FOCUSED 2015 ANNUAL REPORT 2015 Annual Report C The stylish, forward-thinking global leader in hospitality. Offers smart luxury travelers inspiring connections and intuitive service in a world of style. Energizing neighborhood hotels that create a positive stay with simple pleasures, thoughtful extras and nice surprises. Warm. Comfortable. Friendly. Providing true upscale comfort to today’s business and leisure travelers. Relaxed, upscale environment with all-suite locations in the U.S., Canada and Latin America. Quality experience, great value and friendly service in its signature Hamptonality style. Comfy, stylish and packed with perks for the value-conscious, extended stay traveler. A revolutionary new brand that is simplified, spirited and grounded in value for guests. High-quality vacation ownership resorts in celebrated destinations. Offers unforgettable experiences at iconic destinations around the world. A collection of unique hotels, each with its own history and character in cities across the globe. Offers the amenities and services that allow guests to discover and connect while on the road. For guests seeking home-like accommodations when traveling for an extended stay. The award-winning guest loyalty program that honors members with travel experiences worth sharing. FOCUSED ON SERVING GUESTS IN 100+ COUNTRIES & TERRITORIES 13 Distinct, market-leading brands 140 Million Guests served in 2015 50+ Million Hilton HHonors members AMERICAS EUROPE MIDDLE EAST & AFRICA ASIA PACIFIC Rooms: 611,000 Rooms: 74,000 Rooms: 22,000 Rooms: 51,000 Pipeline: 137,000 Pipeline: 27,000 Pipeline: 29,000 Pipeline: 73,000 Under Construction: 51,000 Under Construction: 13,000 Under Construction: 21,000 Under Construction: 49,000 1 Ranked (1) # System size, pipeline & rooms under construction 1,000,000+ ( 3) Rooms open or under development ADJ. EBITDA BY SEGMENT(2) ROOMS BY CHAIN SCALE ADJ. EBITDA BY GEOGRAPHY 4,610 Properties 100,000+ Rooms signed in 2015 Management & Franchise 55% Ownership 34% Timeshare 11% Upper Upscale 35% Upscale 33% Upper Midscale 29% Luxury 2% Other 1% U.S. 80% Europe 9% Asia Pacific 6% Americas Non-U.S. 3% Middle East & Africa 2% Source: Smith Travel Research, Inc. (STR) Global Census, January 2016 (adjusted to December 2015) and STR Global New Development Pipeline, December 2015. Excluding Corporate and Other. (3) Includes rooms approved but not yet signed. (1) (2) 2015 Annual Report 1 Our mission is to be the preeminent global hospitality company – the first choice of guests, team members and owners alike. Christopher J. Nassetta President & Chief Executive Officer FELLOW SHAREHOLDERS We are focused on industry-leading growth and performance. Hilton Worldwide achieved record expansion and financial results in 2015, continuing to lead the industry as the largest, best-performing and fastest-growing hospitality company. Our mission is to be the preeminent global hospitality company – the first choice of guests, team members and owners alike. In this report, we highlight how our competitive advantages of global scale and the best brand portfolio in the business work together to provide exceptional results and opportunities to each one of these key stakeholders. RevPAR 2015 Adj. EBITDA 5.4% 13% (1) Highlights Adj. EBITDA margin 290 BPS (2) Hilton Worldwide (2)  (3) 6.6% (3) Revenue Per Available Room (RevPAR) is hotel room revenue divided by room nights available for guests. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by total revenues, excluding other revenues from Managed and Franchised properties. Management and Franchise segment. (1)  2 Net unit growth Launch of our largest global marketing campaign ever. Focused Portfolio of Market-Leading Brands Our 13 clearly defined, market-leading brands serve customers for practically any travel need across more than 100 countries and territories worldwide. That drives our market share premiums – the highest in the business – as we consistently provide our guests compelling products and services across price points and geographies. Our brands operate at scale and, as a result, we have signifi cant system resources we can use to drive demand. For example, we just launched our largest global marketing campaign ever, entitled “Stop Clicking Around,” highlighting for customers the benefits of joining Hilton HHonors and booking directly with Hilton. This includes offering HHonors members loyalty points of course, as well as preferential pricing, free Wi-Fi and the ability to check-in and choose their room online. Further innovation at scale such as Digital Keyless Entry capabilities are deploying to all our hotels globally. By broadly marketing these benefi ts, we hope to drive growth of our preferred channels, including our industry-leading mobile app, which will increase our value proposition to our guests and owners. Focused on Growth When we drive leading investment returns to our hotel owners, they continue to invest in our system growth. In 2015, Hilton opened approximately 50,000 gross and 43,000 net rooms, representing 6.6 percent net unit growth in our managed and franchised segment and a nearly 20 percent increase versus 2014. This was accomplished with no meaningful capital expenditures or brand acquisitions on our part and included more than 14,000 rooms converted from competitors' brands and independent hotels. We continue to grow our industry-leading pipeline, signing a Hilton record of over 100,000 rooms in the year for a total global development pipeline of 275,000 rooms, including rooms approved but not yet signed. More than half of our pipeline is already under construction and represents nearly one in five of all rooms under construction globally – more than any other hotel company. Our market-leading growth is supercharged by new brands that bring new customers into our system and offer more opportunities for existing customers to stay with us. Since 2007, we have expanded by more than 50 percent and have successfully launched three new brands, Home2 Suites by Hilton, Curio – A Collection by Hilton and Canopy by Hilton, which collectively have over 60,000 rooms either open or in various stages of development. Our goal is to win everywhere, and having a diverse portfolio of brands enables growth as markets ebb and flow. In China, for example, we signed more deals this year than last through our strategic deployment of focused service brands, which gives us incremental growth and builds market share. Through our strategic partnership with Plateno Hotels Group, one of China’s leading hospitality companies, we are launching more than 400 Hampton by Hilton properties to serve the increasing demand from China’s growing middle class. Our growth rate in coming years will also benefit from our most recently launched midscale brand, Tru by Hilton. The brand's innovative design will appeal to a broad range of customers, particularly next-generation travelers, with a price point 25 percent lower than Hampton. We see it as a major market disruptor that will further strengthen our network effect. The design offers very attractive economics to owners, evidenced by more than 160 commitments – all from existing Hilton owners – with the first opening expected later this year, or early next. Focused on Value Creation In 2015, we continued driving stockholder value, reducing long-term debt by nearly $1 billion and paying our first cash dividend. We also completed the sale of the Waldorf Astoria New York, at a multiple of 32 times adjusted EBITDA, retained a 100-year management contract, obtained a commitment from the buyer to renovate the property and used the net proceeds to acquire high-quality assets in some of the fastest-growing and highest barrier-to-entry domestic markets at an aggregate multiple of just over 13 times adjusted EBITDA. We remain committed to achieving a low-grade investment-grade credit profile, and expect to initiate a stock buyback program later this year. 2015 Annual Report 3 Official launch event of Tru by Hilton. We also intend to enhance long-term value by separating our real estate and timeshare business segments, resulting in three pure-play, public companies. By simplifying our business, we will enable dedicated management teams to fully activate their respective businesses, taking advantage of both organic and inorganic growth opportunities as well as capital market and tax efficiencies. Our intention is to complete these spins by the end of the year with appropriate leadership, strategies and capital structures in place to set up all three companies for great success. In Closing We remain optimistic that fundamentals will continue to support top-line growth in 2016. Long term, we believe that execution of our clear strategy, our scaled commercial engines, our well-defined brand portfolio and the best team members in the business will continue delivering value for our stockholders. Sincerely, Christopher J. Nassetta President & Chief Executive Officer HILTON VALUE PROPOSITION STRONG BRANDS & COMMERCIAL SERVICES PLATFORM FINANCIAL PERFORMANCE Value proposition starts with award-winning brands and an industry-leading commercial services platform STRONG BRANDS & COMMERCIAL SERVICES PLATFORM LEADING HOTEL SUPPLY & PIPELINE SATISFIED CUSTOMERS This leads to satisfied customers, including more than 50 million Hilton HHonors loyalty members PREMIUM PERFORMANCE Which results in our global RevPAR premium – the highest in the business SATISFIED OWNERS These hotel operating premiums drive strong financial returns, which benefit our hotel owners SATISFIED CUSTOMERS SATISFIED OWNERS PREMIUM PERFORMANCE 4 Hilton Worldwide LEADING HOTEL SUPPLY & PIPELINE Satisfied existing and new owners continue to invest in growing Hilton’s brands, making us a global leader in hotel supply and pipeline FINANCIAL PERFORMANCE We believe the reinforcing nature of these activities will allow Hilton to outperform the competition GUEST FOCUSED I spend the majority of the year on the road and I couldn’t live without the Hilton HHonors mobile app. The app has everything I need to manage my Hilton stays and gives me the ability to add my booked stays to my e-calendar, pick the room I want and even go straight to my room with Digital Keyless Entry. These are just a few of the many reasons I am loyal to Hilton. Better yet, I know that Hilton is always just a Tweet away and that the social media team will quickly resolve any travel issues 24/7. Ron Hernandez, New Orleans, Louisiana Training Consultant Lifetime Diamond Hilton HHonors Member 2015 Highlights • 50+ million Hilton HHonors members – added a record 6 million new members in 2015 • 2.7 million Hilton HHonors app downloads – one download every 12 seconds • HHonors members drive more than 52% of occupancy across Hilton brands and now receive preferred pricing • 10+ million digital check-ins with room selection • Digital Keyless Entry is now in nearly 100 hotels, and is rolling out at scale in 2016 2015 Annual Report 5 TEAM MEMBER FOCUSED My career with Hilton has taken me all over the world. I started working as a breakfast attendant at a Hampton Inn during school, and I was quickly promoted to the front desk. Even though I went to school for communication, I’ve taken many courses through Hilton Worldwide University to develop my career in hospitality. I’ve since worked in a variety of positions across several Hilton brands in the U.S., New Zealand and now Australia. Our team is a tight-knit family of more than a dozen nationalities, but we share the same passion for serving guests with a warm smile, which translates across any language. Amelia Benjamin, Duty Manager Hilton Sydney 2015 Highlights • Recognized as a Fortune Best Companies to Work For in the U.S. and honored as a top company by the Great Place to Work Institute in China, Colombia, Netherlands, Peru, Italy