Hotel Online  Special Report

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Hilton Hotels Corp. 4th Quarter Profit Up 62%; Strong Demand Brings 
Double-digit RevPAR Growth in All Major Markets 
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Hotel Operating Statistics 
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BEVERLY HILLS, Calif - Jan. 31, 2006 -- Hilton Hotels Corporation (NYSE:HLT) today reported financial results for the fourth quarter and fiscal year ended December 31, 2005. Fourth quarter highlights: 
  • Reported diluted EPS of $.26 versus $.16 in 2004 period, an increase of 63 percent; recurring EPS $.22 versus $.17 in 2004 period, an increase of 29 percent.
  • Comparable owned hotel RevPAR up 13.5 percent; double-digit RevPAR growth in virtually all major markets; comparable owned hotel margins increase 230 basis points from Q4 2004 to 31.4 percent (New Orleans excluded from comparable numbers.)
  • Fees up 19 percent from RevPAR gains, new units.
  • Timeshare revenues up 24 percent; profitability declines 14 percent due to comparatively higher costs.
  • All-cash acquisition of the lodging assets of Hilton Group plc expected to be completed in the first quarter 2006. 
Hilton reported fourth quarter 2005 net income of $105 million compared with $65 million in the 2004 quarter. Diluted net income per share was $.26 in the 2005 fourth quarter, versus $.16 in the 2004 period. Two non-recurring items in the 2005 quarter impacted earnings per share by $.04: 1) a net gain of $.06 per share from asset dispositions, and 2) a $.02 per share hedging loss. EPS in the 2004 fourth quarter was impacted by $.01 as a result of an impairment charge on a Red Lion hotel and the sale of two Doubletree properties.

The company reported fourth quarter 2005 total operating income of $193 million (a 15 percent increase from $168 million in the 2004 period,) on total revenue of $1.083 billion (a 3 percent increase from $1.054 billion in the 2004 quarter.) Total company earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") were $273 million, an increase of 2 percent from $267 million in the 2004 quarter.

For full-year 2005, Hilton reported net income of $460 million versus $238 million in 2004; diluted net income per share was $1.13 compared with $.60 in 2004. Non-recurring items benefited the 2005 full year by $.28 per share, and benefited the 2004 year by $.02 per share. Total company operating income was $805 million in 2005 (a 22 percent increase from $658 million in 2004,) on revenue of $4.437 billion (up 7 percent from $4.146 billion in 2004.) Total company Adjusted EBITDA was $1.140 billion, a 12 percent increase from $1.021 billion in 2004.
Fourth quarter and full-year 2005 revenue, operating income and Adjusted EBITDA were impacted by asset sales completed during the year.

Owned Hotel Results

Increases in room nights and average daily rate (ADR) across all business segments - particularly in the business transient category - resulted in double-digit revenue-per-available-room (RevPAR) gains in the fourth quarter at the company's owned hotels in New York City, Honolulu, Boston, Washington, D.C., Chicago and the San Francisco/San Jose area.

Across all brands, revenue from the company's owned hotels (majority owned and controlled hotels) was $490 million, a 10 percent decrease from $542 million in the 2004 period. Total revenue from comparable owned hotels (excluding New Orleans and the impact of 22 property sales dating back to October 1, 2004) was up 10 percent. RevPAR from comparable owned hotels increased a strong 13.5 percent. Comparable owned hotel occupancy increased 2.5 points to 74.2 percent, while ADR increased 9.7 percent to $195.53. Approximately 75 percent of the quarterly RevPAR increase at the comparable owned hotels was attributable to the ADR gains.

Total owned hotel expenses were down 11 percent in the quarter to $342 million. Expenses at the comparable owned hotels increased 6 percent, due primarily to an increase in occupied rooms. Cost-per-occupied-room (CPOR) increased 2.9 percent in the quarter.
Comparable owned hotel margins in the fourth quarter increased 230 basis points to 31.4 percent.

