Investor. Presentation. February The Diplomat Beach Resort Hollywood, Curio Collection by Hilton

Transcription

1 Investor Presentation February 2019 The Diplomat Beach Resort Hollywood, Curio Collection by Hilton

2 HLT VALUE PROPOSITION Hilton's scale, global presence and leading brands at multiple price points drive a network effect delivering industry-leading performance Award-winning brands that serve guests for virtually any lodging need they have anywhere in the world Leads to satisfied customers, including approximately 85 million Hilton Honors loyalty members HLT Financial Performance Leading Brands serving virtually any lodging need anywhere Satisfied, Loyal Customers Creates a network effect that drives a strong global RevPAR premium of 14% (a) These premiums drive strong financial returns for the company and our hotel owners Satisfied owners continue to invest in growing Hilton s brands, driving leading organic net unit growth with de minimis use of capital Leading Hotel Supply & Pipeline Premium, Growing Market Share We believe the reinforcing nature of these activities will allow Hilton to outperform the competition Satisfied Owners (a) Source: STR (year ended 12/31/2018). RevPAR or Revenue per Available Room represents hotel room revenue divided by room nights available to guests for a given period. 1

3 Investment Thesis 1. THE BEST-PERFORMING PORTFOLIO OF BRANDS IN THE BUSINESS 2. A RESILIENT, FEE-BASED BUSINESS 3. A RECORD PIPELINE GENERATING SUBSTANTIAL RETURNS ON MINIMAL CAPITAL INVESTMENT 4. SUPPORTED BY FAVORABLE FUNDAMENTALS AND A DISCIPLINED STRATEGY 5. GENERATING SIGNIFICANT FREE CASH FLOW FOR SHAREHOLDERS 2

4 1. THE BEST-PERFORMING PORTFOLIO OF BRANDS IN THE BUSINESS Industry-leading, clearly defined, global brands that drive a 14% global RevPAR premium (a) Luxury & Lifestyle Full Service All Suites Focused Service Timeshare Strong commercial engines support $40 billion in annual system revenue (b) Loyalty Program Worldwide Sales Online & Mobile Reservations & Customer Care Revenue Management Information Technology Supply Management ~85M members, ~60% system occupancy ~$13B in annual revenue ~250M unique site visits/year +45M interactions/year Pricing and yield systems Proprietary platform ~$6B of annual spend influenced With ~5,600 properties & ~913,000 rooms in 113 countries and territories, Hilton is one of the world s largest hotel companies (a) (b) Source: STR (year ended 12/31/2018). RevPAR or Revenue per Available Room represents hotel room revenue divided by room nights available to guests for a given period. System revenue includes estimated revenues of franchised properties in addition to revenues from properties owned, leased or managed by Hilton. 3

5 1. THE BEST-PERFORMING PORTFOLIO OF BRANDS IN THE BUSINESS We are the most innovative hotel company, leading in delivering personalized experiences to our guests The highest-rated travel app, downloaded every 8 seconds Exclusively allows guests to select their specific rooms on their phones Digital Key enables guests to use their phones as room keys at the most hotels by far Connected Room the first mobile-centric hotel room, by means of our app, enables members to control lighting, HVAC and entertainment options AT ALL PROPERTIES GLOBALLY AT ~4,100 PROPERTIES DIGITAL CHECK-IN ROOM SELECTION DIGITAL KEY 4

6 1. THE BEST-PERFORMING PORTFOLIO OF BRANDS IN THE BUSINESS Hilton Honors loyalty program enables a better, more personalized hotel stay, driving incremental value to the system HILTON HONORS IS OFFERING MORE VALUE TO MORE MEMBERS Members 85M Share of system 36M Occupancy (b) (a) ~60% +16% CAGR +200 BPS YOY INNOVATIVE NEW FEATURES & PARTNERSHIPS POINTS & MONEY 2.0 Can choose any combination of Points and money to pay for a stay, using an interactive Slider. SHOP WITH POINTS The first hotel loyalty program to enable members to use their Points on Amazon.com. POINTS POOLING Can pool Points into a single account (for free), generating incremental reward stays and increasing engagement. (a) As of December 31, (b) For the year ended December 31,

