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Hilton Reports 3rd Qtr 2006 Net Income of $117 million Compared
with $89 million in the 2005 Qtr; Hilton's Largest U.S. Markets
Exhibiting the Strongest Demand, including New York,
Hawaii and Chicago
Hotel Operating Statistics
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BEVERLY HILLS, Calif. - Hilton Hotels Corporation (NYSE:HLT) today reported financial results for the third quarter and nine months ended September 30, 2006. Third quarter highlights compared to third quarter 2005 are as follows:
  • Recurring diluted EPS of $.31 vs. $.22 in 2005, an increase of 41%.
  • Total company Adjusted EBITDA of $440 million, up 58%.
  • Pro forma worldwide comparable owned RevPAR increased 9.8% driven by strong rate increases and high demand in most major markets. Pro forma worldwide comparable owned margins improved 70 basis points.
  • Fees up 47% to $175 million on strong RevPAR and unit growth and the favorable impact of the Hilton International acquisition.
  • Timeshare profitability up 17%
Hilton reported third quarter 2006 net income of $117 million compared with $89 million in the 2005 quarter. Diluted net income per share was $.29 in the 2006 third quarter, versus $.22 in the 2005 period.

On a recurring basis, diluted EPS was $.31 in the 2006 third quarter, versus $.22 in the 2005 period. In total, non-recurring items adversely impacted the 2006 quarter by approximately $.02 per share as follows:

    * $12 million pre-tax charge ($.02 per share) to increase a guarantee reserve for one managed hotel (included in other operating expenses);
    * $10 million pre-tax loss ($.02 per share) on foreign currency transactions;
    * $13 million pre-tax gain ($.02 per share) on asset sales and other items 

The company reported third quarter 2006 total operating income of $315 million (a 55 percent increase from the 2005 quarter), on total revenue of $2.207 billion (a 100 percent increase from $1.102 billion in the 2005 quarter). Total company earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) were $440 million, an increase of 58 percent from $279 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 $649 million in the third quarter 2006, a 33 percent increase from $489 million in the 2005 quarter. Total owned hotel expenses were up 33 percent in the quarter to $464 million.

On a pro forma basis, as if the acquisition of Hilton International (HI) had occurred January 1, 2005, comparable North America (U.S.) owned revenue and expenses increased 5.9 percent and 5.8 percent, respectively. Pro forma comparable revenue growth in the quarter was significantly impacted by disruptions due to renovations. The pro forma comparable expenses were impacted by higher insurance and marketing costs.

On a pro forma basis, revenue-per-available-room (RevPAR) from comparable North America (N.A.) owned hotels increased 7.4 percent (120 percent rate driven.) Pro forma comparable N.A. owned hotel occupancy decreased 1.2 points to 82.7 percent, while ADR increased 8.9 percent to $194.34. Particularly strong RevPAR growth was reported at the company's owned hotels in Boston, Chicago, and New York. RevPAR growth at the Waldorf=Astoria in New York and the Hilton Hawaiian Village was significantly impacted by renovation disruptions. Excluding the impact of the renovation disruptions, pro forma RevPAR from comparable N.A. owned hotels would have increased approximately 8.4 percent. Food and beverage business at both properties undergoing renovations was also adversely impacted due to group business disruptions.

Comparable N.A. owned hotel margins in the third quarter increased 10 basis points to 29.0 percent. The aforementioned renovation disruptions and higher insurance and marketing costs impacted margins by approximately 190 basis points.

Pro forma comparable international owned revenue and expenses increased 15.4 percent and 11.2 percent, respectively. Pro forma RevPAR from international comparable owned hotels increased 17.5 percent (68 percent rate driven.) Occupancy increased 3.9 points to 75.2 percent, while ADR increased 11.3 percent to $145.79. Strong results were reported in London, Dresden, Zurich, and Paris. Excluding the impact of foreign exchange, RevPAR from international comparable owned hotels increased 12.5 percent. Pro forma comparable international owned margins improved 270 basis points to 27.9 percent.

On a worldwide basis, pro forma comparable owned RevPAR increased 9.8 percent (92 percent rate driven,) with margins increasing 70 basis points to 28.6 percent. Excluding the impact of foreign exchange, worldwide pro forma comparable owned RevPAR increased 8.6 percent.

Leased Hotels

Revenue from leased hotels was $679 million in the third quarter 2006 compared to $28 million in the 2005 quarter, while leased hotel expenses were $578 million in the current quarter versus $24 million last year. The EBITDAR-to-rent coverage ratio was 1.7 times in the quarter.

Pro forma comparable leased revenue increased 9.9 percent, leased expenses increased 8.5 percent and margins increased 110 basis points to 15.2 percent. RevPAR from comparable leased properties increased 12.1 percent. Excluding the impact of foreign exchange, RevPAR from comparable leased hotels increased 8.1 percent.

System-wide RevPAR; Management/Franchise Fees

All 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 third quarter RevPAR gains as follows: Conrad, 13.4 percent; Hilton, 9.8 percent; Doubletree, 9.5 percent; Scandic, 9.0 percent; Embassy Suites, 8.3 percent; Hampton, 7.6 percent; Hilton Garden Inn, 7.4 percent; and Homewood Suites by Hilton, 6.3 percent.

Management and franchise fees increased 47 percent in the third quarter to $175 million, benefiting from RevPAR gains, the addition of new units, and the acquisition of HI.

Brand Development/Unit Growth

In the third quarter, the company added 60 properties and 8,070 rooms to its system as follows: Hampton Inn, 29 hotels and 2,849 rooms; Doubletree, 7 hotels and 1,839 rooms; Hilton, 8 hotels and 1,584 rooms; Homewood Suites by Hilton, 10 hotels and 976 suites; Hilton Garden Inn, 6 hotels and 774 rooms; Hilton Grand Vacations Company, 48 units.

Twenty-six properties and 4,186 rooms were removed from the system during the quarter.

During the third quarter, the company added new full-service hotels in Evian, France; Palermo, Italy; Baton Rouge; Annapolis; Baltimore; London (at Tower Bridge); and the Seychelles. The company also announced future openings in Moscow, Russia, and Bogota, Columbia. During the quarter, the company celebrated its 1,000th opening since the 1999 acquisition of Promus Hotels at the Embassy Suites Fort Myers/Estero, Florida. In addition, during the quarter the company opened one Hilton Garden Inn in Germany and, early in the fourth quarter, one in Italy - the first properties in Europe for the brand.

