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Hilton Hotels Corporation Reports 2nd Qtr Earnings of $144 million, Down
from a Year-ago Profit of $202 million, Expenses Grow to $1.9 billion - 
Double the Year-ago Figure
-
Hotel Operating Statistics
.
BEVERLY HILLS, Calif - Aug. 1, 2006 -- Hilton Hotels Corporation (NYSE:HLT - News) today reported financial results for the second quarter and six months ended June 30, 2006. Second quarter highlights are as follows: 
  • Recurring diluted EPS of $.32 vs. $.27 in 2005, an increase of 19%.
  • Total company Adjusted EBITDA of $489 million, up 46%.
  • Pro forma worldwide comparable owned RevPAR increased 9.3% driven by strong rate increases and high demand in most major markets. Pro forma North America comparable owned RevPAR increased 9.6%.
  • Fees up 50% to $175 million on strong RevPAR and unit growth and as a result of the Hilton International acquisition.
  • Timeshare profitability up 23%.
Hilton reported second quarter 2006 net income of $144 million compared with $202 million in the 2005 quarter. Diluted net income per share was $.35 in the 2006 second quarter, versus $.49 in the 2005 period.

On a recurring basis, diluted EPS was $.32 in the 2006 second quarter, versus $.27 in the 2005 period. Non-recurring items benefited Q2 2006 by $.03 per share, vs. a benefit of $.22 per share in Q2 2005. Non-recurring items that benefited the 2006 quarter were as follows:
 

  • $3 million pre tax benefit from foreign currency gains;
  • $19 million pre tax benefit due primarily to asset dispositions ($10 million book gain), a settlement recovery in Hawaii ($8 million benefit), and other items ($1 million benefit). 
The 2005 second quarter benefited from the following two non-recurring items:
  • $.15 per share related primarily to asset sales;
  • $.07 per share of tax benefit related primarily to the closure of IRS audits for the years 1997-2001. 
The company reported second quarter 2006 total operating income of $366 million (a 49 percent increase from the 2005 quarter), on total revenue of $2.204 billion (an 87 percent increase from $1.176 billion in the 2005 quarter). Total company earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") were $489 million, an increase of 46 percent from $336 million in the 2005 quarter.

Owned Hotel Results

Continued strong demand trends and pricing power resulted in high single digit or double digit average daily rate (ADR) increases at many of the company's gateway hotels around the world. Business transient, group and leisure segments each showed significant ADR improvement.

Across all brands, revenue from the company's owned hotels (majority owned and controlled hotels) was $681 million in the second quarter 2006, an 18 percent increase from $575 million in the 2005 quarter. Total owned hotel expenses were up 22 percent in the quarter to $477 million.

On a pro forma basis, as if the acquisition of Hilton International (HI) had occurred January 1, 2005, comparable North America (U.S. and Canada) owned revenue and expenses increased 6.5 percent and 7.8 percent, respectively. Pro forma comparable revenue growth in the quarter was significantly impacted by disruptions due to renovations. The disproportionate increase in pro forma comparable expenses was due primarily to the impact of higher energy and marketing costs.

On a pro forma basis, revenue-per-available-room (RevPAR) from comparable N.A. owned hotels increased 9.6 percent (99 percent rate driven). Pro forma comparable N.A. owned hotel occupancy increased 0.1 point to 80.4 percent, while ADR increased 9.5 percent to $189.87. Particularly strong RevPAR growth was reported at the company's owned hotels in Chicago, Atlanta, Phoenix, Boston, Washington D.C., and across Canada. RevPAR growth at the company's owned hotels in New York City (the Waldorf=Astoria and the Hilton New York) and at the Hilton Hawaiian Village was significantly impacted by renovation disruptions, though all three properties showed double-digit ADR gains. Excluding the impact of the renovation disruption, pro forma RevPAR from comparable N.A. owned hotels would have increased approximately 12.6 percent. Food and beverage business at the three hotels was also adversely impacted due to group business disruptions. The current renovation phase at the Hilton New York was completed in July. The current renovation phases at the Waldorf=Astoria and Hilton Hawaiian Village are scheduled to be completed during the third quarter.

Comparable N.A. owned hotel margins in the second quarter decreased 80 basis points to 30.2 percent. The aforementioned renovation disruptions and higher energy and marketing costs impacted margins by approximately 160 basis points.

Pro forma comparable international owned revenue and expenses increased 8.0 percent and 6.0 percent, respectively. Pro forma RevPAR from international comparable owned hotels increased 9.2 percent (72 percent rate driven). Occupancy increased 2.3 points to 75.1 percent, while ADR increased 5.9 percent to $150.17. Strong results were reported in the U.K., particularly London, across continental Europe and in South America. Adjusting for the impact of foreign exchange, RevPAR from international comparable owned hotels increased 9.7 percent. Pro forma comparable international margins improved 130 basis points to 30.1 percent.

On a worldwide basis, pro forma comparable owned RevPAR increased 9.3 percent (90 percent rate driven), with margins declining 20 basis points to 30.2 percent.

Leased Hotels

Revenue from leased hotels was $671 million in the second quarter 2006 compared to $31 million in the 2005 quarter, while leased hotel expenses were $572 million in the current quarter versus $27 million last year. The EBITDAR-to-rent coverage ratio was 1.7 times in the quarter.

