# Hilton Worldwide Holdings Inc. (HLT)

Informational only - not investment advice.

CIK: 0001585689
SIC: 7011 Hotels & Motels
SIC breadcrumb: [Services](/division/I/) > [SIC Major Group 70](/major-group/70/) > [SIC 7011 Hotels & Motels](/industry/7011/)
Latest 10-K filed: 2026-02-11
SEC page: https://www.sec.gov/edgar/browse/?CIK=1585689
Filing source: https://www.sec.gov/Archives/edgar/data/1585689/000158568926000007/hlt-20251231.htm

## Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
| --- | ---: | --- | ---: | --- |
| Revenue | 12039000000 | USD | 2025 | 2026-02-11 |
| Net income | 1457000000 | USD | 2025 | 2026-02-11 |
| Assets | 16774000000 | USD | 2025 | 2026-02-11 |

## Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-11. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001585689.json. Derived margins are computed from the extracted annual SEC facts.

| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | 6,576,000,000 | 8,131,000,000 | 8,906,000,000 | 9,452,000,000 | 4,307,000,000 | 5,788,000,000 | 8,773,000,000 | 10,235,000,000 | 11,174,000,000 | 12,039,000,000 |
| Net income | 338,000,000 | 1,084,000,000 | 764,000,000 | 881,000,000 | -715,000,000 | 410,000,000 | 1,255,000,000 | 1,141,000,000 | 1,535,000,000 | 1,457,000,000 |
| Operating income | 868,000,000 | 1,132,000,000 | 1,432,000,000 | 1,657,000,000 | -418,000,000 | 1,010,000,000 | 2,094,000,000 | 2,225,000,000 | 2,370,000,000 | 2,693,000,000 |
| Diluted EPS | 1.03 | 3.32 | 2.50 | 3.04 | -2.58 | 1.46 | 4.53 | 4.33 | 6.14 | 6.12 |
| Assets | 26,211,000,000 | 14,228,000,000 | 13,995,000,000 | 14,957,000,000 | 16,755,000,000 | 15,441,000,000 | 15,512,000,000 | 15,401,000,000 | 16,522,000,000 | 16,774,000,000 |
| Liabilities | 20,362,000,000 | 12,537,000,000 | 13,437,000,000 | 15,429,000,000 | 18,241,000,000 | 16,260,000,000 | 16,610,000,000 | 17,748,000,000 | 20,211,000,000 | 22,120,000,000 |
| Stockholders' equity | 5,899,000,000 | 1,688,000,000 | 551,000,000 | -482,000,000 | -1,490,000,000 | -821,000,000 | -1,102,000,000 | -2,360,000,000 | -3,727,000,000 | -5,388,000,000 |
| Cash and cash equivalents | 1,062,000,000 | 570,000,000 | 403,000,000 | 538,000,000 | 3,218,000,000 | 1,427,000,000 | 1,209,000,000 | 800,000,000 | 1,301,000,000 | 918,000,000 |
| Net margin | 5.14% | 13.33% | 8.58% | 9.32% | -16.60% | 7.08% | 14.31% | 11.15% | 13.74% | 12.10% |
| Operating margin | 13.20% | 13.92% | 16.08% | 17.53% | -9.71% | 17.45% | 23.87% | 21.74% | 21.21% | 22.37% |

## Macro Cross-References
- [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- [UNRATE](/indicator/UNRATE/): Unemployment Rate
- [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate
- [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private
- [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit
- [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit
- [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food
- [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy
- [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter
- [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index
- [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities
- [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate
- [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm
- [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate
- [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio
- [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed
- [CE16OV](/indicator/CE16OV/): Employment Level
- [ICSA](/indicator/ICSA/): Initial Claims
- [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm
- [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm
- [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product
- [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period
- [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index
- [TCU](/indicator/TCU/): Capacity Utilization: Total Index
- [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units
- [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade
- [PCE](/indicator/PCE/): Personal Consumption Expenditures
- [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income
- [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate
- [M2SL](/indicator/M2SL/): M2
- [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance

## Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization.
Confidence: high

Item 7.        Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

For the discussion of the financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, refer to "Part II—Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on February 6, 2025, which is incorporated herein by reference.

Overview

Our Business

Hilton is one of the largest global hospitality companies, with 9,158 properties comprising 1,351,351 rooms in 143 countries and territories as of December 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 December 31, 2025, we had 243 million members in our award-winning guest loyalty program, Hilton Honors, an increase of 15 percent from December 31, 2024.

Segments and Regions

We analyze our operations and business by both operating segments and geographic regions. Our operations consist of two reportable segments that are based on similar products and services: (i) management and franchise and (ii) ownership. 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: (i) management and franchise fees charged to third-party hotel owners; (ii) licensing fees from our strategic partners, including co-branded credit card providers and strategic partner hotels, and HGV; and (iii) fees for managing the hotels in our ownership segment. As a manager of hotels, we typically are responsible for supervising or operating the hotel in exchange for management fees. 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 hotels.