On October 30, the company announced plans for a 360-room Doubletree Hotel in Tianjin, China's fourth largest city, marking Doubletree's initial entry into the China market.

At September 30, 2006, the Hilton worldwide system consisted of 2,895 properties and 496,504 rooms. The company's current development pipeline is its biggest yet, and the largest for any U.S.-based hotel company, with more than 775 hotels and 110,000 rooms at September 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 development pipeline over the next two years.

Hilton Grand Vacations

Hilton Grand Vacations Company (HGVC), the company's vacation ownership business, reported a 17 percent increase in profitability in the third quarter of 2006 compared to 2005, due primarily to a 6 percent increase in average unit sales price and a 2 percent increase in unit sales.

HGVC had third quarter revenue of $152 million, a 7 percent increase from $142 million in the 2005 quarter. Expenses were $111 million in the third quarter, compared with $107 million in the 2005 period.

Distribution

Hilton reported that its proprietary websites collectively rank as one of the largest revenue-generating commercial/retail websites in the world, excluding those that generate advertising revenue. In the third quarter, reservations booked through Hilton's websites increased 39 percent. For the nine-month period ended September 30, 2006, reservations booked through Hilton's websites increased 33 percent.

Over the last five years, the share of reservations booked through Hilton's websites has grown from 9 percent of total reservations to 17 percent of total reservations, making it the largest central distribution channel for the company. Annual revenue booked through the company's proprietary websites has grown from $709 million to $2.5 billion over the period. The share of reservations booked by third-party online agencies has remained flat at 3 percent over the period.

Asset Dispositions

Hilton noted that it intends to begin marketing for sale the following five hotels located in the U.S.: the 599-room Hilton Boston Logan, the 504-room Hilton Atlanta Airport, the 317-room Hilton New Orleans Airport, the 219-room Embassy Suites Memphis and the 140-room Homewood Suites Memphis.

Additionally, the company recently began marketing for sale the following two hotels: the 1,119-room Hilton Washington and the 251-room Hilton Caledonian located in Edinburgh, Scotland.

As previously announced, during the third quarter the company completed the sale of the LivingWell standalone health club system, five Canadian hotels, and the Drake Hotel leasehold in Chicago. Additionally, during the third quarter, the company announced that it began marketing for sale 10 hotels in continental Europe. Hilton also announced in the quarter that it is exploring strategic alternatives for the Scandic brand, a system of 129 hotels and 22,800 rooms, including the possible sale of all or part of the business.

Earlier this month, the company announced the exchange of contracts to sell two hotels located in the U.K., the 1,054-room Hilton London Metropole and the 794-room Hilton Birmingham Metropole, for GBP 417 million. The sale is expected to close by year-end, with the company retaining management of both hotels under long-term contracts.

Corporate Finance

At September 30, 2006, Hilton had total debt of $7.8 billion (net of $505 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 $7.8 billion, approximately 58 percent is floating rate debt. Total cash and equivalents (including restricted cash of $265 million) were approximately $379 million at September 30, 2006.

The company's average basic and diluted share counts for the third quarter were 386 million and 420 million, respectively. Hilton's debt currently has an average life of 6.1 years, at an average cost of approximately 6.5 percent.

Hilton's effective tax rate in the third quarter 2006 was 31.2 percent. The reduction in effective rate is due to the company's ability to utilize more foreign tax credits resulting primarily from the sale of five Canadian hotels.

Total capital expenditures in the third quarter were $147 million, including $20 million for timeshare development.

Nine-Month Results

For the nine-month period ended September 30, 2006, Hilton reported net income of $365 million, compared to $355 million in the 2005 period. Diluted net income per share was $.89 versus $.87 in the 2005 period. Non-recurring items benefited the 2006 nine-month period by $.07 per share, versus $.23 per share benefit in the 2005 nine-month period. On a recurring basis, EPS was $.82 versus $.64 in the 2005 period, an increase of 28 percent. Operating income for the nine months was $916 million (compared with $612 million in the 2005 period) on revenue of $5.930 billion (compared with $3.354 billion in the 2005 period.) For the 2006 nine-month period, when compared to the same period last year, total company Adjusted EBITDA increased 45 percent to $1.257 billion. The company's effective tax rate for the nine-month period was 35 percent.

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

Total revenue:                                  $8.14 billion range
Total Adjusted EBITDA:                          $1.74 billion range
Total operating income:                         $1.28 billion range
Pro forma comparable N.A. owned RevPAR growth:  Approx. 9%
Pro forma comparable worldwide owned RevPAR
 growth:                                        Approx. 9%
Pro forma comparable N.A. owned margin growth:  flat
Pro forma comparable worldwide owned margin
 growth:                                        50 basis points range
Pro forma comparable leased RevPAR growth:      Approx. 7.5%
Pro forma comparable leased margin growth:      80 basis points range
Management and franchise fee growth:            Approx. 50%
Timeshare profitability growth:                 Approx. 20%
Effective tax rate:                             Approx. 35.5%
Diluted earnings per share:                     Approx. $1.27
Recurring diluted EPS:                          Approx. $1.15

The company's 2006 guidance excludes the impact of the expected sale of the two aforementioned Hilton Metropole hotels and other future asset sales. In addition, the company's 2006 diluted EPS guidance includes a benefit of approximately $.05 per share from the sale of its interest in a joint-venture hotel early in the fourth quarter, including a pre-tax gain on the investment of approximately $23 million and a contract termination fee of approximately $11 million. These gains are excluded from recurring diluted EPS.

The company expects that renovation disruptions will not negatively impact results during the fourth quarter of 2006.

Total capital spending in 2006 is expected to be approximately $850 million as follows: approximately $240 million for routine improvements, $305 million for hotel renovation or special projects, and $305 million for timeshare projects.

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

                       Preliminary 2007 Outlook

The company noted that it is in the preliminary stages of its
 budgeting process for 2007. However, based on its expectations of
 continuing strong demand trends, the following preliminary estimates
 for full-year 2007 were provided:

Management and franchise fee growth:      15% range
Pro forma comparable worldwide owned hotel RevPAR
 growth:                                                 Approx. 7-9%
Pro forma comparable worldwide owned hotel margin
 growth:                                                 125-175 bps
Pro forma comparable worldwide leased hotel RevPAR
 growth:                                                 Approx. 4-5%
Pro forma comparable worldwide leased hotel margin
 growth:                                                 30-70 bps
Effective tax rate:                                      Approx. 38%


The 2007 guidance includes the impact of asset sales completed through October 2006, assumes the sale of the two aforementioned Hilton Metropole hotels by year-end 2006, and includes the anticipated impact of renovation disruptions at the Hilton Hawaiian Village, Waldorf=Astoria, and Hilton New York. The 2007 guidance excludes the impact of additional asset sales and other potential transactions.

