HiltonWorldwideHoldingsInc

DerekChait,SeamusFitzPatrick,DianaLamSeptember13,2015

2

TableofContents

I.  InvestmentThesisII.  CompanyOverviewIII.  InvestmentCatalystsIV.  ValuaHonV.  Conclusion

I. InvestmentThesis

4

HiltonWorldwideHoldingsInc.(NYSE:HLT)AsofSeptember11,2015

RecommendaHon:Buy CurrentPrice:$25.59 PriceTarget:$33.41

Hiltonisanindustryleaderwithoneofthemostpowerfulbrandsinthelodgingindustry.Itsshi<tofocusonthefranchisemodelallowsthecompanytobelesscapitalintensiveandmaintainmorepredictablecashflows.Con?nuedRevPARgrowthwillallowHiltontomaintainconsistentgrowthandpaydownitsdebtbalance.

n  Launchofitstwolifestyleanditsnewmid-scalebrandswillexpanditsalreadydiverseporUolio

n  ShiVtocapitallightbusinessmodelsdrivesorganicgrowthwithminimumcapitalinvestment

n  StrongcashflowanddisciplinecapitalallocaHonwillreturnsgreatervaluetoshareholders

n  ManagementindicatespotenHalsharerepurchaseprogramandREITspin-offnextyear

CATALYSTS

RISKS

n  CurrentDebt/EBITDAfiguresaresubstanHallyhigherthanthatofitspeers

n  IncreaseduncertaintyinChina’sduetoitsslowinggrowthandunstablecurrency

n  Sharedeconomybusinesses,suchasAirbnb,couldpotenHallytakeawaymarketshare

II. CompanyOverview

6

HiltonWorldwideHistoricalTimeline

Sources:Bloomberg,CompanyWebsite

HISTORICALOVERVIEW

1925

2007

2009

2009

ConradHiltonopensthehigh-riseDallasHilton,thefirsthoteltocarrytheHiltonname

TheBlackstoneGroupcompletes$26BnleveragedbuyoutofHiltonHotelsCorporaHoninthefallof2007attheheightoftherealestatebubble

ChristopherNassecatakesoverasPresidentandCEO,movingfromhisposiHonasChairmanandCEOofHostHotels&Resorts

ValueofBlackstone’sequityinHiltonhadfallenby70%orroughly$3.9Bn

2013 HiltonWorldwidereturnstotheNewYorkStockExchange,totradeundertheHckerHLT,inDecemberwithitsIPOpricingat$20pershare

7

HiltonWorldwideOverview

Source:CompanyFilings

COMPANYOVERVIEW INDUSTRYOVERVIEW

n  OneofthelargesthotelcompaniesintheworldwithadiverseporUolioofworld-classbrandsconsisHngof4,400properHesand732,000roominnearly100countries

n  Threebusinesssegments:n  Management&Franchisen  Ownershipn  Timeshare

n  ChristopherNasseta–President&CEOn  JoinedHiltonin2007n  1995–2007:HostHotels&Resortsn  1991–1995:BaileyCapitalCorporaHon,Co-Founder

n  HiltonHHonorLoyaltyProgramn  46MMmembersworldwiden  5MMappdownloadsn  ApphashighestaveragecustomerraHngoutofpeers

n  Businessandleisuretravelarethemajordriversofdemandinthehotel/motel/resortspace

n  LargecompanieshavetheadvantageofeconomiesofscaleintheiroperaHonsaswellasstrongnamerecogniHon

n  Roomsrevenueperavailableroom(RevPAR)growthisexpectedtoberemainverystrongin2016withesHmatesreaching7.3%

-20%

-15%

-10%

-5%

0%

5%

10%

RevPARGrowth(%)