We conduct business in three distinct geographic regions: (i) the Americas; (ii) Europe, Middle East and Africa ("EMEA"); and (iii) Asia Pacific. The Americas region includes North America, South America and Central America, including all Caribbean nations. Although the U.S., which represented 64 percent of our system-wide hotel rooms as of December 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 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 and related programs. 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. By increasing the number of management and franchise contracts with third-party owners, over time we expect to increase revenues, overall return on invested capital and free cash flow. See further discussion on our cash management policy in "—Liquidity and Capital Resources." The current economic environment, including elevated levels of inflation and interest rates, has posed certain challenges to the execution of our growth strategy, which in some cases have included and may continue to include delays in openings and new development.

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In addition to our current hotel portfolio, we are focused on the growth of our business by expanding our global hotel network through our development pipeline, which represents hotels that we expect to add to our system in the future. The following table summarizes our development activity:

As of or for the Year Ended December 31, 2025

Hotels

Rooms(1)

Hotel system

Openings

796 

97,000 

Net additions(2)

702 

81,100 

Development pipeline

Additions

1,073 

139,200 

Count as of period end(3)

3,703 

520,500 

____________

(1)Rounded to the nearest hundred.

(2)Represents room additions, net of rooms removed from our system. Net unit growth for the year ended December 31, 2025 was 6.7 percent.

(3)The hotels in our development pipeline were under development throughout 129 countries and territories, including 26 countries and territories where we had no existing hotels, with almost 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. We do not consider any individual development project to be material to us.

Principal Components and Factors Affecting our Results of Operations

Revenues

Principal Components

We primarily derive our revenues from the following sources:

•Franchise and licensing fees. Represents fees earned in connection with licensing our IP, including our brands and/or the use of our booking channels and related programs. Under our long-term franchise contracts with hotel owners, franchisees typically pay us franchise fees that include: (i) monthly royalty fees, generally based on a percentage of the hotel's monthly gross room revenue, and, in some cases, may also include a percentage of gross food and beverage revenues and other revenues, as applicable; and (ii) application, initiation and other fees for when new hotels enter the system, when there is a change of ownership of a hotel or when contracts with hotels already in our system are extended. Consideration provided to incentivize hotel owners to enter into franchise contracts with us is amortized over the life of the applicable contract as a reduction to franchise and licensing fees. Our license agreements, for which we receive licensing fees for the use of our IP and/or the use of our booking channels and related programs, are predominantly with strategic partners, including co-branded credit card providers, strategic partner hotels and HGV.

•Base and incentive management fees. Represents fees earned in connection with the management of hotels. Terms of our management contracts vary, but our fees typically consist of a base management fee, which is generally based on a percentage of the hotel's monthly gross operating revenue and, when applicable, an incentive management fee, which is generally based on a percentage of the hotel's operating profits, normally over a one calendar year period, and, in some cases, may be subject to a stated return threshold to the hotel owner. Outside of the U.S., our fees are often more dependent on hotel profitability measures, either because of a single management fee structure where the entire fee is an incentive management fee, or because our two-tier fee structure is more heavily weighted toward the incentive management fee than the base management fee. Consideration provided to incentivize hotel owners to enter into management contracts with us is amortized over the life of the applicable contract as a reduction to base and other management fees.

•Ownership. Represents revenues derived from the operations of our consolidated hotels, including hotel room sales, accommodations sold in conjunction with other services, food and beverage sales and other ancillary goods and services. These revenues are primarily derived from two categories of customers: transient and group. Transient guests are individual travelers who are traveling for business or leisure. Group guests are travelers who are traveling for group events that reserve rooms for meetings, conferences or social functions, and may be sponsored by corporate, social, military, educational, religious or other organizations or associations. Group business usually includes a block of room

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accommodations, as well as other ancillary services, such as meeting facilities and catering and banquet services. A majority of our food and beverage sales and other ancillary goods and services are provided to customers who are also occupying rooms at our hotels. As a result, occupancy affects all components of our ownership revenues.

•Other revenues. Represents revenues primarily generated by our purchasing operations.

•Cost reimbursement revenues. Represents amounts that are contractually reimbursed to us by property owners, either directly as costs are incurred or indirectly through monthly program fees, for certain costs and expenses supporting the operations of the related properties. The direct reimbursements by property owners are primarily for payroll and related costs if the managed hotel employees are legally employed by us. We have no legal responsibility for the employee liabilities related to certain of our managed properties, predominately those located outside of the U.S., where we are not the legal employer, as well as the employees or the liabilities associated with operating franchised properties or strategic partner hotels. Revenues and expenses for these direct reimbursements have no net effect on operating income (loss) or net income (loss). For the indirect reimbursements, Hilton collects monthly program fees from our managed and franchised properties, which are based on the underlying hotel's sales or usage. The program fees serve as reimbursement for the costs related to the operation of our marketing, sales and brand programs and shared services. Hilton collects program fees from strategic partner hotels when a stay that was reserved using our booking channels is completed. Indirect reimbursements also include revenues related to our Hilton Honors guest loyalty program, which are primarily derived from payments from hotel franchisees and third-party owners of hotels we manage that participate in the program, as well as strategic partners, including strategic partner hotels. We are contractually required to use these fees that we collect solely for these programs.