The company expects to add approximately 250 hotels and 35,000 rooms to its system in 2007.

The company noted the following additional factors that are expected to impact earnings per share growth in 2007:

  • Reported earnings growth in 2007 is expected to be impacted by the timing of the HI acquisition. Results in 2006 include HI from the February 23, 2006, acquisition date. Had the acquisition been completed on January 1, 2006, expected full-year 2006 results would have been reduced by approximately $.05 per share. During the period January 1 to February 23, 2006, the pro forma fixed costs associated with the HI acquisition significantly exceeded HI's operating performance due to the seasonally weak business environment of the period.
  • The company's timeshare business, which anticipates continued strong unit sales and unit price increases in 2007, is expected to be negatively impacted, from a reporting standpoint, by percentage-of-completion accounting associated with new projects. The net change attributable to percentage-of-completion accounting between 2006 and 2007 is expected to total approximately $65 million pre-tax, or $.10 per share. As a result, reported timeshare profits in 2007 are expected to decline approximately 25%. The company expects the impact of percentage-of-completion accounting on 2007 results to reverse in 2008. 
Total capital spending in 2007 is expected to be approximately $920 million as follows: approximately $320 million for routine improvements and technology, approximately $315 million for timeshare projects, and approximately $285 million for hotel renovation or special projects. To the extent the company completes asset sales beyond those completed through October 2006 and the two aforementioned Hilton Metropole hotels scheduled to close by year-end 2006, capital expenditures would decrease.

"The fundamentals of our business worldwide continue to be very strong, as evidenced by the significant RevPAR growth, management and franchise fee increases and timeshare growth we experienced in the third quarter," said Stephen F. Bollenbach, co-chairman and chief executive officer of Hilton Hotels Corporation. "Our largest U.S. markets are exhibiting the strongest demand, including New York, Hawaii and Chicago. We are particularly pleased with the performance of our hotels in the United Kingdom - where London is especially robust - Ireland, Continental Europe, and Latin America/Caribbean; all of these international regions saw double-digit RevPAR gains in the quarter."

Mr. Bollenbach continued: "Our franchising and management business is booming, both as a result of RevPAR increases and the addition of new units. As we continue moving our company to more of a fee-based business, our ability to grow our global system more rapidly and in more countries than our competitors will be a key component in our success going forward. As it is, we have more hotels in development in the U.S. than any other lodging company. Timeshare continues to be very profitable as we experience strong sales and develop exciting new projects in our key markets of Hawaii, Las Vegas, Orlando and New York City.

"The strategic focus of our company for the remainder of 2006 and into 2007 - in addition to continuing operating our business effectively and efficiently on a daily basis - is facilitating our shift to a more fee-based model by bringing our mid-scale brands to new markets around the world while continuing our successful asset disposition program," Mr. Bollenbach said. "We are in active discussions with potential owners in many of the world's hottest growth markets and have already introduced Hilton Garden Inns in Germany and Italy and announced plans for Doubletrees in Thailand and China. In terms of asset sales, we are finding tremendous interest in both the U.S. and Europe for hotels that we currently own, and look forward to continuing the level of success we've had in this area the last two years."

Mr. Bollenbach added: "Another of our strategic priorities going forward is the re-ignition of our flagship Hilton brand. The programs we have initiated to date - including property improvements, more aggressive marketing and a continuing commitment to be the industry leader in the development and use of technology - have combined to enhance the profile and customer loyalty at the world's most well-known hotel brand. It is tending to the product and service basics of our business - along with our global brand development program - that will keep Hilton at the forefront of our industry."

In conclusion, Mr. Bollenbach said: "It is our expectation that the fundamentals of the lodging business will remain strong for the rest of this year and into 2007, and that this environment, coupled with a worldwide demand for highly regarded hotel brands, will benefit our customers, shareholders, team members and hotel owners going forward."
 
 

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

                    Three Months              Nine Months
                        Ended                     Ended
                    September 30,             September 30,
                   ---------------           ---------------
                    2005    2006   % Change   2005    2006   % Change
                   ------- ------- --------- ------- ------- ---------
Revenue
  Owned hotels     $  489  $  649       33 % $1,559  $1,838       18 %
  Leased hotels        28     679        -       87   1,616        -
  Management and
   franchise fees     119     175       47      338     502       49
  Timeshare and
   other income       155     178       15      457     606       33
                   ------- -------           ------- -------
                      791   1,681      113    2,441   4,562       87
  Other revenue
   from managed
   and franchised
   properties         311     526       69      913   1,368       50
                   ------- -------           ------- -------
                    1,102   2,207      100    3,354   5,930       77
Expenses
  Owned hotels        350     464       33    1,117   1,321       18
  Leased hotels        24     578        -       77   1,380        -
  Depreciation and
   amortization        70     118       69      228     321       41
  Impairment loss
   and related
   costs                -       -        -        7       -        -
  Other operating
   expenses           128     177       38      366     545       49
  Corporate
   expense             25      43       72       75     130       73
                   ------- -------           ------- -------
                      597   1,380      131    1,870   3,697       98
  Other expenses
   from managed
   and franchised
   properties         311     527       69      907   1,360       50
                   ------- -------           ------- -------
                      908   1,907      110    2,777   5,057       82

Operating income
 from
 unconsolidated
 affiliates             9      15       67       35      43       23
                   ------- -------           ------- -------

Operating income      203     315       55      612     916       50

Interest and
 dividend income        6       7       17       14      22       57
Interest expense      (66)   (136)     106     (196)   (371)      89
Net interest from
 unconsolidated
 affiliates and
 non-controlled
 interests             (6)    (12)     100      (19)    (34)      79
Net (loss) gain on
 foreign currency
 transactions           -     (10)       -        -      10        -
Net gain on asset
 dispositions and
 other                  4      13        -       76      36      (53)
Loss from non-
 operating
 affiliates            (4)     (4)       -      (13)    (12)      (8)
                   ------- -------           ------- -------
Income before
 taxes and
 minority and non-
 controlled
 interests            137     173       26      474     567       20
Provision for
 income taxes         (47)    (54)      15     (108)   (198)      83
Minority and non-
 controlled
 interests, net        (1)     (2)     100      (11)     (4)     (64)
                   ------- -------           ------- -------
Net income         $   89  $  117       31 % $  355  $  365        3 %
                   ======= =======           ======= =======

