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Item 2. Management’s Discussion and Analysis

2025-04-29 compared with 2024-10-23 · 149 added, 182 removed, 185 unchanged (64% of the section changed)

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risks of doing business outside of the U.S.;

risks associated with conflicts in Eastern Europe and the Middle East and other geopolitical events;

risks associated with conflicts in Eastern Europe and the Middle East;

uncertainty resulting from U.S.

and global political trends, tariffs and other policies, including potential barriers to travel, trade and immigration and other geopolitical events;

and our indebtedness.

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

Hilton is one of the largest global hospitality companies, with 8,301 properties comprising 1,250,506 rooms in 138 countries and territories as of September 30, 2024.

Hilton is one of the largest global hospitality companies, with 8,602 properties comprising 1,282,192 rooms in 139 countries and territories as of March 31, 2025.

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

As of September 30, 2024, we had 203 million members in our award-winning guest loyalty program, Hilton Honors, an increase of 17 percent from September 30, 2023.

As of March 31, 2025, we had 218 million members in our award-winning guest loyalty program, Hilton Honors, an increase of 16 percent from March 31, 2024.

Segments and Regions

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

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

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

Revenues from this segment include:

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

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

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

We conduct business in three distinct geographic regions:

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

Although the U.S., which represented 66 percent of our system-wide hotel rooms as of September 30, 2024, is included in the Americas region, it is often analyzed separately and apart from the Americas region and, as such, it is presented separately within our hotel operating statistics in "—Results of Operations." The EMEA region includes Europe, which represents the western-most peninsula of Eurasia stretching from Iceland in the west to Russia in the east, and the Middle East and Africa ("MEA"), which represents the Middle East region and all African nations, including the Indian Ocean island nations.

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

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

Although the U.S., which represented 65 percent of our system-wide hotel rooms as of March 31, 2025, is included in the Americas region, it is often analyzed separately and apart from the Americas region and, as such, it is presented separately within our hotel operating statistics in "—Results of Operations." The EMEA region includes Europe, which represents the western-most peninsula of Eurasia stretching from Iceland in the west to Russia in the east, and the Middle East

and Africa ("MEA"), which represents the Middle East region and all African nations, including the Indian Ocean island nations.

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

System Growth and Development Pipeline

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

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

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

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As of or for the

Nine Months Ended

September 30, 2024

Three Months Ended

March 31, 2025

Hotels Rooms (1)

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Development pipeline

Additions (4)

1,166 120,000

Count as of period end (3)

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(1) Rounded to the nearest hundred.

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

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

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

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

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

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

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

Net unit growth from March 31, 2024 to March 31, 2025 was 7.2 percent.

(3) The hotels in our development pipeline were under development throughout 123 countries and territories, including 27 countries and territories where we had no existing hotels, with nearly half of the rooms under construction and more than half of the rooms located outside of the U.S.

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

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

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We exclude strategic partner hotels from our comparable hotels.

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

Our 1,650 non-comparable hotels as of September 30, 2024 included (i) 844 hotels that were added to our system after January 1, 2023 or that have undergone a change in brand or ownership type during the current or comparable periods reported and (ii) 806 hotels that were removed from the comparable group for the current or comparable periods reported because they underwent or are undergoing large-scale capital projects, sustained substantial property damage, encountered business interruption or comparable results were otherwise not available.

Of the 8,497 hotels in our system as of March 31, 2025, 449 hotels were strategic partner hotels and 6,503 hotels were classified as comparable hotels.

Our 1,545 non-comparable hotels as of March 31, 2025 included (i) 742 hotels that were added to our system after January 1, 2024 or that have undergone a change in brand or ownership type during the current or comparable periods reported and (ii) 803 hotels that were removed from the comparable group for the current or comparable periods reported because they underwent or are undergoing large-scale capital projects, sustained substantial property damage, encountered business interruption or comparable results were otherwise not available.

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

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

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

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

EBITDA and Adjusted EBITDA

EBITDA reflects net income (loss), excluding interest expense, a provision for income tax benefit (expense) and depreciation and amortization expenses.

Adjusted EBITDA is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including gains, losses, revenues and expenses in connection with:

References to occupancy, ADR and RevPAR are presented on a comparable basis, based on the comparable hotels as of March 31, 2025, and references to ADR and RevPAR are presented on a currency neutral basis, unless otherwise noted.