Pro forma leased revenue increased 1.7 percent, leased expenses increased 1.8 percent and margins declined 10 basis points to 15.1 percent. RevPAR from comparable leased properties increased 4.1 percent (on a U.S. dollar basis). Adjusting for the impact of foreign exchange, RevPAR from comparable leased hotels increased 4.8 percent.

System-wide RevPAR; Management/Franchise Fees

Most of the company's brands reported significant system-wide RevPAR increases, with particularly strong gains in ADR. On a system-wide basis (including owned, leased, managed and franchised properties) and pro forma as if the acquisition of Hilton International had occurred January 1, 2005, the company's brands showed second quarter RevPAR gains (on a U.S. dollar basis) as follows: Doubletree, 14.1 percent; Hampton Inn, 12.3 percent; Hilton Garden Inn, 10.5 percent; Embassy Suites, 9.5 percent; Hilton, 9.2 percent; Homewood Suites by Hilton, 8.2 percent; and Conrad, 7.1 percent. RevPAR for the Scandic brand declined 0.7 percent.

Management and franchise fees increased 50 percent in the second quarter to $175 million, benefiting from RevPAR gains and the addition of new units and the acquisition of HI.

Brand Development/Unit Growth

In the second quarter, the company added 55 properties and 8,362 rooms to its system as follows: Hampton Inn, 26 hotels and 2,292 rooms; Hilton Garden Inn, 13 hotels and 1,875 rooms; Hilton, 4 hotels and 1,545 rooms; Doubletree, 4 hotels and 965 rooms; Homewood Suites by Hilton, 5 hotels and 637 suites; Hilton Grand Vacations Company, 606 units; Embassy Suites, 1 hotel and 150 suites; and other, 2 hotels and 292 rooms.

Sixteen hotels and 2,509 rooms were removed from the system during the quarter.

During the second and early third quarter, the company added new hotels in major markets such as, Boston, St. Louis, Dallas, Jeddah (Saudi Arabia), New York (at J.F.K. Airport), London (at Canary Wharf), Montreal and Fiji. Additionally, during June and July, the company announced signed management or franchise agreements for its first four Hilton Garden Inns in Europe -- two each in Germany and Italy, as well as its first Doubletree in Asia -- in Thailand.

At June 30, 2006, the Hilton worldwide system consisted of 2,861 hotels and 492,620 rooms. The company's current development pipeline is its biggest yet, and the largest for any U.S.-based hotel company, with more than 700 hotels and 100,000 rooms at June 30, 2006. Approximately 90 percent of the hotels in the current development pipeline are in the Americas (U.S., Canada, Mexico, and South America), though international development is expected to comprise an increasingly larger percentage of the company's unit growth within the next two years.

In July, Hilton Garden Inn earned a first place ranking (for the fifth consecutive year) in the mid-scale full service segment of J.D. Power and Associates' 2006 North America Hotel Guest Satisfaction Index Study.

Hilton Grand Vacations

Hilton Grand Vacations Company (HGVC), the company's vacation ownership business, reported a 23 percent increase in profitability in the second quarter, due primarily to an 8 percent increase in average unit sales price and favorable impact from percentage of completion accounting in Las Vegas and Hawaii. Unit sales were flat with the 2005 quarter. The company reported that sales volume remained strong at HGVC's properties in Las Vegas, Orlando and Hawaii. HGVC had second quarter revenue of $173 million, a 27 percent increase from $136 million in the 2005 quarter. Expenses were $125 million in the second quarter, compared with $97 million in the 2005 period. During the quarter, the company spent approximately $106 million to acquire land in New York City (on 57th Street between 6th and 7th Avenues) and Orlando (part of the Ruby Lake planned development west of I-4) that has been earmarked for future HGVC development.

Corporate Finance

At June 30, 2006, Hilton had total debt of $8.4 billion (net of approximately $500 million of debt and capital lease obligations resulting from the consolidation of certain joint venture entities and a managed hotel, which is non-recourse to Hilton). Of the $8.4 billion, approximately 61 percent is floating rate debt. Total cash and equivalents (including restricted cash) were approximately $348 million at June 30, 2006. The company noted that debt reduction is a priority, and will be accomplished through a combination of operating cash flow and proceeds from asset dispositions.

The company's average basic and diluted share counts for the second quarter were 385 million and 419 million, respectively.

Hilton's debt currently has an average life of 6.2 years, at an average cost of approximately 6.4 percent.

Hilton's effective tax rate in the second quarter 2006 was 39 percent.

Total capital expenditures in the second quarter were $266 million, including $144 million expended for timeshare development and the aforementioned purchases of land.

Six-Month Results

For the six-month period ended June 30, 2006, Hilton reported net income of $248 million, compared to $266 million in the 2005 period. Diluted net income per share was $.61 versus $.65 in the 2005 period. Non-recurring items benefited the 2006 six-month period by $.09 per share, versus $.23 per share benefit in the 2005 six-month period. On a recurring basis, EPS was $.52 versus $.42 in the 2005 period, an increase of 24 percent. Operating income for the six months was $601 million (compared with $409 million in the 2005 period) on revenue of $3.723 billion (compared with $2.252 billion in the 2005 period). For the 2006 six-month period, when compared to the same period last year, total company Adjusted EBITDA increased 39 percent to $817 million.