Net income per
 share(1)
------------------
Basic              $  .23  $  .30       30 % $  .93  $  .95        2 %
                   ======= =======           ======= =======
Diluted            $  .22  $  .29       32 % $  .87  $  .89        2 %
                   ======= =======           ======= =======

Average shares -
 basic                381     386        1 %    383     385        1 %
                   ======= =======           ======= =======
Average shares -
 diluted              415     420        1 %    417     419        - %
                   ======= =======           ======= =======

(1) EPS for the nine-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
                                           September 30,
                                           2005      2006    Change
                                        --------- --------- ---------
Worldwide - 57 Hotels
---------------------------------------

 Hilton
 --------------------------------------
   Occupancy                               79.9 %    80.3 %  0.4  pts
   Average Rate                         $169.56   $184.82    9.0  %
   RevPAR                               $135.46   $148.43    9.6  %

 All Other
 --------------------------------------
   Occupancy                               77.0 %    78.6 %  1.6  pts
   Average Rate                         $115.08   $127.53   10.8  %
   RevPAR                               $ 88.58   $100.22   13.1  %

 Total
 --------------------------------------
   Occupancy                               79.6 %    80.1 %  0.5  pts
   Average Rate                         $163.89   $178.74    9.1  %
   RevPAR                               $130.41   $143.22    9.8  %

North America - 25 Hotels
---------------------------------------

 Hilton
 --------------------------------------
   Occupancy                               85.3 %    83.6 % (1.7) pts
   Average Rate                         $184.50   $201.03    9.0  %
   RevPAR                               $157.33   $168.07    6.8  %

 All Other
 --------------------------------------
   Occupancy                               74.3 %    76.5 %  2.2  pts
   Average Rate                         $131.06   $145.40   10.9  %
   RevPAR                               $ 97.39   $111.24   14.2  %

 Total
 --------------------------------------
   Occupancy                               83.9 %    82.7 % (1.2) pts
   Average Rate                         $178.39   $194.34    8.9  %
   RevPAR                               $149.59   $160.69    7.4  %

International - 32 Hotels
---------------------------------------

 Hilton
 --------------------------------------
   Occupancy                               70.2 %    74.4 %  4.2  pts
   Average Rate                         $136.85   $152.21   11.2  %
   RevPAR                               $ 96.04   $113.27   17.9  %

 All Other
 --------------------------------------
   Occupancy                               87.0 %    86.5 % (0.5) pts
   Average Rate                         $ 63.62   $ 67.87    6.7  %
   RevPAR                               $ 55.33   $ 58.69    6.1  %

 Total
 --------------------------------------
   Occupancy                               71.3 %    75.2 %  3.9  pts
   Average Rate                         $130.94   $145.79   11.3  %
   RevPAR                               $ 93.35   $109.66   17.5  %
 

                                         Nine Months Ended
                                            September 30,
                                            2005      2006    Change
                                         --------- --------- ---------
Worldwide - 57 Hotels
----------------------------------------

 Hilton
 ---------------------------------------
   Occupancy                                76.3 %    77.3 %  1.0  pts
   Average Rate                          $172.60   $184.89    7.1  %
   RevPAR                                $131.62   $142.98    8.6  %

 All Other
 ---------------------------------------
   Occupancy                                75.4 %    76.6 %  1.2  pts
   Average Rate                          $113.71   $121.61    6.9  %
   RevPAR                                $ 85.74   $ 93.18    8.7  %

 Total
 ---------------------------------------
   Occupancy                                76.2 %    77.3 %  1.1  pts
   Average Rate                          $166.30   $178.11    7.1  %
   RevPAR                                $126.66   $137.61    8.6  %

North America - 25 Hotels
----------------------------------------

 Hilton
 ---------------------------------------
   Occupancy                                80.3 %    80.0 % (0.3) pts
   Average Rate                          $184.44   $200.29    8.6  %
   RevPAR                                $148.08   $160.21    8.2  %

 All Other
 ---------------------------------------
   Occupancy                                74.4 %    76.0 %  1.6  pts
   Average Rate                          $126.39   $135.70    7.4  %
   RevPAR                                $ 94.01   $103.13    9.7  %

 Total
 ---------------------------------------
   Occupancy                                79.5 %    79.5 %    -  pts
   Average Rate                          $177.43   $192.28    8.4  %
   RevPAR                                $141.10   $152.81    8.3  %

International - 32 Hotels
----------------------------------------

 Hilton
 ---------------------------------------
   Occupancy                                68.9 %    72.6 %  3.7  pts
   Average Rate                          $147.45   $154.47    4.8  %
   RevPAR                                $101.61   $112.12   10.3  %

 All Other
 ---------------------------------------
   Occupancy                                79.3 %    79.0 % (0.3) pts
   Average Rate                          $ 68.82   $ 70.46    2.4  %
   RevPAR                                $ 54.54   $ 55.66    2.1  %

 Total
 ---------------------------------------
   Occupancy                                69.6 %    73.0 %  3.4  pts
   Average Rate                          $141.47   $148.46    4.9  %
   RevPAR                                $ 98.46   $108.39   10.1  %
 
 

(1) Statistics are presented pro forma as if the acquisition of Hilton
 International had occurred January 1, 2005. Includes hotels owned as
 of September 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            Nine Months Ended
                September 30,                September 30,
               2005      2006     Change    2005      2006     Change
             --------- --------- -------- --------- --------- --------
Worldwide -
 199 Hotels
------------

 Hilton
 -----------
   Occupancy    74.4 %    76.4 %  2.0 pts    71.5 %    74.0 %  2.5 pts
   Average
    Rate     $142.55   $158.45   11.2 %   $146.67   $153.78    4.8 %
   RevPAR    $106.06   $120.99   14.1 %   $104.81   $113.79    8.6 %

 Scandic
 -----------
   Occupancy    72.2 %    72.7 %  0.5 pts    64.4 %    65.5 %  1.1 pts
   Average
    Rate     $ 95.93   $103.46    7.8 %   $106.09   $107.37    1.2 %
   RevPAR    $ 69.24   $ 75.26    8.7 %   $ 68.36   $ 70.30    2.8 %

 All Other
 -----------
   Occupancy    81.2 %    84.7 %  3.5 pts    76.5 %    78.1 %  1.6 pts
   Average
    Rate     $120.41   $133.89   11.2 %   $116.34   $128.00   10.0 %
   RevPAR    $ 97.78   $113.34   15.9 %   $ 89.05   $100.03   12.3 %