For full-year 2005, revenue from the company's owned hotels (majority owned and controlled hotels) was $2.049 billion, compared with $2.062 billion in 2004. Total revenue from comparable owned hotels (excluding New Orleans and the impact of 25 property sales dating back to January 1, 2004) was up 10 percent from 2004. RevPAR from comparable owned hotels (also excluding New Orleans and the aforementioned property sales) increased 11.9 percent for full-year 2005 when compared with full-year 2004; occupancy increased 2.2 points to 77.3 percent, and ADR showed an 8.7 percent increase to $178.35. Total owned hotel expenses in 2005 were down 3 percent to $1.459 billion; expenses at the comparable owned hotels increased 7 percent in 2005. Comparable owned hotel margins increased 180 basis points in 2005 to 28.8 percent.

The company's two owned hotels in New Orleans - the Hilton New Orleans Riverside and the Hilton New Orleans Airport - are excluded from the comparable numbers due to interruptions in operations caused by Hurricane Katrina. Both hotels are currently fully operational.

System-wide RevPAR; Management/Franchise Fees

Each of the company's brands reported significant system-wide RevPAR increases, with particularly strong gains in ADR. On a system-wide basis (including managed and franchised properties,) the company's brands showed fourth quarter RevPAR gains as follows: Hilton, 12.5 percent; Doubletree, 10.7 percent; Hampton Inn, 9.8 percent; Embassy Suites, 9.4 percent; Hilton Garden Inn, 8.0 percent, Homewood Suites by Hilton, 7.5 percent.

Management and franchise fees increased 19 percent in the fourth quarter to $114 million, benefiting from both RevPAR gains and the addition of new units.

For full-year 2005, system-wide RevPAR at Hilton's brands improved as follows: Hilton, 11.8 percent; Hampton Inn, 11.1 percent; Doubletree, 10.4 percent; Embassy Suites, 9.3 percent; Hilton Garden Inn, 9.3 percent, Homewood Suites by Hilton, 7.2 percent.
Management and franchise fees in 2005 increased 18 percent from 2004 to a record $452 million.

Brand Development/Unit Growth

In the fourth quarter, the company added 48 properties and 6,970 rooms to its system as follows: Hampton Inn, 19 hotels and 1,690 rooms; Hilton Garden Inn, 14 hotels and 1,913 rooms; Doubletree, 6 hotels and 1,686 rooms; Homewood Suites by Hilton, 3 hotels and 302 rooms; Embassy Suites, 2 hotels and 538 rooms; Hilton, 1 hotel and 289 rooms; Conrad, 1 hotel and 311 rooms; Hilton Grand Vacations, 1 property and 22 units, and other non-branded, 1 hotel and 219 rooms. Seventeen hotels and 2,412 rooms were removed from the system during the quarter.

During the fourth quarter, the Hilton brand added a new full-service hotel in British Columbia, Canada (the Whistler Ski Resort and Spa), and in early 2006 added new hotels in Dallas (the Anatole Hotel) and in San Francisco's Financial District. Doubletree added hotels in the fourth quarter in Milwaukee, Atlanta, St. Louis, Rochester, Cleveland, Newark and Houston, and in early 2006 in Tampa, Detroit, Pittsburgh and Bloomington (Ill.) Also in the fourth quarter, Conrad Hotels added a new luxury property in Chicago.

In early 2006, the company introduced a new brand line, the Waldorf=Astoria Collection. This new, elite brand designation debuts with New York's legendary Waldorf=Astoria, along with three world-class luxury resorts newly managed by Hilton: the Grand Wailea Resort Hotel & Spa on the island of Maui in Hawaii; the Arizona Biltmore Resort & Spa in Phoenix, and La Quinta Resort & Club in La Quinta, California.
For full-year 2005, the company added 175 properties and 24,631 rooms to its system. Forty-six properties and 8,370 rooms were removed from the system during 2005.

At December 31, 2005, the Hilton system consisted of 2,388 hotels and 374,669 rooms. The company's current development pipeline is its biggest yet, with approximately 600 hotels and 78,000 rooms at December 31, 2005, not including potential international development.

Hilton Grand Vacations

Hilton Grand Vacations Company (HGVC), the company's vacation ownership business, reported a 14 percent decline in profitability in the fourth quarter owing primarily to higher costs. Results in the 2005 period reflect a comparatively higher cost of product, partially due to a change in the sales mix, and an increase in corporate overhead. Unit sales declined 6 percent in the quarter, and average unit sales price increased 7 percent, driven by Las Vegas, Orlando and Waikoloa. HGVC had fourth quarter revenue of $130 million, a 24 percent increase from $105 million in the 2004 quarter. Expenses were $111 million in the fourth quarter, compared with $83 million in the 2004 period.
For full-year 2005, HGVC revenue was $554 million, compared with $421 million in 2004; expenses were $420 million versus $316 million in 2004.