Factors Affecting our Revenues

The following factors affect the revenues we derive from our operations:

•Consumer demand and global economic conditions. Consumer demand for our products and services, as well as the products and services of the third parties from which we earn licensing fees, is closely linked to the performance of the general economy and is sensitive to business and personal discretionary spending levels. Among other factors, declines in consumer demand due to adverse general economic conditions, risks reducing or otherwise negatively affecting travel patterns, lower consumer confidence and adverse geopolitical conditions can reduce the amount of management and franchise fees we are able to generate and/or reduce the revenues and profitability of the operations of our consolidated hotels. Further, competition for hotel guests and the supply of hotel services affect our ability to sustain or increase rates charged to customers of our hotels. Also, declines in hotel profitability during an economic downturn directly affect the incentive portion of our management fees, which is based on hotel profitability measures. As a result, changes in consumer demand and general business cycles have historically subjected and could in the future subject our revenues to significant volatility.

•Contracts with third-party hotel owners and franchisees and relationships with developers. We depend on our long-term management and franchise contracts with third-party hotel owners and hotel franchisees for our management and franchise fee revenues. The success and sustainability of our management and franchise business depends on our ability to perform under our management and franchise contracts and maintain good relationships with third-party hotel owners and franchisees. Our relationships with these third parties allow us to maintain our current presence as contracts mature and also generate new incremental opportunities for property development that can support our growth. Growth and maintenance of our hotel system and earning fees related to hotels in development are dependent on the ability of developers and owners to access capital for the development, maintenance and renovation of properties. We believe that we generally have good relationships with our third-party hotel owners, franchisees and developers and are committed to the continued growth and development of these relationships. These relationships exist with a diverse group of owners, franchisees and developers and are not significantly concentrated with any one particular third party.

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Expenses

Principal Components

We primarily incur the following expenses:

•Ownership. Reflects the operating expenses of our consolidated hotels, including room expenses, food and beverage costs, other support costs and property expenses. Room expenses include compensation costs for housekeeping, laundry and front desk staff, as well as supply costs for guest room amenities and laundry. Food and beverage costs include costs for wait and kitchen staff and food and beverage inventory. Other support expenses include costs associated with property-level management, utilities, sales and marketing, operating hotel spas, operating telephones, parking and other guest recreation, entertainment and other services. Property expenses include property taxes, repairs and maintenance, rent and insurance.

•Depreciation and amortization. These are non-cash expenses that primarily consist of: (i) amortization of capitalized software costs; (ii) depreciation and amortization of property and equipment, including our finance lease right-of-use ("ROU") assets, such as buildings and furniture and equipment that are used in corporate operations or at our consolidated hotels; (iii) amortization of management and franchise contracts acquired from third parties and (iv) amortization of intangible assets that were recorded at their fair value at the time of the 2007 transaction whereby we became a wholly owned subsidiary of affiliates of Blackstone Inc. (the "Merger"). As of January 1, 2023, the only remaining finite-lived intangible assets resulting from the Merger related to leases, international management contracts and our Hilton Honors guest loyalty program. The assets related to the international management contracts and Hilton Honors, which both had useful lives of 16 years, were fully amortized during the year ended December 31, 2023.

•General and administrative. Consists primarily of compensation costs for our corporate employees, including share-based compensation; professional fees, including consulting, audit and legal fees; travel and entertainment expenses; credit losses for estimated uncollectible management, franchise and other fees; and administrative and related expenses.

•Other expenses. Primarily consists of expenses incurred by our purchasing operations.

•Reimbursed expenses. Represents certain costs and expenses that are contractually reimbursed to us by property owners, primarily for (i) payroll and related costs for hotels that we manage where the employees are legally employed by us and (ii) expenses related to our marketing, sales, brands and shared services programs. We are contractually required to use these fees solely for these programs. We have no legal responsibility for the employees or the liabilities associated with operating franchised properties, strategic partner hotels or certain of our managed hotels, predominately those located outside of the U.S. Reimbursed expenses also includes expenses for the operation of our Hilton Honors guest loyalty program as well as credit losses for estimated uncollectible Hilton Honors and program fees.