and UAE • 2 million courses and 5 million hours of learning completed through Hilton Worldwide University 6 Hilton Worldwide • Introduced industry-leading benefits including new parental leave, enhanced paid time off, GED assistance and flexible work schedule programs • Filled 100,000 jobs, including new hires and internal job growth OWNER FOCUSED We choose to partner with Hilton Worldwide because all of their brands are segment-leading and the Hilton engine delivers returns unmatched by other hotel brands. Hilton’s owner-centric and guest-centric mindset ensures our hotels are equally satisfying to guests and my investors – it’s the perfect match. We take comfort in Hilton as our preferred partner, knowing that my team can rely on their expertise to guide our every step, and that has been the case since we opened our first Hampton in 1997. Since then we have been proud to own several hotels with Hilton brands, and we can’t wait to open one of the first Tru by Hilton properties, which we think will be a game changer in the midscale market. Mitch Patel, Vision Hospitality Group, Chattanooga, Tennessee 19-year Hilton owner with a portfolio of 17 properties and an additional 16 properties in development, representing six Hilton brands 2015 Highlights • Owner base of 10,000 owners, of which 76% are repeat owners • Our industry-leading pipeline of rooms globally is all third-party developed, representing $40-50 billion of owner investment in our system • 14,500 rooms were converted from competitors’ brands and independent hotels, representing over 30% of all openings in 2015 2015 Annual Report 7 Hilton Team Members in Jaipur, India, mentored more than 200 hotel management students during the Global Month of Service and also participated in prepping meals for underprivileged community members. COMMUNITY FOCUSED Hilton Worldwide invests in global partnerships and programs to activate hotel and office teams, not only to drive positive social impact, but also to support long-term business success. Travel with Purpose has played an important role in uniting our organization around a set of global issues that connect our business to society – creating opportunities, strengthening communities and preserving the environment. CREATING OPPORTUNITIES Globally, more than 74 million young people are unemployed, and the travel and tourism industry will need to fill 73 million new jobs by 2022. Hilton announced a commitment to invest in youth in 2014 and has since reached more than 400,000 young people through apprenticeship programs, career engagement and life skills training. STRENGTHENING COMMUNITIES Tourism makes up 9 percent of global GDP and up to 40 percent GDP in developing countries, so the success of companies in the tourism industry is directly tied to the success of the countries and communities where we operate. Around the world, Hilton hotels are active in their communities throughout the year and set aside each October to celebrate this commitment, activating 4,145 volunteer projects, resulting in 213,000 volunteer hours during the 2015 Global Month of Service. Learn more about our commitment to Travel with Purpose at cr.hiltonworldwide.com. 8 Hilton Worldwide PRESERVING ENVIRONMENT Natural resources are diminishing 50 percent faster than the earth can replenish. The survival of businesses from a wide range of industries will depend upon their ability to manage the major risks posed by climate change, including depleted natural resources, the loss of biodiversity and extreme weather conditions. Hilton has invested in proprietary technology to track, analyze and improve natural resource management across its portfolio, and as a result has reduced energy use by 14.5 percent, carbon output by 20.9 percent, waste output by 27.6 percent and water use by 14.1 percent since 2009, resulting in an estimated $550 million of cumulative savings. 2015 FORM 10-K United States Securities and Exchange Commission Washington, DC 20549 Form 10-K (Mark One) S ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 or £ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to . Commission file number 001-36243 Hilton Worldwide Holdings Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 27-4384691 (IRS Employer Identification No.) 7930 Jones Branch Drive, Suite 1100, McLean, VA 22102 (Address of Principal Executive Offices) (Zip Code) Registrant’s telephone number, including area code: (703) 883-1000 Securities registered pursuant to Section 12(b) of the Act: (Title of each class) Common Stock, par value $0.01 per share (Name of each exchange on which registered) New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes S No £ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes £ No S Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No £ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes S No £ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. S Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer S Accelerated filer £ Non-accelerated filer £ (Do not check if a smaller reporting company) Smaller reporting company £ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No S As of June 30, 2015, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $14,679 million (based upon the closing sale price of the common stock on that date on the New York Stock Exchange). The number of shares of common stock outstanding on February 19, 2016 was 987,873,503. DOCUMENTS INCORPORATED BY REFERENCE Items 10, 11, 12, 13 and 14 of Part III incorporate information by reference from the registrant’s definitive proxy statement relating to its 2016 annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the close of the registrant’s fiscal year. 2 Hilton Worldwide TABLE OF CONTENTS Part I Page Forward-Looking Statements Terms Used in this Annual Report on Form 10-K 4 4 Item 1 Business 4 Item 1A Risk Factors 13 Item 1B Unresolved Staff Comments 34 Item 2 Properties 35 Item 3 Legal Proceedings 38 Item 4 Mine Safety Disclosures 38 Part II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 38 Item 6 Selected Financial Data 40 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 41 Item 7A Quantitative and Qualitative Disclosures About Market Risk 61 Item 8 Financial Statements and Supplementary Data 63 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 111 Item 9A Controls and Procedures 111 Item 9B Other Information 111 Item 10 Directors, Executive Officers and Corporate Governance 112 Item 11 Executive Compensation 112 Part III Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 112 Item 13 Certain Relationships and Related Transactions, and Director Independence 112 Item 14 Principal Accounting Fees and Services 112 Exhibits and Financial Statement Schedules 113 Part IV Item 15 Signatures 116 2015 Annual Report 3 Part I Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, the proposed spin-offs and other non-historical statements. In some cases, you can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “projects,” “predicts,” “intends,” “plans,” ­“estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks inherent to the hospitality industry, macroeconomic factors beyond our control, ­competition for hotel guests, management and franchise agreements and timeshare sales, risks related to doing ­business with third-party hotel owners, our significant investments in owned and leased real estate, performance of our information technology systems, growth of reservation channels outside of our system, risks of doing business outside of the United States of America (“U.S.”), risks related to our proposed spin-offs and our indebtedness. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under “Part I—Item 1A. Risk Factors.” These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Annual Report on Form 10-K. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. Terms Used in this Annual Report on Form 10-K Except where the context requires otherwise, references in this Annual Report on Form 10-K to “Hilton,” “Hilton Worldwide,” “the Company,” “we,” “us” and “our” refer to Hilton Worldwide Holdings Inc., together with its consolidated subsidiaries. Except where the context requires otherwise, references to our “properties,” “hotels” and “rooms” refer to the hotels, resorts and timeshare properties managed, franchised, owned or leased by us. Of these hotels, resorts and rooms, a portion are directly owned or leased by us or joint ventures in which we have an interest and the remaining hotels, resorts and rooms are owned by our third-party owners. Investment funds associated with or designated by The Blackstone Group L.P. and their affiliates, our former majority owners, are referred to herein as “Blackstone.” 4 Hilton Worldwide Reference to “ADR” or “Average Daily Rate” means hotel room revenue divided by total number of room nights sold in a given period and “RevPAR” or “Revenue per Available Room” represents hotel room revenue divided by room nights available to guests for a given period. Reference to “Adjusted EBITDA” means earnings before interest expense, taxes and depreciation and amortization or “EBITDA,” further adjusted to exclude certain items. Refer to “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business and Financial Metrics Used by Management” for further ­discussion of these financial metrics. Item 1. Business Overview Hilton Worldwide is one of the largest and fastest growing hospitality companies in the world, with 4,610 hotels, resorts and timeshare properties comprising 758,502 rooms in 100 countries and territories as of December 31, 2015. In the nearly 100 years since our founding, we have defined the hospitality industry and established a portfolio of distinct, market-leading brands. Our flagship full service Hilton Hotels & Resorts brand is the most recognized hotel brand in the world. Our premier brand portfolio includes our luxury and lifestyle hotel brands, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts and Canopy by Hilton, our full service hotel brands, Hilton Hotels & Resorts, Curio—A Collection by Hilton, DoubleTree by Hilton and Embassy Suites by Hilton, our focused service hotel brands, Hilton Garden Inn, Hampton by Hilton, Homewood Suites by Hilton and Home2 Suites by Hilton, our timeshare brand, Hilton Grand Vacations, and our new focused service midscale brand, Tru by Hilton, launched in January 2016. More than 164,000 employees proudly serve in our managed, owned, leased and timeshare properties and corporate offices around the world, and we have approximately 51 million members in our award-winning customer loyalty program, Hilton HHonors. We operate our business through three segments: (1) ownership; (2) management and franchise; and (3) timeshare. These complementary business segments enable us to capitalize on our strong brands, global market presence and significant operational scale. Our ownership segment consists of 146 hotels with 59,463 rooms as of December 31, 2015 in which we have an ownership interest or lease. Through our management and franchise segment, which consists of 4,419 hotels with 691,887 rooms as of December 31, 2015, we manage hotels, resorts and timeshare properties owned by third parties and we license our brands to franchisees. Through our timeshare segment, which consists of 45 properties comprising 7,152 units as of December 31, 2015, we market and sell timeshare intervals; operate timeshare resorts and a timeshare membership club; and provide consumer financing. In addition to our current hotel portfolio, we are focused on the growth of our business through expanding our share of the global lodging industry through our development pipeline, which includes over 266,000 rooms, all in our management and franchise segment, scheduled to be opened in the future. As of December 31, 2015, approximately 134,000 rooms, representing