Asset Dispositions

During the fourth quarter, the company sold six hotels - the Hilton Dallas-Ft. Worth, Hilton Anchorage, Hilton Portland, Hilton San Diego Resort, Hilton Boston Back Bay and Hilton Southfield (Michigan) - for a total of approximately $420 million. Hilton is retaining management or franchise agreements on all six properties. In 2005, the company sold 20 owned hotels for more than $1 billion, retaining management or franchise contracts on all but one property.

Acquisition of Hilton International

On December 29, 2005, the company announced an agreement to acquire the lodging assets of Hilton Group plc (known collectively as Hilton International) for approximately GBP 3.3 billion. The company will finance the transaction with existing cash on hand at the time of the closing, and with borrowings under a new bank facility that is being arranged through a large consortium of banks.
The transaction received approval from Hilton Group shareholders January 27, and is on schedule to be completed in the first quarter 2006. Completion of the transaction remains subject to a number of conditions, including receipt of certain competition and governmental clearances.

Corporate Finance

At December 31, 2005, Hilton had total debt of $3.6 billion (net of $100 million of debt resulting from the consolidation of a managed hotel, which is non-recourse to Hilton.) Approximately 13 percent of the company's debt is floating rate debt. Total cash and equivalents (including restricted cash) were approximately $1.3 billion at December 31, 2005.

The company's average basic and diluted share counts for the fourth quarter were 382 million and 415 million, respectively. For full-year 2005, the company's average basic and diluted share counts were 383 million and 417 million, respectively.

Hilton's debt currently has an average life of 7.9 years, at an average cost of approximately 7.1 percent.

The company's effective tax rate in the fourth quarter 2005 was 35 percent. The effective tax rate benefited from tax credits associated with the company's synthetic fuel investment.

Total hotel capital expenditures in the fourth quarter were $101 million, with an additional $54 million expended for timeshare development. For full-year 2005, total capital expenditures were $602 million, including $179 million expended for timeshare development and $180 million related to land acquisition on Hawaii's Big Island.

Updated 2006 Outlook

The company provided the following estimates for full-year 2006, noting that the estimates are for Hilton Hotels Corporation as a stand-alone company and do not include any impact from the pending Hilton International transaction. More detailed guidance will be provided in the company's first quarter 2006 earnings report if, as expected, the Hilton International acquisition is completed in the first quarter.

  • Comparable U.S. owned hotel RevPAR      -       Increase of 8 - 10%
  • Comparable U.S. owned hotel margin growth   -   100 - 200 basis points
  • North America management/franchise fee growth - Approximately 15%
  • Timeshare profitability growth       -          Approximately 10%
Total domestic capital spending in 2006 is expected to be approximately $495 million, broken out as follows: approximately $125 million for routine improvements, $195 million for timeshare projects, and $175 million in hotel renovation, ROI or special projects.
The company anticipates adding approximately 200 hotels and 28,000 rooms to its system in 2006, not including potential international development.

"While 2005 will be remembered for our historic agreement to acquire Hilton International, we are also very pleased that in the fourth quarter and full-year 2005 we achieved exceptional financial results, experienced strong performance across our owned hotels, opened more hotels in the U.S. than anyone in the industry, saw record results in our timeshare and fee businesses, and introduced a number of exciting product, service and marketing initiatives," said Stephen F. Bollenbach, co-chairman and chief executive officer of Hilton Hotels Corporation.

"Demand for hotel rooms, particularly among business travelers, continued to accelerate in 2005. Occupancy levels of 90 percent were the norm at some of our large hotels in New York and Hawaii, and the increase in business travel -- coupled with little new full-service supply -- enabled us to once again significantly increase room rates.

"Unit growth continues to be strong across all of our brands. We were pleased in 2005 to mark the opening of the 1,300th Hampton Inn and the 250th Hilton Garden Inn, while also seeing outstanding growth in our full-service Hilton and Doubletree brands. Our development pipeline has never been bigger, which speaks to the appeal of our brands to hotel owners."