 Total
 -----------
   Occupancy    73.7 %    75.1 %  1.4 pts    68.5 %    70.3 %  1.8 pts
   Average
    Rate     $120.85   $133.01   10.1 %   $127.97   $132.93    3.9 %
   RevPAR    $ 89.04   $ 99.83   12.1 %   $ 87.65   $ 93.45    6.6 %
 

(1) Statistics are presented pro forma as if the acquisition of Hilton
 International had occurred January 1, 2005. Includes hotels leased as
 of September 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
                                           September 30,
                                         2005      2006      Change
                                        --------- --------- ---------

North America (US & Canada)
---------------------------------------
  Occupancy                                76.0 %    76.0 %    -  pts
  Average Rate                          $111.59   $120.35    7.9  %
  RevPAR                                 $84.76    $91.43    7.9  %

United Kingdom & Ireland
---------------------------------------
  Occupancy                                76.8 %    80.7 %  3.9  pts
  Average Rate                          $153.46   $174.21   13.5  %
  RevPAR                                $117.93   $140.59   19.2  %

Continental Europe
---------------------------------------
  Occupancy                                71.6 %    72.5 %  0.9  pts
  Average Rate                          $142.94   $159.51   11.6  %
  RevPAR                                $102.29   $115.67   13.1  %

Africa
---------------------------------------
  Occupancy                                67.1 %    73.9 %  6.8  pts
  Average Rate                          $119.07   $128.28    7.7  %
  RevPAR                                 $79.92    $94.85   18.7  %

Middle East
---------------------------------------
  Occupancy                                80.2 %    75.7 % (4.5) pts
  Average Rate                           $95.26   $108.08   13.5  %
  RevPAR                                 $76.43    $81.78    7.0  %

Asia Pacific
---------------------------------------
  Occupancy                                79.9 %    78.1 % (1.8) pts
  Average Rate                          $122.49   $129.58    5.8  %
  RevPAR                                 $97.92   $101.25    3.4  %

Latin America & Caribbean
---------------------------------------
  Occupancy                                67.9 %    71.5 %  3.6  pts
  Average Rate                          $108.59   $120.03   10.5  %
  RevPAR                                 $73.77    $85.79   16.3  %

Nordic
---------------------------------------
  Occupancy                                72.5 %    73.2 %  0.7  pts
  Average Rate                           $99.57   $107.46    7.9  %
  RevPAR                                 $72.21    $78.69    9.0  %

Total
---------------------------------------
  Occupancy                                75.6 %    75.8 %  0.2  pts
  Average Rate                          $113.89   $123.64    8.6  %
  RevPAR                                 $86.07    $93.69    8.9  %
 

                                          Nine Months Ended
                                            September 30,
                                          2005      2006      Change
                                         --------- --------- ---------

North America (US & Canada)
----------------------------------------
  Occupancy                                 73.3 %    74.3 %  1.0  pts
  Average Rate                           $110.76   $119.69    8.1  %
  RevPAR                                  $81.13    $88.94    9.6  %

United Kingdom & Ireland
----------------------------------------
  Occupancy                                 74.2 %    77.8 %  3.6  pts
  Average Rate                           $159.34   $165.74    4.0  %
  RevPAR                                 $118.24   $128.88    9.0  %

Continental Europe
----------------------------------------
  Occupancy                                 67.6 %    69.2 %  1.6  pts
  Average Rate                           $151.31   $159.52    5.4  %
  RevPAR                                 $102.33   $110.36    7.8  %

Africa
----------------------------------------
  Occupancy                                 66.3 %    71.3 %  5.0  pts
  Average Rate                           $119.36   $127.77    7.0  %
  RevPAR                                  $79.09    $91.06   15.1  %

Middle East
----------------------------------------
  Occupancy                                 76.6 %    72.8 % (3.8) pts
  Average Rate                            $96.76   $106.19    9.7  %
  RevPAR                                  $74.16    $77.34    4.3  %

Asia Pacific
----------------------------------------
  Occupancy                                 77.0 %    76.7 % (0.3) pts
  Average Rate                           $124.50   $129.05    3.7  %
  RevPAR                                  $95.80    $99.02    3.4  %

Latin America & Caribbean
----------------------------------------
  Occupancy                                 69.7 %    72.3 %  2.6  pts
  Average Rate                           $116.39   $127.21    9.3  %
  RevPAR                                  $81.09    $91.99   13.4  %

Nordic
----------------------------------------
  Occupancy                                 64.7 %    65.9 %  1.2  pts
  Average Rate                           $109.71   $111.10    1.3  %
  RevPAR                                  $70.96    $73.17    3.1  %

Total
----------------------------------------
  Occupancy                                 72.6 %    73.7 %  1.1  pts
  Average Rate                           $114.60   $123.07    7.4  %
  RevPAR                                  $83.23    $90.71    9.0  %
 

(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 September 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
                                           September 30,
                                           2005      2006    Change
                                        --------- --------- ---------

Hilton
---------------------------------------
  Occupancy                                75.3 %    75.7 %  0.4  pts
  Average Rate                          $135.00   $147.50    9.3  %
  RevPAR                                $101.69   $111.70    9.8  %

Hilton Garden Inn
---------------------------------------
  Occupancy                                74.3 %    74.5 %  0.2  pts
  Average Rate                          $104.81   $112.32    7.2  %
  RevPAR                                $ 77.90   $ 83.65    7.4  %

Doubletree
---------------------------------------
  Occupancy                                73.6 %    74.3 %  0.7  pts
  Average Rate                          $111.07   $120.56    8.5  %
  RevPAR                                $ 81.75   $ 89.53    9.5  %

Embassy Suites
---------------------------------------
  Occupancy                                76.7 %    77.0 %  0.3  pts
  Average Rate                          $130.09   $140.30    7.8  %
  RevPAR                                $ 99.75   $108.02    8.3  %

Homewood Suites by Hilton
---------------------------------------
  Occupancy                                78.6 %    78.1 % (0.5) pts
  Average Rate                          $101.35   $108.51    7.1  %
  RevPAR                                $ 79.69   $ 84.73    6.3  %

Hampton
---------------------------------------
  Occupancy                                76.4 %    76.3 % (0.1) pts
  Average Rate                          $ 89.57   $ 96.46    7.7  %
  RevPAR                                $ 68.46   $ 73.63    7.6  %