2006 Outlook

The company provided the following updated estimates for full-year 2006:

Total revenue:       $8.100-$8.130 billion
Total Adjusted EBITDA:       $1.740-$1.765 billion
Total operating income:      $1.280-$1.300 billion
Pro forma comparable N. A. owned RevPAR growth:  9 - 10%
Pro forma comparable worldwide owned RevPAR growth:      9 - 10%
Pro forma comparable N. A. owned margin growth:  30 - 60 basis points
Pro forma comparable worldwide owned margin growth:      50 - 80 basis points
Pro forma comparable leased RevPAR growth:       7 - 8%
Pro forma comparable leased margin growth:     80 - 100 basis points
Management and franchise fee growth:     45% range
Timeshare profitability growth:      20% range
Diluted earnings per share:       $1.17 - $1.21
Recurring diluted EPS:        $1.08 - $1.12
The company's 2006 guidance excludes the impact of future asset sales.

Total capital spending in 2006 is expected to be approximately $860 million as follows: approximately $235 million for routine improvements, $300 million for hotel renovation or special projects, and $325 million for timeshare projects.

The company expects to add approximately 225 hotels and 36,000 rooms to its system in 2006.

Stephen F. Bollenbach, co-chairman and chief executive officer of Hilton Hotels Corporation, said: "All three parts of our company -- the hotels we own, our management and franchise fee business, and our timeshare operations -- continue to perform extremely well as our unparalleled collection of respected brands remain the first choices for the world's travelers and hotel owners.

"Strong demand is driving room rate growth in many of our most important markets, including New York, Hawaii, London and Chicago, a trend we see continuing due to limited new supply in urban centers and the ongoing rebound in the U.K. The renovation projects we have undertaken in New York and Hawaii, enhancing the guestrooms and improving the infrastructure of the important properties we own in those markets, are nearing completion and will have a positive impact on our results going forward.

"No one is opening more hotels in the U.S. than Hilton, a testament to the power of the Hilton Family of Brands. We anticipate our pipeline of more than 700 hotels to grow as we sign additional management and franchise agreements for our brands in Europe and Asia, as well as continuing our brand development success in North America. As we expected when we acquired Hilton International, the opportunities to introduce Hilton Garden Inn and Hampton Inn -- along with our full-service Hilton and Doubletree brands -- in new markets are plentiful and we are pursuing them aggressively. We are also finding excellent opportunities to expand our luxury presence through our Conrad and Waldorf=Astoria Collection brands. In addition, we were happy to have reached a favorable agreement with our labor unions that provided a new six-year agreement in Manhattan and established a structure for improved relations with UNITE HERE in the future."

Mr. Bollenbach concluded: "Just a few short months after completing the Hilton International transaction, our global business is operating seamlessly, new worldwide technology, product and marketing initiatives are underway, and we are moving assertively to take full advantage of the wide range of opportunities to grow our business for the benefit of our shareholders, customers, team members and hotel owners."

Note: 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. The forward-looking statements in this press release are subject to numerous risks and uncertainties, including the effects of economic conditions; supply and demand changes for hotel rooms; competitive conditions in the lodging industry, relationships with clients and property owners; the impact of government regulations; changes in foreign currency exchange rates; and the availability of capital to finance growth, which could cause actual results to differ materially from those expressed in or implied by the statements herein.
 
 

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

                   Three Months               Six Months
                       Ended                     Ended
                      June 30                   June 30
                   -------------            ---------------
                    2005   2006  % Change     2005    2006  % Change
                   ------ ------ ---------- ------- ------- ----------
Revenue
  Owned hotels      $575   $681        18 % $1,070  $1,189        11 %
  Leased hotels       31    671         -       59     937         -
  Management and
   franchise fees    117    175        50      219     327        49
  Timeshare and
   other income      148    217        47      302     428        42
                   ------ ------            ------- -------
                     871  1,744       100    1,650   2,881        75
  Other revenue
   from managed
   and franchised
   properties        305    460        51      602     842        40
                   ------ ------            ------- -------
                   1,176  2,204        87    2,252   3,723        65
Expenses
  Owned hotels       391    477        22      767     857        12
  Leased hotels       27    572         -       53     802         -
  Depreciation and
   amortization       78    117        50      158     203        28
  Impairment loss
   and related
   costs               5      -         -        7       -         -
  Other operating
   expenses          116    190        64      238     368        55
  Corporate
   expense            26     43        65       50      87        74
                   ------ ------            ------- -------
                     643  1,399       118    1,273   2,317        82
  Other expenses
   from managed
   and franchised
   properties        303    457        51      596     833        40
                   ------ ------            ------- -------
                     946  1,856        96    1,869   3,150        69

Operating income
 from
 unconsolidated
 affiliates           16     18        13       26      28         8
                   ------ ------            ------- -------

Operating income     246    366        49      409     601        47

Interest and
 dividend income       4      4         -        8      15        88
Interest expense     (66)  (139)      111     (130)   (235)       81
Net interest from
 unconsolidated
 affiliates and
 non-controlled
 interests            (7)   (13)       86      (13)    (22)       69
Net gain on
 foreign currency
 transactions          -      3         -        -      20         -
Net gain on asset
 dispositions and
 other                61     19       (69)      72      23       (68)
Loss from non-
 operating
 affiliates           (4)    (4)        -       (9)     (8)      (11)
                   ------ ------            ------- -------
Income before
 taxes and
 minority and non-
 controlled
 interests           234    236         1      337     394        17
Provision for
 income taxes        (25)   (92)        -      (61)   (144)      136
Minority and non-
 controlled
 interests, net       (7)     -         -      (10)     (2)      (80)
                   ------ ------            ------- -------
Net income          $202   $144       (29)%   $266    $248        (7)%
                   ====== ======            ======= =======

