# Hilton Worldwide Holdings Inc. (HLT) — Narrative, third quarter 2026

Hilton reports in US dollars. The Business, Risks and annual MD&A sections come from the Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (accession 0001585689-26-000007). The current-quarter sections come from the Form 10-Q for the quarter ended September 30, 2026 (accession 0001585689-26-000054) and the third-quarter results release furnished as Exhibit 99.1 to the Form 8-K of October 27, 2026 (accession 0001585689-26-000049).

## Business

*Source: FY2025 Form 10-K, accession 0001585689-26-000007 (Item 1 and Item 7).*

Hilton is one of the world's largest hotel companies, and it makes almost all of its money from fees rather than from owning hotels. Third-party owners pay Hilton to manage their hotels or to use its brands, and partners such as co-branded credit card issuers and Hilton Grand Vacations (HGV) pay it to license the brand and the Hilton Honors loyalty program. Owners supply nearly all of the capital that builds and renovates the hotels. At December 31, 2025 the system had 9,158 properties with 1,351,351 rooms in 143 countries and territories, and Hilton Honors had 243 million members, 15 percent more than a year earlier. By September 30, 2026 the system had grown to 9,620 properties, 1,408,417 rooms and 144 countries and territories, with 270 million Honors members (10-Q, accession 0001585689-26-000054).

Hilton reports two segments:

- **Management and franchise.** This segment is where the economics lie. As a **manager** (873 hotels and 264,760 rooms at year-end 2025, excluding the ownership segment), Hilton earns a base fee that is generally a percentage of the hotel's monthly gross operating revenue. Where a contract provides for one, it also earns an incentive fee that is generally a percentage of hotel operating profit, sometimes payable only after the owner reaches a stated return. Initial management terms typically run 20 to 30 years, and Hilton often employs the hotel staff, particularly in the U.S. As a **franchisor and licensor** (8,239 properties and 1,071,304 rooms, including timeshare resorts and strategic partner hotels), Hilton charges an application or initiation fee and a royalty, which is generally a percentage of monthly gross room revenue. Initial franchise terms are about 20 years for new hotels and about 10 to 20 years for conversions. License fees also come from co-branded credit card arrangements, HGV (which has the exclusive right to use Hilton's timeshare brands under a long-term license) and strategic partner hotels, which join the booking channels and Hilton Honors without carrying a Hilton brand. Outside the U.S., management fees depend more heavily on hotel profitability.
- **Ownership.** At year-end 2025 this segment held 46 hotels with 15,287 rooms: 40 leased, 2 leased by consolidated variable interest entities in Japan, and 4 owned or leased by unconsolidated affiliates. Because the costs of these hotels are largely fixed, earnings here fall faster than revenue in a downturn. The segment had 45 hotels with 14,881 rooms at September 30, 2026.

Owners also pay program fees for marketing, reservations, technology and Hilton Honors, and they reimburse Hilton for the payroll of hotel staff it employs. These pass-through amounts appear as "cost reimbursement revenues" and "reimbursed expenses", and they are large: $7,085 million and $7,550 million in 2025, against total revenues of $12,039 million. Hilton runs these programs at breakeven over time and leaves them out of Adjusted EBITDA.

The portfolio runs from luxury to economy and extended stay. By rooms, focused-service brands dominate. At year-end 2025, Hampton by Hilton had 3,195 properties with 359,886 rooms (26.6 percent of total rooms), Hilton Hotels & Resorts 622 properties with 228,611 rooms (16.9 percent), Hilton Garden Inn 1,124 with 165,782 (12.3 percent) and DoubleTree by Hilton 715 with 160,138 (11.9 percent). The luxury and lifestyle tier includes Waldorf Astoria, Conrad, LXR, NoMad, Signia, Canopy, Curio Collection, Graduate, Tapestry Collection, Tempo, Motto and Outset Collection. Hilton added three brands in 2026: Apartment Collection by Hilton (announced January 2026), Select by Hilton (March 2026, with the independent lifestyle brand YOTEL as its first member under an exclusive agreement) and Undergraduate by Hilton (June 2026), an upper-midscale lifestyle brand for college and university markets. In October 2026 the company described its portfolio as 28 brands (earnings releases for Q4 2025, Q1 2026 and Q2 2026, accessions 0001585689-26-000005, 0001585689-26-000031 and 0001585689-26-000042; listing-transfer release, accession 0001585689-26-000045).