As such, comparisons of these hotel operating statistics for the three months ended March 31, 2025 and 2024 use foreign currency exchange rates for the three months ended March 31, 2025.

Adjusted EBITDA

Adjusted EBITDA is calculated as net income (loss), excluding interest expense, a provision for income tax benefit (expense) and depreciation and amortization expenses, as well as gains, losses, revenues and expenses earned or incurred in connection with:

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

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(iii) debt restructurings and retirements;

(iv) furniture, fixtures and equipment ("FF&E") replacement reserves required under certain lease agreements;

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

(v) share-based compensation;

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(viii) amortization of contract acquisition costs;

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

(ix) cost reimbursement revenues and reimbursed expenses;

and (x) other items.

We believe that EBITDA and Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons:

(i) these measures are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions and (ii) these measures are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry.

Additionally, these measures exclude certain items that can vary widely across different industries and among competitors within our industry.

For instance, interest expense and income taxes are dependent on company specifics, including, among other things, capital structure and operating jurisdictions, respectively, and, therefore, could vary significantly across companies.

We believe that Adjusted EBITDA provides useful information to investors about us and our financial condition and results of operations for the following reasons:

(i) it is used by our management team to evaluate our operating performance and make day-to-day operating decisions and (ii) it is frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry.

Additionally, this measure excludes certain items that can vary widely across different industries and among competitors within our industry.

For instance, interest expense and income taxes are dependent on company specifics, including, among other things, capital

structure and operating jurisdictions, respectively, and, therefore, could vary significantly across companies.

Depreciation and amortization expenses, as well as amortization of contract acquisition costs, are dependent upon company policies, including the method of acquiring and depreciating assets and the useful lives that are assigned to those depreciating or amortizing assets for accounting purposes.

For Adjusted EBITDA, we also exclude items such as:

We also exclude items such as:

(i) FF&E replacement reserves for leased hotels to be consistent with the treatment of capital expenditures for property and equipment, where depreciation of such capitalized assets is reported within depreciation and amortization expenses;

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

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

life of these programs.

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

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

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

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

Further, EBITDA and Adjusted EBITDA have limitations as analytical tools, including:

• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;

• EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

• EBITDA and Adjusted EBITDA do not reflect income tax expenses or the cash requirements to pay our taxes;

• EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

• EBITDA and Adjusted EBITDA do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;

• other companies in our industry may calculate EBITDA and Adjusted EBITDA differently, limiting their usefulness as comparative measures.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business, return to our stockholders through share repurchases and dividends or as measures of cash that will be available to us to meet our obligations.

Further, Adjusted EBITDA excludes both cost reimbursement revenues and reimbursed expenses as we contractually do not operate the related programs to generate a profit and have contractual rights to adjust future collections to recover prior period expenditures.

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

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

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

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

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

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

Further, Adjusted EBITDA has limitations as an analytical tool, including:

• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

• Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness;

• Adjusted EBITDA does not reflect income tax expenses or the cash requirements to pay our taxes;

• Adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;

• Adjusted EBITDA does not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

• other companies in our industry may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business, return to our stockholders through share repurchases and dividends or as measures of cash that will be available to us to meet our obligations.

Results of Operations

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

Three Months Ended Change Nine Months Ended Change

September 30, 2024 2024 vs.

2023 September 30, 2024 2024 vs.

Three Months Ended Change

March 31, 2025 2025 vs.

Occupancy 66.8 % 0.4 % pts.

72.8 % 0.7 % pts.

ADR $ 155.07 1.8 %

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Occupancy 67.7 % 0.2 % pts.

73.5 % 0.3 % pts.

ADR $ 164.58 1.7 %

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Occupancy 64.4 % 0.4 % pts.

69.9 % 1.1 % pts.

ADR $ 153.63 7.1 %

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Occupancy 64.5 % 0.6 % pts.

74.7 % 2.6 % pts.

ADR $ 138.58 1.6 %

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Occupancy 70.8 % 2.1 % pts.

70.9 % 2.5 % pts.

ADR $ 202.79 5.3 %

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Occupancy 64.1 % 0.8 % pts.

69.5 % 0.6 % pts.

ADR $ 107.09 (1.2) %

RevPAR $ 68.69 — %

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

The increases in RevPAR in the U.S.