over half of our development pipeline, were under construction. The expansion of our business is supported by strong lodging industry fundamentals, including limited supply growth, in the current economic environment and long-term growth prospects based on increasing global travel and tourism. Overall, we believe that our experience in the hotel industry and strong, well-defined brands that operate throughout the lodging industry chain scales and commercial service offerings will continue to drive customer loyalty, including participation in our Hilton HHonors loyalty program. Satisfied customers will continue to provide strong overall hotel performance for our hotel owners and us, and encourage further development of additional hotels under our brands and with existing and new hotel owners, which further supports our growth and future financial performance. We believe that our existing portfolio and development pipeline, which will require minimal initial capital investment from us, put us in a strong position to further improve our business and serve our customers in the future. In February 2016, we announced a plan to separate a ­substantial portion of our ownership business, consisting primarily of our owned hotels located in the U.S., as well as our timeshare business from Hilton to form two additional new publicly traded companies. See Item 1A. Risk Factors and Note 29: “Subsequent Events” in our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional discussion. Our Brand Portfolio The goal of each of our brands is to deliver exceptional customer experiences and superior operating performance. Brand(1) Chain Scale Luxury December 31, 2015 Countries/ Territories Properties Rooms 12 25 10,303 Percentage of Total Rooms 1.4% Ritz Carlton, Four Seasons, Peninsula, Luxury 18 23 7,785 — — — 85 572 206,635 4 18 4,704 38 457 110,772 6 225 53,284 26 668 94,031 20 2,108 210,372 3 387 43,401 5.7% Upper Midscale 3 73 7,600 4 45 7,152 La Quinta Inns, Wyngate, AmericInn Residence Inn, Hyatt House, Staybridge Suites, Candlewood Suites 1.0% Candlewood Suites, Towne Place Suites, Timeshare Aloft, Four Points 27.7% Fairfield Inn, Holiday Inn Express, Comfort Inn, Upscale Residence Inn 12.4% Courtyard, Holiday Inn, Hyatt Place, Novotel, Upper Midscale Holiday Inn, Renaissance, Delta, Hyatt 7.0% Renaissance, Sheraton, Hyatt, Upscale Ascend Collection, Tribute 14.6% Sheraton, Crowne Plaza, Wyndham, Radisson, Upper Upscale Radisson Blu, Renaissance, Westin, Sofitel 0.6% Autograph Collection, Luxury Collection, Upscale Joie De Vivre 27.2% Marriott, Sheraton, Hyatt Regency, Upper Upscale JW Marriott, Fairmont N/A Kimpton, Le Meridien, Hyatt Centric, Upper Upscale St. Regis, Mandarin Oriental 1.0% Park Hyatt, Sofitel, Intercontinental, Lifestyle Selected Competitors(2) Hawthorn Suites 0.9% Marriott Vacation Club, Starwood Vacation Ownership, Hyatt Residence, Wyndham Vacations Resorts The table above excludes nine unbranded properties with 2,463 rooms, representing approximately 0.5 percent of total rooms. The table also excludes our new midscale brand, Tru by Hilton, which launched in January 2016. The table excludes lesser known regional competitors. 2015 Annual Report (1)  (2) 5 Waldorf Astoria Hotels & Resorts: What began as an iconic hotel in New York City is today a portfolio of 25 luxury hotels and resorts. In landmark destinations around the world, Waldorf Astoria Hotels & Resorts reflect their locations, each providing the inspirational environments and personalized attention that are the source of unforgettable moments. Properties typically include elegant spa and wellness facilities, high-end restaurants, golf courses (at resort properties), 24-hour room service, fitness and business centers, meeting, wedding and banquet facilities and special event and concierge services. Conrad Hotels & Resorts: Conrad is a global luxury brand of 23 properties offering guests personalized experiences with sophisticated, locally inspired surroundings and an intuitive service model based on customization and control, as demonstrated by the Conrad Concierge mobile application that enables guest control of on-property amenities and services. Properties typically include convenient and relaxing spa and wellness facilities, enticing restaurants, comprehensive room service, fitness and business centers, multi-purpose meeting facilities and special event and concierge services. Canopy by Hilton: Canopy by Hilton represents a new hotel concept that has defined a more accessible lifestyle category, targeting the upper upscale price point segment. Canopy represents an energizing, new hotel in the neighborhood offering simple, guest-directed service, thoughtful local choices and comfortable spaces. Each property is designed as a natural extension of its neighborhood, with local design, food and drink and culture. As of December 31, 2015, 28 properties were in the pipeline or in various states of approval. The first Canopy hotel is expected to open in March 2016. Hilton Hotels & Resorts: Hilton is our global flagship brand and ranks number one for global brand awareness in the hospitality industry, with 572 hotels and resorts in 85 countries and territories across six continents. The brand primarily serves business and leisure upper upscale travelers and meeting groups. Hilton hotels are full service hotels that typically include meeting, wedding and banquet facilities and special event services, restaurants and lounges, food and beverage services, swimming pools, gift shops, retail facilities and other services. 6 Hilton Worldwide Curio—A Collection by Hilton: Curio—A Collection by Hilton is created for travelers who seek local discovery and one-of-akind experiences. Curio is made up of a collection of handpicked hotels that retain their unique identity but are able to leverage the many benefits of the Hilton Worldwide global platform, including our common reservation and customer care service and Hilton HHonors guest loyalty program. As of December 31, 2015, Curio had 18 properties open, contributing 4,704 rooms to our portfolio, and 66 properties were in the pipeline or in various states of approval. DoubleTree by Hilton: DoubleTree by Hilton is an upscale, full service hotel designed to provide true comfort to today’s business and leisure travelers. DoubleTree’s 457 hotels and resorts are united by the brand’s CARE (“Creating a Rewarding Experience”) culture and its iconic warm chocolate chip cookie served at check-in. DoubleTree’s diverse portfolio includes historic icons, small contemporary hotels, resorts and large urban hotels. Embassy Suites by Hilton: Embassy Suites by Hilton comprises 225 upper upscale, all-suite hotels that feature two-room guest suites with a separate living room and dining/work area, a complimentary cooked-to-order breakfast and complimentary evening receptions every night. Embassy Suites’ bundled pricing ensures that guests receive all of the amenities our properties have to offer at a single price. Hilton Garden Inn: Hilton Garden Inn is our award-winning, upscale brand with 668 hotels that strives to ensure today’s busy travelers have what they need to be productive on the road. From the Serta Perfect Sleeper bed, to complimentary internet access, to a comfortable lobby pavilion, Hilton Garden Inn is the brand guests can count on to support them on their journeys. Hampton by Hilton: Hampton by Hilton is our moderately priced, upper midscale hotel with limited food and beverage facilities. The Hampton by Hilton brand also includes Hampton Inn & Suites hotels, which offer both traditional hotel rooms and suite accommodations within one property. Across our over 2,100 Hampton locations around the world, guests receive free hot breakfast and free high-speed internet access, all for a great price and all supported by the 100% Hampton Guarantee. Tru by Hilton: Tru by Hilton is a new midscale brand, launched in January 2016, designed to attract a cross-generation of travelers who share a desire for human connection. Tru by Hilton embraces the value-conscious traveler, offering a back-to-basics experience. Each property will include lively social spaces in a large, first floor lobby with a work, play and eat zone, all with a unique personality. As of February 16, 2016, Tru by Hilton had commitments for 163 properties. The first property is expected to open in the fourth quarter of 2016. Homewood Suites by Hilton: Homewood Suites by Hilton are our upscale, extended-stay hotels that feature residential style accommodations including business centers, swimming pools, convenience stores and limited meeting facilities. These 387 hotels provide the touches, familiarity and comforts of home so that extended-stay travelers can feel at home on the road. Home2 Suites by Hilton: Home2 Suites by Hilton are upper midscale hotels that provide a modern and savvy option to budget conscious extended-stay travelers. Offering inno­ vative suites with contemporary design and cutting-edge technology, we strive to ensure that our guests are ­comfortable and productive, whether they are staying a few days or a few months. Each of the brand’s 73 hotels, 28 of which were opened in 2015, offers complimentary continental breakfast, integrated laundry and exercise f­ acility, recycling and sustainability initiatives and a pet-friendly policy. During 2015, 143 properties were added to our pipeline, and as of December 31, 2015, 297 properties were in the pipeline or in various states of approval. Our Customer Loyalty Program Hilton HHonors is our award-winning guest loyalty program that supports our portfolio of brands and our entire system of hotels and timeshare properties. The program generates significant repeat business by rewarding guests with points for each stay at any of our more than 4,500 hotels worldwide, which are then redeemable for free hotel nights and other rewards. Members also can transact with over 140 partners, including airlines, rail and car rental companies, credit card providers and others. The program provides targeted marketing, promotions and customized guest experiences to approximately 51 million members. Our Hilton HHonors members represented approximately 52 percent of our ­system-wide occupancy and contributed hotel-level revenues to us and our hotel owners of over $15 billion during the year ended December 31, 2015. Affiliation with our loyalty programs encourages members to allocate more of their travel spending to our hotels. The percentage of travel spending we capture from loyalty members increases as they move up the tiers of our program. The program is funded by contributions from eligible revenues generated by Hilton HHonors members and collected by us from hotels in our system. These funds are applied to reimburse hotels and partners for Hilton HHonors points redemptions and to pay for program administrative expenses and marketing initiatives that support the program. Hilton Grand Vacations: Hilton Grand Vacations (“HGV”) is our timeshare brand. Ownership of a deeded real estate interest with club membership points provides members with a lifetime of vacation advantages and the comfort and con­venience of residential-style resort accommodations in select, renowned vacation destinations. Each of our 45 club properties provides a distinctive setting, while signature­e ­ lements remain ­consistent, such as high-quality guest service, spacious units and extensive on-property amenities. 