15

20

25

30

35

Sep-15May-15Dec-14Aug-14Apr-14Dec-13

8

RecentPullbackProvidesaBuyingOpportunity

Source:Yahoo!Finance

PRICEPERFORMANCEFOLLOWINGIPO CAUSESOFPULLBACK

n  Pullbackof[16.5%]fromhighof$31.10onApril9th

n  April13th,2015:EvercoredowngradesHiltonfromaBuyraHngtoaHoldraHng

n  Worriesofinterestratehikeshavecausedageneralsell-offinstocks,parHcularlyinlodgingstocks

n  ConcernsforHiltonareexacerbatedbythesubstanHaldebtloadcurrentlyontheirbalancesheetasacarryoverfromtheBlackstoneLBO

7580859095100105110

Sep-15Aug-15Jul-15Jun-15May-15Apr-15

HLT MAR HOT H

III. InvestmentCatalysts

10

GrowingDiversifiedPorUolioofHotels

Source:CompanyFilings,InvestorPresentaHonNote:(1)LTM6/30/2015

n  250,000roompipelineisthelargestinHilton’shistoryandtheindustrywith54%locatedinternaHonallyn  Hilton’sroomunderconstrucHonmakeup20%of

roomsunderconstrucHonintheindustryn  Entering32newcountries

n  Launchofanewmid-scalebrandinmid-2016n  40%ofUSoverallroomdemandn  Fragmentedmid-scalesegmentprovidesmeaningful

growthopportunityn  Goalisasystemsizeofthousandsofhotels

78%

4%

9%2%7% US

AmericasNon-USEurope

MiddleEast&AfricaAsiaPacifics

29%

32%

35%

1%3% UpperMidscaleUpscale

UpperUpscaleOther

Luxury

LARGESTPIPELINEINTHEINDUSTRY

ADJUSTEDEBITDABYGEOGRAPHY CURRENTROOMSBYCHAINSCALE

n  Launchoftwolifestylebrands–CanopyandCurio

n  InvestmentinChina’srapidlyexpandingmiddleclass

n  SecondlargestpipelineinChina

n  219Projects–64,672roomsindevelopment

n  53%-limitedservicehotelstargeHngmiddleclass

n  HiltonexpectssigningsformidscaleproperHestoacceleratenextyear

11

ShiVtoanIncreasinglyCapitalLightBusinessModel

Source:CompanyFilingsNote:(1)LTM6/30/2015

n  Third-partyownersanddeveloperprovidethecapitalfordevelopmentwhileHiltonactsasthesalesandmarkeHngagentandthepropertymanager

n  Allroomsscheduledtobeopenincompany’spipelineexpandstheM&Fcapitallightmodel

n  RecentlysoldtheWaldorfAstoriaNYandHiltonSydney

MANAGEMENT&FRANCHISEDRIVEVALUEWITHMINIMUMINVESTMENT

PIPELINETOEXPANDCAPITALLIGHTMODEL

34.9%

53.6%

11.5%

AdjustedEBITDAbySegment

Ownership

Mgmt.&Franchise

Timeshare

116 114 137 145315 329 360 368

749 828971 1078

$1,180 $1,271$1,468

$1,591

$0

$500

$1,000

$1,500

$2,000

2012 2013 2014 LTM6/30/2015

IncenHve BaseMgmt. Franchise

n  M&FunitsareessenHally100%margin

n  ExpandsHilton’sglobalfootprintwithlicletonocapitalinvestment

n  IniHaltermsofmanagement&franchisecontractsfornewdevelopmentare20years,with5-10yearextensions,providingstablesourceofcashflow

n  70%ofM&Frevenuegeneratedbystablefranchisefees

n  Hiltonalsosettoraisefeesforselectbrands

12

CommitmenttoReturningValuetoShareholders

Source:CompanyFilings,PWCResearchNote:(1)LTM6/30/2015

n  Aggressivelyreducinglong-termdebtthroughvoluntaryincrementaldebtprepayment

n  Debtloweredby$750MMthroughJuly,2015

n  $1.1–1.3Bnfordebtrepaymentandshareholdersn  Management’sgoalistoachieveinvestmentgrade

byyearendn  ExpectsNetDebt/Adj.EBITDAof3.4ximplying

$200-400MMdebtreducHonfor2H2015

n  IniHatedquarterlydividendof$0.07inQ2of2015n  IntenttogrowdividendoverHmetargeHnga