The U.S. held 64 percent of system rooms at year-end 2025 and 63 percent at September 30, 2026. Hilton reports results for the U.S., the rest of the Americas, Europe, the Middle East and Africa, and Asia Pacific. Growth comes from new units: in 2025 Hilton opened 796 hotels with about 97,000 rooms, for net unit growth of 6.7 percent. At year-end its development pipeline held 3,703 hotels with about 520,500 rooms in 129 countries and territories, almost half of those rooms were under construction, and nearly all will join the fee-based segment. Hilton's main global competitors are Accor, Choice Hotels, Hyatt, IHG, Marriott and Wyndham. Demand is seasonal, with the first quarter normally the weakest, and cyclical, following macroeconomic indicators with a lag. At year-end 2025 Hilton employed or managed about 182,000 people at its leased and managed hotels and corporate offices, and franchisees employed about 328,000 more.

## Risk factors

*Source: FY2025 Form 10-K, accession 0001585689-26-000007, Item 1A. The Q3 2026 10-Q reports no material changes to these risk factors.*

These are the risks the 10-K treats as most consequential for the economics of the business:

- **Demand is cyclical and exposed to events Hilton cannot control.** Recessions, inflation, tariffs, barriers to travel and immigration, wars and terrorism, pandemics, government shutdowns and cuts to corporate travel budgets all reduce room demand. Incentive fees, which are tied to hotel profit, and the largely fixed-cost leased hotels absorb the hit first. The 2026 filings show this at work: geopolitical conflict in the Middle East cut MEA RevPAR, and the forward-looking statements now name conflicts "including Iran".
- **The business depends on third-party owners.** Owners can terminate some management contracts if hotels miss performance tests. Hilton sometimes has a cure right, which can require it to pay the shortfall. Owners who cannot refinance property loans may lose their hotels to lenders, which can end the contract. Hilton has also been required to pay on debt guarantees it extended to owners. If owners refuse to fund upgrades to brand standards, the brands suffer, while standards seen as too costly push owners to rival brands.
- **The pipeline may not turn into hotels.** Of the 3,703 hotels in the year-end 2025 pipeline, roughly half the rooms were not yet under construction. Owners' access to financing and approvals decides how many open, and some never enter the system.
- **Competition, including from intermediaries and AI.** Hilton competes for guests and for management and franchise contracts. Online travel agencies can demand higher commissions or rank Hilton hotels lower in search results. The filing specifically warns that large language models and other big technology platforms could move into travel booking and pull reservations away from direct channels.
- **Technology, cyber-attacks and AI.** Reservation, loyalty and property systems depend on third-party and cloud providers, and some data-center operations sit in a single facility or with a single cloud provider. Hilton has been the target of cyber-attacks before. The filing cites the July 2024 CrowdStrike outage, which affected Hilton temporarily but not materially. Hilton is also building generative and agentic AI into its processes, which brings regulatory, accuracy and reputational risk.
- **Hilton Honors.** Changes to the program, or a decision to tax members' benefits, could cause members to leave it. Its accounting depends on actuarial estimates of how many points will be redeemed, how many will never be, and what each will cost, so changes in those estimates can move deferred revenue and licensing fees materially.
- **International exposure, sanctions and currency.** About 36 percent of system rooms were outside the U.S. in 2025. Hilton faces anti-corruption law, OFAC sanctions (where it has filed voluntary disclosures in the past), restrictions on moving funds home, nationalization and currency translation. The sanctions risk materialized in Q3 2026 at two Frankfurt hotels; see Current quarter.
- **Labor.** About 25 percent of people Hilton employs or manages globally, and about 45 percent in the U.S., were covered by collective bargaining agreements at year-end 2025, several of them under renegotiation. Labor shortages and minimum-wage increases raise costs for Hilton and its franchisees.
- **Taxes.** The IRS is auditing Hilton's federal returns for 2011 through 2020. A dispute over how the Hilton Honors program is taxed has been effectively settled through 2018, but later years remain open to audit and could materially raise tax liabilities.
- **Leverage.** Total debt was about $12.5 billion at year-end 2025, rising to about $13.5 billion by September 30, 2026. At year-end 2025, scheduled long-term debt maturities for 2026, 2027 and 2028 were $25 million, $619 million and $12 million respectively. The credit agreement caps the consolidated secured net leverage ratio at 5.0 to 1.0. As a holding company, the parent depends on distributions from its subsidiaries.
- **Insurance and climate.** Hilton expects general and excess liability insurance across the portfolio to cost more in 2026. The U.S. terrorism insurance backstop runs only through December 31, 2027. Climate change and severe weather threaten hotels and destinations.
- **Shareholder matters.** The dividend can be changed at any time. Delaware law and Hilton's charter provisions, including undesignated preferred stock and advance-notice requirements, could deter a takeover.