2015 Annual Report 7 Our Business We operate our business across three segments: (1) ownership; (2) management and franchise; and (3) timeshare. For more information regarding our segments, see “Part II—Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 23: “Business Segments” in our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. As of December 31, 2015, our system included the following properties and rooms, by type, brand and region: Owned/Leased(1) Properties Rooms Waldorf Astoria Hotels & Resorts U.S. Americas (excluding U.S.) Europe Middle East and Africa Asia Pacific 4 — 2 — — 1,148 — 463 — — Conrad Hotels & Resorts U.S. Americas (excluding U.S.) Europe Middle East and Africa Asia Pacific — — 1 1 — Hilton Hotels & Resorts U.S. Americas (excluding U.S.) Europe Middle East and Africa Asia Pacific Managed Properties 8 1 4 3 2 5,523 153 898 703 431 — 1 — — — — — 191 614 — 3 — 2 2 11 1,029 — 707 641 3,417 25 3 69 6 7 23,143 1,836 17,927 2,276 3,380 40 23 57 45 68 Curio—A Collection by Hilton U.S. Americas (excluding U.S.) Europe 1 — — 224 — — DoubleTree by Hilton U.S. Americas (excluding U.S.) Europe Middle East and Africa Asia Pacific 11 — — — — Embassy Suites by Hilton U.S. Americas (excluding U.S.) Rooms — 984 — — — 12 2 6 3 2 6,671 1,137 1,361 703 431 — 1 1 — 1 — 294 256 — 636 3 1 4 3 12 1,029 294 1,154 1,255 4,053 24,042 7,656 16,650 14,186 25,652 173 19 28 1 8 52,622 5,994 7,879 410 2,982 238 45 154 52 83 99,807 15,486 42,456 16,872 32,014 1 — — 998 — — 12 3 1 2,679 525 278 14 3 1 3,901 525 278 4,264 — — — — 28 4 11 9 41 8,276 785 3,456 1,874 11,868 274 17 56 4 2 65,848 3,283 9,665 488 965 313 21 67 13 43 78,388 4,068 13,121 2,362 12,833 10 — 2,523 — 34 3 9,154 623 173 5 39,702 1,282 217 8 51,379 1,905 Hilton Garden Inn U.S. Americas (excluding U.S.) Europe Middle East and Africa Asia Pacific 2 — — — — 290 — — — — 4 7 18 5 8 430 948 3,306 1,017 1,329 569 28 27 — — 77,887 4,371 4,453 — — 575 35 45 5 8 78,607 5,319 7,759 1,017 1,329 Hampton by Hilton U.S. Americas (excluding U.S.) Europe Asia Pacific 1 — — — 130 — — — 50 11 10 — 6,178 1,416 1,537 — 1,927 77 30 2 186,943 9,164 4,630 374 1,978 88 40 2 193,251 10,580 6,167 374 Homewood Suites by Hilton U.S. Americas (excluding U.S.) — — — — 25 2 2,687 224 345 15 38,791 1,699 370 17 41,478 1,923 Home2 Suites by Hilton U.S. Americas (excluding U.S.) — — — — — 1 — 97 71 1 7,376 127 71 2 7,376 224 Total 3 1,054 3 957 3 452 9 2,463 146 — 59,463 — 544 45 158,848 7,152 3,875 — 533,039 — 4,565 45 751,350 7,152 146 59,463 589 166,000 3,875 533,039 4,610 758,502 Includes properties owned or leased by entities in which we own a noncontrolling interest. (1)  Hilton Worldwide Rooms Total Properties Lodging Hilton Grand Vacations 8 Franchised Rooms Other Properties Ownership Hotel and Timeshare Management We are one of the largest hotel owners in the world based upon the number of rooms at our owned, leased and joint venture hotels. Our diverse global portfolio of owned and leased properties includes a number of leading hotels in major gateway cities such as New York City, London, San Francisco, Chicago, São Paolo and Tokyo. The portfolio includes iconic hotels with significant underlying real estate value, including the Hilton New York, Hilton Hawaiian Village and the London Hilton on Park Lane. Real estate investment was a critical component of the growth of our business in our early years. Our real estate holdings grew over time through new construction, purchases or leases of hotels, investments in joint ventures and the acquisition of other hotel companies. In recent years, we have expanded our hotel system less through real estate investment and more by increasing the number of management and franchise agreements we have with third-party hotel owners. Our core management services consist of operating hotels under management agreements for the benefit of third parties, who either own or lease the hotels and the associated personal property. Terms of our management agreements vary, but our fees generally consist of a base management fee based on a percentage of the hotel’s gross revenue, and we also may earn an incentive fee based on gross operating profits, cash flow or a combination thereof. In general, the owner pays all operating and other expenses and reimburses our out-of-pocket expenses. In turn, our managerial discretion typically is subject to approval by the owner in certain major areas, including the approval of annual operating and capital expenditure budgets. Additionally, the owners generally pay a monthly fee based on a percentage of the total gross room revenue that covers the costs of advertising and marketing programs; internet, technology and reservation systems expenses; and quality assurance program costs. Owners are also responsible for various other fees and charges, including payments for participation in our Hilton HHonors reward program, training, consultation and procurement of certain goods and services. As of December 31, 2015, we managed 544 hotels with 158,848 rooms, excluding our owned and leased hotels and timeshare properties. We have focused on maximizing the cost efficiency and profitability of the portfolio by, among other things, implementing new labor management practices and systems and reducing fixed costs. Through our disciplined approach to asset management, we have developed and executed on strategic plans for each of our hotels to enhance the market position of each property, and at many of our hotels we have renovated guest rooms and public spaces and added or enhanced meeting and retail space to improve profitability. At certain of our hotels, we are evaluating options for the adaptive reuse of all or a portion of the property to residential, retail or timeshare in order to deploy our real estate to its highest and best use. Management and Franchise Through our management and franchise segment we ­manage hotels and timeshare properties and license our brands to franchisees. This segment generates its revenue primarily from fees charged to hotel owners and to home­ owners’ associations at timeshare properties. We grow our management and franchise business by attracting owners to become a part of our system and participate in our brands and commercial services to support their hotel properties. These contracts require little or no capital investment to i­nitiate on our part, and provide significant return on ­investment for us as fees are earned. The initial terms of our management agreements for full service hotels typically are 20 years. In certain cases where we have entered into a franchise agreement as well as a management agreement, we classify these hotels as ­managed hotels in our portfolio. Extension options for our management agreements are negotiated and vary, but ­typically are more prevalent in full service hotels. Typically, these agreements contain one or two extension options that are either for 5 or 10 years and can be exercised at our or the other party’s option or by mutual agreement. Some of our management agreements provide early ­termination rights to hotel owners upon certain events, including the failure to meet certain financial or performance criteria. Performance test measures typically are based upon the hotel’s performance individually and/or in comparison to specified competitive hotels. We often have a cure right by paying an amount equal to the performance shortfall over a specified period, although in some cases our cure rights are limited. In addition to the third-party owned hotels we manage, as of December 31, 2015, we provided management services for 45 timeshare properties owned by homeowners’ associations and 146 owned, leased and joint venture hotels from which we recognized management fee revenues. Revenues from our owned and leased hotels are eliminated in our audited consolidated financial statements included ­elsewhere in this Annual Report on Form 10-K. 2015 Annual Report 9 Franchising Timeshare We franchise our brand names, trade and service marks and operating systems to hotel owners under franchise agreements. We do not directly participate in the day-to-day management or operation of franchised hotels and do not employ the individuals working at these locations. We conduct periodic inspections to ensure that brand standards are maintained. We approve the location for new construction of franchised hotels, as well as certain aspects of development. In some cases, we provide franchisees with product improvement plans that must be completed in accordance with brand standards to remain in our hotel system. As of December 31, 2015, we franchised 3,875 hotels with 533,039 rooms. Our timeshare segment generates revenue from three ­primary sources: Each franchisee pays us a franchise application fee. Franchisees also pay a royalty fee, generally based on a ­percentage of the hotel’s total gross room revenue (and a percentage of food and beverage revenue in some brands), as well as a monthly program fee based on a percentage of the total gross room revenue that covers the costs of advertising and marketing programs; internet, technology and reservation systems expenses; and quality assurance program costs. Franchisees also are responsible for various other fees and charges, including payments for participation in our Hilton HHonors reward program, training, consultation and procurement of certain goods and services. Our franchise agreements typically have initial terms of approximately 20 years for new construction and approximately 10 to 20 years for properties that are converted from other brands. At the expiration of the initial term, we may have a contractual right or obligation to relicense the hotel to the franchisee, at our or the hotel owner’s option or by mutual agreement, for an additional term ranging from 10 to 15 years. We have the right to terminate a franchise agreement upon specified events of default, including nonpayment of fees or noncompliance with brand standards. If a franchise agreement is terminated by us because of a franchisee’s default, the franchisee is contractually required to pay us liquidated damages. 10 Hilton Worldwide ▸ Timeshare Sales—We market and sell timeshare interests owned by Hilton and third parties. We also source ­timeshare intervals through sales and marketing agreements with third-party developers. This allows us to sell timeshare intervals on behalf of third-party developers using the Hilton Grand Vacations brand in exchange for sales, marketing and branding fees on interval sales, and to earn fees from resort operations and the servicing of consumer loans while deploying little up-front capital related to the construction of the property. ▸  Resort Operations—We manage the HGV Club, receiving enrollment fees, annual dues and transaction fees from member exchanges for other vacation products. We generate rental revenue from unit rentals of unsold ­inventory and inventory made available due to owner­ship exchanges under our HGV Club program. We also earn revenue from retail and spa outlets at our timeshare properties. ▸  Financing—We provide consumer financing, which includes interest income generated from the origination of consumer loans to customers to finance their purchase of timeshare intervals and revenue from servicing the loans. HGV’s primary product is the marketing and selling of ­fee-simple timeshare interests deeded in perpetuity, developed either by us or by third parties. This ownership interest is an interest in real estate equivalent to annual usage rights, generally for one week, at the timeshare resort where the timeshare interval was purchased. Each purchaser is automatically enrolled in the HGV Club, giving the purchaser an annual allotment of club points that allow the purchaser to exchange his or her annual usage rights for a number of options, including: a priority reservation period to stay at his or her home resort where his or her timeshare interval is deeded, stays at any resort in the HGV system, reservations for experiential travel such as cruises, conversion to Hilton HHonors points for stays at our hotels and other options, including stays at more than 5,000 resorts included in the RCI timeshare vacation exchange network. In addition, we