BEVERLY HILLS, Calif - Jan. 24, 2001- Hilton Hotels Corporation (NYSE:HLT) today reported results for the fourth quarter and fiscal year ended December 31, 2000.

Strong results both for the quarter and full year were highlighted by significant increases in revenue per available room (RevPAR) at the company�s owned-or-operated hotels and at all of the brands in the Hilton portfolio, as well as strong gains in total earnings before interest, taxes, depreciation, amortization and non-cash items (EBITDA).

Financial information for 1999 is presented on a pro forma basis as if the company�s acquisition of Promus Hotel Corporation had occurred on January 1, 1999.

Hilton reported net income for the fourth quarter of $64 million, or $.17 per diluted share, compared to $25 million, or $.07 per diluted share, for the same period a year ago. On a recurring basis, fourth quarter net income was $59 million, or $.16 per diluted share, versus $42 million, or $.11 per diluted share last year, a 45 percent increase in earnings per share.

As part of the integration of the Hilton and Promus employee benefit plans, Hilton terminated its post-retirement life insurance programs effective December 31, 2000. As a result, the company recorded an $8 million benefit in the quarter, equal to $.01 per share. In the 1999 fourth quarter, the company recorded a $26 million charge, equal to $.04 per share, for business combination expenses related to its acquisition of Promus. 

For the full year, Hilton�s reported net income was $272 million, compared to $216 million in 1999. Reported net income per diluted share was $.73 in 2000 and $.58 in 1999. On a recurring basis, fiscal 2000 net income was $249 million, compared to $223 million in 1999, while diluted net income per share increased 12 percent to $.67 from $.60 in 1999.

The company noted that on a recurring cash EPS basis, 2000 earnings per share were $1.26 versus pro forma $1.02 in 1999.

Comparable RevPAR at the company�s U.S. owned-or-operated hotels increased 7.4 percent during the quarter, and was achieved despite severe weather conditions in December that affected business and leisure travel in certain U.S. markets. The RevPAR gain was a result of occupancy increasing 1.8 points to 68.2 percent, and a 4.7 percent increase in average daily rate (ADR) to $137.48.  Within the Hilton full-service brand, comparable owned-or-operated RevPAR increased 7.8 percent for the quarter, a result of a 3.0-point gain in occupancy to 71.5 percent and a 3.2 percent improvement in ADR to $175.94.

For the full year, comparable RevPAR at the company�s U.S. owned or operated hotels increased 7.8 percent. Occupancy improved 2.0 points to 73.3 percent, while ADR increased 4.8 percent to $133.04. Full year comparable RevPAR within the Hilton full-service brand increased 9.9 percent, resulting from a 3.2-point improvement in occupancy to 76.3 percent, and an ADR gain of 5.3 percent to $166.77.

The company reported a 7 percent increase in fourth quarter revenue to $875 million, while fiscal 2000 revenue improved 9 percent to $3.45 billion. Before non-recurring items, total company EBITDA increased 12 percent both for the fourth quarter (to $305 million) and full year (to $1.26 billion). The increases in revenue and EBITDA were a result of the aforementioned strong RevPAR gains, the benefit of 1999 acquisitions and new hotel openings, and the impact of cost-saving and revenue-enhancement synergies realized from the Promus acquisition. Additionally, the 1999 period includes revenue and EBITDA from owned Homewood Suites and Hampton Inn hotels that were subsequently sold.
Across all brands, EBITDA from the company�s owned hotels in the fourth quarter totaled $219 million, with comparable EBITDA up 13.4 percent. RevPAR from comparable owned properties improved 8.7 percent. Owned property comparable EBITDA margins remained the industry�s strongest, improving 1.6 points to 34.8 percent.

Strong RevPAR gains were posted during the fourth quarter at many of the hotels in the Hilton brand owned portfolio, including properties in New York, Honolulu, San Francisco, Washington, D.C., Boston and San Diego. Additionally, significant RevPAR increases were reported at owned Doubletree hotels in Bellevue, Washington and San Jose and Santa Barbara, California.
For the full year, EBITDA from the company�s owned hotels (across all brands) totaled $858 million, with comparable EBITDA up 13.6 percent. RevPAR from comparable owned properties improved 9.2 percent for the year. EBITDA margins were strong at 35.3 percent, up 1.6 points from 1999.