payoutraHoof30%-40%ofrecurringcashflow

n  AnHcipatesiniHaHonofsharerepurchasingprogramformid-year2016

10.5x8.9x

7.7x

5.2x4.1x 3.7x

0x

4x

8x

12x

2010 2011 2012 2013 2014 LTM6/30/2015

NetDebt/Adj.EBITDA

DISCIPLINEDCAPITALALLOCATION POTENTIALREITSPIN-OFF

n  CompanyexpectedtoannounceatyearendthepotenHalspin-offofitsHmesharebusinessandthe100-plushotelsthatitowns,leases,orpartlyownsintoaRealEstateInvestmentTrust(REIT)structure

n  REITbenefits:n  Significantcorporatetaxsavingsn  Tax-efficientstructurecanallowREITtotradeata

highermulHple,whichcanacractnewinvestorsn  TwoenHHesthatcanfocusontheircorebusinesses

n  However,thereareconsiderablerequirementsthatanenHtyhastomeettoqualifyasaREIT

Shareholders

PropCo–RealEstate

OpCo–operaHngbusiness

TotalDeleverage:6.8x

13

ThreatFromthe“SharingEconomy”RISEOFALTERNATIVEACCOMODATION

INDUSTRYRESPONSE HILTON-SPECIFICRESPONSE

n  HotelchainshaveyettotakesubstanHalacHontocounter“threat”fromtheupstartlodgingservice

n  Servefundamentallydifferentmarketsandoperateindissimilarspacesànorealeffectonpricingpower

n  Hotels:Businesscustomerforbusinesspurposes

n  AlternaHves:Casualleisuretraveler(80%oflisHngsarelocatedoutsideacity'scentraldistrict)

n  LobbyingpushforlawsrequiringAirbnbproperHestoadheretothesamesafetystandardsandtaxlawsthathotelsdoàAmericanHotel&LodgingAssociaHon

29

22

14

25

0 10 20 30

Hilton

Marrioc

Starwood

AirBnB

94

79

100

190

0 50 100 150 200

Hilton

Marrioc

Starwood

AirBnB

715,062

714,765

354,200

1,000,000

0 200,000400,000600,000800,0001,000,0001,200,000

Hilton

Marrioc

Starwood

AirBnB

Value($B) #Rooms #Countries

n  ModernizaHoniniHaHvestointegratemorecustomizaHonandefficiencyintothehotelexperience

n  “SweetDreamsBed,”newsocialseaHngareas

n  “MadeMarket”grab-and-go,eaHngestablishmentsthatcelebratelocalcultureandcuisine

n  HiltonHHonorsMembers

n  “CareCulture”recogniHonofpersonalpreferences

n  “HHonorsApp”:Digitalkey/straight-to-roomabiliHes

n  eCheck-InàAddmoreguest-facingtechnology

IV. Valua?on

15

ComparableUniverse

Source:Bloomberg

SELECTEDCOMPARABLEMETRICS

Company MarketCap($MM)

1-YrRevenueGrowth(%) P/ETTM(x) EV/TTM

EBITDA(x)EBITDAMargin

(%) NetMargin(%)

StarwoodHotels&ResortsWorldwide,Inc.(NYSE:HOT) 12,557 (2.2%) 22.6x 12.5x 19.5% 9.8%

HyajHotelsCorpora?on(NYSE:H) 7,402 5.5% 70.9x 12.1x 15.5% 6.3%

MarriojInterna?onal,Inc.(NASDAQ:MAR) 19,412 7.9% 25.1x 16.2x 9.5% 5.9%

HiltonWorldwideHoldings,Inc.(NYSE:HLT) 25,269 7.9% 39.4x 14.2x 22.4% 5.9%

CompanyNumberofHotelRooms

AverageOccupancy(%) ADR($) RevPAR($) DividendYield

(%)NetDebt/EBITDA(x)