operate the Hilton Club, which operates for owners of ­timeshare intervals at the Hilton New York, but whose members also enjoy exchange benefits with the HGV Club. As of December 31, 2015, HGV managed a global system of 45 resorts and the HGV Club and the Hilton Club had nearly 250,000 members in total. Traditionally, timeshare operators have funded 100 percent of the investment necessary to acquire land and construct timeshare properties. In 2010, we began sourcing timeshare intervals through sales and marketing agreements with third-party developers. These agreements enable us to generate fees from the sales and marketing of the timeshare intervals and club memberships and from the management of the timeshare properties without requiring us to fund acquisition and construction costs. In addition, we source intervals by acquiring units in third-party developed properties, which requires less capital than constructing timeshare properties. Our supply of third-party developed timeshare intervals was approximately 114,000, or 85 percent of our total supply, as of December 31, 2015, and the percentage of sales of timeshare intervals developed by third parties was 66 percent for the year ended December 31, 2015. In the timeshare business, we compete with other hotel and resort timeshare operators for sales of timeshare intervals based principally on location, quality of accommodations, price, financing terms, quality of service, terms of property use and opportunity for timeshare owners to exchange into time at other timeshare properties or other travel rewards. In addition, we compete based on brand name recognition and reputation, as well as with national and independent timeshare resale companies and owners reselling existing timeshare intervals, which could reduce demand or prices for sales of new timeshare intervals. Our primary com­ petitors in the timeshare space include Diamond Resorts International, Hyatt Residence Club, Marriott Vacations Worldwide, Starwood Vacation Ownership and Wyndham Vacation Resorts. Competition The hospitality industry is seasonal in nature. The periods during which our lodging properties experience higher revenues vary from property to property, depending principally upon location and the customer-base served. We generally expect our revenues to be lower in the first quarter of each year than in each of the three subsequent quarters. We encounter active and robust competition as a hotel, ­residential, resort and timeshare manager, franchisor, owner and developer. Competition in the hotel and lodging industry generally is based on the attractiveness of the facility, location, level of service, quality of accommodations, amenities, food and beverage options and outlets, public spaces and other guest services, consistency of service, room rate, brand reputation and the ability to earn and redeem loyalty program points through a global system. Our properties and brands compete with other hotels, resorts, motels and inns in their respective geographic markets or customer segments, including facilities owned by local interests, individuals, national and international chains, institutions, investment and pension funds and real estate investment trusts (“REITs”). We believe that our position as a multi-branded manager, franchisor, owner and operator of hotels makes us one of the largest and most geographically diverse lodging ­companies in the world. Our principal competitors include other branded and ­independent hotel operating companies, national and international hotel brands and ownership companies, including hotel REITs. While local and independent brand competitors vary, on a global scale our primary competitors are firms such as Accor S.A., Carlson Rezidor Group, Hong Kong and Shanghai Hotels, Limited, Hyatt Hotels Corporation, Intercontinental Hotel Group, Marriott International, Mövenpick Hotels and Resorts, Starwood Hotels & Resorts Worldwide and Wyndham Worldwide Corporation. Seasonality Cyclicality The hospitality industry is cyclical and demand generally ­follows, on a lagged basis, key macroeconomic indicators. There is a history of increases and decreases in demand for hotel rooms, in occupancy levels and in room rates realized by owners of hotels through economic cycles. The combi­ nation of changes in economic conditions and in the supply of hotel rooms can result in significant volatility in results for owners and managers of hotel properties. The costs of running a hotel tend to be more fixed than variable. As a result, in an environment of declining revenues the rate of decline in earnings can be higher than the rate of decline in revenues. The vacation ownership business also is cyclical as the demand for vacation ownership units is affected by the availability and cost of financing for purchases of vacation ownership units, as well as general economic conditions and the relative health of the housing market. Intellectual Property In the highly competitive hospitality industry in which we operate, trademarks, service marks, trade names, logos and patents are very important to the success of our business. We have a significant number of trademarks, service marks, trade names, logos, patents and pending registrations and expend significant resources each year on surveillance, registra­ tion and protection of our trademarks, service marks, trade names, logos and patents, which we believe have become synonymous in the hospitality industry with a reputation for excellence in service and authentic hospitality. 2015 Annual Report 11 Government Regulation Environmental Matters Our business is subject to various foreign and U.S. federal and state laws and regulations, including: laws and regulations that govern the offer and sale of franchises, many of which impose substantive requirements on franchise agreements and require that certain materials be registered before ­franchises can be offered or sold in a particular state; and extensive state and federal laws and regulations relating to our timeshare business, primarily relating to the sale and marketing of timeshare intervals. We are subject to certain requirements and potential ­liabilities under various foreign and U.S. federal, state and local environmental, health and safety laws and regulations and incur costs in complying with such requirements. These laws and regulations govern actions including air emissions, the use, storage and disposal of hazardous and toxic substances, and wastewater disposal. In addition to investigation and remediation liabilities that could arise under such laws, we may also face personal injury, property damage, fines or other claims by third parties concerning environmental compliance or contamination. In addition to our hotel accommodations, we operate a number of laundry facilities located in certain areas where we have multiple properties. We use and store hazardous and toxic substances, such as cleaning materials, pool chemicals, heating oil and fuel for back-up generators at some of our facilities, and we generate certain wastes in connection with our operations. Some of our properties include older buildings, and some may have, or may historically have had, dry-cleaning facilities and underground storage tanks for heating oil and back-up ­generators. We have from time to time been responsible for investigating and remediating contamination at some of our facilities, such as contamination that has been discovered when we have removed underground storage tanks, and we could be held responsible for any contamination resulting from the disposal of wastes that we generate, including at locations where such wastes have been sent for disposal. In some cases, we may be entitled to indemnification from the party that caused the contamination pursuant to our management or franchise agreements, but there can be no assurance that we would be able to recover all or any costs we incur in addressing such problems. From time to time, we may also be required to manage, abate, remove or ­contain mold, lead, asbestos-containing materials, radon gas or other hazardous conditions found in or on our properties. We have implemented an on-going operations and main­tenance plan at each of our owned and operated properties that seeks to identify and remediate these conditions as appropriate. Although we have incurred, and expect that we will continue to incur, costs relating to the investigation, identification and remediation of hazardous materials known or discovered to exist at our properties, those costs have not had, and are not expected to have, a material adverse effect on our financial condition, results of operations or cash flow. In addition, a number of states regulate the activities of ­hospitality properties and restaurants, including safety and health standards, as well as the sale of liquor at such properties, by requiring licensing, registration, disclosure statements and compliance with specific standards of conduct. Operators of hospitality properties also are subject to laws governing their relationship with employees, including minimum wage requirements, overtime, working conditions and work permit requirements. Our franchisees are responsible for their own compliance with laws, including with respect to their employee, minimum wage requirements, overtime, working conditions and work permit requirements. Compliance with, or changes in, these laws could reduce the revenue and profitability of our properties and could otherwise adversely affect our operations. We also manage and own hotels with casino gaming ­operations as part of or adjacent to the hotels. However, with the exception of casinos at certain of our properties in Puerto Rico and one property in Egypt, third parties manage and operate the casinos. We hold and maintain the casino gaming license and manage the casinos located in Puerto Rico and Egypt and employ third-party compliance con­ sultants and service providers. As a result, our business ­operations at these facilities are subject to the licensing and regulatory control of the local regulatory agency responsible for gaming licenses and operations in those jurisdictions. Finally, as an international owner, operator and franchisor of hospitality properties in 100 countries and territories, we also are subject to the local laws and regulations in each country in which we operate, including employment laws and practices, privacy laws, tax laws, which may provide for tax rates that exceed those of the U.S. and which may provide that our foreign earnings are subject to withholding requirements or other restrictions, unexpected changes in regulatory requirements or monetary policy and other potentially adverse tax consequences. 