Factors Affecting our Costs and Expenses

The following are principal factors that affect the costs and expenses we incur in the course of our operations:

•Fixed expenses. Many of the expenses associated with our consolidated hotels are relatively fixed. These expenses include personnel costs, rent, property taxes, insurance and utilities. If we are unable to decrease these costs significantly or rapidly when demand for our hotels decreases, the resulting decline in our revenues can have an adverse effect on our net cash flows and profits. This effect can be especially pronounced during periods of economic contraction or slow economic growth. Economic downturns generally affect the results of our ownership segment more significantly than the results of our management and franchise segment due to the high fixed costs associated with operating a leased hotel. Employees at some of our consolidated hotels are parties to collective bargaining agreements that may also limit our ability to make timely staffing or labor changes in response to declining revenues. In addition, any efforts to reduce costs, including the deferral or cancellation of capital improvements, could adversely affect the economic value of our hotels and brands. Additionally, the general and administrative expenses of operating a global business also include fixed personnel costs, rent, property taxes, insurance and utilities. The effectiveness of any cost-cutting efforts related to leasing hotels or corporate operations is limited by the amount of inherent fixed costs. However, we have taken steps to manage our fixed costs to levels we believe are appropriate to maximize

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profitability and respond to market conditions, while continuing to optimize value for the experiences of our customers, owners and Hilton employees, which supports the long-term sustainability of our brands and business.

•Changes in depreciation and amortization expenses. We capitalize costs associated with certain software development projects and, as those projects are completed and placed into service, amortization expense will increase. As the finite-lived intangible assets that were recorded at the Merger become fully amortized, amortization expense will decrease. As of December 31, 2025, the only remaining finite-lived intangible assets that resulted from the Merger were those related to leases, as included in other intangible assets. We capitalize management and franchise contract intangible assets acquired from third parties and amortize the amounts over their useful lives. Additionally, changes in depreciation expense may be driven by renovations of existing consolidated hotels, acquisition or development of new hotels, the disposition of existing consolidated hotels or corporate facilities through sale, closure or lease termination, lease renewals, expenditures related to our corporate facilities or changes in estimates of the useful lives of our assets. As we place new assets into service, we will be required to recognize additional depreciation expense on those assets. If we are required to recognize impairment losses related to our depreciable assets or finite-lived intangible assets, the related depreciation or amortization expense, respectively, will decrease.

Other Items

Effect of foreign currency exchange rate fluctuations

Significant portions of our operations are conducted in functional currencies other than our reporting currency, which is USD, and we have assets and liabilities, including those that are payable or receivable by consolidated subsidiaries, denominated in a variety of foreign currencies. As a result, we are required to translate the results of those operations, assets and liabilities from their functional currency into USD at market-based foreign currency exchange rates for each reporting period. When comparing our results of operations between reporting periods, there may be material portions of the changes in our revenues or expenses that are derived from fluctuations in foreign currency exchange rates experienced between those periods. We hedge foreign currency exchange-based cash flow variability of certain of our fees using foreign currency forward contracts designated as hedging instruments. We also hold short-term foreign currency forward contracts to offset exposure to fluctuations in certain of our foreign currency denominated cash balances and intercompany financing arrangements, and we have not elected to designate these forward contracts as hedging instruments.

Seasonality

The hospitality industry is seasonal in nature. The periods during which our properties experience higher or lower levels of demand vary from property to property, depending principally upon their location, type of property and competitive mix within the specific location. Based on historical results, we generally expect our revenues to be lower in the first quarter of each year than in each of the three subsequent quarters.

Key Business and Financial Metrics Used by Management

Comparable Hotels

We define our comparable hotels as those that were active and operating in our system for at least one full calendar year and were open January 1st of the previous year. We exclude hotels that have undergone a change in brand or ownership type or a large-scale capital project during the current or comparable periods or otherwise do not have available comparable results, such as those that have sustained substantial property damage or encountered business interruption. We exclude strategic partner hotels from our comparable hotels. Of the 9,044 hotels in our system as of December 31, 2025, 509 hotels were strategic partner hotels and 6,162 hotels were classified as comparable hotels. Our 2,373 non-comparable hotels as of December 31, 2025 included (i) 1,281 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) 1,092 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 for them.

Occupancy

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. Occupancy measures the utilization of available capacity at a hotel or group of hotels.

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Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help management determine achievable Average Daily Rate ("ADR") pricing levels as demand for hotel rooms increases or decreases.

ADR

ADR represents hotel room revenue divided by the total number of room nights sold for a given period. ADR measures the average room price attained by a hotel, and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the industry, and we use ADR to assess pricing levels that we are able to generate by type of customer, as changes in rates charged to customers have different effects on overall revenues and incremental profitability than changes in occupancy, as described above.

Revenue per Available Room ("RevPAR")

RevPAR is calculated by dividing hotel room revenue by the total number of room nights available to guests for a given period. We consider RevPAR to be a meaningful indicator of our performance as it provides a metric correlated to two primary and key drivers of operations at a hotel or group of hotels, as previously described: occupancy and ADR. 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 December 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 years ended December 31, 2025 and 2024 use foreign currency exchange rates for the year ended December 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; (ii) foreign currency transactions; (iii) debt restructurings and retirements; (iv) furniture, fixtures and equipment ("FF&E") replacement reserves required under certain lease agreements; (v) share-based compensation; (vi) reorganization, severance, relocation and other expenses; (vii) non-cash impairment; (viii) amortization of contract acquisition costs; (ix) cost reimbursement revenues and reimbursed expenses; and (x) other items.