Scandic
---------------------------------------
  Occupancy                                72.3 %    73.0 %  0.7  pts
  Average Rate                          $ 95.49   $103.06    7.9  %
  RevPAR                                $ 69.07   $ 75.26    9.0  %

Conrad
---------------------------------------
  Occupancy                                74.4 %    71.4 % (3.0) pts
  Average Rate                          $140.88   $166.56   18.2  %
  RevPAR                                $104.85   $118.95   13.4  %

Other
---------------------------------------
  Occupancy                                83.1 %    85.3 %  2.2  pts
  Average Rate                          $134.19   $149.50   11.4  %
  RevPAR                                $111.57   $127.57   14.3  %

Total
---------------------------------------
  Occupancy                                75.6 %    75.8 %  0.2  pts
  Average Rate                          $113.89   $123.64    8.6  %
  RevPAR                                $ 86.07   $ 93.69    8.9  %
 
 

                                          Nine Months Ended
                                            September 30,
                                            2005      2006    Change
                                        ---------- --------- ---------

Hilton
---------------------------------------
  Occupancy                                 72.6 %    73.7 %  1.1  pts
  Average Rate                           $137.25   $147.14    7.2  %
  RevPAR                                 $ 99.67   $108.48    8.8  %

Hilton Garden Inn
---------------------------------------
  Occupancy                                 71.4 %    73.1 %  1.7  pts
  Average Rate                           $103.92   $111.52    7.3  %
  RevPAR                                 $ 74.17   $ 81.47    9.8  %

Doubletree
---------------------------------------
  Occupancy                                 72.0 %    73.3 %  1.3  pts
  Average Rate                           $110.99   $120.47    8.5  %
  RevPAR                                 $ 79.86   $ 88.35   10.6  %

Embassy Suites
---------------------------------------
  Occupancy                                 75.3 %    76.4 %  1.1  pts
  Average Rate                           $129.78   $140.14    8.0  %
  RevPAR                                 $ 97.73   $107.03    9.5  %

Homewood Suites by Hilton
---------------------------------------
  Occupancy                                 76.5 %    77.3 %  0.8  pts
  Average Rate                           $101.22   $108.29    7.0  %
  RevPAR                                 $ 77.43   $ 83.71    8.1  %

Hampton
---------------------------------------
  Occupancy                                 73.1 %    74.0 %  0.9  pts
  Average Rate                           $ 87.62   $ 94.57    7.9  %
  RevPAR                                 $ 64.07   $ 70.01    9.3  %

Scandic
---------------------------------------
  Occupancy                                 64.5 %    65.7 %  1.2  pts
  Average Rate                           $105.63   $106.94    1.2  %
  RevPAR                                 $ 68.16   $ 70.23    3.0  %

Conrad
---------------------------------------
  Occupancy                                 71.2 %    69.5 % (1.7) pts
  Average Rate                           $143.74   $162.46   13.0  %
  RevPAR                                 $102.41   $112.99   10.3  %

Other
---------------------------------------
  Occupancy                                 75.6 %    80.1 %  4.5  pts
  Average Rate                           $130.82   $140.87    7.7  %
  RevPAR                                 $ 98.89   $112.88   14.1  %

Total
---------------------------------------
  Occupancy                                 72.6 %    73.7 %  1.1  pts
  Average Rate                           $114.60   $123.07    7.4  %
  RevPAR                                 $ 83.23   $ 90.71    9.0  %
 

(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 September 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)
 

                                            September
                            -----------------------------------------
                                   2005                 2006
                                  Number of            Number of
                             Properties   Rooms   Properties   Rooms
                            ----------- -------- ----------- --------
Hilton
---------------------------
  Owned                             79   38,207          49   28,071
  Leased                            80   23,509          80   23,798
  Joint Venture                     16    6,844          14    6,156
  Managed                          123   44,834         150   54,925
  Franchised                       188   52,465         204   59,097
                            ----------- -------- ----------- --------
                                   486  165,859         497  172,047
Hilton Garden Inn
---------------------------
  Owned                              1      162           1      162
  Joint Venture                      1      128           1      128
  Managed                            7      895           7      886
  Franchised                       236   32,429         275   37,878
                            ----------- -------- ----------- --------
                                   245   33,614         284   39,054
Doubletree
---------------------------
  Owned                              3    1,349           3    1,349
  Leased                             5    1,746           5    1,750
  Joint Venture                     14    4,306          12    3,761
  Managed                           31    8,240          26    7,291
  Franchised                       102   24,936         127   31,002
                            ----------- -------- ----------- --------
                                   155   40,577         173   45,153
Embassy Suites
---------------------------
  Owned                              3      663           3      664
  Joint Venture                     25    6,586          24    6,251
  Managed                           56   14,767          55   14,630
  Franchised                        97   22,118          98   22,246
                            ----------- -------- ----------- --------
                                   181   44,134         180   43,791
Homewood Suites by Hilton
---------------------------
  Owned                              1      140           1      140
  Managed                           41    4,706          41    4,706
  Franchised                       120   13,108         142   15,410
                            ----------- -------- ----------- --------
                                   162   17,954         184   20,256
Hampton
---------------------------
  Owned                              1      133           1      133
  Managed                           34    4,453          34    4,448
  Franchised                     1,290  128,640       1,345  132,753
                            ----------- -------- ----------- --------
                                 1,325  133,226       1,380  137,334
Scandic
---------------------------
  Owned                              1      325           1      325
  Leased                           123   21,951         120   21,377
  Managed                            3      429           3      429
  Franchised                         5      508           5      669
                            ----------- -------- ----------- --------
                                   132   23,213         129   22,800
Conrad
---------------------------
  Joint Venture                      3    1,395           3    1,399
  Managed                           11    3,348          13    3,935
                            ----------- -------- ----------- --------
                                    14    4,743          16    5,334
Other
---------------------------
  Owned                              2      630           1      324
  Leased                             2      666           1      129
  Managed                            9    2,118          11    4,277
  Franchised                         5    2,215           5    2,265
                            ----------- -------- ----------- --------
                                    18    5,629          18    6,995

Timeshare                           39    4,250          34    3,740
---------------------------

Total
---------------------------
  Owned                             91   41,609          60   31,168
  Leased                           210   47,872         206   47,054
  Joint Venture                     59   19,259          54   17,695
  Managed                          315   83,790         340   95,527
  Franchised                     2,043  276,419       2,201  301,320
  Timeshare                         39    4,250          34    3,740
                            ----------- -------- ----------- --------
TOTAL PROPERTIES                 2,757  473,199       2,895  496,504
                            =========== ==================== ========
 