Mr. Bollenbach continued: "Our decision to increase our investment in timeshare has paid off as our selective approach to development, along with high quality product, has generated strong returns, the best in the industry.

"In 2006, we look forward to a continuation of the strong business trends we experienced in 2005, along with the new worldwide growth opportunities presented by our acquisition of Hilton International. We had an exciting and productive year in 2005, and anticipate a great future in 2006 and beyond for our customers, team members, owners and shareholders."
 

HILTON HOTELS CORPORATION
Financial Highlights (Unaudited)
(in millions, except per share amounts)

                      Three Months Ended       Twelve Months Ended
                         December 31               December 31
                   ------------------------ --------------------------
                    2004   2005   % Change    2004    2005  % Change
                   ------ ------ ---------- ------- ------- ----------
Revenue
  Owned hotels      $542   $490    (10)%    $2,062  $2,049     (1)%
  Leased hotels       26     24     (8)        111     111      -
  Management and
   franchise fees     96    114     19         384     452     18
  Timeshare and
   other income      117    149     27         463     606     31
                   ------ ------            ------- -------
                     781    777     (1)      3,020   3,218      7
  Other revenue
   from managed and
   franchised
   properties        273    306     12       1,126   1,219      8
                   ------ ------            ------- -------
                   1,054  1,083      3       4,146   4,437      7
Expenses
  Owned hotels       385    342     (11)     1,501   1,459     (3)
  Leased hotels       25     22     (12)       101      99     (2)
  Depreciation and
   amortization       83     71     (14)       330     299     (9)
  Impairment loss
   and related costs   5      -      -           5       7     40
  Other operating
   expenses          104    131     26         395     497     26
  Corporate expense   22     28     27          85     103     21
                   ------ ------            ------- -------
                     624    594     (5)      2,417   2,464      2
  Other expenses
   from managed and
   franchised
   properties        271    305     13       1,120   1,212      8
                   ------ ------            ------- -------
                     895    899      -       3,537   3,676      4

Operating income
 from unconsolidated
 affiliates            9      9      -          49      44     (10)
                   ------ ------            ------- -------

Operating income     168    193     15         658     805     22

Interest and
 dividend income       7     18      -          26      32     23
Interest expense     (65)   (63)    (3)       (274)   (259)    (5)
Net interest from
 unconsolidated
 affiliates and
 non-controlled
 interests            (6)    (7)    17         (26)    (26)     -
Net (loss) gain on
 asset dispositions
 and other            (3)    27      -          (5)    103      -
Loss from non-
 operating
 affiliates           (3)    (4)    33          (6)    (17)     -
                   ------ ------            ------- -------
Income before
 taxes and minority
 and non-controlled
 interests            98    164     67         373     638     71
Provision for
 income taxes        (31)   (58)    87        (127)   (166)    31
Minority and non-
 controlled
 interests, net       (2)    (1)    (50)        (8)    (12)    50
                   ------ ------            ------- -------
Net income           $65   $105     62%       $238    $460     93%
                   ====== ======            ======= =======

Net income per share(1)
--------------------
Basic               $.17   $.28     65%       $.62   $1.20     94%
                   ====== ======            ======= =======
Diluted             $.16   $.26     63%       $.60   $1.13     88%
                   ====== ======            ======= =======

Average shares -
 basic               388    382     (2)%       384     383      -%
                   ====== ======            ======= =======
Average shares -
 diluted             422    415     (2)%       418     417      -%
                   ====== ======            ======= =======
 

(1) EPS for the full year differs from the sum of quarterly EPS
    amounts due to the required method of computing EPS in the
    respective periods.

                      HILTON HOTELS CORPORATION
                      U.S. Owned Statistics(1)

            Three Months Ended           Twelve Months Ended
                December 31                  December 31
            -------------------          -------------------
             2004      2005      Change   2004      2005      Change
            --------- --------- -------- --------- --------- ---------
Hilton
-----------
  Occupancy    72.5 %    74.8 %  2.3 pts    75.7 %    77.9 %   2.2 pts
  Average
   Rate     $185.62   $204.68   10.3  %  $169.45   $184.94     9.1  %
  RevPAR    $134.56   $153.13   13.8  %  $128.32   $144.00    12.2  %

