Investor Presentation May 2017
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Investor Presentation May 2017 Conrad Lower Manhattan New York, New York With 4,980 properties & 812,000 rooms in 103 countries and territories, Hilton is one of the world’s largest hotel companies 14 Industry-leading global brands that drive a 14% global RevPAR premium(a) Luxury & Lifestyle Full Service All Suites Focused Service Timeshare Strong commercial engines support an estimated $37 billion in annual system revenue(b) Reservations & Revenue Information Supply Loyalty Program Worldwide Sales Online & Mobile Customer Care Management Technology Management ~63M members, ~$10B in annual ~600M site visits/year +47M Pricing and yield Proprietary ~$6B of influenced 57% system occupancy revenue interactions/year systems platform spend annually Diversified across business segments, geographies and chain scales Adj. EBITDA by Business(c) Adj. EBITDA by Geography(c) Current Rooms by Chain Scale(d) Mgmt. & Owned & Franchise Leased Americas Luxury Other 90% Middle 10% Non-U.S. 3% 1% 4% East & Africa Asia 3% Pacific Upper 10% Midscale Upper 90% of Adj. 30% Upscale EBITDA from 33% fees Europe U.S. 13% 70% Upscale 33% (a) Source: STR (3 months ended 3/31/2017). “RevPAR” or “Revenue per Available Room” represents hotel room revenue divided by room nights available to guests for a given period. (b) System revenue includes estimated revenues of franchised properties in addition to revenues from properties owned, leased or managed by Hilton. (c) Based on LTM 3/31/2017 pro forma Adj. EBITDA excluding Corporate and Other. (d) Room count as of 3/31/2017. Other includes HGV. © 2017 Hilton Confidential and Proprietary 1 Company value proposition Hilton's scale, global presence and leading brands at multiple price points drive a “loyalty effect,” leading to industry-leading performance for our hotel owners and the company • Award-winning brands that serve guests Leading Brands for virtually any lodging need they have serving virtually anywhere in the world HLT Financial any lodging need Performance anywhere • Leads to satisfied customers, including approximately 63 million Hilton Honors loyalty members • Creates a “loyalty effect” that drives a Satisfied, Loyal strong global RevPAR premium of 14% Leading Customers Hotel • These premiums drive strong financial Supply & returns for the company and our hotel Pipeline owners • Satisfied owners continue to invest in growing Hilton’s brands, driving leading Premium, organic net unit growth with de minimis Satisfied Growing use of capital Owners Market Share • We believe the reinforcing nature of these activities will allow Hilton to outperform the competition © 2017 Hilton Confidential and Proprietary 2 Value proposition supported by a disciplined strategy ALIGN CULTURE & • Performance-driven culture based on common vision, mission, values and key ORGANIZATION strategic priorities • Maximize relevance of existing brands, and strategically add new brands STRENGTHEN • Build on leading commercial capabilities to maximize revenues BRANDS & • Lead in digital and personalization capabilities COMMERCIAL • Drive deeper loyalty and more direct relationships with guests through Hilton SERVICES PLATFORM Honors • Deliver industry-leading, high-quality organic net unit growth EXPAND GLOBAL • Fill market gaps with the right brand in the right location at the right time FOOTPRINT • Expand luxury portfolio; execute China growth strategy • Grow market share MAXIMIZE • Grow free cash flow per share, preserve strong balance sheet, and accelerate PERFORMANCE return of capital © 2017 Hilton Confidential and Proprietary 3 Hilton’s brand portfolio is driving market-leading net unit growth . Top performing brands • Pure bred portfolio of clearly-defined brands, with global scale and distribution • Consistent, compelling product and service offerings of clear value to guests and hotel owners • Connected by leading loyalty program and commercial engines in the business White space: Urban micro, Luxury Lifestyle, Luxury Collection, Hilton+ Existing brands in current markets Existing brands in new markets Organically develop new brands • Highly fragmented market • Strategically deploy brands • Target incremental market presents opportunities for our globally segments, build network effect existing brands • Examples include HGI/Hampton in • In last 7 years, have launched 5 China, DoubleTree in Europe new brands ~55% of pipeline ~25% of pipeline ~20% of pipeline Resulting in: Record pipelines across all brand segments with minimal HLT capital investment Pipeline rooms Under Construction Third Party Investment HLT investment Stabilized Adj. EBITDA 325K 168K $50B $155M $660M © 2017 Hilton Confidential and Proprietary 4 . as seen in our system growth to date, all accomplished without brand acquisitions . Global System (# of Rooms) 2007 Today % Growth 496,000 812,000 64% 113,000 179,000 58% (a) 794,000 1,203,000 52% 564,000 767,000 36% (a) 542,000 700,000 29% (b) 487,000 587,000 20% 446,000 515,000 16% Note: “2007” metrics are as of 6/30/2007, except for Hyatt which is as of 12/31/2007; “Today” metrics are as of 3/31/2017. This page contains additional trademarks, service marks and trade names of others, which are the property of their respective owners. All trademarks, service marks and trade names appearing in this presentation are, to our knowledge, the property of their respective owners. (a) Reflects MAR acquisition of HOT in both periods presented. Excludes timeshare properties due to lack of 2007 data availability for Wyndham. (b) Accor data reflects sale of Motel 6 and Studio 6 brands and the acquisition of Fairmont Raffles Hotels International Group. 