## Management's discussion and analysis: fiscal 2025

*Source: FY2025 Form 10-K, accession 0001585689-26-000007, Item 7. Diluted EPS is from the Q4 2025 results release, Exhibit 99.1 to Form 8-K, accession 0001585689-26-000005.*

2025 was a year of flat RevPAR and rising fees. System-wide comparable RevPAR rose only 0.4 percent on a currency-neutral basis, to $114.39: occupancy slipped 0.1 points to 71.5 percent and ADR rose 0.5 percent to $159.89. The regions moved in different directions:

- **U.S.:** down 0.8 percent, as inbound international travel fell and macroeconomic uncertainty reduced business travel.
- **Americas excluding the U.S.:** up 5.1 percent, on inbound leisure and group travel.
- **Europe:** up 2.9 percent, on leisure and group travel.
- **Middle East and Africa:** up 11.5 percent, on leisure travel to special regional events.
- **Asia Pacific:** up 1.1 percent, as growth outside China outweighed a decline in China's group and business travel.

Fees still grew because the system grew and licensing income rose:

- **Franchise and licensing fees** rose 6.9 percent to $2,780 million. Licensing fees, mostly from the co-branded credit cards and HGV, added $104 million. Net hotel additions added $60 million. Comparable franchise fees rose only $8 million because higher in-place rates were partly offset by lower RevPAR at franchised hotels.
- **Management fees** rose 4.6 percent to $689 million, with incentive fees up 7.9 percent to $313 million. RevPAR at comparable managed hotels rose 3.9 percent, though termination fees fell $12 million.
- **Ownership revenues** fell 1.8 percent to $1,233 million as leased hotels left the system.

Total revenues were $12,039 million, against $11,174 million in 2024. Adjusted EBITDA rose to $3,725 million from $3,429 million. Net income nevertheless fell to $1,461 million from $1,539 million, and diluted EPS slipped to $6.12 from $6.14. The decline came from income tax expense, which rose to $611 million from $244 million mainly because 2024 included a $270 million tax benefit tied to increased foreign tax basis in certain brand assets. Interest expense also rose to $620 million from $569 million, with new note issuances in 2024 and July 2025 adding $85 million. Depreciation and amortization rose to $177 million from $146 million as new software went into service, and general and administrative expense fell to $393 million from $415 million.

Hilton returns most of its cash to shareholders and finances the program partly with debt. Operating cash flow was $2,129 million in 2025, against $2,013 million in 2024. Hilton repurchased about 12.5 million shares for $3.2 billion, excluding excise tax, and in January 2026 the board authorized another $3.5 billion. On the debt side, Hilton issued $1.0 billion of senior notes in July 2025 and $1.0 billion of 5.500% Senior Notes due 2034 in December 2025. It repaid the $500 million of 5.375% notes due 2025 at maturity in May 2025 and redeemed the $500 million of 5.750% notes due 2028. Year-end debt was about $12.5 billion, cash was $970 million (including $52 million restricted), the revolving credit facility was undrawn with $1,894 million available, and no material debt was due before April 2027. Because of the buybacks, total equity was a deficit of $5,359 million at year-end 2025.

Management names three areas of critical accounting judgment. The first is Hilton Honors: the actuarially estimated cost per point and breakage, and the split of credit card partner fees between the brand license and points. The second is income taxes. The third is legal contingencies: a loss is accrued when it is probable and can be reasonably estimated, and judging the probability of an unfavorable outcome and whether the loss can be estimated requires significant judgment.