7 2. A RESILIENT, FEE-BASED BUSINESS Top-Line Driven Majority Franchise Fees Capital Efficient Growth 90% Adj. EBITDA 70% of total fees ~7% from fees, 90% franchise NUG(b) revenue driven (a) driven (a) +/- 1% of RevPAR growth is roughly +/- 1% of Adjusted EBITDA growth Increasing franchise fees as contracts roll over at higher published rates 4.9% in-place rate vs. 5.6% published rate (c) ~$140M annual Adj. EBITDA $204M Total HLT investment in pipeline, with over 50% under construction and average contract term of 19 years Meaningful Fee Growth MANAGEMENT & FRANCHISE FEES (d) $814M $2,113M Diversified Across Geographies and Chain Scales ADJ. EBITDA BY GEOGRAPHY (a) Americas Middle East Non-U.S. & Africa Asia 3% 3% Pacific 10% Europe 11% ROOMS BY CHAIN SCALE (f) Upper Midscale 31% Luxury 3% Other 1% Upper Upscale 32% 2009 (e) 2018 (a) +11% CAGR U.S. 73% No single U.S. market accounts for more than 3% of Adj. EBITDA Upscale 33% (a) Based on year ended 12/31/2018. For Adjusted EBITDA, excludes corporate and other. (b) Net Unit Growth (NUG) based on year-end 12/31/2018. (c) As of or for year ended 12/31/2018. Effective franchise rate is up 87 bps since FY 2007 and is calculated as the total franchise fee revenue divided by total franchise room revenue. Published franchise rate is calculated as the weighted average of current published brand franchise fee rates. (d) Excludes amortization of contract acquisition costs recorded as contra-revenue. (e) Does not include the effect of the new revenue recognition accounting standard. (f) Room count as of 12/31/2018. Other includes HGV. 6

8 3. A RECORD PIPELINE GENERATING SUBSTANTIAL RETURNS ON MINIMAL CAPITAL INVESTMENT BEST PERFORMING BRANDS Existing brands in current markets Existing brands in new markets Organically developed new brands ~55% of pipeline ~20%of pipeline ~25% of pipeline Resulting in: Record pipelines across all brand segments with minimal HLT capital investment Pipeline rooms 364K Under Construction 184K % Pipeline Outside U.S. 53% 3 rd Party Investment $50B HLT Investment (b) $204M Stabilized Adj. EBITDA $730M Illustrative Value Creation (a) $10,000M (a) (b) Based on 13.5x Illustrative Adjusted EBITDA. Figure is illustrative only and does not reflect the actual valuation or the view of Hilton with respect to proper valuation. The market may attribute a different valuation. Reflects committed investment. 7

9 3. A RECORD PIPELINE GENERATING SUBSTANTIAL RETURNS ON MINIMAL CAPITAL INVESTMENT Development focused on balanced global growth - brand portfolio drives high quality, high return, industry-leading organic growth enabled by demand patterns around the world LEADING SHARE OF FUTURE DEVELOPMENT IN EVERY REGION (a) DEVELOPMENT MARKET SHARE IS ~4X LARGER THAN CURRENT SHARE Existing Room Supply Rooms Under Construction % of Total % of Total United States 12% 24% Americas ex. U.S. 3% 17% Europe 2% 9% Middle East, Africa 3% 13% Asia Pacific 2% 22% Global System 5% 19% 3.9x GLOBAL SHARE OF ROOMS UNDER CONSTRUCTION/EXISTING SHARE (a) 2.7x 1.6x (a) Source: STR Global Census, January 2019 (adjusted to December 2018) and STR Global New Development Pipeline, January

10 3. A RECORD PIPELINE GENERATING SUBSTANTIAL RETURNS ON MINIMAL CAPITAL INVESTMENT Industry-leading growth with great sight lines into future development GLOBAL SYSTEM ROOM GROWTH 2007-TODAY (a) (b) (c) (e) (d) 84% 90% 66% 49% 48% 45% 28% 19 60% HLT NET UNIT GROWTH (000s of rooms) 24 43% International 18 51% 25 57% 36 53% 43 U.S % 69% 66% 40% 57% 49% 43% 47% 43% 31% 34% % 58% 44% 42% E 23% 46% 38% 35% 26% 29% 22% 20% 25% 22% % Conversions (f) (a) Note: 2007 metrics are as of 6/30/07, except for H which is as of 12/31/07; Today metrics are as of most recent reporting: 12/31/2018 for HLT and peers. (b) Room count includes Hyatt s Q4 acquisition of Two Roads Hospitality, adding approximately 12,000 rooms. Excluding acquisition growth would be 79%. (c) Reflects MAR acquisition of HOT in both periods. (d) Excl. timeshare properties due to lack of 2007 data availability for WYN. (e) Accor data reflects sale of Motel 6 and Studio 6 brands and the acquisition of Fairmont Raffles Hotels International Group. (f) As a % of gross room openings. This page contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this presentation are, to our knowledge, the property of their respective owners. Source: Company filings. 9

11 4. SUPPORTED BY STRONG FUNDAMENTALS GROWING CUSTOMER BASE THAT CAN & WANT TO TRAVEL HOTEL UNDER-PENETRATION IN HIGH GROWTH MARKETS GLOBAL MIDDLE CLASS 2x Last GLOBAL TOURIST ARRIVALS +1BN Incremental 20 years, double again next 20 years annual trips expected over next 20 years (hotel rooms per 1,000 people) INDIA BRAZIL CHINA 15.8 UNITED STATES Source: STR, UNWTO, World Bank, OECD 10