8 Source: Company filings © 2017 Hilton Confidential and Proprietary 5 . and our leading share of future global development . Hilton’s global market share of rooms under construction of approximately 22% is ~4.5x larger than its current market share of existing rooms, implying significant potential for continued growth Hilton Market Share Existing Room Supply Rooms Under Construction Ratio to Competitor % of Total % of Total installed base Ratio Rank(a) United States 11.7% 23.3% 2.0x #2 Americas ex. 2.8% 12.3% 4.4x #1 U.S. Europe 1.6% 19.4% 11.8x #1 Middle East & 2.8% 22.2% 8.0x #1 Africa Asia Pacific 1.4% 20.8% 15.0x #1 Global System 4.8% 21.8% 4.5x #1 Source: STR Global Census, April 2017 (adjusted to March 2017) and STR Global New Development Pipeline, March 2017. (a) Ratio rank relative rank of MAR, HLT and IHG. 9 © 2017 Hilton Confidential and Proprietary 6 …generating substantial returns on minimal capital investment Management and Franchise Value Creation ($ in millions) Pipeline rooms of $10,000$2,000 ~$8,800 325,000 $1,500 $1,000 $8.8B $650 of value creation for only $500 $155M $155 of capital investment $0 Capital Investment in Annual Run-Rate Illustrative Value Creation Pipeline Adj. EBITDA (a) (13.5x Illustrative Adjusted EBITDA) (b) (a) Based on pipeline of 325,000 rooms as of 3/31/17 and projected fees by contract. (b) The multiple of 13.5x 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. © 2017 Hilton Confidential and Proprietary 7 Global Growth: Key Emerging Markets © 2017 Hilton Confidential and Proprietary 8 Global Growth: Key Emerging Markets (cont.) China - Today 381 hotels open or in the pipeline ~105,000 rooms. EXISTING HOTELS PIPELINE Waldorf Astoria 2 3 Conrad 6 9 Canopy 0 2 Hilton 42 67 Curio 0 2 DoubleTree 29 57 Embassy Suites 0 1 Hilton Garden Inn 12 40 Hampton 11 98 Total (381 hotels) 102 279 Note: As of 4/30/2017. Greater China. © 2017 Hilton Confidential and Proprietary 9 Global Growth: Brand Expansion © 2017 Hilton Confidential and Proprietary 10 Global Growth: Brand Expansion (cont.) Europe - Today 371 non-Hilton, non-Conrad hotels open or in the pipeline EXISTING HOTELS PIPELINE Waldorf Astoria 6 0 Canopy 1 2 Curio 3 11 DoubleTree 90 30 Hilton Garden Inn 54 49 Hampton 54 71 Total (371 hotels) 208 163 Note: As of 4/30/2017. © 2017 Hilton Confidential and Proprietary 11 Brand strength, global breadth driving resilient growth… Based on Investor Day model illustrative ranges © 2017 Hilton Confidential and Proprietary 12 . supported by strong fundamentals Growing base of customers that can and Hotel under-penetration in high growth want to travel markets Hotel rooms per capita(a) Global middle Last 20 years, class double again 2x next 20 years 15.8 Global Tourist Arrivals +1B 1.1 1.5 Incremental annual trips 0.2 States United expected over next 20 years China Brazil India Sources: STR, UNWTO, World Bank, OECD (a) Hotel rooms as of December 2015, Population as of 2014. © 2017 Hilton Confidential and Proprietary 13 The New Hilton: a market-leading, resilient, fee-based business . Lower volatility Majority franchise fees Capital efficient growth Adj. EBITDA Managed & from fees, of total fees Franchised 90% franchise net unit revenue driven 90% 70% 6.6% growth(a) driven Management & Franchise Fees ($ in millions) $1,785 High growth $814 +11.4% CAGR 2009 LTM 3/31/17(b) (a) Based on LTM 3/31/2017 (b) On a pro forma basis © 2017 Hilton Confidential and Proprietary 14 . with significant embedded growth 1.0% of system-wide $20M - $25M annual 1 Operating upside in a simplified model RevPAR growth Adj. EBITDA Meaningful, growing and resilient (a) ~$650M annual Adj. 2 325K room pipeline (a) pipeline EBITDA Increasing franchise fees as contracts 4.8% in-place rate vs. ~$160M annual 3 (b) roll over at higher published rates 5.6% published rate Adj. EBITDA $3.0 billion to $4.5 billion of potential capital return 4 Meaningful capital return potential 2017E-19E, 13% to 21% shares outstanding repurchased Note: The various Adj. EBITDA amounts reflected above do not represent projections of future results and are included only for illustrative purposes to present illustrative Adj. EBITDA amounts by applying assumptions to existing room pipeline and other fees, increase of in-place rates and increase in RevPAR, as applicable.