## Current quarter: three and nine months ended September 30, 2026

*Source: Form 10-Q, accession 0001585689-26-000054, and Q3 2026 results release, Exhibit 99.1 to Form 8-K, accession 0001585689-26-000049.*

**Demand strengthened.** System-wide comparable RevPAR rose 5.8 percent in the third quarter to $124.70, with occupancy up 1.4 points to 75.8 percent and ADR up 3.9 percent to $164.57. For the nine months it rose 4.7 percent. The regions again diverged:

- **U.S.:** up 7.0 percent in the quarter, on strength in business and group travel, leisure demand from the World Cup, and favorable calendar and holiday shifts.
- **Americas excluding the U.S.:** up 6.3 percent, on rate gains from business and group travel and strength in Canada and South America.
- **Europe:** up 6.5 percent, on business, group and special events. The Winter Olympics helped the nine-month figure.
- **Middle East and Africa:** down 5.6 percent in the quarter and 12.3 percent for nine months, because of the ongoing geopolitical conflict in the Middle East. Occupancy fell 5.0 points in the quarter.
- **Asia Pacific:** down 0.5 percent in the quarter. Japan and Korea grew, but China declined on softer consumer sentiment and continued government restrictions on business and group travel.

**Fees accelerated.** Management and franchise fee revenues rose 9.5 percent in the quarter and 8.7 percent for nine months, broken down as follows:

- **Franchise and licensing fees** rose 10.3 percent to $815 million. Comparable franchised hotels contributed $29 million on currency-neutral RevPAR up 5.8 percent, net hotel additions $16 million, non-comparable hotels $11 million and licensing fees $15 million, the last from co-branded cards, HGV and branded residential fees.
- **Total management fees** rose 5.7 percent to $167 million, with incentive fees up 9.2 percent to $71 million on higher hotel profitability.
- **Ownership revenues** fell 5.6 percent to $304 million because of renovations. A hotel that left the system also lowered the nine-month figure.

**Earnings rose.** Total revenues were $3,325 million, against $3,120 million a year earlier, and operating income was $909 million, against $777 million. Much of the operating income increase came from the owner-funded programs described above: cost reimbursement revenues of $1,967 million exceeded reimbursed expenses of $1,951 million this quarter, after falling short of them a year earlier ($1,837 million against $1,902 million), and Hilton runs those programs to break even over time. Net income was $536 million, against $421 million. Diluted EPS was $2.37, against $1.78, or $2.45 against $2.11 adjusted for special items. Adjusted EBITDA was $1,058 million, against $976 million, a 77.0 percent margin against 75.2 percent. For the nine months, net income was $1,401 million (against $1,163 million), diluted EPS $6.13 (against $4.84) and Adjusted EBITDA $3,013 million (against $2,779 million).

The main costs that offset this growth were:

- **Interest expense** rose to $184 million from $159 million. The December 2025 and May 2026 note issuances added $29 million, and the March 2026 maturity of the $1.6 billion interest rate swap added $14 million. With the swap gone, Hilton has no hedge on its variable-rate debt.
- **General and administrative expense** rose to $110 million from $95 million on payroll and compensation.

Third-quarter and nine-month results also include a loss on deconsolidating a subsidiary that previously leased a hotel. The 10-Q does not disclose the amount of this loss.

**Growth and pipeline.** Hilton opened 182 hotels with 27,000 rooms in the quarter, for 23,000 net additions and net unit growth of 6.0 percent from a year earlier. Over nine months it opened 520 hotels with about 67,400 rooms. The pipeline reached 3,869 hotels with about 543,100 rooms in 135 countries and territories, up 5 percent from a year earlier, after 30,500 rooms were approved in the quarter. Quarter-end segment counts were 892 managed and 8,683 franchised or licensed properties, the latter including 126 timeshare and 585 strategic partner hotels. Management named the quarter its highest ever for organic openings.