12 Hilton Worldwide Insurance Where You Can Find More Information We maintain insurance coverage for general liability, ­property including business interruption, terrorism, workers’ compensation and other risks with respect to our business for all of our owned hotels. Most of our insurance policies are written with self-insured retentions or deductibles that are common in the insurance market for similar risks. These policies provide coverage for claim amounts that exceed our self-insured retentions or deductibles. Our insurance provides coverage related to any claims or losses arising out of the design, development and operation of our hotels. We file annual, quarterly and current reports, proxy ­statements and other information with the Securities and Exchange Commission (“SEC”). Our SEC filings are available to the public over the internet at the SEC’s website at http://www.sec.gov. Our SEC filings are also available on our website at http://www.hiltonworldwide.com as soon as reasonably practicable after they are filed with or furnished to the SEC. You may also read and copy any filed document at the SEC’s public reference room in Washington, D.C. at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information about ­public reference rooms. U.S. hotels that we manage are permitted to participate in our insurance programs by mutual agreement with our hotel owners or, if not participating, must purchase insurance programs consistent with our requirements. U.S. franchised hotels are not permitted to participate in our insurance ­programs but rather must purchase insurance programs consistent with our requirements. Non-U.S. managed and franchised hotels are required to participate in certain of our insurance programs. All other insurance programs purchased by hotel owners must meet our requirements. In addition, our management and franchise agreements typically include provisions requiring the owner of the hotel property to indemnify us against losses arising from the design, development and operation of hotels owned by such third parties. History Hilton Worldwide Holdings Inc. was incorporated in Delaware in March 2010. In 1919, our founder Conrad Hilton purchased his first hotel in Cisco, Texas. Through our predecessors, we commenced operations in 1946 when our subsidiary Hilton Hotels Corporation, later renamed Hilton Worldwide, Inc., was incorporated in Delaware. Employees As of December 31, 2015, more than 164,000 people were employed at our managed, owned, leased and timeshare properties and corporate locations. As of December 31, 2015, approximately 31 percent of our employees globally (or 32 percent of our employees in the U.S.) were covered by various collective bargaining agreements generally addressing pay rates, working hours, other terms and conditions of employment, certain employee ­benefits and orderly settlement of labor disputes. We maintain an internet site at http://www.hiltonworldwide.com. Our website and the information contained on or connected to that site are not incorporated into this Annual Report on Form 10-K. Item 1A. Risk Factors In addition to the other information in this Annual Report on Form 10-K, the following risk factors should be considered carefully in evaluating our company and our business. Risks Related to Our Business and Industry We are subject to the business, financial and operating risks inherent to the hospitality industry, any of which could reduce our revenues and limit opportunities for growth. Our business is subject to a number of business, financial and operating risks inherent to the hospitality industry, including: ▸ significant competition from multiple hospitality providers in all parts of the world; ▸ changes in operating costs, including energy, food, employee compensation and benefits and insurance; ▸ increases in costs due to inflation that may not be fully offset by price and fee increases in our business; ▸ changes in taxes and governmental regulations that ­influence or set wages, prices, interest rates or ­construction and maintenance procedures and costs; ▸ the costs and administrative burdens associated with complying with applicable laws and regulations; ▸ the costs or desirability of complying with local practices and customs; ▸ significant increases in cost for health care coverage for employees and potential government regulation with respect to health care coverage; ▸ shortages of labor or labor disruptions; ▸ the ability of third-party internet and other travel ­intermediaries to attract and retain customers; 2015 Annual Report 13 ▸ the availability and cost of capital necessary for us and third-party hotel owners to fund investments, capital expenditures and service debt obligations; ▸ delays in or cancellations of planned or future development or refurbishment projects; ▸ the quality of services provided by franchisees; ▸ the financial condition of third-party property owners, developers and joint venture partners; ▸ relationships with third-party property owners, ­developers and joint venture partners, including the risk that owners may terminate our management, franchise or joint venture agreements; ▸ cyclical over-building in the hotel and timeshare industries; ▸ changes in desirability of geographic regions of the hotels or timeshare resorts in our business, geographic concentration of our operations and customers and shortages of desirable locations for development; ▸ changes in the supply and demand for hotel services (including rooms, food and beverage and other products and services) and vacation ownership services and products; and ▸ decreases in the frequency of business travel that may result from alternatives to in-person meetings, including virtual meetings hosted online or over private ­teleconferencing networks. Any of these factors could increase our costs or limit or reduce the prices we are able to charge for hospitality products and services, or otherwise affect our ability to maintain existing properties or develop new properties. As a result, any of these factors can reduce our revenues and limit opportunities for growth. Macroeconomic and other factors beyond our control can adversely affect and reduce demand for our products and services. Macroeconomic and other factors beyond our control can reduce demand for hospitality products and services, including demand for rooms at properties that we manage, franchise, own, lease or develop, as well as demand for ­timeshare properties. These factors include, but are not ­limited to: ▸ changes in general economic conditions, including low consumer confidence, unemployment levels and depressed real estate prices resulting from the severity and duration of any downturn in the U.S. or global economy; ▸ war, political conditions or civil unrest, terrorist activities or threats and heightened travel security measures ­instituted in response to these events; ▸ decreased corporate or government travel-related budgets and spending, as well as cancellations, deferrals or renegotiations of group business such as industry conventions; 14 Hilton Worldwide ▸ statements, actions, or interventions by governmental officials related to travel and corporate travel-related activities and the resulting negative public perception of such travel and activities; ▸ the financial and general business condition of the airline, automotive and other transportation-related industries and its effect on travel, including decreased airline ­capacity and routes; ▸ conditions that negatively shape public perception of travel, including travel-related accidents and outbreaks of pandemic or contagious diseases, such as Ebola, avian flu, severe acute respiratory syndrome (SARS) and H1N1 (swine flu); ▸ cyber-attacks; ▸ climate change or availability of natural resources; ▸ natural or man-made disasters, such as earthquakes, ­tsunamis, tornadoes, hurricanes, typhoons, floods, ­volcanic eruptions, oil spills and nuclear incidents; ▸ changes in the desirability of particular locations or travel patterns of customers; and ▸ organized labor activities, which could cause a diversion of business from hotels involved in labor negotiations and loss of business for our hotels generally as a result of certain labor tactics. Any one or more of these factors could limit or reduce o ­ verall demand for our products and services or could negatively affect our revenue sources, which could adversely affect our business, financial condition and results of operations. Contraction in the global economy or low levels of economic growth could adversely affect our revenues and profitability as well as limit or slow our future growth. Consumer demand for our services is closely linked to the performance of the general economy and is sensitive to business and personal discretionary spending levels. Decreased global or regional demand for hospitality products and services can be especially pronounced during periods of economic contraction or low levels of economic growth, and the recovery period in our industry may lag overall economic improvement. Declines in demand for our products and ­services due to general economic conditions could negatively affect our business by decreasing the revenues and profitability of our owned properties, limiting the amount of fee revenues we are able to generate from our managed and franchised properties and reducing overall demand for timeshare intervals. In addition, many of the expenses ­associated with our business, including personnel costs, interest, rent, property taxes, insurance and utilities, are ­relatively fixed. During a period of overall economic weakness, if we are unable to meaningfully decrease these costs as demand for our hotels and timeshare properties decreases, our business operations and financial performance may be adversely affected. The hospitality industry is subject to seasonal and cyclical volatility, which may contribute to fluctuations in our results of operations and financial condition. The hospitality industry is seasonal in nature. The periods during which our lodging properties experience higher revenues vary from property to property, depending principally upon location and the customer base served. We generally expect our revenues to be lower in the first quarter of each year than in each of the three subsequent quarters with the fourth quarter generally being the highest. In addition, the hospitality industry is cyclical and demand generally follows the general economy on a lagged basis. The seasonality and cyclicality of our industry may contribute to fluctuations in our results of operations and financial condition. Because we operate in a highly competitive industry, our revenues or profits could be harmed if we are unable to compete effectively. The segments of the hospitality industry in which we ­operate are subject to intense competition. Our principal competitors are other operators of luxury, full service and focused service hotels and timeshare properties, including other major hospitality chains with well-established and recognized brands. We also compete against smaller hotel chains, independent and local hotel owners and operators, home and apartment sharing services and independent timeshare operators. If we are unable to compete ­successfully, our revenues or profits may decline. Competition for hotel guests We face competition for individual guests, group reservations and conference business. We compete for these customers based primarily on brand name recognition and reputation, as well as location, room rates, property size and availability of rooms and conference space, quality of the accommodations, customer satisfaction, amenities and the ability to earn and redeem loyalty program points. Our competitors may have greater commercial, financial and marketing resources and more efficient technology platforms, which could allow them to improve their properties and expand and improve their marketing efforts in ways that could affect our ability to compete for guests effectively, or they could offer a type of lodging product that customers find attractive but that we do not offer. Competition for management and franchise agreements We compete to enter into management and franchise agreements. Our ability to compete effectively is based ­primarily on the value and quality of our management ­services, brand name recognition and reputation, our ability and willingness to invest capital, availability of suitable properties in certain geographic areas, and the overall economic terms of our agreements and the economic advantages to the property owner of retaining our management services and using our brands. If the properties that we manage or franchise perform less successfully than those of our ­competitors, if we are unable to offer terms as favorable as those offered by our competitors, or if the availability of suitable properties is limited, our ability to compete ­effectively for new management or franchise