Net income per
 share (1)
--------------
Basic               $.53   $.37       (30)%   $.69    $.65        (6)%
                   ====== ======            ======= =======
Diluted             $.49   $.35       (29)%   $.65    $.61        (6)%
                   ====== ======            ======= =======

Average shares -
 basic               381    385         1 %    384     384         - %
                   ====== ======            ======= =======
 Average shares -
  diluted            416    419         1 %    418     418         - %
                   ====== ======            ======= =======

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

                      HILTON HOTELS CORPORATION
                   Comparable Owned Statistics (1)

             Three Months Ended            Six Months Ended
                   June 30,                     June 30,
                2005      2006    Change     2005      2006   Change
             --------- --------- -------- --------- --------- --------
Worldwide -
 63 Hotels
-----------

Hilton
------
Occupancy       78.1 %    79.0 %  0.9 pts    73.8 %    75.5 %  1.7 pts
Average Rate $170.54   $184.66    8.3 %   $169.64   $180.50    6.4 %
RevPAR       $133.20   $145.85    9.5 %   $125.24   $136.34    8.9 %

All Other
---------
Occupancy       76.5 %    76.1 % (0.4)pts    73.9 %    74.8 %  0.9 pts
Average Rate $109.02   $117.41    7.7 %   $109.13   $115.22    5.6 %
RevPAR        $83.44    $89.30    7.0 %    $80.62    $86.20    6.9 %

Total
-----
Occupancy       77.9 %    78.7 %  0.8 pts    73.8 %    75.5 %  1.7 pts
Average Rate $163.95   $177.58    8.3 %   $163.03   $173.46    6.4 %
RevPAR       $127.77   $139.69    9.3 %   $120.37   $130.88    8.7 %

North America 
(US & Canada)
 - 30 Hotels
-------------

Hilton
------
Occupancy       81.0 %    80.9 % (0.1)pts    76.5 %    77.4 %  0.9 pts
Average Rate $179.18   $196.88    9.9 %   $176.71   $191.76    8.5 %
RevPAR       $145.05   $159.22    9.8 %   $135.19   $148.50    9.8 %

All Other
---------
Occupancy       75.6 %    76.5 %  0.9 pts    74.4 %    75.7 %  1.3 pts
Average Rate $125.46   $133.38    6.3 %   $124.02   $130.72    5.4 %
RevPAR        $94.89   $101.98    7.5 %    $92.29    $99.01    7.3 %

Total
-----
Occupancy       80.3 %    80.4 %  0.1 pts    76.3 %    77.2 %  0.9 pts
Average Rate $173.35   $189.87    9.5 %   $170.78   $184.84    8.2 %
RevPAR       $139.27   $152.58    9.6 %   $130.24   $142.77    9.6 %

International
 - 33 Hotels
-------------

Hilton
------
Occupancy       72.2 %    75.1 %  2.9 pts    68.2 %    71.7 %  3.5 pts
Average Rate $150.35   $157.91    5.0 %   $153.09   $155.66    1.7 %
RevPAR       $108.48   $118.64    9.4 %   $104.49   $111.54    6.7 %

All Other
---------
Occupancy       78.8 %    75.0 % (3.8)pts    72.5 %    72.4 % (0.1)pts
Average Rate  $68.58    $75.70   10.4 %    $69.93    $73.67    5.3 %
RevPAR        $54.08    $56.79    5.0 %    $50.68    $53.35    5.3 %

Total
-----
Occupancy       72.8 %    75.1 %  2.3 pts    68.7 %    71.7 %  3.0 pts
Average Rate $141.86   $150.17    5.9 %   $144.68   $147.86    2.2 %
RevPAR       $103.27   $112.80    9.2 %    $99.33   $106.05    6.8 %

(1) Statistics are presented pro forma as if the acquisition of Hilton
    International had occurred January 1, 2005. Includes hotels owned
    as of June 30, 2006 which were owned by HHC or HI since January 1,
    2005. Excludes the Company's owned hotels in New Orleans.
 

                      HILTON HOTELS CORPORATION
                   Comparable Leased Statistics (1)

              Three Months Ended           Six Months Ended
                   June 30,                    June 30,
               2005      2006      Change  2005      2006      Change
              --------- --------- ------- --------- -------- ---------
Worldwide -
 200 Hotels
-----------

Hilton
------
Occupancy        74.2 %    76.0 %  1.8 pts   70.0 %    72.8  % 2.8 pts
Average Rate  $152.58   $159.48    4.5 %  $148.89   $151.29    1.6 %
RevPAR        $113.20   $121.20    7.1 %  $104.18   $110.13    5.7 %

Scandic
-------
Occupancy        65.9 %    64.5 % (1.4)pts   60.5 %    61.8  % 1.3 pts
Average Rate  $110.43   $111.97    1.4 %  $112.25   $109.72   (2.3)%
RevPAR         $72.82    $72.18   (0.9)%   $67.91    $67.82   (0.1)%

All Other
---------
Occupancy        80.7 %    78.2 % (2.5)pts   73.4 %    74.4  % 1.0 pts
Average Rate  $139.36   $151.49    8.7 %  $131.42   $143.12    8.9 %
RevPAR        $112.45   $118.53    5.4 %   $96.41   $106.54   10.5 %

Total
-----
Occupancy        70.8 %    70.9 %  0.1 pts   65.9 %    68.0  % 2.1 pts
Average Rate  $134.23   $139.61    4.0 %  $132.82   $133.86    0.8 %
RevPAR         $95.09    $99.02    4.1 %   $87.54    $90.96    3.9 %

(1) Statistics are presented pro forma as if the acquisition of Hilton
    International had occurred January 1, 2005. Includes hotels leased
    as of June 30, 2006 which were leased by HHC or HI since January
    1, 2005.
 