                                              Change to
                              ----------------------------------------
                                 September 2005       December 2005
                                    Number of           Number of
                               Properties   Rooms   Properties  Rooms
                              ----------- -------- ----------- -------
Hilton
-----------------------------
  Owned                              (30) (10,136)         (8) (4,298)
  Leased                               -      289           1     338
  Joint Venture                       (2)    (688)         (2)   (688)
  Managed                             27   10,091          13   7,216
  Franchised                          16    6,632          11   4,313
                              ----------- -------- ----------- -------
                                      11    6,188          15   6,881
Hilton Garden Inn
-----------------------------
  Owned                                -        -           -       -
  Joint Venture                        -        -           -       -
  Managed                              -       (9)          -       -
  Franchised                          39    5,449          25   3,531
                              ----------- -------- ----------- -------
                                      39    5,440          25   3,531
Doubletree
-----------------------------
  Owned                                -        -           -       -
  Leased                               -        4           -       4
  Joint Venture                       (2)    (545)         (2)   (545)
  Managed                             (5)    (949)         (4)   (769)
  Franchised                          25    6,066          19   4,295
                              ----------- -------- ----------- -------
                                      18    4,576          13   2,985
Embassy Suites
-----------------------------
  Owned                                -        1           -       1
  Joint Venture                       (1)    (335)         (1)   (335)
  Managed                             (1)    (137)         (1)   (202)
  Franchised                           1      128           -    (102)
                              ----------- -------- ----------- -------
                                      (1)    (343)         (2)   (638)
Homewood Suites by Hilton
-----------------------------
  Owned                                -        -           -       -
  Managed                              -        -           -       -
  Franchised                          22    2,302          20   2,123
                              ----------- -------- ----------- -------
                                      22    2,302          20   2,123
Hampton
-----------------------------
  Owned                                -        -           -       -
  Managed                              -       (5)          -      (5)
  Franchised                          55    4,113          44   3,218
                              ----------- -------- ----------- -------
                                      55    4,108          44   3,213
Scandic
-----------------------------
  Owned                                -        -           -       -
  Leased                              (3)    (574)         (1)    (28)
  Managed                              -        -           -       -
  Franchised                           -      161           -     (46)
                              ----------- -------- ----------- -------
                                      (3)    (413)         (1)    (74)
Conrad
-----------------------------
  Joint Venture                        -        4           -       4
  Managed                              2      587           1     275
                              ----------- -------- ----------- -------
                                       2      591           1     279
Other
-----------------------------
  Owned                               (1)    (306)         (1)   (306)
  Leased                              (1)    (537)         (1)   (537)
  Managed                              2    2,159           5   2,966
  Franchised                           -       50          (1)   (169)
                              ----------- -------- ----------- -------
                                       -    1,366           2   1,954

Timeshare                             (5)    (510)         (6)   (532)
-----------------------------

Total
-----------------------------
  Owned                              (31) (10,441)         (9) (4,603)
  Leased                              (4)    (818)         (1)   (223)
  Joint Venture                       (5)  (1,564)         (5) (1,564)
  Managed                             25   11,737          14   9,481
  Franchised                         158   24,901         118  17,163
  Timeshare                           (5)    (510)         (6)   (532)
                              ----------- -------- ----------- -------
TOTAL PROPERTIES                     138   23,305         111  19,722
                              =========== ======== =========== =======
 

(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 Ended      Nine Months Ended
                             September 30,          September 30,
                         --------------------- -----------------------
                         2005  2006  % Change  2005   2006   % Change
                         ----- ----- --------- ----- ------- ---------

Adjusted EBITDA          $279  $440       58 % $867  $1,257       45 %
  Proportionate share of
   depreciation and
   amortization of
   unconsolidated
   affiliates              (8)   (8)       -    (22)    (23)       5
  Impairment loss and
   related costs            -     -        -     (7)      -        -
  Operating interest and
   dividend income         (1)   (2)     100     (6)     (5)     (17)
  Operating income of
   non-controlled
   interests                3     3        -      8       8        -
  Net (loss) gain on
   foreign currency
   transactions             -   (10)       -      -      10        -
  Net gain on asset
   dispositions and
   other                    4    13        -     76      36      (53)
  Loss from non-
   operating affiliates    (4)   (4)       -    (13)    (12)      (8)
  Minority and non-
   controlled interests,
   net                     (1)   (2)     100    (11)     (4)     (64)
                         ----- -----           ----- -------
EBITDA                    272   430       58    892   1,267       42
  Depreciation and
   amortization           (70) (118)      69   (228)   (321)      41
  Interest expense, net   (66) (141)     114   (201)   (383)      91
  Provision for income
   taxes                  (47)  (54)      15   (108)   (198)      83
                         ----- -----           ----- -------
Net income                $89  $117       31 % $355    $365        3 %
                         ===== =====           ===== =======

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

                                                      Estimated
                                                   Full Year 2006
                                               -----------------------

Adjusted EBITDA                                $                1,740
  Proportionate share of depreciation and
   amortization of unconsolidated affiliates                      (30)
  Operating interest and dividend income                           (7)
  Operating income of non-controlled interests                     11
  Net gain on foreign currency transactions                        10
  Net gain on asset dispositions and other                         59
  Loss from non-operating affiliates                              (16)
  Minority and non-controlled interests, net                       (6)
                                               -----------------------
EBITDA                                                          1,761
  Depreciation and amortization                                  (435)
  Interest expense, net                                          (517)
  Provision for income taxes                                     (289)
                                               -----------------------
Net income                                     $                  520
                                               =======================

Diluted EPS                                    $                 1.27
                                               =======================

Recurring Diluted EPS                          $                 1.15
                                               =======================