agreements could be reduced. Competition for timeshare sales We compete with other timeshare operators for sales of timeshare intervals based principally on location, quality of accommodations, price, financing terms, quality of service, terms of property use, opportunity for timeshare owners to exchange their owned interval for use of other timeshare properties or other travel rewards as well as brand name recognition and reputation. Our ability to attract and retain purchasers of timeshare intervals depends on our success in distinguishing the quality and value of our timeshare offerings from those offered by others. If we are unable to do so, our ability to compete effectively for sales of ­timeshare intervals could be adversely affected. Any deterioration in the quality or reputation of our brands could have an adverse effect on our reputation, business, financial condition or results of operations. Our brands and our reputation are among our most ­important assets. Our ability to attract and retain guests depends, in part, on the public recognition of our brands and their associated reputation. In addition, the success of our hotel owners’ businesses and their ability to make payments to us for our services may depend on the strength and ­reputation of our brands. If our brands become obsolete or consumers view them as unfashionable or lacking in ­consistency and quality, we may be unable to attract guests to our hotels, and may further be unable to attract or retain our hotel owners. Changes in ownership or management practices, the ­occurrence of accidents or injuries, natural disasters, crime, individual guest notoriety or similar events at our managed, owned, leased or timeshare properties can harm our repu­ tation, create adverse publicity and cause a loss of consumer confidence in our business. Because of the global nature of our brands and the broad expanse of our business and hotel locations, events occurring in one location could negatively affect the reputation and operations of otherwise successful individual locations. In addition, the recent expansion of social media has compounded the potential scope of ­negative publicity. We also could face legal claims related to negative events, along with resulting adverse publicity. If the perceived quality of our brands declines, or if our ­ reputation is damaged, our business, financial condition or results of operations could be adversely affected. 2015 Annual Report 15 Our management and franchise business is subject to risks related to doing business with third-party hotel owners that could adversely affect our reputation, operational results or prospects for growth. Unless we maintain good relationships with third-party hotel owners and renew or enter into new management and franchise agreements, we may be unable to expand our presence and our business, financial condition and results of operations may suffer. Our management and franchise business depends on our ability to establish and maintain long-term, positive rela­ tionships with third-party property owners and our ability to enter into new and renew management and franchise agreements. Although our management and franchise ­contracts are typically long-term arrangements, hotel ­owners may be able to terminate the agreements under certain circumstances, including the failure to meet specified financial or performance criteria. Our ability to meet these financial and performance criteria is subject to, among other things, risks common to the overall hotel industry, including factors outside of our control. In addition, negative management and franchise pricing trends could adversely affect our ability to negotiate with hotel owners. If we fail to maintain and renew existing management and franchise agreements and enter into new agreements on favorable terms, we may be unable to expand our presence and our business, and our financial condition and results of operations may suffer. Our management and franchise business is subject to real estate investment risks for third-party owners that could adversely affect our operational results and our prospects for growth. Growth of our management and franchise business is affected, and may potentially be limited, by factors influencing real estate development generally, including site availability, financing, planning, zoning and other local approvals. In addition, market factors such as projected room occupancy, changes in growth in demand compared to projected supply, geographic area restrictions in management and franchise agreements, costs of construction and anticipated room rate structure, if not managed effectively by our third-party owners could adversely affect the growth of our management and franchise business. 16 Hilton Worldwide If our third-party property owners are unable to repay or refinance loans secured by the mortgaged properties, or to obtain financing adequate to fund current operations or growth plans, our revenues, profits and capital resources could be reduced and our business could be harmed. Many of our third-party property owners pledged their properties as collateral for mortgage loans entered into at the time of development, purchase or refinancing. If our third-party property owners are unable to repay or refinance maturing indebtedness on favorable terms or at all, their lenders could declare a default, accelerate the related debt and repossess the property. A repossession could result in the termination of our management or franchise agreement or eliminate revenues and cash flows from the property. In addition, the owners of managed and franchised hotels depend on financing to buy, develop and improve hotels and in some cases, fund operations during down cycles. Our hotel owners’ inability to obtain adequate funding could materially adversely affect the maintenance and improvement plans of existing hotels, result in the delay or stoppage of the development of our existing pipeline and limit additional development to further expand our hotel portfolio. If third-party property owners fail to make investments ­necessary to maintain or improve their properties, guest preference for Hilton brands and reputation and performance results could suffer. Substantially all of our management and franchise ­agreements require third-party property owners to comply with quality and reputation standards of our brands. This includes requirements related to the physical condition, safety standards and appearance of the properties as well as the service levels provided by hotel employees. These standards may evolve with customer preference, or we may introduce new requirements over time. If our property ­owners fail to make investments necessary to maintain or improve the properties in accordance with our standards, guest preference for our brands could diminish. In addition, if third-party property owners fail to observe standards or meet their contractual requirements, we may elect to exercise our termination rights, which would eliminate revenues from these properties and cause us to incur expenses related to terminating these contracts. We may be unable to find suitable or offsetting replacements for any terminated relationships. Contractual and other disagreements with third-party property owners could make us liable to them or result in litigation costs or other expenses. Our management and franchise agreements require us and our hotel owners to comply with operational and performance conditions that are subject to interpretation and could result in disagreements. Any dispute with a hotel owner could be very expensive for us, even if the outcome is ultimately in our favor. We cannot predict the outcome of any arbitration or litigation, the effect of any negative judgment against us or the amount of any settlement that we may enter into with any third party. Furthermore, specific to our industry, some courts have applied principles of agency law and related fiduciary standards to managers of third-party hotel properties, which means that property owners may assert the right to terminate agreements even where the agreements do not expressly provide for termination. Our fees from any terminated property would be eliminated, and accordingly may negatively affect our results of operations. The risks resulting from significant investments in owned and leased real estate could increase our costs, reduce our profits and limit our ability to respond to market conditions. We own or lease a substantial amount of real property, which subjects us to various risks that may not be applicable to managed or franchised properties, including: ▸ governmental regulations relating to real estate ­ownership or operations, including tax, environmental, zoning and eminent domain laws; ▸ loss in value of real estate due to changes in market ­conditions or the area in which real estate is located; ▸ increased potential civil liability for accidents or other occurrences on owned or leased properties; ▸ the ongoing need for owner-funded capital improvements and expenditures to maintain or upgrade properties; ▸ periodic total or partial closures due to renovations and facility improvements; ▸ risks associated with mortgage debt, including the ­possibility of default, fluctuating interest rate levels and uncertainties in the availability of replacement financing; ▸ fluctuations in real estate values or potential impairments in the value of our assets; and ▸ the relative illiquidity of real estate compared to some other assets. Our efforts to develop, redevelop or renovate our owned and leased properties could be delayed or become more expensive. Certain of our owned and leased properties were constructed more than a century ago. The condition of aging properties could negatively affect our ability to attract guests or result in higher operating and capital costs, either of which could reduce revenues or profits from these properties. There can be no assurance that our planned replacements and repairs will occur, or even if completed, will result in improved performance. In addition, these efforts are subject to a number of risks, including: ▸ construction delays or cost overruns (including labor and materials); ▸ obtaining zoning, occupancy and other required permits or authorizations; ▸ changes in economic conditions that may result in ­weakened or lack of demand for improvements that we make or negative project returns; ▸ governmental restrictions on the size or kind of development; ▸ volatility in the debt and capital markets that may limit our ability to raise capital for projects or improvements; ▸ lack of availability of rooms or meeting spaces for ­revenue-generating activities during construction, ­modernization or renovation projects; ▸ force majeure events, including earthquakes, tornadoes, hurricanes, floods or tsunamis, or acts of terrorism; and ▸ design defects that could increase costs. If our properties are not updated to meet guest preferences, if properties under development or renovation are delayed in opening as scheduled, or if renovation investments adversely affect or fail to improve performance, our operations and financial results could be negatively affected. Our properties may not be permitted to be rebuilt if destroyed. Certain of our properties may qualify as legally-permissible nonconforming uses and improvements, including certain of our iconic and most profitable properties. If a substantial portion of any such property were to be destroyed by fire or other casualty, we might not be permitted to rebuild that property as it now exists, regardless of the availability of insurance proceeds. Any loss of this nature, whether insured or not, could materially adversely affect our results of ­operations and prospects. The negative effect on profitability and cash flow from declines in revenues is more pronounced in owned properties because we, as the owner, bear the risk of their high fixedcost structure. Further, during times of economic distress, declining demand and declining earnings often result in declining asset values, and we may not be able to sell ­properties on favorable terms or at all. Accordingly, we may not be able to adjust our owned property portfolio promptly in response to changes in economic or other conditions. 