                      HILTON HOTELS CORPORATION
                 Comparable Systemwide Statistics (1)
                           Regional Summary

             Three Months Ended            Six Months Ended
                  June 30,                     June 30,
               2005      2006      Change   2005      2006     Change
             --------- --------- -------- --------- --------- --------

North America
(US & Canada)
-------------
Occupancy       73.3 %    76.3 %  3.0 pts    69.6 %    72.6 %  3.0 pts
Average Rate $106.70   $113.93    6.8 %   $105.83   $113.00    6.8 %
RevPAR        $78.20    $86.93   11.2 %    $73.66    $81.99   11.3 %

United Kingdom
 & Ireland
--------------
Occupancy       75.5 %    78.1 %  2.6 pts    71.3 %    75.1 %  3.8 pts
Average Rate $169.16   $172.85    2.2 %   $168.60   $167.06   (0.9)%
RevPAR       $127.78   $135.08    5.7 %   $120.15   $125.45    4.4 %

Continental
 Europe
-----------
Occupancy       71.8 %    73.6 %  1.8 pts    65.0 %    66.9 %  1.9 pts
Average Rate $164.33   $173.02    5.3 %   $159.40   $162.36    1.9 %
RevPAR       $118.04   $127.35    7.9 %   $103.66   $108.60    4.8 %

Africa
------
Occupancy       64.1 %    71.7 %  7.6 pts    64.9 %    69.5 %  4.6 pts
Average Rate $128.46   $135.62    5.6 %   $127.74   $134.59    5.4 %
RevPAR        $82.40    $97.23   18.0 %    $82.94    $93.55   12.8 %

Middle East
-----------
Occupancy       76.6 %    71.4 % (5.2)pts    76.3 %    72.7 % (3.6)pts
Average Rate  $80.39    $89.21   11.0 %    $91.10    $97.13    6.6 %
RevPAR        $61.61    $63.71    3.4 %    $69.50    $70.59    1.6 %

Asia Pacific
------------
Occupancy       75.4 %    75.9 %  0.5 pts    74.9 %    76.0 %  1.1 pts
Average Rate $126.30   $131.80    4.4 %   $126.69   $132.45    4.5 %
RevPAR        $95.19   $100.06    5.1 %    $94.89   $100.62    6.0 %

Latin America
 & Caribbean
-------------
Occupancy       69.4 %    72.2 %  2.8 pts    69.0 %    72.6 %  3.6 pts
Average Rate $112.91   $124.35   10.1 %   $118.49   $129.74    9.5 %
RevPAR        $78.40    $89.74   14.5 %    $81.78    $94.15   15.1 %

Nordic
------
Occupancy       66.1 %    64.8 % (1.3)pts    60.7 %    62.1 %  1.4 pts
Average Rate $114.56   $116.16    1.4 %   $115.88   $113.29   (2.2)%
RevPAR        $75.78    $75.23   (0.7)%    $70.32    $70.40    0.1 %

Total
-----
Occupancy       72.9 %    75.3 %  2.4 pts    69.3 %    71.9 %  2.6 pts
Average Rate $111.91   $118.96    6.3 %   $111.31   $117.63    5.7 %
RevPAR        $81.60    $89.62    9.8 %    $77.09    $84.57    9.7 %

(1) Statistics are presented pro forma as if the acquisition of Hilton
    International had occurred January 1, 2005. Includes hotels in the
    system as of June 30, 2006 which were in the system of HHC or HI
    since January 1, 2005. Excludes the Company's owned hotels in New
    Orleans. Excludes data for HI franchise hotels.
 

                      HILTON HOTELS CORPORATION
                 Comparable Systemwide Statistics (1)
                            Brand Summary

             Three Months Ended            Six Months Ended
                  June 30,                     June 30,
              2005      2006      Change   2005      2006      Change
             --------- --------- -------- --------- --------- --------

Hilton
------
Occupancy       73.9 %    75.3 %  1.4 pts    70.8 %    72.4 %  1.6 pts
Average Rate $136.67   $146.42    7.1 %   $136.02   $144.06    5.9 %
RevPAR       $101.03   $110.30    9.2 %    $96.29   $104.27    8.3 %

Hilton Garden
 Inn
-------------
Occupancy       72.0 %    75.1 %  3.1 pts    68.9 %    71.5 %  2.6 pts
Average Rate  $99.64   $105.51    5.9 %    $98.60   $104.71    6.2 %
RevPAR        $71.76    $79.28   10.5 %    $67.93    $74.84   10.2 %

Doubletree
----------
Occupancy       71.8 %    75.9 %  4.1 pts    68.4 %    72.3 %  3.9 pts
Average Rate $105.36   $113.67    7.9 %   $104.90   $112.89    7.6 %
RevPAR        $75.59    $86.28   14.1 %    $71.73    $81.56   13.7 %

Embassy
 Suites
-------
Occupancy       75.7 %    77.1 %  1.4 pts    72.5 %    74.5 %  2.0 pts
Average Rate $126.33   $135.75    7.5 %   $125.50   $134.35    7.1 %
RevPAR        $95.62   $104.70    9.5 %    $90.99   $100.13   10.0 %