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. 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; (ii) share-based compensation, as this could vary widely among companies due to the different plans in place and the usage of them; 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 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

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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 U.S. generally accepted accounting principles ("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; and

•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.

43

Results of Operations

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

Year Ended

Change

December 31, 2025

2025 vs. 2024

System-wide

Occupancy

71.5 

%

(0.1)

%

pts.

ADR

$

159.89

0.5 

%

RevPAR

$

114.39

0.4 

%

U.S.

Occupancy

72.0 

%

(0.5)

%

pts.

ADR

$

169.28

— 

%

RevPAR

$

121.91

(0.8)

%

Americas (excluding U.S.)

Occupancy

68.3 

%

0.5 

%

pts.

ADR

$

153.79

4.4 

%

RevPAR

$

105.06

5.1 

%

Europe

Occupancy

74.3 

%

0.8 

%

pts.

ADR

$

168.43

1.8 

%

RevPAR

$

125.13

2.9 

%

MEA

Occupancy

72.8 

%

4.2 

%

pts.

ADR

$

192.15

5.0 

%

RevPAR

$

139.89

11.5 

%

Asia Pacific

Occupancy

68.7 

%

0.4 

%

pts.

ADR

$

104.62

0.5 

%

RevPAR

$

71.86

1.1 

%

System-wide RevPAR increased during the year ended December 31, 2025, supported by an improvement in system-wide ADR, which included the impact of inflation. In the U.S., RevPAR was impacted by a decrease in inbound international travel, as well as macroeconomic uncertainty which led to a decline in business travel. The increase in RevPAR in the Americas region, excluding the U.S., was attributable to increases in inbound leisure and group travel. The increase in RevPAR in Europe was primarily driven by increases in leisure and group travel. The RevPAR increase in MEA was primarily driven by increased leisure travel, mostly attributable to special regional events, and increases in group and business demand. RevPAR in Asia Pacific increased due to growth in countries and territories outside of China, specifically in leisure and group demand, partially offset by a decrease in RevPAR in China due to a decline in group and business travel.

44

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

Year Ended December 31,

2025

2024

(in millions)

Net income

$

1,461 

$

1,539 

Interest expense

620 

569 

Income tax expense

611 

244 

Depreciation and amortization expenses

177 

146 

Gain on sales of assets, net

— 

(5)

Loss on foreign currency transactions

11 

12 

Loss on debt guarantees(1)

— 

50 

FF&E replacement reserves

73 

57 

Share-based compensation expense

170 

176 

Amortization of contract acquisition costs

57 

50 

Cost reimbursement revenues(2)

(7,085)

(6,428)

Reimbursed expenses(2)

7,550 

6,985 

Other adjustments(3)

80 

34 

Adjusted EBITDA

$

3,725 

$

3,429 

____________

(1)Amount includes losses on debt guarantees for certain hotels that we manage; refer to Note 19: "Commitments and Contingencies" in our consolidated financial statements for additional information.

(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 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 year ended December 31, 2025 includes expected future credit losses on financing receivables. Amount for the year ended December 31, 2024 includes transaction costs resulting from the amendment of our credit agreement governing the senior secured term loan facilities (the "Term Loans") and transaction costs incurred for acquisitions. Amounts for both periods also include losses for the full or partial settlement of certain pension plans, restructuring costs related to certain leased hotels, severance and other items, including non-cash charges, such as net losses (gains) related to certain of our investments in unconsolidated affiliates.

Revenues

Year Ended December 31,

Percent Change

2025

2024

2025 vs. 2024

(in millions)

Franchise and licensing fees

$

2,780 

$

2,600 

6.9

Base and other management fees

$

376 

$

369 

1.9

Incentive management fees

313 

290 

7.9

Total management fees

$

689 

$

659 

4.6

The increase in franchise fees and management fees included a net increase of $60 million and $11 million, respectively, during the year ended December 31, 2025 as a result of net hotel additions between the periods.

The currency neutral increase of $8 million in franchise fees at our comparable franchised hotels during the year ended December 31, 2025 was largely attributable to increases of in-place rates charged to hotels, partially offset by a decrease in fees due to a decrease in RevPAR. RevPAR at our comparable franchised hotels decreased 0.8 percent, due to decreases in occupancy of 0.4 percentage points and ADR of 0.2 percent.

Licensing fees increased $104 million primarily as a result of an increase in fees from our strategic partnerships, predominantly resulting from activity under our co-branded credit card arrangements, and HGV. Increased fees from HGV were the result of increased timeshare revenues earned by HGV, inclusive of the impact of adding new timeshare properties to our system between the periods.

