Pro Forma Financial Results
Net income for the fourth quarter was $25 million, compared to $22 million for the same period a year ago, an increase of 14 percent. Diluted net income per share increased 17 percent to $.07 per share from $.06 per share a year ago. Earnings before interest, taxes, depreciation, amortization and non-cash items (EBITDA) rose 6 percent to $246 million. EBITDA benefited from hotel acquisitions made in 1999 and strong performances at selected Hilton-owned hotels. EBITDA was negatively impacted by asset sales, a decline in purchasing and service fees and a decline in the performance of certain comparable properties, including many Doubletree hotels, a difficult comparison at the Hilton San Francisco and a soft Phoenix market.

For the full year 1999, net income rose 10 percent to $216 million from $197 million in 1998. Diluted net income per share increased 14 percent to $.58 per share from $.51 per share in 1998. EBITDA for the year increased 8 percent to $1.094 billion from $1.016 billion a year ago.  Included in EBITDA are non-recurring charges totaling $41 million and $26 million for the three months ended December 31, 1998 and 1999, respectively, and $51 million and $36 million for the twelve months ended December 31, 1998 and 1999, respectively. The per share impact of the non-recurring charges was $.10 and $.04 for the three months ended December 31, 1998 and 1999, respectively, and $.11 and $.06 for the twelve months ended December 31, 1998 and 1999, respectively. Non-recurring charges include business combination expenses related to Hilton�s acquisition of Promus and business combination and other costs associated with the Promus-Doubletree merger, as well as spin-off costs incurred in 1998.

Owned Hotels
Across all brands, EBITDA from owned properties in the fourth quarter totaled $194 million, with comparable EBITDA flat quarter over quarter. Revenue per available room (RevPAR) from comparable owned properties increased 3 percent based on occupancy of 69.2 percent (down from 70.3 percent) and a 4.6 percent average daily rate (ADR) gain to $165.20. For the full year 1999, EBITDA at this group of properties totaled $758 million, with comparable EBITDA up 1 percent over last year. RevPAR increased 2.5 percent.  Comparable owned hotels in the Hilton portfolio showed a fourth quarter EBITDA increase of 1.9 percent.  

Occupancy of 71.2 percent was down from 72.5 percent in the same period a year ago, with ADR increasing 5.2 percent to $183.58, resulting in a RevPAR gain of 3.2 percent. The Waldorf-Astoria and Hilton New Orleans showed particularly strong results owing to New Year�s activities in those markets, while the Hilton Washington, Hilton Chicago and Hilton Hawaiian Village also performed well. Results at the Hilton San Francisco were adversely impacted as a result of a major convention which rescheduled from December to January and a difficult comparison to a record fourth quarter 1998, while softness in group business in the Phoenix market affected the company�s two owned resorts there. Margins for the period at this group of hotels remained strong at 34 percent.  For the year, comparable Hilton-owned hotels reported a 1.2 percent increase in EBITDA, while fiscal 1999 RevPAR at these properties improved 2.7 percent. Flow-through to EBITDA was impacted at various points during the year by reduced attendance at group meetings, property tax increases and yearlong softness in the Hawaii market. Margins for full year 1999 were 34 percent.

Comparable EBITDA from all other owned, joint venture and leased hotels (Doubletree, Embassy Suites, Homewood Suites by Hilton) declined 13 percent in the fourth quarter, with most of the decline attributable to the weak performance of Doubletree. Occupancy of 65.0 percent (down from 65.7 percent in the 1998 period), coupled with a 1.7 percent ADR increase to $112.25, resulted in a RevPAR increase of 0.7 percent. For the year, EBITDA at this group of hotels was down 5 percent, with RevPAR up 0.9 percent. Margins at �other owned� hotels were 35 percent for the full year.

Franchising/Management
Fee income from franchising and managing hotels (across all brands) increased 7 percent to $78 million in the fourth quarter 1999. The increase was attributable mainly to growth in the Hilton Garden Inn and Hampton Inn brands, but was partially offset by a decline in incentive management fees compared to the 1998 quarter. For the full year, franchise and management fee income was comparable to last year�s results at $317 million. Impacting the full year results was a decline in change of ownership fees and lower incentive fees, as well as the acquisition of managed hotels, which reclassified the EBITDA.

In 1999, Hampton Inn and Hampton Inn Suites led the industry in new room growth for the fifth consecutive year.  In addition, the opening of new Embassy Suites and Hilton full-service hotels accounted for one in four new hotel openings in the upper-upscale segment in 1999.
During the fourth quarter, the company added a net 26 hotels and 3,772 rooms to its portfolio, consisting of 18 Hampton Inns and Hampton Inns Suites, 10 Hilton Garden Inns, two Homewood Suites by Hilton, one Red Lion and net reductions of four Doubletree and one Embassy Suites property. In addition, nine Doubletree hotels were converted to Red Lions during the quarter. For the full year, the company added a net 166 hotels and 21,222 rooms to the system.