(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             Nine Months
                          Ended        % or        Ended        % or
                      September 30,   basis    September 30,   basis
                                       point                    point
                      2005    2006    Change   2005    2006    Change
                     --------------- -------- --------------- --------
  Revenue
  ------------------
   Reported            $489    $649           $1,559  $1,838
    Less sold hotels
     and non-
     comparable        (101)    (73)            (420)   (223)
    Less HI
     comparable, as
     reported             -    (165)               -    (404)
                     ------- -------          ------- -------
   Pro Forma
    Comparable Owned
    - North America     388     411    6%      1,139   1,211    6%
    Plus HI
     International,
     net(1)             143     165   15%        453     492    9%
                     ------- -------          ------- -------
   Pro Forma
    Comparable Owned
    - Worldwide        $531    $576    8%     $1,592  $1,703    7%
                     ======= =======          ======= =======
  Expenses
  ------------------
   Reported            $350    $464           $1,117  $1,321
    Less sold hotels
     and non-
     comparable         (74)    (53)            (302)   (163)
    Less HI
     comparable, as
     reported             -    (119)               -    (287)
                     ------- -------          ------- -------
   Pro Forma
    Comparable Owned
    - North America     276     292    6%        815     871    7%
    Plus HI
     International,
     net(1)             107     119   11%        335     354    6%
                     ------- -------          ------- -------
   Pro Forma
    Comparable Owned
    - Worldwide        $383    $411    7%     $1,150  $1,225    7%
                     ======= =======          ======= =======
  Margins
  ------------------
   Pro Forma
    Comparable Owned
    - North America    28.9%   29.0%  10  bps   28.4%   28.1% (30) bps
   Pro Forma
    Comparable Owned
    - International    25.2%   27.9% 270  bps   26.0%   28.0% 200  bps
   Pro Forma
    Comparable Owned
    - Worldwide        27.9%   28.6%  70  bps   27.8%   28.1%  30  bps
 

 Leased Hotels
 ----------------------------------- ------------------------ --------
                      Three Months             Nine Months
                          Ended        % or        Ended        % or
                      September 30,   basis    September 30,   basis
                                       point                    point
                       2005    2006   Change    2005    2006   Change
                     --------------- -------- --------------- --------
  Revenue
  ------------------
   Reported             $28    $679              $87  $1,616
    Less sold hotels
     and non-
     comparable           -     (33)              (9)    (69)
    Less HI
     comparable, as
     reported             -    (616)               -  (1,462)
    Plus HI, net(1)     560     616   10%      1,699   1,764    4%
                     ------- -------          ------- -------
   Pro Forma
    Comparable
    Leased -
    Worldwide          $588    $646   10%     $1,777  $1,849    4%
                     ======= =======          ======= =======
  Expenses
  ------------------
   Reported             $24    $578              $77  $1,380
    Less sold hotels
     and non-
     comparable           -     (30)              (8)    (62)
    Less HI
     comparable, as
     reported             -    (524)               -  (1,248)
    Plus HI, net(1)     481     524    9%      1,487   1,528    3%
                     ------- -------          ------- -------
   Pro Forma
    Comparable
    Leased -
    Worldwide          $505    $548    9%     $1,556  $1,598    3%
                     ======= =======          ======= =======
  Margins
  ------------------
   Pro Forma
    Comparable
    Leased -
    Worldwide          14.1%   15.2% 110  bps   12.4%   13.6% 120  bps
 

 Management and
  Franchise Fees
 ----------------------------------- ------------------------ --------
                      Three Months             Nine Months
                          Ended                    Ended
                      September 30,     %      September 30,     %
                       2005    2006   Change    2005    2006   Change
                     --------------- -------- --------------- --------
   Reported            $119    $175             $338    $502
    Less HI reported      -     (29)               -     (67)
    Plus HI              21      29   38%         66      81   23%
                     ------- -------          ------- -------
   Pro Forma -
    Worldwide          $140    $175   25%       $404    $516   28%
                     ======= =======          ======= =======

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

The following supplemental unaudited financial information presents
 the estimated 2006 full year outlook for owned hotels, leased hotels
 and depreciation and amortization on a pro forma basis assuming the
 acquisition of Hilton International had occurred on January 1, 2006,
 and based on the anticipated mix of owned and leased properties at
 December 31, 2006. The pro forma information presented excludes
 hotels sold through September 30, 2006, as well as the Hilton
 Metropoles in London and Birmingham, the sale of which is expected to
 be completed by year end.
 

                      HILTON HOTELS CORPORATION
            Supplemental Financial Information (Unaudited)
        Future Performance - Estimated 2006 Full Year Outlook
                  Pro Forma Revenue and Expenses(1)
    Based on Anticipated Comparable Mix as of December 31, 2006(2)
                           ($ in millions)

 Owned Hotels
 ---------------------------------------------------------------------
  Revenue
  ---------------------------------------------------
   Full Year Outlook                                 $          2,525
    Less sold hotels and non-comparable                          (357)
    Plus HI Pro Forma                                              70
                                                     -----------------
   Pro Forma Comparable Owned - Worldwide            $          2,238
                                                     =================
  Expenses
  ---------------------------------------------------
   Full Year Outlook                                 $          1,780
    Less sold hotels and non-comparable                          (233)
    Plus HI Pro Forma                                              57
                                                     -----------------
   Pro Forma Comparable Owned - Worldwide            $          1,604
                                                     =================
  Margins
  ---------------------------------------------------
   Pro Forma Comparable Owned - Worldwide                        28.3%
 

 Leased Hotels
 ---------------------------------------------------------------------
  Revenue
  ---------------------------------------------------
   Full Year Outlook                                 $          2,300
    Less sold hotels and non-comparable                           (63)
    Plus HI Pro Forma                                             308
                                                     -----------------
   Pro Forma Comparable Leased - Worldwide           $          2,545
                                                     =================
  Expenses
  ---------------------------------------------------
   Full Year Outlook                                 $          1,960
    Less sold hotels and non-comparable                           (55)
    Plus HI Pro Forma                                             285
                                                     -----------------
   Pro Forma Comparable Leased - Worldwide           $          2,190
                                                     =================
  Margins
  ---------------------------------------------------
   Pro Forma Comparable Leased - Worldwide                       13.9%
 

 Consolidated Depreciation and Amortization Expense
 ---------------------------------------------------------------------
   Full Year Outlook                                 $            435
    Less sold hotels                                              (20)
    Plus HI Pro Forma                                              27
                                                     -----------------
   Adjusted Full Year Outlook                        $            442
                                                     =================

(1) Pro forma for the entities acquired with Hilton International as
 if they had been acquired on January 1, 2006.

(2) Excludes hotels sold during 2006, including the Hilton Metropoles
 in London and Birmingham, which are expected to be sold by year-end
 2006; also excludes the Hilton New Orleans Riverside. Comparable set
 of hotels includes those that were owned or leased since January 1,
 2006, pro forma as if the acquisition of HI had occurred January 1,
 2006.

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.

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.
 

.
Contact:

Hilton Hotels Corporation
Marc Grossman, Sr. VP - Corporate Affairs
310-205-4030 phone
marc_grossman@hilton.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

.

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