Management fees from comparable properties increased $29 million, on a currency neutral basis, as a result of an increase in RevPAR at our comparable managed hotels of 3.9 percent due to increases in occupancy of 1.0 percentage points and ADR

45

of 2.3 percent. The increase in management fees from comparable properties was partially offset by a decrease of $12 million in termination fees received from hotels that exited our system.

Year Ended December 31,

Percent Change

2025

2024

2025 vs. 2024

(in millions)

Ownership revenues

$

1,233 

$

1,255 

(1.8)

The $22 million decrease in ownership revenues included a currency neutral decrease of $64 million, partially offset by a $42 million increase resulting from favorable fluctuations in foreign currency exchange rates.

Revenues from our comparable leased hotels increased $17 million, on a currency neutral basis, as a result of an increase in RevPAR of 3.9 percent due to increases in occupancy of 1.4 percentage points and ADR of 2.0 percent. The currency neutral decrease in revenues from our non-comparable leased hotels of $81 million included a decrease of $101 million due to hotels that exited our system or changed ownership types between the periods, partially offset by an increase of $29 million related to hotels that were previously under renovation or had business disruption in the prior period.

Year Ended December 31,

Percent Change

2025

2024

2025 vs. 2024

(in millions)

Other revenues

$

252 

$

232 

8.6

The increase in other revenues was primarily due to an increase in vendor rebates for activity related to our purchasing operations.

Operating Expenses

Year Ended December 31,

Percent Change

2025

2024

2025 vs. 2024

(in millions)

Ownership expenses

$

1,094 

$

1,126 

(2.8)

The $32 million decrease in ownership expenses included a decrease of $69 million, on a currency neutral basis, partially offset by a $37 million increase resulting from unfavorable fluctuations in foreign currency exchange rates.

Ownership expenses for our non-comparable leased hotels decreased $70 million, on a currency neutral basis, and include a decrease of $96 million due to hotels that exited our system or changed ownership types between the periods, partially offset by an increase of $24 million related to hotels that were previously undergoing renovations or had business disruption in the prior period.

Year Ended December 31,

Percent Change

2025

2024

2025 vs. 2024

(in millions)

Depreciation and amortization expenses

$

177 

$

146 

21.2

General and administrative expenses

393 

415 

(5.3)

Other expenses

132 

137 

(3.6)

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 driven by lower general corporate costs.

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

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Non-operating Income and Expenses

Year Ended December 31,

Percent Change

2025

2024

2025 vs. 2024

(in millions)

Interest expense

$

(620)

$

(569)

9.0

Loss on foreign currency transactions

(11)

(12)

(8.3)

Other non-operating income (loss), net

10 

(6)

NM⁽¹⁾

Income tax expense

(611)

(244)

NM⁽¹⁾

____________

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

In both March 2024 and 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 ended December 31, 2024. In May 2025, we repaid, at maturity, all $500 million in aggregate principal amount of the 5.375% Senior Notes due 2025 (the "May 2025 Senior Notes"). In July 2025, we issued $1.0 billion Senior Notes (the "July 2025 Senior Notes issuance"). See Note 10: "Debt" in our consolidated financial statements for additional information.

The increase in interest expense was primarily attributable to an increase of $85 million due to the March 2024 Senior Notes issuance, the September 2024 Senior Notes issuance and the July 2025 Senior Notes issuance. The increase was partially offset by a decrease in interest expense of $19 million due to the repayment of the May 2025 Senior Notes and a decrease of $19 million on the unhedged portion of our Term Loans primarily as a result of decreases in one-month Secured Overnight Financing Rate ("SOFR") for the comparable periods.

The net losses on foreign currency transactions are a 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 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, which were recognized during the year ended December 31, 2024, partially offset by a loss on an investment in an unconsolidated affiliate recognized during the year ended December 31, 2025. See Note 19: "Commitments and Contingencies" in our consolidated financial statements for additional information.

The increase in income tax expense was primarily attributable to the $270 million tax benefit recognized during the year ended December 31, 2024 for the tax claim for increased foreign tax basis for certain brand assets, as well as a $72 million increase to income tax expense attributable to the increase in income before income taxes for the year ended December 31, 2025.

Segment Results

As of December 31, 2025, our management and franchise segment included 873 managed and 8,239 franchised and licensed properties, which included 114 timeshare and 509 strategic partner hotels, consisting of 1,336,064 total rooms, and our ownership segment included 46 hotels consisting of 15,287 total rooms. Refer to Note 18: "Business Segments" in our 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 year ended December 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.

47

Liquidity and Capital Resources

Overview

As of December 31, 2025, we had total cash and cash equivalents of $970 million, including $52 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.

Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating and other expenditures, including:

•costs associated with the management and franchising of hotels, including those costs related to our Hilton Honors program, marketing, sales and brand programs and shared services;

•corporate expenses;

•payroll and compensation costs;

•taxes and compliance costs;

•scheduled debt maturities and interest payments on our outstanding indebtedness, which, excluding finance lease liabilities, are estimated to be approximately $611 million in 2026;

•lease payments under our finance and operating leases, which include minimum lease payments that are estimated to be approximately $40 million and $156 million, respectively, in 2026;

•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;

•committed contract acquisition costs;

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

•corporate capital and information technology expenditures;

•dividends as declared; and

•share repurchases.

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

•scheduled debt maturities and interest payments on our outstanding indebtedness, which, excluding finance lease liabilities, are estimated to total an aggregate of $14.9 billion after December 31, 2026;

•lease payments under our finance and operating leases, which include minimum lease payments that are estimated to total an aggregate of $572 million and $906 million, respectively, after December 31, 2026;

•committed contract acquisition costs;

•capital improvements to the consolidated hotels within our ownership segment;

•corporate capital and information technology expenditures;

•dividends as declared;

•share repurchases; and

48

•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 brand programs and shared services.

During the year ended December 31, 2025, we repurchased approximately 12.5 million shares of our common stock for $3.2 billion, excluding the excise tax on share repurchases. As of December 31, 2025, approximately $1.3 billion remained available for share repurchases under our stock repurchase program. In January 2026, our board of directors authorized an additional $3.5 billion 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. See Note 19: "Commitments and Contingencies" in our consolidated financial statements for additional information on our commitments and contingencies that were outstanding as of December 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 December 31, 2025, cash generated from our operations and, as needed, the use of the available capacity of our senior secured revolving credit facility (the "Revolving Credit Facility"). We have continued access to debt markets and have obtained, and expect to continue 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.

We have in the past, and may, from time to time, in the future issue or incur or increase our capacity to incur new debt and/or purchase our outstanding debt through underwritten offerings, open market transactions, privately negotiated transactions or otherwise. Issuances or incurrence of new debt (or an increase in our capacity to incur new debt) and/or purchases or retirements of outstanding debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Sources and Uses of Our Cash and Cash Equivalents

The following table summarizes our net cash flows:

Year Ended December 31,

Percent Change

2025

2024

2025 vs. 2024

(in millions)

Net cash provided by operating activities

$

2,129 

$

2,013 

5.8

Net cash used in investing activities

(190)

(446)

(57.4)

Net cash used in financing activities

(2,348)

(1,045)

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. The increase in net cash inflows during the period included an increase in cash inflows generated from franchise and licensing fees, discussed in "—Revenues." Additionally, there was a decrease in cash outflows of $77 million for debt guarantee payments that were made during the year ended December 31, 2024. The increases to net cash provided by operating activities were partially offset by increases in cash paid for contract acquisition costs of $126 million and cash paid for interest of $86 million.

49

Investing Activities

Net cash used in investing activities for the year ended December 31, 2024 primarily included cash flows related to the acquisitions of (i) the Graduate brand and the associated franchise contracts and (ii) a controlling financial interest in the Sydell Group, both completed during the year ended December 31, 2024. Net cash used in investing activities for both periods included: (i) capital expenditures for property and equipment related to corporate property and the renovation of certain consolidated hotels, and (ii) capitalized software costs that were related to various systems initiatives for the benefit of both our hotel owners and our overall corporate operations.

Financing Activities

The increase in net cash used in financing activities included (i) an aggregate $1.0 billion of cash outflows for the repayment of the May 2025 Senior Notes and the 5.750% Senior Notes due 2028 during the year ended December 31, 2025, (ii) an aggregate cash inflow of $2.0 billion from the March 2024 Senior Notes issuance and the September 2024 Senior Notes issuance during the year ended December 31, 2024, and (iii) a $289 million increase in cash outflows for share repurchases, inclusive of payments made for excise taxes. The increase in net cash used was partially offset by cash inflows of $1.0 billion from the July 2025 Senior Notes issuance and $1.0 billion from the issuance of the 5.500% Senior Notes due 2034 in December 2025.

Debt and Borrowing Capacity

As of December 31, 2025, our total indebtedness, excluding the deduction for unamortized deferred financing costs and discount, was approximately $12.5 billion. No debt amounts were outstanding under our Revolving Credit Facility as of December 31, 2025, which had an available borrowing capacity of $1,894 million after considering $106 million of letters of credit outstanding. For additional information on our total indebtedness and guarantees on our debt, refer to Note 10: "Debt" in our consolidated financial statements.

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. However, we do not have any material indebtedness outstanding that matures prior to April 2027, and we believe that we have sufficient sources of liquidity and access to debt markets to address all indebtedness at or prior to the respective maturity dates. 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.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in the consolidated financial statements and accompanying footnotes. On an ongoing basis, we evaluate these estimates and judgments based on historical experiences and various other factors that we believe reflect the current circumstances. While we believe our estimates, assumptions and judgments are reasonable, they are based on information available when they are made. Actual results may differ significantly from these estimates due to changes in judgments, assumptions and conditions as a result of unforeseen events or otherwise, which could have a material effect on our financial position or results of operations.