Homewood 
Suites by
 Hilton
---------
Occupancy       76.9 %    79.3 %  2.4 pts    74.1 %    76.8 %  2.7 pts
Average Rate  $98.55   $103.43    5.0 %    $98.35   $103.20    4.9 %
RevPAR        $75.76    $81.99    8.2 %    $72.85    $79.21    8.7 %

Hampton
-------
Occupancy       72.0 %    76.1 %  4.1 pts    67.6 %    71.6 %  4.0 pts
Average Rate  $82.21    $87.29    6.2 %    $81.22    $86.42    6.4 %
RevPAR        $59.16    $66.45   12.3 %    $54.94    $61.89   12.7 %

Scandic
-------
Occupancy       65.9 %    64.5 % (1.4)pts    60.4 %    61.8 %  1.4 pts
Average Rate $109.95   $111.55    1.5 %   $111.79   $109.30   (2.2)%
RevPAR        $72.48    $71.97   (0.7)%    $67.57    $67.57      - %

Conrad
------
Occupancy       72.5 %    69.4 % (3.1)pts    69.6 %    68.6 % (1.0)pts
Average Rate $145.36   $162.52   11.8 %   $145.29   $160.27   10.3 %
RevPAR       $105.38   $112.81    7.1 %   $101.17   $109.93    8.7 %

Other
-----
Occupancy       80.0 %    82.0 %  2.0 pts    71.8 %    77.5 %  5.7 pts
Average Rate $139.71   $149.01    6.7 %   $128.83   $136.05    5.6 %
RevPAR       $111.81   $122.22    9.3 %    $92.45   $105.41   14.0 %

Total
-----
Occupancy       72.9 %    75.3 %  2.4 pts    69.3 %    71.9 %  2.6 pts
Average Rate $111.91   $118.96    6.3 %   $111.31   $117.63    5.7 %
RevPAR        $81.60    $89.62    9.8 %    $77.09    $84.57    9.7 %

(1) Statistics are presented pro forma as if the acquisition of Hilton
    International had occurred January 1, 2005. Includes hotels in the
    system as of June 30, 2006 which were in the system of HHC or HI
    since January 1, 2005. Excludes the Company's owned hotels in New
    Orleans. Excludes data for HI franchise hotels.
 

                      HILTON HOTELS CORPORATION
              Supplementary Statistical Information (1)

                                                June
                              ---------------------------------------
                                     2005                2006
                                   Number of           Number of
                               Properties  Rooms   Properties  Rooms
                              ------------------- -------------------
Hilton                                                       
------                                                       
Owned                              81     39,770       54     30,339
Leased                             78     22,908       79     23,552
Joint Venture                      16      6,844       14      6,156
Managed                           118     42,797      143     52,783
Franchised                        188     52,364      201     58,012
                              ------------------- -------------------
                                  481    164,683      491    170,842
Hilton Garden Inn                                            
-----------------                                            
Owned                               1        162        1        162
Joint Venture                       1        128        1        128
Managed                             7        895        7        886
Franchised                        223     30,454      270     37,198
                              ------------------- -------------------
                                  232     31,639      279     38,374
Doubletree                                                   
----------                                                   
Owned                               3      1,349        3      1,349
Leased                              5      1,746        5      1,746
Joint Venture                      16      4,982       14      4,306
Managed                            33      8,611       26      7,146
Franchised                         96     23,307      119     29,102
                              ------------------- -------------------
                                  153     39,995      167     43,649
Embassy Suites                                               
--------------                                               
Owned                               3        664        3        664
Joint Venture                      26      6,923       24      6,251
Managed                            55     14,433       56     14,830
Franchised                         94     21,382       98     22,247
                              ------------------- -------------------
                                  178     43,402      181     43,992
Homewood Suites by Hilton                                    
-------------------------                                    
Owned                               1        140        1        140
Managed                            41      4,802       41      4,706
Franchised                        113     12,367      132     14,434
                              ------------------- -------------------
                                  155     17,309      174     19,280
Hampton                                                      
-------                                                      
Owned                               1        133        1        133
Managed                            35      4,569       35      4,607
Franchised                      1,269    126,815    1,329    131,421
                              ------------------- -------------------
                                1,305    131,517    1,365    136,161
Scandic                                                      
-------                                                      
Owned                               1        325        1        325
Leased                            123     21,774      120     21,431
Managed                             3        429        3        429
Franchised                          5        575        6        962
                              ------------------- -------------------
                                  132     23,103      130     23,147
Conrad                                                       
------                                                       
Joint Venture                       3      1,395        3      1,399
Managed                            10      3,059       13      3,903
                              ------------------- -------------------
                                   13      4,454       16      5,302
Other                                                        
-----                                                        
Owned                               2        630        2        630
Leased                              2        666        2        666
Joint Venture                       3        807        -          -
Managed                             5      1,164        9      3,434
Franchised                          5      2,215        5      2,265
                              ------------------- -------------------
                                   17      5,482       18      6,995
                                                             
Timeshare                          38      4,170       40      4,878
---------                                                    
                                                             
Total                                                        
-----                                                        
Owned                              93     43,173       66     33,742
Leased                            208     47,094      206     47,395
Joint Venture                      65     21,079       56     18,240
Managed                           307     80,759      333     92,724
Franchised                      1,993    269,479    2,160    295,641
Timeshare                          38      4,170       40      4,878
                              ------------------- -------------------
TOTAL PROPERTIES                2,704    465,754    2,861    492,620
                              =======================================
 