12 AND A DISCIPLINED STRATEGY ALIGN CULTURE & ORGANIZATION Performance-driven, purpose-led culture based on common vision, mission, values and key strategic priorities WIN ON CUSTOMER EXPERIENCE Maximize relevance of existing brands, strategically add new brands Build on leading commercial capabilities to maximize revenues Lead in digital and personalization capabilities Drive deeper loyalty and more direct relationships with guests through Hilton Honors EXPAND GLOBAL FOOTPRINT Deliver industry-leading, high-quality organic net unit growth Fill gaps with the right brand in the right location at the right time Expand luxury portfolio; execute international growth strategy MAXIMIZE PERFORMANCE Grow market share Grow free cash flow per share, preserve strong balance sheet and accelerate return of capital 11

13 5. GENERATING SIGNIFICANT FREE CASH FLOW AND CAPITAL RETURN POTENTIAL 2019 OUTLOOK (a) SAME STORE NET UNIT FEE RATE GROWTH (Y/Y % chg.) +1% and +3% + 6.5% Effective Franchise Rate = 4.9% Annual Adj. EBITDA Sensitivity (b) 1 Pt. = ~$20-25M 10K rooms = ~$20M steady-state 10 bps = ~$20M General and Administrative Expense $430M and $450M Adj. EBITDA $2,240M to $2,290M +8% Y/Y at midpoint Available for shareholder returns $1.3B and $1.8B Share repurchases $1.1B to $1.6B (a) Outlook as of 2/13/2019. (b) Sensitivity within the ranges given. 12

14 Hilton Haikou Appendix

15 FLEXIBLE CAPITAL STRUCTURE WITH SIGNIFICANT LIQUIDITY CAPITAL STRUCTURE OVERVIEW DEBT BREAKDOWN / SCHEDULED AMORTIZATION AND MATURITIES (a) Net debt $6.9B % fixed 79% ($ in millions) $4,000 $3,000 Weighted average term: 5.9 years $3,119 Net leverage (b) 3.3x % unsecured 56% $2,000 $1,500 WACD 4.5% % freely prepayable 44% $1,000 $0 $1,000 $900 $600 $0 $0 $0 $ (a) (b) Excludes capital lease obligations and other debt of our consolidated variable interest entities. Ratio of net debt as of 12/31/2018 to year ended 12/31/2018 Adjusted EBITDA. 14

16 RECONCILIATIONS ($ in millions) (a) (b) Represents furniture, fixture & equipment ( FF&E ) replacement reserves established for the benefit of lessors for requisition of capital assets under certain lease agreements. Includes adjustments for severance and other items, and, for the year ended December 31, 2017, also includes transactions costs and impairment loss. 15

17 DISCLAIMER This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources and other non-historical statements. You can identify these forwardlooking statements by the use of words such as outlook, believes, expects, potential, continues, may, will, should, could, seeks, projects, predicts, intends, plans, estimates, anticipates or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks inherent to the hospitality industry, macroeconomic factors beyond our control, competition for hotel guests and management and franchise contracts, risks related to doing business with third-party hotel owners, performance of our information technology systems, growth of reservation channels outside of our system, risks of doing business outside of the United States and our indebtedness, as well as those described under the section entitled Risk Factors in Hilton Worldwide Holdings Inc. s Annual Report on Form 10-K for the year ended December 31, 2018, as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission ( SEC ), which are accessible on the SEC s website at Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this presentation and in our filings with the SEC. 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. All results herein, including prior year, reflect the adoption of new accounting standards, including Accounting Standards Update No , Revenue from Contracts with Customers (Topic 606), unless otherwise noted. This presentation includes certain financial measures, including adjusted earnings before interest expense, taxes, depreciation and amortization ( Adj. EBITDA ), Net Debt, and Net Debt to Adj. EBITDA ratio, that are not calculated in accordance with U.S. generally accepted accounting principles ( GAAP ). These non-gaap financial measures should be considered only as supplemental to, and not as a substitute for or superior to, financial measures prepared in accordance with U.S. GAAP. Please refer to the Appendix and footnotes of this presentation for a reconciliation of the historical non-gaap financial measures included in this presentation to the most directly comparable financial measures prepared in accordance with U.S. GAAP. Please refer to Hilton Worldwide Holding Inc. s Annual Report on Form 10-K for the year ended December 31, 2018 for additional information on the effect of the adoption of new accounting standards. Slides in this presentation include certain Adj. EBITDA amounts that are used only for illustrative purposes to present illustrative Adj. EBITDA amounts by applying assumptions to existing rooms pipeline, increases of in-place rates and increases in RevPAR, as applicable, in each case based on information for the year ended December 31, These amounts do not represent projections of future results and may not be realized. Value information on such slides that is derived from such illustrative Adj. EBITDA amounts is indicative only, based upon a number of assumptions, and does not reflect actual valuation. Please review carefully the detailed footnotes in this presentation. 16

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