2015 Annual Report 17 We have investments in joint venture projects, which limits our ability to manage third-party risks associated with these projects. In most cases, we are minority participants and do not ­control the decisions of the joint ventures in which we are involved. Therefore, joint venture investments may involve risks such as the possibility that a co-venturer in an investment might become bankrupt, be unable to meet its capital contribution obligations, have economic or business interests or goals that are inconsistent with our business interests or goals or take actions that are contrary to our instructions or to applicable laws and regulations. In addition, we may be unable to take action without the approval of our joint venture partners, or our joint venture partners could take actions binding on the joint venture without our consent. Consequently, actions by a co-venturer or other third-party could expose us to claims for damages, financial penalties and reputational harm, any of which could adversely affect our business and operations. In addition, we may agree to guarantee indebtedness incurred by a joint venture or ­co-venturer or provide standard indemnifications to lenders for loss liability or damage occurring as a result of our actions or actions of the joint venture or other co-venturers. Such a guarantee or indemnity may be on a joint and several basis with a co-venturer, in which case we may be liable in the event that our co-venturer defaults on its guarantee obligation. The non-performance of a co-venturer’s ­obligations may cause losses to us in excess of the capital we initially may have invested or committed. Preparing our financial statements requires us to have access to information regarding the results of operations, financial position and cash flows of our joint ventures. Any deficiencies in our joint ventures’ internal controls over financial reporting may affect our ability to report our financial results accurately or prevent or detect fraud. Such deficiencies also could result in restatements of, or other adjustments to, our previously reported or announced operating results, which could diminish investor confidence and reduce the market price for our shares. Additionally, if our joint ventures are unable to provide this information for any meaningful period or fail to meet expected deadlines, we may be unable to satisfy our financial reporting obligations or timely file our periodic reports. Although our joint ventures may generate positive cash flow, in some cases they may be unable to distribute that cash to the joint venture partners. Additionally, in some cases our joint venture partners control distributions and may choose to leave capital in the joint venture rather than distribute it. Because our ability to generate liquidity from our joint ventures depends in part on their ability to distribute capital to us, our failure to receive distributions from our joint venture partners could reduce our cash flow return on these investments. 18 Hilton Worldwide Our timeshare business is subject to risks associated with regulation, third-party owners and providing financing to purchasers. The timeshare business is subject to extensive regulation. We develop, manage, market and sell timeshare intervals. Certain of these activities are subject to extensive state ­regulation in both the state in which the timeshare property is located and the states in which the timeshare property is marketed and sold. Federal regulation of certain marketing practices also applies. In addition, because we provide financing to some purchasers of timeshare intervals and also service the resulting loans as well as the loans on inventory sold by third-party developers for which we provide mar­ keting services, we are subject to various federal and state regulations, including those requiring disclosure to borrowers regarding the terms of their loans as well as settlement, ­servicing and collection of loans. If we fail to comply with applicable federal, state and local laws in connection with our timeshare business, we may be unable to offer timeshare intervals or associated financing in certain areas, which could result in a decline in timeshare revenues. A decline in timeshare interval inventory or our failure to enter into and maintain timeshare management agreements may have an adverse effect on our business or results of operations. In addition to timeshare interval supply from our owned timeshare properties, we source interval supply through sales and marketing agreements with third-party developers. If we fail to develop timeshare properties or are unsuccessful in entering into new agreements with third-party developers, we may experience a decline in timeshare interval supply available to be sold by us, which could result in a decrease in our revenues. In addition, a decline in timeshare interval supply could result in both a decrease of financing revenues that are generated from purchasers of timeshare intervals and fee revenues that are generated by providing management, loan and collection services to the timeshare properties. If purchasers default on the loans that we provide to finance their purchases of timeshare intervals, the revenues and profits that we derive from the timeshare business could be reduced. Providing secured financing to some purchasers of ­timeshare intervals subjects us to the risk of purchaser default. As of December 31, 2015, we had approximately $1,082 million of timeshare financing receivables outstanding. If a purchaser defaults under the financing that we provide, we could be forced to write off the loan and reclaim ownership of the timeshare interval. We may be unable to resell the property in a timely manner or at the same price, or at all. Also, if a purchaser of a timeshare interval defaults on the related loan during the early part of the amortization period, we may not have recovered the marketing, selling and ­general and administrative costs associated with the sale of that timeshare interval. If we are unable to recover any of the principal amount of the loan from a defaulting purchaser, or if the allowances for losses from such defaults are inadequate, the revenues and profits that we derive from the timeshare business could be reduced. Some of our existing development pipeline may not be developed into new hotels, which could materially adversely affect our growth prospects. As of December 31, 2015, we had a total of 1,616 hotels in our development pipeline, which we define as hotels under construction or approved for development under one of our brands. The commitments of owners and developers with whom we have agreements are subject to numerous con­ ditions, and the eventual development and construction of our pipeline not currently under construction is subject to numerous risks, including, in certain cases, the owner’s or developer’s ability to obtain adequate financing, obtaining governmental or regulatory approvals and adequate financing. As a result, not every hotel in our development pipeline may develop into a new hotel that enters our system. New hotel brands or non-hotel branded concepts that we launch in the future may not be as successful as we anticipate, which could have a material adverse effect on our business, financial condition or results of operations. We launched a new midscale brand, Tru by Hilton, in January 2016. We introduced a new brand, Canopy by Hilton, in October 2014, opened our first Curio—A Collection by Hilton hotel in August 2014, opened the first Herb N’ Kitchen Restaurant in 2013 and opened our first Home2 Suites by Hilton hotel in 2011. We may continue to build our portfolio by launching new hotel and non-hotel brands in the future. In addition, the Hilton Garden Inn, DoubleTree by Hilton and Hampton by Hilton brands have been expanding into new jurisdictions outside the United States in recent years. We may continue to expand existing brands into new international markets. New hotel products or concepts or brand expansions may not be accepted by hotel owners, franchisees or customers and we cannot guarantee the level of acceptance any new brand will have in the development and consumer marketplaces. If new branded hotel products, non-hotel branded concepts or brand expansions are not as successful as we anticipate, we may not recover the costs we incurred in their development or expansion, which could have a material adverse effect on our business, financial condition or results of operations. Failures in, material damage to, or interruptions in our information technology systems, software or websites and difficulties in updating our existing software or developing or implementing new software could have a material adverse effect on our business or results of operations. We depend heavily upon our information technology systems in the conduct of our business. We own and license or otherwise contract for sophisticated technology and systems for property management, procurement, reservations and the operation of the Hilton HHonors customer loyalty program. Such systems are subject to, among other things, damage or interruption from power outages, computer and telecommunications failures, computer viruses and natural and man-made disasters. Although we have a cold disaster recovery site in a separate location to back up our core ­reservation, distribution and financial systems, substantially all of our data center operations are currently located in a single facility. Any loss or damage to our primary facility could result in operational disruption and data loss as we move production operations to our disaster recovery site. Damage or interruption to our information systems may require a significant investment to update, remediate or replace with alternate systems, and we may suffer i­nterruptions in our operations as a result. In addition, costs and potential problems and interruptions associated with the implementation of new or upgraded systems and ­technology or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations. Any material interruptions or failures in our systems, including those that may result from our failure to adequately develop, implement and maintain a robust disaster recovery plan and backup systems could severely affect our ability to conduct normal business operations and, as a result, have a material adverse effect on our business operations and financial performance. 2015 Annual Report 19 We rely on third parties for the performance of a significant portion of our information technology functions worldwide. In particular, our reservation system relies on data communications networks operated by unaffiliated third parties. The success of our business depends in part on maintaining our relationships with these third parties and their continuing ability to perform these functions and services in a timely and satisfactory manner. If we experience a loss or disruption in the provision of any of these functions or services, or they are not performed in a satisfactory manner, we may have difficulty in finding alternate providers on terms favorable to us, in a timely manner or at all, and our business could be adversely affected. Even if we are fully compliant with legal standards and ­contractual requirements, we still may not be able to prevent security b...
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