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

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

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

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

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

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

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

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

System-wide RevPAR increased during the three months ended March 31, 2025, supported by improvements in system-wide ADR, which included the impact of inflation, an increase in occupancy in all regions and increased group performance in all regions.

The U.S., Europe and MEA all benefited from holiday shifts in the respective regions.

The increase in RevPAR in the U.S.

was also a result of special events.

Europe was also positively impacted by an increase in business travel.

MEA benefited from the shift of Ramadan fully into the first quarter, as well as an increase in inbound business and leisure travel.

The increase in the Americas, excluding the U.S., was also due to special events in the region, attributable to increases in both inbound and domestic leisure travel.

RevPAR in Asia Pacific was flat due to growth in countries and territories outside of China, driven by special events, offset by tougher year-over-year comparisons in China, as demand continues to steady.

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

Three Months Ended

(in millions)

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Depreciation and amortization expenses 41 36

EBITDA 668 701 1,966 1,872

Loss (gain) on sales of assets, net

Loss on foreign currency transactions

Loss on investments in unconsolidated affiliate (1)

Gain on sales of assets, net

Loss (gain) on foreign currency transactions

Loss on debt guarantees (1)

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Amortization of contract acquisition costs 14 12

Net other expenses from managed and franchised properties

Cost reimbursement revenues (2)

(1,630) (1,521)

Reimbursed expenses (2)

Other adjustments (3)

Adjusted EBITDA $ 795 $ 750

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

refer to Note 5:

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

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

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

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

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

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

(2) 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 condensed 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 contractual rights to adjust future collections to recover prior period expenditures.

(3) Amount for the three months ended March 31, 2025 includes restructuring costs related to one of our leased properties.

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

Amounts for both periods include net losses (gains) related to certain of our investments in unconsolidated affiliates, severance and other items.

Three Months Ended Percent

March 31, Change

2025 2024 2025 vs.

(in millions) (in millions)

(in millions)

Franchise and licensing fees $ 625 $ 571 9.5

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Total management fees $ 160 $ 176 (9.1)

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

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

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

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

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

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

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

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

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

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

The increase in franchise fees included the impact of an increase in RevPAR at our comparable franchised hotels.

During the three months ended March 31, 2025, RevPAR at our comparable franchised hotels increased 1.5 percent, contributing to a currency neutral increase in franchise fees of $8 million, as a result of an increase in occupancy of 0.2 percentage points, and an increase in ADR of 1.2 percent.

Further, franchise fees include a net increase of $12 million, as a result of net hotel additions, partially offset by a decrease of $3 million in termination fees.

Licensing fees increased $34 million as a result of an increase in fees from our strategic partnerships, primarily resulting from activity under our co-branded credit card arrangements and HGV.

Increased fees from HGV resulted from increased timeshare revenues earned by HGV, inclusive of the impact of adding new timeshare properties to our system between the periods.

The decrease in management fees was largely attributable to a decrease of $20 million in termination fees received from hotels that exited our system, partially offset by an increase in RevPAR at our comparable managed hotels.

During the three months ended March 31, 2025, RevPAR at our comparable managed hotels increased 5.2 percent, contributing to a currency neutral increase in management fees of $5 million, as a result of an increase in occupancy of 1.1 percentage points, and an increase in ADR of 3.5 percent.

Three Months Ended Percent

March 31, Change

2025 2024 2025 vs.

(in millions) (in millions)

Owned and leased hotels revenues

(in millions)

Ownership revenues

$ 234 $ 255 (8.2)

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

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

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

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

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

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

The $21 million decrease in ownership revenues included a currency neutral decrease of $16 million and a $5 million decrease resulting from unfavorable fluctuations in foreign currency exchange rates.

Revenues from our non-comparable consolidated hotels within our ownership segment decreased $15 million, on a currency neutral basis, primarily due to hotels that exited our system or changed ownership types between the periods.

Three Months Ended Percent

March 31, Change

2025 2024 2025 vs.

(in millions) (in millions)

(in millions)

Other revenues $ 46 $ 50 (8.0)

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

The decrease in other revenues was primarily due to decreased procurement volume and associated vendor rebates for purchases made by properties outside of our system, partially offset by increased activity by properties within our system, that participate in our purchasing programs.

Operating Expenses

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

Three Months Ended Percent

March 31, Change

2025 2024 2025 vs.