Management and franchise fees (across all brands) increased 9 percent to $86 million in the fourth quarter, attributable to increased RevPAR at comparable properties, and unit growth at virtually all brands. For the full year, management and franchise fees increased 9 percent to $350 million.

Systemwide Brand Performance

All brands in the Hilton family of brands � including owned, managed, franchised, leased and joint venture properties � reported strong RevPAR gains both for the fourth quarter and the full year, reflecting the positive impact of Hilton�s HHonors program, cross-selling and other marketing initiatives.
In the fourth quarter, RevPAR across the Hilton brand increased 7.1 percent; Hilton Garden Inn, 10.3 percent; Doubletree, 7.3 percent; Embassy Suites, 6.1 percent; Homewood Suites by Hilton, 8.6 percent; and Hampton Inn, 5.7 percent.

For the full year, RevPAR gains across the brands were as follows: Hilton, 8.6 percent; Hilton Garden Inn, 12.3 percent; Doubletree, 6.1 percent; Embassy Suites, 5.6 percent; Homewood Suites by Hilton, 5.4 percent; and Hampton Inn, 3.6 percent.

The gains at the Doubletree brand are particularly noteworthy, as this brand continues the turnaround that began in the second quarter 2000. The aforementioned marketing programs, along with the benefit of the Hilton worldwide sales network, has enabled the Doubletree brand to not only increase RevPAR, but enhance its market share.

Brand Development

During the fourth quarter, Hilton added 34 hotels and 4,901 rooms to its system as follows: Hampton Inn (19 hotels, 1,782 rooms); Hilton Garden Inn (6 hotels, 946 rooms); Embassy Suites (3 hotels, 679 rooms); Homewood Suites by Hilton (3 hotels, 468 rooms); Hilton (2 hotels, 610 rooms); Red Lion (1 hotel, 416 rooms). Six properties and 1,707 rooms were removed from the system during the quarter.

For the full year, 170 hotels and 23,531 rooms were added to the Hilton system. When combined with 27 properties and 5,987 rooms removed from the system during 2000 (mostly during the first half of the year), the company�s system at year-end consisted of 1,895 hotels and 317,823 rooms.

During 2000, the company approved applications for 223 new hotels (with more than 32,000 rooms), in line with its projections.  The company expects to open an estimated 190-200 hotels (and approximately 25,000-27,000 rooms) during 2001, a decline from earlier estimates reflecting a more difficult financing environment for franchisees. In total, including fees from existing franchised and managed hotels, and from those opening in 2001, Hilton expects to be able to increase its fees from managing and franchising by approximately 9-10 percent in 2001.

In January, the company announced a long-term franchise agreement with the prestigious Camino Real hotel chain in Mexico for 13 properties in Mexico and one in Texas. The hotels will be re-branded as either Hiltons or Doubletrees.

Hilton Grand Vacations

Hilton Grand Vacations, the company�s vacation ownership business, reported continued strong sales at its existing properties, and anticipates significantly increased revenues and EBITDA in 2001 as a result of the January 2001 opening of its successful new property at the Hilton Hawaiian Village in Waikiki. Additionally, the company announced in January the development of a new 1,500-unit timeshare property in Las Vegas, the company�s third development in that market, along with its successful properties at the Las Vegas Hilton and Flamingo Hilton hotels.

Conrad Hotels

In the fourth quarter, Hilton announced a joint venture agreement with Hilton Group plc to develop, through management contracts, the Conrad brand of luxury hotels throughout the world. There are presently 12 Conrad luxury properties operating in Europe, the Middle East, South America and Australasia, with another two in development.

Marketing Initiatives/Synergies

Hilton generated 2000 synergies from the Promus acquisition of approximately $72 million (excluding the $8 million synergy relating to the termination of post-retirement life insurance programs), exceeding its original estimate by more than 30 percent. This increase is primarily a result of the success of the company�s three main revenue enhancement initiatives, including:

• Hilton HHonors. Stays related to the company�s industry-leading HHonors guest loyalty program�introduced April 3, 2000 to the Hampton Inn, Doubletree, Embassy Suites and Homewood Suites by Hilton brands�accounted for 20 percent of the combined total stays at those four brands since the April introduction. HHonors, with its unique benefit of allowing members to earn and redeem both hotel points and airline miles, is credited with helping boost RevPAR gains at the brands in 2000. Hilton HHonors continues to experience significant enrollment activity, and closed 2000 with 11 million members.
• Cross-selling. Cross-selling efforts among all of the brands in the Hilton portfolio generated $100 million in incremental systemwide booked revenue in 2000, about double the company�s projections. Consolidation of the company�s reservations system -- completed in late 2000 -- is expected to increase this number by approximately 25 percent in 2001.
• Sales. In 2000, group bookings into the Promus brands more than doubled over 1999 as a result of efforts by Hilton�s 300-person worldwide sales force. Due to the advance nature of group bookings, it is expected that benefits from this initiative will be realized more fully in 2001.