All Other
-----------
  Occupancy    65.8 %    69.5 %  3.7 pts    70.3 %    73.2 %   2.9 pts
  Average
   Rate     $116.55   $120.58    3.5  %  $120.33   $125.00     3.9  %
  RevPAR     $76.69    $83.85    9.3  %   $84.58    $91.45     8.1  %

Total
-----------
  Occupancy    71.7 %    74.2 %  2.5 pts    75.1 %    77.3 %   2.2 pts
  Average
   Rate     $178.26   $195.53    9.7  %  $164.11   $178.35     8.7  %
  RevPAR    $127.83   $145.08   13.5  %  $123.24   $137.90    11.9  %

(1) Statistics are for comparable hotels, and include only those
    hotels in the system as of December 31, 2005 and owned by us since
    January 1, 2004. Comparable hotels exclude the Company's owned
    hotels in New Orleans.
 

                      HILTON HOTELS CORPORATION
                      System-wide Statistics(1)

             Three Months Ended           Twelve Months Ended
                 December 31                  December 31
             -------------------          -------------------
                2004      2005    Change     2004      2005    Change
             --------- --------- -------- --------- --------- --------
Hilton
------------
  Occupancy     65.2 %    67.9 %  2.7 pts    69.6 %    71.7 %  2.1 pts
  Average 
   Rate      $135.80   $146.85    8.1   % $129.38   $140.42    8.5  %
  RevPAR      $88.61    $99.72   12.5   %  $90.06   $100.68   11.8  %

Hilton Garden Inn
-----------------
  Occupancy     65.4 %    66.3 %  0.9 pts    69.1 %    71.1 %  2.0 pts
  Average 
   Rate       $98.17   $104.69    6.6   %  $98.65   $104.74    6.2   %
  RevPAR      $64.23    $69.37    8.0   %  $68.14    $74.47    9.3   %

Doubletree
------------
  Occupancy     63.7 %    65.5 %  1.8 pts    68.2 %    70.3 %  2.1 pts
  Average 
   Rate      $104.06   $112.14    7.8  %  $102.29   $109.60    7.1  %
  RevPAR      $66.28    $73.40   10.7  %   $69.78    $77.01   10.4  %

Embassy Suites
--------------
  Occupancy     65.8 %    68.1 %  2.3 pts    70.6 %    73.2 %  2.6 pts
  Average 
   Rate      $122.84   $129.89    5.7  %  $123.30   $129.98    5.4  %
  RevPAR      $80.84    $88.47    9.4  %   $87.01    $95.09    9.3  %

Homewood Suites by Hilton
-------------------------
  Occupancy     69.9 %    71.6 %  1.7 pts    73.5 %    75.6 %  2.1 pts
  Average 
   Rate       $96.09   $100.87    5.0  %   $96.51   $100.57    4.2  %
  RevPAR      $67.13    $72.19    7.5  %   $70.93    $76.05    7.2  %

Hampton
-------
  Occupancy     65.3 %    66.7 %  1.4 pts    68.7 %    71.5 %  2.8 pts
  Average 
   Rate       $81.07    $87.16    7.5  %  $81.57     $86.98    6.6  %
  RevPAR      $52.97    $58.16    9.8  %  $56.00     $62.22   11.1  %

Other
-----
  Occupancy     68.9 %    69.3 %  0.4 pts    71.7 %    71.5 % (0.2)pts
  Average 
   Rate      $145.68   $155.25    6.6  %  $133.03   $148.80   11.9  %
  RevPAR     $100.38   $107.55    7.1  %   $95.33   $106.33   11.5  %

(1) Statistics are for comparable hotels, and include only those
    hotels in the system as of December 31, 2005 and owned, operated
    or franchised by us since January 1, 2004. Comparable hotels
    exclude the Company's owned hotels in New Orleans.
 