(in millions) (in millions)

Owned and leased hotels expenses

(in millions)

Ownership expenses

$ 239 $ 247 (3.2)

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

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

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

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

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

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

The $8 million decrease in ownership expenses included a decrease of $4 million on a currency neutral basis and a $4 million decrease resulting from favorable fluctuations in foreign currency exchange rates.

Expenses from our non-comparable consolidated hotels within our ownership segment decreased $6 million, on a currency neutral basis, primarily due to hotels that exited our system or changed ownership types between the periods, partially offset by increases in expenses for hotels undergoing renovations.

Three Months Ended Percent

March 31, Change

2025 2024 2025 vs.

(in millions) (in millions)

(in millions)

Depreciation and amortization expenses $ 41 $ 36 13.9

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Other expenses 26 30 (13.3)

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

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

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

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

The increase in depreciation and amortization expenses was primarily related to software placed in service between the periods.

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

The decrease in other expenses was primarily due to decreased procurement volume from our purchasing operations with properties outside of our system.

Non-operating Income and Expenses

Three Months Ended Percent Nine Months Ended Percent

September 30, Change September 30, Change

2024 2023 2024 vs.

Three Months Ended Percent

March 31, Change

2025 2024 2025 vs.

(in millions) (in millions)

(in millions)

Interest expense $ (145) $ (131) 10.7

Loss on foreign currency transactions

(3) (7) (57.1) (5) (13) (61.5)

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

Gain (loss) on foreign currency transactions

Other non-operating income (loss), net

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

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

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

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

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

The increase in interest expense was primarily attributable to an increase of $30 million due to the March 2024 Senior Notes issuance and the September 2024 Senior Notes issuance.

The increase was partially offset by a decrease in interest expense on the Term Loans of $11 million primarily as a result of decreases in one-month Secured Overnight Financing Rate ("SOFR") for the comparable periods.

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

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

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

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

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

The net change in other non-operating income (loss), net was primarily driven by a decrease in losses on debt guarantees for certain hotels that Hilton manages.

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

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

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

The increase in income tax expense was primarily attributable to the increase in income before income taxes.

Segment Results

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

As of March 31, 2025, our management and franchise segment included 833 managed and 7,722 franchised and licensed properties, which included 105 timeshare and 449 strategic partner hotels, consisting of 1,266,586 total rooms, and our ownership segment included 47 hotels consisting of 15,606 total rooms.

Refer to Note 11:

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

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

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

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

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

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

For the three months ended March 31, 2025, refer to "—Revenues" for further discussion of the changes in our franchise and licensing fees and total management fees as well as for further discussion of the changes in revenues from our ownership segment.

Refer to "—Operating Expenses" for further discussion of the changes in our ownership segment expenses.

Liquidity and Capital Resources

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

As of March 31, 2025, we had total cash and cash equivalents of $807 million, including $76 million of restricted cash and cash equivalents.

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

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(iv) taxes and compliance costs;

(v) scheduled debt maturities and interest payments on our outstanding indebtedness;

(v) scheduled debt maturities and interest payments on our outstanding indebtedness, including repayment of the May 2025 Senior Notes;

(vi) lease payments under our finance and operating leases;

(vii) costs, other than compensation and lease payments that are noted separately, associated with the operations of owned and leased hotels, including, but not limited to, utilities and operating supplies;

(vii) costs, other than compensation and lease payments that are noted separately, associated with the operations of consolidated hotels within our ownership segment, including, but not limited to, utilities and operating supplies;

(viii) committed contract acquisition costs;

(ix) capital and maintenance expenditures for required renovations and maintenance at the hotels within our ownership segment;

(x) dividends as declared;

and (xi) share repurchases.

(ix) capital and maintenance expenditures for required renovations and maintenance at the consolidated hotels within our ownership segment;

(x) corporate capital and information technology expenditures;

(xi) dividends as declared;

and (xii) share repurchases.

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

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(iii) committed contract acquisition costs;

(iv) capital improvements to the hotels within our ownership segment;

(iv) capital improvements to the consolidated hotels within our ownership segment;

(v) corporate capital and information technology expenditures;

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(vii) share repurchases;

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

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

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

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

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

Refer to Note 6:

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

Except for the March and September Senior Notes issuances and the amendment to the credit agreement governing our Term Loans in June 2024, there were no material changes to our contractual obligations from what we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

During the nine months ended September 30, 2024, we repurchased approximately 10.2 million shares of our common stock for $2,113 million.