Corporate Finance/Asset Sales

In 2000, the company sold approximately $175 million of non-strategic assets and securities for pre-tax gains of $32 million.  Included in this total is the December sale of seven Homewood Suites by Hilton properties, with Hilton retaining long-term management and franchise agreements on these hotels.
At year-end 2000, Hilton had long-term debt of $5.1 billion (net of $625 million of debt allocated to Park Place Entertainment), and ended the year with a debt-to-EBITDA ratio of 4.0 times. This compares favorably with the ratio of 4.6 times at the end of 1999 on a pro forma basis. Additional debt reduction is anticipated in 2001 from selective asset sales and the free cash flow Hilton expects to generate during the year.

In January 2001, the company completed its transaction to sell 52 operating leases and four management contracts on hotels owned by RFS Hotel Investors, Inc. back to RFS for $60 million in cash. Hilton also sold 973,684 shares of RFS preferred stock back to RFS for $13 million in cash. Proceeds from these transactions have been used to further reduce debt.

Additionally, the company on January 8, 2001 announced an agreement to manage 16 hotels owned by Equity Inns, Inc. The two-year management agreement includes 15 Hampton Inn and one Homewood Suites by Hilton hotels.

2001 Outlook

Hilton expects RevPAR from its owned hotels to increase 3-4 percent in 2001, which would be in excess of the anticipated rate of inflation. The company�s advance bookings for 2001 are solid. High demand for rooms in cities where Hilton has a significant ownership presence, coupled with limited new competitive supply introduced against these hotels, is expected to continue to generate good RevPAR gains. With recent concerns about an economic slowdown, the company said that in the event RevPAR growth was slower than expected, a one-point change in expected RevPAR growth would likely impact Hilton�s earnings by some $15-$20 million pre-tax, or $.02-$.03 per share.

EBITDA is expected to grow in the mid-single digits over 2000. The impact of property sales mentioned previously, increased energy costs (estimated in 2001 to be 10 percent above normal levels) and property renovations in New Orleans and San Francisco, will be offset by the openings of the renovated Seattle Airport Hilton and Kalia Tower and new timeshare property at the Hilton Hawaiian Village. Free cash flow for 2001, after all capital expenditures, is estimated to be $300-$350 million. The company anticipates recurring earnings-per-share growth in the mid-to-high teens range, with the higher end of the estimate range made possible by factoring in the favorable impact of interest rate declines.

Hilton indicated it was comfortable with first quarter 2001 earnings-per-share estimates in the mid-teens, including the favorable impact of recognizing year 2000 timeshare sales at the Hilton Hawaiian Village, which had previously been deferred. This is expected to account for approximately $.02 per share.
�As we entered the year 2000 as a larger and more diverse hotel company, we outlined three objectives for growth, and I am proud to say that we achieved each of them in a big way,� said Stephen F. Bollenbach, president and chief executive officer.

�We maximized the return on our owned hotels by generating significant increases in RevPAR. Our major-market properties had a banner year, consistent with what was an excellent year overall for the hotel industry, and we continued to operate at the highest margins in the industry. Secondly, 170 hotels were added to our system, solidifying our brands� status as the brands-of-choice among owners, and enabling us to grow our franchising business. Finally, we successfully completed the integration of Promus while exceeding our synergy targets.�

Bollenbach continued: �Looking to 2001, we expect a return to more normal RevPAR increases in anticipation of a slower economy than what we experienced last year. Solid performances at our owned hotels, continued growth in our franchise and brand development business and further achievement of the Promus synergies have us reasonably optimistic for the coming year.�
 

This press release contains �forward-looking statements� within the meaning of federal securities law, including statements concerning business strategies and their intended results, and similar statements concerning anticipated future events and expectations that are not historical facts.