**Cash, capital return and debt.** Nine-month operating cash flow fell to $1,811 million from $1,926 million, because the timing of income tax payments added $401 million: payments net of refunds were $566 million, against $165 million. The capital return and debt moves were:

- **Buybacks.** Hilton repurchased 8.2 million shares for $2,602 million (excluding excise tax) in the nine months, including 2.6 million in the third quarter at an average of $320.05. About $2.2 billion of authorization remained at quarter-end.
- **Revolving credit facility.** In March 2026 Hilton amended it to extend the expected maturity to March 2031 and reprice it at SOFR plus 1.00%. It borrowed and repaid $565 million under the facility during the nine months.
- **2031 notes.** In May 2026 Hilton issued $1.0 billion of 5.500% Senior Notes due 2031 and used part of the proceeds to repay $450 million of revolver borrowings.
- **Debt outstanding.** Total debt was about $13.5 billion at quarter-end, at a weighted average rate of 5.09 percent. Net debt was $12,623 million, 3.2 times trailing-twelve-month Adjusted EBITDA of $3,959 million. The $600 million of 4.875% notes due April 2027 are now classified as current. Apart from them, no material debt matures before April 2029.
- **Liquidity and equity.** Cash was $830 million, including $56 million restricted, and the revolver had $1,894 million available. The total equity deficit widened to $6,563 million.

**Sanctions at two Frankfurt hotels.** During the quarter, OFAC sanctioned the entity that indirectly majority-owns the Hilton Frankfurt Gravenbruch and the property housing the Hilton Frankfurt City Centre. Hilton wound down its management of the Gravenbruch under OFAC licenses running through August 31, 2026. For the City Centre, where Hilton is the tenant, it obtained a license to wind down its dealings with the sanctioned landlord.

### Outlook (as of October 27, 2026)

The October guidance is:

- **Full-year 2026:**
  - Comparable, currency-neutral RevPAR up 4.0 to 4.5 percent.
  - Diluted EPS of $8.38 to $8.44, or $9.07 to $9.13 adjusted for special items.
  - Net income of $1,909 million to $1,923 million.
  - Adjusted EBITDA of $4,060 million to $4,080 million. This range already reflects lower expectations than the prior guidance for the Middle East and for timeshare license fees.
  - Contract acquisition costs and capital expenditures of $350 million to $375 million.
  - Capital return of about $3.5 billion and general and administrative expense of about $400 million.
  - Net unit growth of 6.0 to 7.0 percent, which management expects to land around the midpoint.
- **Fourth quarter 2026:**
  - RevPAR up 3.0 to 3.5 percent; Hilton expects the U.S. midterm elections and a larger Middle East impact to weigh on the quarter.
  - Diluted EPS of $2.25 to $2.31, or $2.32 to $2.38 adjusted.
  - Net income of $508 million to $522 million.
  - Adjusted EBITDA of $1,047 million to $1,067 million.

## Subsequent events

*Sources: Form 8-K, accession 0001585689-26-000045 (Items 3.01 and 7.01, and Exhibit 99.1); Q3 2026 results release, Exhibit 99.1 to Form 8-K, accession 0001585689-26-000049; Form 10-Q, accession 0001585689-26-000054 (Part II, Item 5).*

The Q3 2026 10-Q has no subsequent-events note. These are the events after September 30, 2026 that Hilton disclosed:

- **Transfer of the stock listing to Nasdaq.** On October 20, 2026, acting with board authorization, Hilton notified the NYSE that it would voluntarily move the principal listing of its common stock to the Nasdaq Global Select Market. Hilton expected NYSE trading to end at the close on November 4, 2026, and Nasdaq trading under the same ticker, HLT, to begin at the open on November 5, 2026. Shareholders do not need to act. Hilton says the move does not change its strategy or capital allocation priorities.
- **Exit from the Hilton Frankfurt City Centre lease.** After OFAC sanctioned the hotel's indirect majority beneficial landlord, Hilton terminated its lease effective October 31, 2026. It obtained an OFAC license to wind down its dealings with the landlord through that date, is blocking rent and related payments to the landlord, and is winding down operations at the hotel. From the sanctions designation through September 30, 2026, the hotel generated about $5 million of gross revenue for Hilton.
- **Dividend.** In October 2026 the board authorized a regular quarterly cash dividend of $0.15 per share, payable on December 29, 2026 to holders of record at the close of business on December 1, 2026.
- **Continued capital return.** Capital returned to shareholders, including dividends, reached $2,902 million for the year through October, against $2,705 million through September 30. Shares outstanding were 222.5 million on October 22, 2026, against 223.1 million at quarter-end.

Neither the 10-Q nor the October 27 results release discloses any acquisition, divestiture or new financing after the quarter-end.