 
                      HILTON HOTELS CORPORATION
                Supplementary Statistical Information

                            December                     Change to
            --------------------------------------- ------------------
                  2004                2005            December 2004
                 Number of           Number of           Number of
             Properties  Rooms   Properties  Rooms   Properties Rooms
            ------------------- ------------------- ------------------
Hilton
------
 Owned              36  27,492          21  20,524         (15)(6,968)
 Leased              1     499           1     499           -      -
 Joint
  Venture           10   4,177          11   4,625           1    448
 Managed            24  13,822          27  15,923           3  2,101
 Franchised        159  43,266         174  48,907          15  5,641
            ------------------- ------------------- ------------------
                   230  89,256         234  90,478           4  1,222
Hilton Garden Inn
-----------------
 Owned               1     162           1     162           -      -
 Joint
  Venture            1     128           1     128           -      -
 Managed             6     796           7     886           1     90
 Franchised        211  28,755         250  34,347          39  5,592
            ------------------- ------------------- ------------------
                   219  29,841         259  35,523          40  5,682
Doubletree
-----------
 Owned               4   1,702           3   1,349          (1)  (353)
 Leased              6   2,144           5   1,746          (1)  (398)
 Joint
  Venture           24   7,208          14   4,306         (10)(2,902)
 Managed            38  10,074          30   8,060          (8)(2,014)
 Franchised         82  19,794         108  26,707          26  6,913
            ------------------- ------------------- ------------------
                   154  40,922         160  42,168           6  1,246
Embassy Suites
--------------
 Owned               4     881           3     663          (1)  (218)
 Joint
  Venture           27   7,279          25   6,586          (2)  (693)
 Managed            54  14,134          56  14,832           2    698
 Franchised         90  20,421          98  22,348           8  1,927
            ------------------- ------------------- ------------------
                   175  42,715         182  44,429           7  1,714

Homewood Suites by Hilton
-------------------------
 Owned               3     398           1     140          (2)  (258)
 Managed            36   4,304          41   4,706           5    402
 Franchised        104  11,352         122  13,287          18  1,935
            ------------------- ------------------- ------------------
                   143  16,054         164  18,133          21  2,079
Hampton
-------
 Owned               1     133           1     133           -      -
 Managed            35   4,462          34   4,453          (1)    (9)
 Franchised      1,254 125,803       1,301 129,535          47  3,732
            ------------------- ------------------- ------------------
                 1,290 130,398       1,336 134,121          46  3,723
Other
-----
 Owned               1     300           -       -          (1)  (300)
 Joint
  Venture            3   1,394           3   1,395           -      1
 Managed            13   3,788          15   4,255           2    467
 Franchised          -       -           1     219           1    219
            ------------------- ------------------- ------------------
                    17   5,482          19   5,869           2    387

Timeshare           31   3,740          34   3,948           3    208
---------

Total
-----
 Owned              50  31,068          30  22,971         (20)(8,097)
 Leased              7   2,643           6   2,245          (1)  (398)
 Joint
  Venture           65  20,186          54  17,040         (11)(3,146)
 Managed           206  51,380         210  53,115           4  1,735
 Franchised      1,900 249,391       2,054 275,350         154 25,959
 Timeshare          31   3,740          34   3,948           3    208
            ------------------- ------------------- ------------------
TOTAL
 PROPERTIES      2,259 358,408       2,388 374,669         129 16,261
            ======================================= ==================
 

                      HILTON HOTELS CORPORATION
            Supplemental Financial Information (Unaudited)
      Reconciliation of Adjusted EBITDA to EBITDA and Net Income
                           Historical Data
                           ($ in millions)

                        Three Months Ended      Twelve Months Ended
                            December 31             December 31
                       --------------------- -------------------------
                       2004  2005  % Change   2004    2005   % Change
                       ----- ----- --------- ------- ------- ---------

Adjusted EBITDA        $267  $273     2%     $1,021  $1,140     12%
Proportionate share of
 depreciation and
 amortization of
 unconsolidated
 affiliates              (8)   (9)    13        (28)    (31)    11
Non-recurring items      (5)    -     -          (5)     (7)    40
Operating interest and
 dividend income         (5)   (2)   (60)        (8)     (8)    -
Operating income of
 non-controlled
 interests                2     2     -           8      10     25
Net (loss) gain on
 asset dispositions
 and other               (3)   27     -          (5)    103     -
Loss from non-
 operating affiliates    (3)   (4)    33         (6)    (17)    -
Minority and non-
 controlled interests,
 net                     (2)   (1)   (50)        (8)    (12)    50
                       ----- -----           ------- -------
EBITDA                  243   286     18        969   1,178     22
Depreciation and
 amortization           (83)  (71)   (14)      (330)   (299)    (9)
Interest expense, net   (64)  (52)   (19)      (274)   (253)    (8)
Provision for income
 taxes                  (31)  (58)    87       (127)   (166)    31
                       ----- -----           ------- -------
Net income              $65  $105     62%      $238    $460     93%
                       ===== =====           ======= =======
 