We believe that the following estimates, which are used in conjunction with our significant accounting policies, are critical because they involve a higher degree of judgment and are based on information that is inherently uncertain; refer to Note 2: "Basis of Presentation and Summary of Significant Accounting Policies" in our consolidated financial statements for information on our significant accounting policies. Management has discussed the development and selection of the following critical accounting estimates with the Audit Committee of the board of directors:

Hilton Honors

We record a point redemption liability for amounts received from properties participating in our Hilton Honors guest loyalty program and from strategic partners affiliated with the loyalty program, in an amount equal to the estimated cost per point of the future redemption obligation. We engage third-party actuaries annually to assist in determining the fair value of the future reward redemption obligation using a discount rate and statistical formulas that project future point redemptions based on factors that require judgment, including: (i) an estimate of the number of points that will eventually be redeemed, which

50

includes an estimate of breakage (i.e., points that will never be redeemed); (ii) an estimate of when such points will be redeemed; and (iii) an estimate of the cost of reimbursing managed and franchised properties and other third parties for redemptions. The cost of the points expected to be redeemed includes further estimates of available room nights, occupancy rates, room rates and any changes to the Hilton Honors program, including devaluation or appreciation of points based on changes in the number of points required to redeem a reward. Any amounts received related to the issuance of points that are in excess of the cost per point, as determined with assistance from an actuary, are recorded as deferred revenue in our consolidated balance sheet and recognized as revenue upon point redemption. We recognize revenue for point redemptions in the amount we expect to retain in excess of the cost per point, inclusive of estimated breakage, and limit the revenue recognized to an amount that is probable to not result in a significant reversal in the cumulative revenue recognized when breakage occurs.

In addition to the Hilton Honors fees we receive from property owners to operate the program, we earn fees from strategic partnerships, including co-branded credit card arrangements, for a license to use our IP and the issuance of points. The allocation of the overall fees from the strategic partnerships between the IP license and the points issued is based on their estimated standalone selling prices. The estimated standalone selling price of the IP license is determined using a relief-from-royalty valuation method incorporating statistical formulas based on factors that require significant judgment, including estimates of the usage of the strategic partner's goods or services, an appropriate royalty rate and a discount rate applied to the projected cash flows. The estimated standalone selling price of the points issued under the strategic partnerships, which will be used for future reward redemptions, is calculated using a discounted cash flow analysis with the same assumptions as the point redemption liability discussed above, adjusted for an appropriate margin.

Changes in our estimates and assumptions that are used to determine our estimated cost per point and the allocation of fees from strategic partnerships between the IP license fee and the points could result in material changes in the balances of our liability for guest loyalty program and deferred revenues in our consolidated balance sheet. Further, the estimates and assumptions used for the allocation of fees from strategic partnerships could result in material changes to our licensing fees and cost reimbursement revenues recognized in our consolidated statement of operations.

Income Taxes

We regularly review our deferred tax assets to assess their potential realization and establish valuation allowances for portions of such assets that we believe will not be ultimately realized. In performing this review, we consider all positive and negative evidence available, including, but not limited to, estimates and assumptions regarding projected future taxable income, the expected timing of reversals of existing temporary differences and the implementation of tax planning strategies, all of which require significant use of judgment. A change in these assumptions may increase or decrease our valuation allowances resulting in an increase or decrease in our effective tax rate, respectively, which could materially affect our consolidated financial statements. Refer to Note 13: "Income Taxes" for information on the balances of our deferred tax assets and respective valuation allowances as of December 31, 2025.

We record the benefits of income tax positions by recognizing the largest amount of income tax benefit more-likely-than-not to be realized upon resolution. Estimating this benefit involves, but is not limited to, interpreting complex tax laws in the multiple jurisdictions where we operate, evaluating the technical merits of each tax position and assessing amounts we would ultimately accept in a negotiated settlement with the tax authorities, if applicable. The complexities and judgment involved in estimating the Company's income tax positions could result in payments materially different than the liabilities previously recognized for such expected payments. Additionally, as new information becomes available (e.g., legislative changes or administrative rulings), changes in the Company's judgment and assumptions could result in adjustments to our existing income tax position recognition. Changes to these assumptions and estimates may increase or decrease our existing liabilities, resulting in additional income tax expense or benefit, respectively, which could materially affect our consolidated financial statements.

Legal Contingencies

We are subject to various legal proceedings and claims, the outcomes of which are subject to significant uncertainty. An estimated loss from a loss contingency is accrued as a charge to income if it is probable and the amount of the loss can be reasonably estimated. Significant judgment is required when we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss in determining whether an accrual of an estimated loss is appropriate. Changes in these factors could materially affect our consolidated financial statements.

51