StarwoodHotels&ResortsWorldwide,Inc.(NYSE:HOT) 354,200 70.1% 175.64 123.08 2.08% 1.4x

HyajHotelsCorpora?on(NYSE:H) 151,105 76.2% 220.00 168.00 N/A 1.0x

MarriojInterna?onal,Inc.(NASDAQ:MAR) 714,765 73.7% 178.96 131.83 1.40% 2.6x

HiltonWorldwideHoldings,Inc.(NYSE:HLT) 715,062 74.6% 141.52 105.63 1.10% 4.2x

16

PriceTargetandSensiHvityAnalysisAsofSeptember11,2015

Source:Yahoo!Finance

BULL/BASE/BEARPRICETARGETS SENSITIVITYTABLES

15

25

35

45

Dec-15Jul-15Mar-15Oct-14May-14Dec-13

$41.24

$33.41

$22.68

BASECASE ValuePerShareTerminalEBITDAMultiple10.0x 11.0x 12.0x

Discount 6.9% $30.99 $34.26 $37.54Rate 7.4% $30.20 $33.41 $36.61(WACC) 7.9% $29.43 $32.57 $35.71

BULLCASE ValuePerShareTerminalEBITDAMultiple10.0x 11.0x 12.0x

Discount 6.9% $38.36 $42.25 $46.15Rate 7.4% $37.43 $41.24 $45.05(WACC) 7.9% $36.51 $40.25 $43.99

BEARCASE ValuePerShareTerminalEBITDAMultiple10.0x 11.0x 12.0x

Discount 6.9% $20.89 $23.32 $25.75Rate 7.4% $20.30 $22.68 $25.06(WACC) 7.9% $19.73 $22.06 $24.39

V. Conclusion

18

ClosingThoughts

n  AVersignificantresearchintoHiltonWorldwideHoldingsInc.(NYSE:HLT),webelievethatHiltonisundervalueddespitestrongunderlyingfundamentalsandaseriesofinternalini?a?vespoisedtopromotefuturegrowthandanulHmatereducHonindebt

n  HiltonisvicHmofarecentsell-offinlodgingstocksduetolargelyunsupportedspeculaHonregardinginterestratehikes

n  WhilethecompanymaycurrentlyhaveasubstanHaldebt-load,managementhasiniHatedanaggressive,voluntaryplanofincrementaldebtpaymentsinordertocleanupthebalancesheet

n  ManagementisalsosupporHveofreturningcashtoshareholdersthroughanewquarterlydividendandfuturesharerepurchasingprogramformid-year2016

n  Thecompanyislookingtoexpanduponitsalreadyindustry-leadingdiversifica?on,includingthroughthelaunchofanewmid-scalebrandinmid-2016thatwilltargetasubstanHalporHonofthemodernhospitalitymarket

n  AconsideredREITand/or?mesharespin-offprogramwillenableHiltontofurtherreturnvaluetoshareholders

n  AnewpipelinetodevelopaM&FcapitallightmodelwillallowHiltontocon?nuetoexpandanddeliverthequalityhospitalityexperiencethatcustomershavecometoexpectwhileenablingthecompanytoavoiddevelopmentalcosts

n  Allroomsscheduledtobeopenincompany’spipelineexpandtheM&Fcapitallightmodel

n  AlthoughtherewillbeconHnuedpressurefromtheriseof“SharedEconomy”hospitalityplaUorms,thecorrelaHonbetweenalternaHveaccommodaHonandthetradiHonalhotelmarketislargelyoverblowninthepresent?me

n  Thehotelindustryasawholeexperiencedarecordyearwiththecon?nuedup?ckininboundtravelfromallmarketsàThetwomarketscatertodifferentsortsofcustomerslookingforadifferenttypeoftravelexperience

n  Hiltonhaspromisedtoexploreallpossiblestructuralop?onsinordertofurtherpromoteitsgrowingbusiness

n  Increasedfocusonrevampingthelodgingexperiencetoprovidetravelerswithamorecustomizableandtechnologicallyefficientprocess

POST-DILIGENCEOPINION