 

                      HILTON HOTELS CORPORATION
            Supplemental Financial Information (Unaudited)
                   Owned Hotel Revenue and Expenses
               Adjusted for Asset Sales and New Orleans
                           ($ in millions)

                        Three Months Ended      Twelve Months Ended
                            December 31             December 31
                       --------------------- -------------------------
                       2004  2005  % Change   2004    2005   % Change
                       ----- ----- --------- ------- ------- ---------

Revenue - owned hotels $542  $490    (10)%   $2,062  $2,049     (1)%
Less sold hotels and
 New Orleans           (136)  (44)             (543)   (379)
                       ----- -----           ------- -------
Revenue - comparable
 owned hotels          $406  $446     10 %   $1,519  $1,670     10 %
                       ===== =====           ======= =======

Expenses - owned
 hotels                $385  $342    (11)%   $1,501  $1,459     (3)%
Less sold hotels and
 New Orleans            (97)  (36)             (392)   (269)
                       ----- -----           ------- -------
Expenses - comparable
 owned hotels          $288  $306      6 %   $1,109  $1,190      7 %
                       ===== =====           ======= =======
 
 

NON-GAAP FINANCIAL MEASURES
---------------------------
Regulation G, "Conditions for Use of Non-GAAP Financial Measures,"
prescribes the conditions for use of non-GAAP financial information in
public disclosures. We believe that our presentation of EBITDA and
Adjusted EBITDA, which are non-GAAP financial measures, are important
supplemental measures of operating performance to investors. The
following discussion defines these terms and why we believe they are
useful measures of our performance.

EBITDA and Adjusted EBITDA
--------------------------

Earnings before interest, taxes, depreciation and amortization
(EBITDA) is a commonly used measure of performance in our industry
which we believe, when considered with measures calculated in
accordance with United States Generally Accepted Accounting Principles
(GAAP), gives investors a more complete understanding of operating
results before the impact of investing and financing transactions and
income taxes and facilitates comparisons between us and our
competitors. Management has historically adjusted EBITDA when
evaluating operating performance because we believe that the inclusion
or exclusion of certain recurring and non- recurring items described
below is necessary to provide the most accurate measure of our core
operating results and as a means to evaluate period-to-period results.
We have chosen to provide this information to investors to enable them
to perform more meaningful comparisons of past, present and future
operating results and as a means to evaluate the results of core
on-going operations. We do not reflect such items when calculating
EBITDA, however, we adjust for these items and refer to this measure
as Adjusted EBITDA. We have historically reported this measure to our
investors and believe that the continued inclusion of Adjusted EBITDA
provides consistency in our financial reporting. We use Adjusted
EBITDA in this press release because we believe it is useful to
investors in allowing greater transparency related to a significant
measure used by management in its financial and operational
decision-making. Adjusted EBITDA is among the more significant factors
in management's internal evaluation of total company and individual
property performance and in the evaluation of incentive compensation
related to property management. Management also uses Adjusted EBITDA
as a measure in determining the value of acquisitions and
dispositions. Adjusted EBITDA is also widely used by management in the
annual budget process. Externally, we believe these measures continue
to be used by investors in their assessment of our operating
performance and the valuation of our company. Adjusted EBITDA reflects
EBITDA adjusted for the following items:

    Gains and Losses on Asset Dispositions and Non-Recurring Items
    --------------------------------------------------------------

    We exclude from Adjusted EBITDA the effect of gains and losses on
    asset dispositions and non-recurring items, such as asset write-
    downs and impairment losses. We believe the inclusion of these
    items is not consistent with reflecting the on-going performance
    of our assets. Management believes it is useful to exclude gains
    and losses on asset dispositions as these amounts are not
    reflective of our operating performance or the performance of our
    assets and the amount of such items can vary dramatically from
    period to period. The timing and selection of an asset for
    disposition is subject to a number of variables that are generally
    unrelated to our on-going operations.

