed by someone other than us.

Revenues from this segment include:

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

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

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

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

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

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

Our President and Chief Executive Officer is our CODM.

Our CODM uses Adjusted EBITDA to evaluate the performance of our operating segments.

Adjusted EBITDA is calculated as EBITDA, which reflects net income (loss), excluding interest expense, a provision for income tax benefit (expense) and depreciation and amortization expenses, further adjusted to exclude certain items, including gains, losses, revenues and expenses in connection with:

(i) asset dispositions for both consolidated and unconsolidated investments;

(ii) foreign currency transactions;

(iii) debt restructurings and retirements;

(iv) FF&E replacement reserves required under certain lease agreements;

(v) share-based compensation;

(vi) reorganization, severance, relocation and other expenses;

(vii) non-cash impairment;

(viii) amortization of contract acquisition costs;

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

and (x) other items.

Our CODM uses Adjusted EBITDA to evaluate the trends of our segments over time and monitor the segments in light of the performance of our industry and competitors to determine how to allocate capital resources, including contract acquisition costs and capital expenditures.

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

We previously were required to report segment profitability based on segment operating income (loss) as such measure was also regularly provided to our CODM.

Beginning in the fourth quarter of 2024, segment operating income (loss) was no longer included in regular reporting provided to the CODM, and, as a result, our reported measure of segment profit changed to Adjusted EBITDA.

The change in our reported measure of segment profit did not change the identification of our reportable segments from prior periods.

Prior period amounts presented are measured on the same basis as amounts for the year ended December 31, 2024.

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

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

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

The following table presents Adjusted EBITDA for each of our reportable segments, reconciled to consolidated income before income taxes:

Year Ended December 31,

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Ownership (1)(2)

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

Amortization of contract acquisition costs ( 43 ) ( 38 ) ( 32 )

Other revenues, less other expenses 66 42 34

Net other expenses from managed and franchised properties ( 337 ) ( 39 ) ( 110 )

Depreciation and amortization expenses ( 147 ) ( 162 ) ( 188 )

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

Impairment losses

Loss on sales of assets, net

Operating income

Segment Adjusted EBITDA

3,511 3,205 2,729

Corporate and other (3)

( 82 ) ( 116 ) ( 130 )

Interest expense

( 569 ) ( 464 ) ( 415 )

Depreciation and amortization expenses ( 146 ) ( 147 ) ( 162 )

Gain on sales of assets, net 5 — —

Gain (loss) on foreign currency transactions

Loss on debt extinguishment

( 12 ) ( 16 ) 5

Loss on investments in unconsolidated affiliate

Other non-operating income, net

Loss on debt guarantees (4)

FF&E replacement reserves

( 57 ) ( 63 ) ( 54 )

Share-based compensation expense

( 176 ) ( 169 ) ( 162 )

Impairment losses

Amortization of contract acquisition costs

( 50 ) ( 43 ) ( 38 )

Other revenues from managed and franchised properties (5)

6,428 5,827 5,037

Other expenses from managed and franchised properties (5)

( 6,985 ) ( 6,164 ) ( 5,076 )

Other adjustment items (6)

( 34 ) ( 28 ) —

Income before income taxes

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(2) No expenses are allocated to the management and franchise segment.

For the ownership segment, rent expense is a significant expense regularly provided to the CODM;

rent expense for the years ended December 31, 2024, 2023 and 2022 was $ 224 million, $ 233 million and $ 213 million, respectively, and total other expenses were $ 868 million, $ 870 million and $ 753 million for the years ended December 31, 2024, 2023 and 2022, respectively, comprising (i) room expenses;

(ii) food and beverage costs;

(iii) property expenses;

and (iv) other support costs.

Ownership segment Adjusted EBITDA also includes income (losses) from hotels owned or leased by entities in which we own a noncontrolling financial interest.

(3) Amounts primarily include activity related to general and administrative expenses, excluding share-based compensation expense, and our purchasing operations.

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

refer to Note 20:

Commitments and Contingencies for additional information.

(5) 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.

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

Amount for the year ended December 31, 2024 relates to losses for the full or partial settlement of certain pension plans, 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 Term Loans in June 2024 and November 2023, respectively.

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.

Total revenues by country were as follows:

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Commitments and Contingencies

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

Although we include performance clauses in certain of our management contracts, most of these clauses do not require us to fund shortfalls but instead allow the owner to terminate the contract if specified operating performance levels are not

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

As of December 31, 2024, we had performance guarantees with expirations ranging from 2025 to 2043 and possible cash outlays totaling $ 20 million.

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

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

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

We also have extended debt guarantees and provided letters of credit to owners of certain hotels that we currently or in the future will manage or franchise.

During the year ended December 31, 2024, we recognized losses of $ 50 million in other non-operating loss, net in our consolidated statement of operations for debt guarantees extended to certain hotels that we manage that have failed to comply with the requirements of their respective debt agreements.

We paid $ 77 million during the year ended December 31, 2024 related to debt guarantees.

Our debt guarantees and letters of credit as of December 31, 2024 had expirations ranging from 2025 to 2033 and remaining possible cash outlays totaling $ 49 million.

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

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

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

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

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

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

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

While the ultimate results of claims and litigation cannot be predicted with certainty, we expect that the ultimate resolution of all pending or threatened claims and litigation as of December 31, 2024 will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Supplemental Disclosures of Cash Flow Information

Cash interest paid included within operating activities in our consolidated statements of cash flows was $ 562 million, $ 492 million and $ 385 million during the years ended December 31, 2024, 2023 and 2022, respectively.

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

These amounts exclude $ 56 million, $ 53 million and $ 2 million for the years ended December 31, 2024, 2023 and 2022, respectively, of cash receipts related to settlements of our interest rate swap with a financing component, which are separately disclosed within financing activities in our consolidated statements of cash flows.

Income tax payments, net of refunds received, were $ 492 million, $ 478 million and $ 389 million for the years ended December 31, 2024, 2023 and 2022, respectively.

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data