                                               Change to
                                 -------------------------------------
                                     June 2005        December 2005
                                      Number of          Number of
                                  Properties Rooms   Properties Rooms
                                 ------------------ ------------------
Hilton                                                         
------                                                         
Owned                                (27)   (9,431)      (3)   (2,030)
Leased                                 1       644        -        92
Joint Venture                         (2)     (688)      (2)     (688)
Managed                               25     9,986        6     5,074
Franchised                            13     5,648        8     3,228
                                 ------------------ ------------------
                                      10     6,159        9     5,676
Hilton Garden Inn                                              
-----------------                                              
Owned                                  -         -        -         -
Joint Venture                          -         -        -         -
Managed                                -        (9)       -         -
Franchised                            47     6,744       20     2,851
                                 ------------------ ------------------
                                      47     6,735       20     2,851
Doubletree                                                     
----------                                                     
Owned                                  -         -        -         -
Leased                                 -         -        -         -
Joint Venture                         (2)     (676)       -         -
Managed                               (7)   (1,465)      (4)     (914)
Franchised                            23     5,795       11     2,395
                                 ------------------ ------------------
                                      14     3,654        7     1,481
Embassy Suites                                                 
--------------                                                 
Owned                                  -         -        -         1
Joint Venture                         (2)     (672)      (1)     (335)
Managed                                1       397        -        (2)
Franchised                             4       865        -      (101)
                                 ------------------ ------------------
                                       3       590       (1)     (437)
Homewood Suites by Hilton                                      
-------------------------                                      
Owned                                  -         -        -         -
Managed                                -       (96)       -         -
Franchised                            19     2,067       10     1,147
                                 ------------------ ------------------
                                      19     1,971       10     1,147
Hampton                                                        
-------                                                        
Owned                                  -         -        -         -
Managed                                -        38        1       154
Franchised                            60     4,606       28     1,886
                                 ------------------ ------------------
                                      60     4,644       29     2,040
Scandic                                                        
-------                                                        
Owned                                  -         -        -         -
Leased                                (3)     (343)      (1)       26
Managed                                -         -        -         -
Franchised                             1       387        1       247
                                 ------------------ ------------------
                                      (2)       44        -       273
Conrad                                                         
------                                                         
Joint Venture                          -         4        -         4
Managed                                3       844        1       243
                                 ------------------ ------------------
                                       3       848        1       247
Other                                                          
-----                                                          
Owned                                  -         -        -         -
Leased                                 -         -        -         -
Joint Venture                         (3)     (807)       -         -
Managed                                4     2,270        3     2,123
Franchised                             -        50       (1)     (169)
                                 ------------------ ------------------
                                       1     1,513        2     1,954
                                                               
Timeshare                              2       708        -       606
---------                                                      
                                                               
Total                                                          
-----                                                          
Owned                                (27)   (9,431)      (3)   (2,029)
Leased                                (2)      301       (1)      118
Joint Venture                         (9)   (2,839)      (3)   (1,019)
Managed                               26    11,965        7     6,678
Franchised                           167    26,162       77    11,484
Timeshare                              2       708        -       606
                                 ------------------ ------------------
TOTAL PROPERTIES                     157    26,866       77    15,838
                                 ================== ==================

(1) Statistics are presented pro forma as if the acquisition of Hilton
    International had occurred January 1, 2005.
 

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

                           Three Months           Six Months
                              Ended                 Ended
                             June 30               June 30
                           -----------           -----------
                           2005  2006  % Change  2005  2006  % Change
                           ----- ----- --------- ----- ----- ---------

Adjusted EBITDA            $336  $489       46 % $588  $817       39 %
  Proportionate share of
   depreciation and
   amortization of
   unconsolidated
   affiliates                (7)   (7)       -    (14)  (15)       7
  Impairment loss and
   related costs             (5)    -        -     (7)    -        -
  Operating interest and
   dividend income           (2)   (1)     (50)    (5)   (3)     (40)
  Operating income of non-
   controlled interests       2     2        -      5     5        -
  Net gain on foreign
   currency transactions      -     3        -      -    20        -
  Net gain on asset
   dispositions and other    61    19      (69)    72    23      (68)
  Loss from non-operating
   affiliates                (4)   (4)       -     (9)   (8)     (11)
  Minority and non-
   controlled interests,
   net                       (7)    -        -    (10)   (2)     (80)
                           ----- -----           ----- -----
EBITDA                      374   501       34    620   837       35
  Depreciation and
   amortization             (78) (117)      50   (158) (203)      28
  Interest expense, net     (69) (148)     114   (135) (242)      79
  Provision for income
   taxes                    (25)  (92)       -    (61) (144)     136
                           ----- -----           ----- -----
Net income                 $202  $144      (29)% $266  $248       (7)%
                           ===== =====           ===== =====
 

      Reconciliation of Adjusted EBITDA to EBITDA and Net Income
           Future Performance - Full Year 2006 Outlook (1)
              ($ in millions, except per share amounts)

                                                   Estimated Estimated
                                                   Full Year Full Year
                                                      2006      2006
                                                    Low End  High End
                                                   --------- ---------

Adjusted EBITDA                                      $1,740    $1,765
  Proportionate share of depreciation and
   amortization of unconsolidated affiliates            (31)      (31)
  Operating interest and dividend income                 (7)       (7)
  Operating income of non-controlled interests           11        11
  Net gain on foreign currency transactions              20        20
  Net gain on asset dispositions and other               23        23
  Loss from non-operating affiliates                    (16)      (16)
  Minority and non-controlled interests, net             (6)       (6)
                                                   --------- ---------
EBITDA                                                1,734     1,759
  Depreciation and amortization                        (436)     (436)
  Interest expense, net                                (526)     (525)
  Provision for income taxes                           (292)     (302)
                                                   --------- ---------
Net income                                             $480      $496
                                                   ========= =========

Diluted EPS                                           $1.17     $1.21
                                                   ========= =========

Recurring Diluted EPS                                 $1.08     $1.12
                                                   ========= =========

(1) Includes the impact of Hilton International from the acquisition
    date of February 23, 2006.
 