    Proportionate Share of Depreciation and Amortization of 
     Unconsolidated Affiliates
    ------------------------------------------------------------------

    Our consolidated results include the equity earnings from our
    unconsolidated affiliates after the deduction of our proportionate
    share of depreciation and amortization expense from unconsolidated
    affiliates. We exclude our proportionate share of depreciation and
    amortization expense from unconsolidated affiliates from Adjusted
    EBITDA to provide a more accurate measure of our proportionate
    share of core operating results before investing activities and to
    provide consistency with the performance measure we use for our
    consolidated properties.

    Operating Interest and Dividend Income
    --------------------------------------

    Interest and dividend income from investments related to operating
    activities is included in our calculation of Adjusted EBITDA. We
    consider this income, primarily interest on notes receivable
    issued to properties we manage or franchise and dividend income
    from investments related to the development of our core
    businesses, to be a part of our core operating results.

    Non-Controlled Interest
    -----------------------

    We exclude from Adjusted EBITDA the operating income, net interest
    expense, tax provision and non-controlled interest reported on our
    income statement to the extent these amounts belong to other
    ownership interests. These exclusions are shown in their
    respective lines on the Reconciliation of Adjusted EBITDA to
    EBITDA and Net Income.

    Minority Interest, Net
    ----------------------

    We exclude the minority interest in the income or loss of our
    consolidated joint ventures because these amounts effectively
    include our minority partners' proportionate share of
    depreciation, amortization, interest and taxes, which are excluded
    from EBITDA.

Limitations on the Use of Non-GAAP Measures
-------------------------------------------

The use of EBITDA and Adjusted EBITDA has certain limitations. Our
presentation of EBITDA and Adjusted EBITDA may be different from the
presentation used by other companies and therefore comparability may
be limited. Depreciation expense for various long-term assets,
interest expense, income taxes and other items have been and will be
incurred and are not reflected in the presentation of EBITDA or
Adjusted EBITDA. Each of these items should also be considered in the
overall evaluation of our results. Additionally, EBITDA and Adjusted
EBITDA do not consider capital expenditures and other investing
activities and should not be considered as a measure of our liquidity.
We compensate for these limitations by providing the relevant
disclosure of our depreciation, interest and income tax expense,
capital expenditures and other items both in our reconciliations to
the GAAP financial measures and in our consolidated financial
statements, all of which should be considered when evaluating our
performance.

EBITDA and Adjusted EBITDA are used in addition to and in conjunction
with results presented in accordance with GAAP. EBITDA and Adjusted
EBITDA should not be considered as an alternative to net income,
operating income, or any other operating performance measure
prescribed by GAAP, nor should these measures be relied upon to the
exclusion of GAAP financial measures. EBITDA and Adjusted EBITDA
reflect additional ways of viewing our operations that we believe,
when viewed with our GAAP results and the reconciliations to the
corresponding GAAP financial measures, provide a more complete
understanding of factors and trends affecting our business than could
be obtained absent this disclosure. Management strongly encourages
investors to review our financial information in its entirety and not
to rely on a single financial measure.

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. 

.
Contact:

Hilton Hotels Corporation
Sr. VP - Corporate Affairs
Marc Grossman, 310-205-4030
marc_grossman@hilton.com
http://www.hiltonworldwide.com

Also See: Hilton Hotels Corp. 4th Quarter Income Slips to $65 million from $67 million a Year Ago; For Full-year 2004, Hilton's Net Income of $238 million Jumps 45% Over $164 million in 2003 / Hotel Operating Statistics / January 2005
Hilton Reports Solid Occupancy Levels for 4th Quarter; For the Full Year 2003 Net Income Down 17% to $164 million from $198 million a Year Earlier / Hotel Operating Statistics / January 2004
Hilton Hotels Corp. Reports Large Increase in 4th Quarter Net Income to $40 million Compared with $4 million in 4th Quarter 2001; Cites Strong Occupancy in New York, Boston, Chicago and Hawaii / Hotel Statistics / Jan 2003
Hilton's RevPAR Down 22.8% for Fourth Quarter / Year End Hotel Statistics / Jan 2002
During 2000 Hilton RevPAR Up 7.8%, Occupancy Improved 2.0 points to 73.3% / Jan 2001 
Hilton Reports RevPAR from Owned Properties Increased 3 % in 1999; Occupancy of 69.2 % down from 70.3 % / Feb 2000
Occupancy at Hilton Owned Properties in 1998 Declined to 75.0 %, While ADR Increased 8.3 % / Feb 1999

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