Hilton has a strong development pipeline for 2000 and 2001, with more than 430 hotels and 63,000 rooms either under construction or in design, and anticipates opening an average of two hotels every three working days during that period. Hampton Inn, Homewood Suites by Hilton and Hilton Garden Inn hotels account for the majority of the development pipeline. The company expects to grow its number of units by an average of 10 percent annually for the next three years, with a similar increase in fee income during that period.

Brand News
With specific brand operating data (occupancy, ADR and RevPAR) delineated on the attachment to the press release titled �Summary Statistical Information,� the company reported the following noteworthy developments within each of its brands:

Hilton
The $85 million refurbishment of the Hilton New York was virtually completed late in the fourth quarter, a period which also saw the beginning of improved market trends in Hawaii and the first full quarter of the new 600-room Hilton at Boston Logan Airport. Major projects underway in 2000 for the Hilton full-service brand include the new 453-room Kalia Tower at the Hilton Hawaiian Village, a new 321-room tower at the Hilton Portland and a major renovation project at the Hilton Seattle Airport. In mid-February, the 350-room Red Lion hotel in Glendale, California (Los Angeles metropolitan area), will convert to a Hilton.

Hampton Inn, Hampton Inn Suites
During the quarter, Hampton Inn and Hampton Inn Suites hotels were opened in 17 U.S. states and in Ottawa, Canada, while the brand also celebrated the tenth anniversary of its 100% Satisfaction Guarantee, the industry�s first such program. Hampton Inn expansion accounts for approximately half of the company�s 2000-01 franchise development pipeline, with particularly strong opportunities in the currently under-represented Western United States. The brand will open its 1,000th hotel in early 2000.

Embassy Suites
During the quarter, Embassy Suites opened its 150th hotel and this spring will open its largest hotel, the 463-room Embassy Suites - New York City in Manhattan�s Financial District. The brand also recently introduced a 150-room prototype for use in secondary and tertiary markets.

Homewood Suites by Hilton
In January 2000, the company re-launched the Homewood extended-stay brand as �Homewood Suites by Hilton,� and also announced a new prototype design with a more efficient, home-like interior, and a product that can be built at a lower cost-per-key than previous design plans. During the fourth quarter, new Homewood Suites hotels opened in Massachusetts and Tennessee.

Hilton Garden Inn
Hilton Garden Inn hotels opened during the quarter in California, Connecticut, Florida, Illinois, Maryland, North Carolina, Ohio and Oklahoma, and the company said it is on schedule to meet its target of having 200 of these mid-priced hotels open or under construction by the end of 2000.

Doubletree
Upon completion of the Promus acquisition, the company immediately began a program of positioning and marketing Doubletree as a complementary full-service brand to Hilton. The Doubletree brand is expected to be a prime beneficiary of the Hilton Honors frequent-stay program and Hilton�s worldwide sales network.

Hilton Grand Vacations
Hilton continued to expand its presence in the vacation ownership business with the opening in December of a new 232-unit property adjacent to the Las Vegas Hilton. Initial sales trends have been strong. Additionally, sales started in early 2000 at the company�s latest timeshare property, a 245-unit facility in the Lagoon Tower, a former apartment tower at the Hilton Hawaiian Village in Honolulu being converted to timeshare units.

Red Lion
Red Lion added one hotel to its portfolio in 1999, and the company is exploring additional franchise opportunities for this regional brand.

Benefiting the company�s family of brands will be the April 3 introduction to all brands (except Red Lion) of Hilton�s industry-leading Honors frequent-stay program. With its unique �Double Dipping� feature�enabling members to earn both points and airline miles�the Honors program is expected to have some 10 million members by year-end 2000, up from the current enrollment of 6 million.

�We were able to show reasonably good RevPAR growth across our owned Hilton hotels and demonstrate solid unit growth in our franchising business, but the fourth quarter and full year were somewhat disappointing due to lower-than-expected Millennium activity, along with reduced attendance at group meetings and higher property taxes that impacted our ability to bring these good RevPAR gains to the EBITDA line,� said Stephen F.  Bollenbach, president and chief executive officer. �In addition, and as expected, the Doubletree brand had sluggish results.

�As we look toward 2000, we have hit the ground running following our acquisition of Promus, and have our sights set firmly on achieving the synergies we anticipate from this combination; maximizing RevPAR and EBITDA margins and enhancing RevPAR flow-through to EBITDA at our owned hotels; growing our franchise business; and improving our balance sheet.

�While we face many challenges this coming year�new supply in selected markets, ensuring the smooth integration of Promus and strengthening our leadership position in the increasingly important area of using technology to deliver customers and build business�we are well-equipped to meet those challenges.  �The size and scope brought to us through the Promus acquisition guarantees our ability to compete effectively with anyone for customers, employees, management contracts and franchisees. Further, what appear to be continuing favorable economic conditions, the prime locations of our owned hotels, our ability to cross-sell between our strong family of brands and the vibrant franchise pipeline across all of our brands, gives us optimism for 2000 and beyond.�
 

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.