                      HILTON HOTELS CORPORATION
            Supplemental Financial Information (Unaudited)
                    Pro Forma Revenue and Expenses
                           ($ in millions)

 Owned Hotels
 ---------------------------------------------------------------------
                         Three Months  % or      Six Months     % or
                             Ended    basis         Ended      basis
                           June 30,   point        June 30,    point
                          2005  2006  Change     2005    2006  Change
                          -------------------  -----------------------
  Revenue
  -------
   Reported               $575  $681           $1,070  $1,189
      Less sold hotels
       and New Orleans    (172)  (33)            (319)    (87)
      Less HI reported       -  (222)               -    (302)
      Plus HI North
       America, net (1)     26    31  19%          46      56  22%
                          ----- -----          ------- -------
   Pro Forma Comparable
    Owned - North America  429   457   7%         797     856   7%
      Plus HI
       International, net
       (1)                 163   176   8%         313     331   6%
                          ----- -----          ------- -------
   Pro Forma Comparable
    Owned - Worldwide     $592  $633   7%      $1,110  $1,187   7%
                          ===== =====          ======= =======
  Expenses
  --------
   Reported               $391  $477             $767    $857
      Less sold hotels
       and New Orleans    (115)  (24)            (228)    (62)
      Less HI reported       -  (158)               -    (217)
      Plus HI North
       America, net (1)     20    24  20%          39      45  15%
                          ----- -----          ------- -------
   Pro Forma Comparable
    Owned - North America  296   319   8%         578     623   8%
      Plus HI
       International, net
       (1)                 116   123   6%         231     239   3%
                          ----- -----          ------- -------
   Pro Forma Comparable
    Owned - Worldwide     $412  $442   7%        $809    $862   7%
                          ===== =====          ======= =======
  Margins
  -------
   Pro Forma Comparable
    Owned - North America 31.0% 30.2%(80) bps    27.5%   27.2%(30) bps
   Pro Forma Comparable
    Owned - International 28.8% 30.1%130  bps    26.2%   27.8%160  bps
   Pro Forma Comparable
    Owned - Worldwide     30.4% 30.2%(20) bps    27.1%   27.4% 30  bps
 

 Leased Hotels
 ---------------------------------------------------------------------
                         Three Months  % or      Six Months     % or
                             Ended    basis         Ended      basis
                           June 30,   point        June 30,    point
                          2005  2006  Change     2005    2006  Change
                          -------------------  -----------------------
  Revenue
  -------
   Reported                $31  $671              $59    $937
      Less non-comparable   (4)    -               (8)      -
      Less HI reported       -  (643)               -    (882)
      Plus HI, net (1)     624   634   2%       1,163   1,174   1%
                          ----- -----          ------- -------
   Pro Forma Comparable
    Leased - Worldwide    $651  $662   2%      $1,214  $1,229   1%
                          ===== =====          ======= =======
  Expenses
  --------
   Reported                $27  $572              $53    $802
      Less non-comparable   (4)    -               (7)      -
      Less HI reported       -  (549)               -    (756)
      Plus HI, net (1)     529   539   2%       1,027   1,028   -%
                          ----- -----          ------- -------
   Pro Forma Comparable
    Leased - Worldwide    $552  $562   2%      $1,073  $1,074   -%
                          ===== =====          ======= =======
  Margins
  -------
   Pro Forma Comparable
    Leased - Worldwide    15.2% 15.1%(10) bps    11.6%   12.6%100  bps
 

 Management and Franchise
  Fees
 ---------------------------------------------------------------------
                         Three Months             Six Months
                             Ended                  Ended
                           June 30,     %          June 30,      %
                          2005  2006  Change     2005    2006  Change
                          -------------------  -----------------------
   Reported               $117  $175             $219    $327
      Less HI reported       -   (28)               -     (38)
      Plus HI               26    28   8%          45      52  16%
                          ----- -----          ------- -------
   Pro Forma - Worldwide  $143  $175  22%        $264    $341  29%
                          ===== =====          ======= =======

(1) Pro forma for the entities acquired with Hilton International as
    if they had been acquired on January 1, 2005. Excludes non-
    comparable hotels.
 

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 we have no ownership interest.
    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. 

 
.
Contact:

Hilton Hotels Corporation
Atish Shah, 310-205-8664
[email protected]
http://www.hiltonworldwide.com
.
Also See: Hilton Hotels 1st Qtr 2006 Net Income Up 63% to $104 million from $64 million a Year Earlier; Revpar Rose 9% / Hotel Operating Statistics / May 2006
Hilton Hotels Corp. 4th Quarter Profit Up 62%; Strong Demand Brings Double-digit RevPAR Growth in All Major Markets / Hotel Operating Statistics / January 2006

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