As of September 30, 2024, approximately $1.7 billion remained available for share repurchases under our stock repurchase program.

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

During the three months ended March 31, 2025, we repurchased approximately 3.7 million shares of our common stock for $890 million.

As of March 31, 2025, approximately $3.5 billion remained available for share repurchases under our stock repurchase program.

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

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

"Commitments and Contingencies" in our unaudited condensed consolidated financial statements for additional information on our commitments that were outstanding as of March 31, 2025.

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

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

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

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

Within the framework of our investment policy, we intend to finance our business activities primarily with cash on our balance sheet as of March 31, 2025, cash generated from our operations and, as needed, the use of the available capacity of our Revolving Credit Facility.

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

Additionally, we may from time to time pre-sell Hilton Honors points through strategic partnership arrangements as a source of liquidity.

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

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

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The following table summarizes our net cash flows:

Nine Months Ended Percent

September 30, Change

Three Months Ended Percent

March 31, Change

2025 2024 2025 vs.

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Net cash used in investing activities (50) (27) 85.2

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

Net cash provided by (used in) financing activities (974) 238 NM (1)

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

Operating Activities

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

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

$50 million increase in the net cash outflows related to income tax payments, primarily due to income tax refunds received during the nine months ended September 30, 2023 and an outflow of $77 million for debt guarantee payments.

The decrease in cash provided by operating activities was partially offset by the increase in cash inflows generated from our management and franchise segment, discussed in "—Revenues," largely as a result of an increase in RevPAR at our comparable managed and franchised hotels as well as revenues from new hotels added, net of hotels removed, and a $77 million decrease in payments of contract acquisition costs due to the timing of certain strategic hotel developments supporting our growth during the nine months ended September 30, 2023.

Cash flows from operating activities were primarily generated from management, franchise and licensing fee revenue.

The increase in net cash inflows during the period included an increase in cash inflows generated from our management and franchise segment, discussed in "—Revenues," largely as a result of revenues from new hotels added, net of hotels removed and an increase in RevPAR at our comparable franchised hotels, partially offset by a decrease of $20 million in termination fees received from managed properties.

Additionally, there was a decrease in a cash outflows of $62 million for debt guarantee payments that were made during the three months ended March 31, 2024.

Investing Activities

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

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

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

dollar for the nine months ended September 30, 2023.

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

dollar for the three months ended March 31, 2025.

Financing Activities

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

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

The decrease in net cash provided by financing activities was primarily attributable to a $1.0 billion cash inflow from the March 2024 Senior Notes issuance during the three months ended March 31, 2024.

The decrease in cash inflows also reflects a $209 million increase in cash outflows for share repurchases.

Debt and Borrowing Capacity

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

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

As of March 31, 2025, our total indebtedness, excluding the deduction for unamortized deferred financing costs and discount, was approximately $11.2 billion.

No borrowings were outstanding under the Revolving Credit Facility as of March 31, 2025, which had an available borrowing capacity of $1,908 million after considering $92 million of outstanding letters of credit.

For additional information on our total indebtedness and guarantees on our debt, refer to Note 5:

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

We do not have any material indebtedness outstanding that matures prior to 2027 other than the May 2025 Senior Notes due in May 2025, and we believe that we have sufficient sources of liquidity and access to debt financing to address the repayment of the May 2025 Senior Notes at or prior to their maturity date.

We do not have any material indebtedness outstanding that matures prior to April 2027, other than the May 2025 Senior Notes due in May 2025.

We believe that we have sufficient sources of liquidity and access to debt financing to address the repayment of the May 2025 Senior Notes, as well as all indebtedness that becomes due thereafter, at or prior to the respective maturity dates.

In April 2025, we issued notice to borrow $500 million under the Revolving Credit Facility and plan to use the proceeds, together with available cash, to repay, at maturity, all $500 million in aggregate principal amount of the May 2025 Senior Notes, plus accrued and unpaid interest.

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

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

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

We have discussed the estimates and assumptions that we believe are critical because they involve a higher degree of judgment in their application and are based on information that is inherently uncertain in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and, during the three months ended March 31, 2025, there were no material changes to those critical accounting estimates that were previously disclosed.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis