Item 1. Business

Overview

Hilton is one of the largest and fastest growing hospitality companies in the world, with 5,284 properties comprising 856,115 rooms in 105 countries and territories as of December 31, 2017. 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, Tapestry Collection by Hilton and Embassy Suites by Hilton; our focused service hotel brands, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton and Home2 Suites by Hilton; and our timeshare brand, Hilton Grand Vacations. As of December 31, 2017, we had approximately 71 million members in our award-winning guest loyalty program, Hilton Honors.

We operate our business through two operating segments: (i) management and franchise; and (ii) ownership. Each segment is managed separately because of its distinct economic characteristics. The management and franchise segment includes all of the hotels we manage for third-party owners, as well as all franchised hotels operated or managed by someone other than us. As of December 31, 2017, this segment included 656 managed hotels, 4,507 franchised hotels and 48 timeshare resorts totaling 5,211 properties consisting of 833,909 rooms. Within this total are the 67 hotels with 35,406 rooms that were previously owned or leased by Hilton or unconsolidated affiliates of Hilton and, upon completion of the spin-offs, were owned or leased by Park or unconsolidated affiliates of Park. The management and franchise segment generates its revenue from: (i) management and franchise fees charged to third-party hotel owners; (ii) license fees for the exclusive right to use certain Hilton marks and intellectual property; and (iii) affiliate fees charged to owned and leased hotels. As of December 31, 2017, the ownership segment included 73 properties totaling 22,206 rooms, comprising 64 hotels that we wholly owned or leased, one hotel owned by a consolidated non-wholly owned entity, two hotels leased by consolidated variable interest entities ("VIEs") and six hotels owned or leased by unconsolidated affiliates.

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. During the year ended December 31, 2017, nearly 108,000 new rooms were approved for development, and we opened 399 hotels consisting of over 59,000 rooms. As of December 31, 2017, we had a total of 2,257 hotels in our development pipeline, representing approximately 345,000 rooms under construction or approved for development throughout 107 countries and territories, including 39 countries and territories where we do not currently have any open hotels. All of the rooms in the pipeline are within our management and franchise segment. Over 182,000 rooms in the pipeline, or more than half, are located outside the U.S. Additionally, over 174,000 rooms in the pipeline, or more than half, are under construction. We do not consider any individual development project to be material to us.

Overall, we believe that our experience in the hotel industry, which spans nearly a century of highly focused customer service and entrepreneurship, evolving for the needs of our customers; our strong, well-defined brands that operate throughout the lodging industry chain scales; and our commercial service offerings will continue to drive customer loyalty, including participation in our Hilton Honors guest loyalty program. We believe that 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 capital investment from us, puts us in a strong position to further improve our business and serve our customers in the future.

Our Brand Portfolio

The goal of each of our brands is to deliver exceptional customer experiences and superior operating performance.

				December 31, 2017
Brand(1)		Chain Scale		Countries/ Territories		Properties		Rooms		Percentage of Total Rooms		Selected Competitors(2)
		Luxury		12		27		9,579		1.1%		Four Seasons, Mandarin Oriental, Peninsula, Ritz Carlton, St. Regis
		Luxury		24		34		10,709		1.3%		Fairmont, Intercontinental, JW Marriott, Park Hyatt, Sofitel
		Upper Upscale		2		2		287		—%		Hyatt Centric, Joie De Vivre, Kimpton, Le Méridien
		Upper Upscale		88		578		211,423		24.7%		Hyatt Regency, Marriott, Renaissance, Sheraton, Sofitel, Westin
		Upper Upscale		15		48		10,548		1.2%		Autograph Collection, The Unbound Collection
		Upscale		41		520		123,773		14.5%		Crowne Plaza, Delta, Holiday Inn, Hyatt, Radisson, Renaissance, Sheraton
		Upscale		1		4		467		0.1%		Ascend Collection, Tribute Portfolio
		Upper Upscale		6		245		57,216		6.7%		Courtyard, Hyatt Regency, Marriott, Renaissance, Sheraton
		Upscale		37		771		111,438		13.0%		Aloft, Courtyard, Four Points, Holiday Inn, Hyatt Place, Springhill Suites
		Upper Midscale		21		2,338		237,334		27.7%		Comfort Suites, Courtyard, Fairfield Inn, Holiday Inn Express, Springhill Suites
		Midscale		1		9		911		0.1%		Best Western, Comfort Inn & Suites, La Quinta, Quality Inn, Sleep Inn
		Upscale		3		451		51,305		6.0%		Element, Hyatt House, Residence Inn, Staybridge Suites
		Upper Midscale		2		204		21,015		2.5%		Candlewood Suites, Hawthorn Suites, TownePlace Suites, WoodSpring Suites
		Timeshare		3		48		8,101		0.9%		Hyatt Residence, Marriott Vacation Club, Vistana Signature Experiences, Wyndham Vacations Resorts

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(1)	The table above excludes five unbranded properties with 2,009 rooms, representing approximately 0.2 percent of total rooms. HGV has the exclusive right to use our Hilton Grand Vacations brand, subject to the terms of a license agreement with us.

(2)	The table excludes lesser known regional competitors.

Waldorf Astoria Hotels & Resorts: What began as an iconic hotel in New York City is today a portfolio of 27 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 34 hotels and resorts 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 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, 2017, Canopy had two properties open and 30 properties in the pipeline.

Hilton Hotels & Resorts: Hilton is our global flagship brand and one of the most globally recognized hotel brands, with 578 hotels and resorts in 88 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. Additionally, Hilton Hotels & Resorts was voted the favorite hotel chain in the 2018 Globe Travel Awards.

Curio – A Collection by Hilton: Curio – A Collection by Hilton is created for travelers who seek local discovery and one-of-a-kind experiences. Curio is made up of a collection of hand-picked hotels that retain their unique identity, but are able to leverage the many benefits of the Hilton global platform, including our common reservation and customer care service and Hilton Honors guest loyalty program. As of December 31, 2017, Curio had 48 properties open and 59 properties in the pipeline.

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 520 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.

Tapestry Collection by Hilton: Tapestry Collection by Hilton, our newest brand, is a curated portfolio of original hotels in the upscale hotel segment that have recognizable features distinct to each hotel. Tapestry guests are looking for new experiences and choose to stay where they can expect to never see the same thing twice. Travelers can book an independent and reliable stay with confidence knowing these hotels are backed by the Hilton name and the award winning Hilton Honors guest loyalty program. In May 2017, the first Tapestry Collection by Hilton opened in Syracuse, New York, just four months after the brand's launch. As of December 31, 2017, Tapestry Collection by Hilton had four properties open and 24 properties in the pipeline.

Embassy Suites by Hilton: Embassy Suites by Hilton comprises 245 upper upscale, all-suite hotels that feature two-room guest suites with a separate living room and dining or 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 771 hotels worldwide. At Hilton Garden Inn, guests find an open, inviting atmosphere with warm, glowing service and simple, thoughtful touches that allow them to relax and recharge. As a recognized leader in food and beverage services, Hilton Garden Inn caters to guests' dining needs by serving cooked-to-order breakfast and offering handcrafted cocktails, shareable small plates and full meals at its on-site restaurants and bars. Flexible meeting space, free Wi-Fi, wireless printing and fitness centers are offered to help guests stay polished and productive.

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 2,300 Hamptons 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 brand designed to be a game changer in the midscale segment. Tru was built from a belief that being cost conscious and having a great stay do not have to be mutually exclusive. By focusing on the brand's three key tenets of simplified, spirited and grounded in value, every detail of the property is crafted for operational efficiency and to drive increased guest satisfaction - from the activated, open lobby to the efficiently designed bedrooms. In May 2017, the first Tru by Hilton property opened in Oklahoma City. As of December 31, 2017, Tru had nine properties open and 284 properties in the pipeline.

Homewood Suites by Hilton: Homewood Suites by Hilton is our upscale, extended-stay hotel that features residential style accommodations including business centers, swimming pools, convenience stores and limited meeting facilities. These 451 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 is our upper midscale hotel that provides a modern and savvy option to budget conscious extended-stay travelers. Offering innovative 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 204 open hotels offer complimentary continental breakfast, integrated laundry and exercise facility, recycling and sustainability initiatives and a pet-friendly policy. As of December 31, 2017, 387 properties were in the pipeline.

Hilton Grand Vacations: Hilton Grand Vacations 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 the 48 Hilton Grand Vacations properties provides a distinctive setting, while signature elements remain consistent, such as high-quality guest service, spacious units and extensive on-property amenities.

Our Guest Loyalty Program

Hilton Honors is our award-winning guest loyalty program that supports our portfolio of brands and our owned, leased, managed and franchised hotels and resorts. The program generates significant repeat business by rewarding guests with points for each stay at any of our nearly 5,300 properties worldwide, which are then redeemable for free nights and other goods and services. Members can also use points earned to transact with nearly 130 partners, including airlines, rail and car rental companies, credit card providers, Amazon.com and others. The program provides targeted marketing, promotions and customized guest experiences to approximately 71 million members, a 20 percent increase from December 31, 2016. Our Hilton Honors members represented approximately 57 percent of our system-wide occupancy and contributed hotel-level revenues to us and our hotel owners of over $19 billion during the year ended December 31, 2017. 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 Honors members and collected by us from hotels and resorts in our system. These funds are applied to reimburse hotels and partners for Hilton Honors points redemptions by loyalty members and to pay for program administrative expenses and marketing initiatives that support the program.

Our Business

As of December 31, 2017, our system included the following properties and rooms, by type, brand and region:

	Owned / Leased(1)						Managed						Franchised						Total
	Properties			Rooms			Properties			Rooms			Properties			Rooms			Properties			Rooms
Waldorf Astoria Hotels & Resorts
U.S.	1			215			12			5,451			—			—			13			5,666
Americas (excluding U.S.)	—			—			1			142			1			984			2			1,126
Europe	2			463			4			898			—			—			6			1,361
Middle East and Africa	—			—			3			703			—			—			3			703
Asia Pacific	—			—			3			723			—			—			3			723
Conrad Hotels & Resorts
U.S.	—			—			4			1,287			1			319			5			1,606
Americas (excluding U.S.)	—			—			2			402			1			294			3			696
Europe	—			—			4			1,155			—			—			4			1,155
Middle East and Africa	1			614			3			1,076			—			—			4			1,690
Asia Pacific	1			164			15			4,630			2			768			18			5,562
Canopy by Hilton
U.S.	—			—			—			—			1			175			1			175
Europe	—			—			—			—			1			112			1			112
Hilton Hotels & Resorts
U.S.	—			—			65			48,048			179			54,319			244			102,367
Americas (excluding U.S.)	1			405			25			9,235			17			5,469			43			15,109
Europe	55			14,935			54			16,359			33			9,430			142			40,724
Middle East and Africa	5			1,998			44			13,427			2			605			51			16,030
Asia Pacific	7			3,412			84			30,955			7			2,826			98			37,193
Curio - A Collection by Hilton
U.S.	—			—			4			1,981			26			5,694			30			7,675
Americas (excluding U.S.)	—			—			—			—			7			1,271			7			1,271
Europe	—			—			2			189			6			764			8			953
Middle East and Africa	—			—			1			201			—			—			1			201
Asia Pacific	—			—			2			448			—			—			2			448
DoubleTree by Hilton
U.S.	—			—			37			12,241			301			71,450			338			83,691
Americas (excluding U.S.)	—			—			4			809			21			4,351			25			5,160
Europe	—			—			11			2,915			81			13,984			92			16,899
Middle East and Africa	—			—			10			2,350			4			488			14			2,838
Asia Pacific	—			—			49			14,220			2			965			51			15,185
Tapestry Collection by Hilton
U.S.	—			—			—			—			4			467			4			467
Embassy Suites by Hilton
U.S.	—			—			44			11,568			193			43,659			237			55,227
Americas (excluding U.S.)	—			—			3			667			5			1,322			8			1,989
Hilton Garden Inn
U.S.	—			—			4			430			634			87,739			638			88,169
Americas (excluding U.S.)	—			—			8			1,084			36			5,594			44			6,678
Europe	—			—			21			3,870			38			6,230			59			10,100
Middle East and Africa	—			—			7			1,574			—			—			7			1,574
Asia Pacific	—			—			23			4,917			—			—			23			4,917
Hampton by Hilton
U.S.	—			—			47			5,806			2,097			204,936			2,144			210,742
Americas (excluding U.S.)	—			—			13			1,677			89			10,651			102			12,328
Europe	—			—			15			2,439			52			8,016			67			10,455
Asia Pacific	—			—			—			—			25			3,809			25			3,809
Tru by Hilton
U.S.	—			—			—			—			9			911			9			911
Homewood Suites by Hilton
U.S.	—			—			21			2,241			410			46,786			431			49,027
Americas (excluding U.S.)	—			—			3			358			17			1,920			20			2,278
Home2 Suites by Hilton
U.S.	—			—			—			—			201			20,698			201			20,698
Americas (excluding U.S.)	—			—			—			—			3			317			3			317
Other	—			—			4			1,759			1			250			5			2,009
Lodging	73			22,206			656			208,235			4,507			617,573			5,236			848,014
Hilton Grand Vacations	—			—			—			—			48			8,101			48			8,101
Total	73			22,206			656			208,235			4,555			625,674			5,284			856,115

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(1)	Includes properties owned or leased by entities in which we own a noncontrolling interest.

We operate our business under a management and franchise segment and an ownership segment. 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 19: "Business Segments" in "Part II—Item 8. Financial Statements and Supplementary Data."

Management and Franchise

Through our management and franchise segment, we manage hotels and license our brands. This segment generates its revenue primarily from fees charged to hotel owners. We grow our management and franchise business by attracting owners to become a part of our system and participate in our 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.

Hotel Management

Our core management services consist of operating hotels under management contracts for the benefit of third parties who either own or lease the hotels and the associated personal property. Terms of our management contracts vary, but our fees generally consist of a base management fee, which is based on a percentage of the hotel’s gross revenue, and, when applicable, an incentive management fee, which is typically based on a percentage of hotel operating profits. 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 hotel's gross room revenue, or other usage fees, which covers the costs of advertising and marketing programs; the costs of internet, technology and reservation systems; and quality assurance program expenses. Owners are also responsible for various other fees and charges, including payments for participation in our Hilton Honors guest loyalty program, training, consultation and procurement of certain goods and services. As of December 31, 2017, we managed 656 hotels with 208,235 rooms, excluding our owned, leased and joint venture hotels.

The initial terms of our management contracts for full service hotels are typically 20 to 30 years. In certain cases, when we have entered into a franchise contract in addition to a management contract, we classify these hotels as managed hotels in our portfolio. Extension options for our management contracts are negotiated and vary, but typically are more prevalent in full service hotels. Typically, these contracts contain one or two extension options that are for either five or 10 years and can be exercised at our or the other party’s option or by mutual agreement. In the case of our management contracts with Park, assuming we exercise all renewal periods, the total term of the management contracts will range from 30 to 70 years.

Some of our management contracts 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.

Franchising

We license our brand names, trademarks and service marks and operating systems to hotel owners under franchise contracts. We do not own, manage or operate franchised hotels and do not employ the individuals working at these locations. We conduct periodic inspections to ensure that brand standards are maintained. For new franchised hotels (both new construction and conversions of existing hotels from other brands), we approve the location, as well as the plans for the facilities to ensure the hotels meet our brand standards. For existing franchised hotels, we provide franchisees with product improvement plans that must be completed to keep the hotels in compliance with our brand standards so they can remain in our hotel system. Occasionally, we may have a franchise contract and a management contract in place at the same property, in which case we are both the franchisor and the manager of that property. We also earn license fees from a license agreement with HGV and co-brand credit card arrangements for the use of certain Hilton marks and intellectual property. As of December 31, 2017, we franchised 4,555 properties with 625,674 rooms.

Each franchisee pays us a franchise application fee in conjunction with the inception of a franchise contract. Franchisees also pay a royalty fee, generally based on a percentage of the hotel’s gross room revenue and, in some cases, a percentage of food and beverage revenue. Additionally, the franchisees pay a monthly program fee based on a percentage of the hotel's gross room revenue that covers the costs of certain advertising and marketing programs, internet, technology and reservation systems, and quality assurance programs (among other things) that benefit the brand. Franchisees also are responsible for various other fees and charges, including payments for participation in our Hilton Honors guest loyalty program, training, consultation and procurement of certain goods and services.

Our franchise contracts for new construction hotels and our franchise contracts with Park typically have initial terms of approximately 20 years. Our franchise contracts for converted hotels have initial terms of approximately 10 to 20 years. At the expiration of the initial term, we may have a contractual right or obligation to relicense the hotel to the franchisee, for an additional term ranging from 10 to 15 years. Our franchise contracts with Park cannot be extended without our consent. We have the right to terminate a franchise contract upon specified events of default, including nonpayment of fees or noncompliance with brand standards. If a franchise contract is terminated by us because of a franchisee’s default, the franchisee is contractually required to pay us liquidated damages.

Ownership

As of December 31, 2017, our ownership segment consisted of 73 hotels with 22,206 rooms that we owned or leased or that are owned or leased by entities in which we own a noncontrolling interest. As a hotel owner, we focus on maximizing the cost efficiency and profitability of the portfolio by, among other things, maximizing hotel revenues, implementing new labor management practices and systems and reducing fixed costs. Through our disciplined approach to asset management, we develop and execute on strategic plans for each of our hotels to enhance their market position and, at many of our hotels, we invest in renovating guest rooms and public spaces and adding or enhancing meeting and retail space to improve profitability.

Competition

We encounter active and robust competition as a hotel, residential and resort 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 and meeting 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 and owner of hotels with an associated system-wide guest loyalty platform helps us succeed as 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, Choice Hotels International, Hongkong and Shanghai Hotels, Hyatt Hotels Corporation, Intercontinental Hotel Group, Marriott International and Wyndham Worldwide Corporation.

Seasonality

The hospitality industry is seasonal in nature. The periods during which our hotels and resorts experience higher revenues vary from property to property, depending principally upon their 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.

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 the development and supply of and demand for hotel rooms, occupancy levels and room rates realized by owners of hotels through economic cycles. The combination 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 of such fixed costs, in a negative economic environment, the rate of decline in earnings can be higher than the rate of decline in revenues.

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, registration 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.

Government Regulation

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 contracts and require that certain materials be registered before franchises can be offered or sold in a particular jurisdiction.

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 employees, 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 consultants 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, manager and franchisor of properties in 105 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 and 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.

In addition, our business operations in countries outside the U.S. are subject to a number of laws and regulations, including restrictions imposed by the Foreign Corrupt Practices Act ("FCPA"), as well as trade sanctions administered by the Office of Foreign Assets Control ("OFAC"). The FCPA is intended to prohibit bribery of foreign officials and requires us to keep books and records that accurately and fairly reflect our transactions. OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign states, organizations and individuals. In addition, some of our operations may be subject to additional laws and regulations of non-U.S. jurisdictions, including the United Kingdom's ("U.K.") Bribery Act 2010, which contains significant prohibitions on bribery and other corrupt business activities, and other local anti-corruption laws in the countries and territories in which we conduct operations.

Environmental Matters

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. 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 waste that we generate, including at locations where such waste has 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 contracts, 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 managed 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 position, results of operations or cash flow.

Insurance

U.S. hotels that we manage are permitted to participate in certain of our insurance programs by mutual agreement with our hotel owners. If not participating in our programs, hotel owners 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. Foreign managed and franchised hotels are required to participate in certain of our insurance programs. In addition, our management and franchise contracts 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.

Most of our insurance policies are written with self-insured retentions or deductibles that are common in the insurance market for similar risks, and we believe such risks are prudent for us to assume. Our third-party insurance policies provide coverage for claim amounts that exceed our self-insurance retentions or deductible obligations. We maintain insurance coverage for general liability, property including business interruption, terrorism and other risks with respect to our business for all of our owned and leased hotels, and we maintain workers' compensation coverage for all of our team members. In addition, through our captive insurance subsidiary, we participate in a reinsurance arrangement that provides coverage for a certain portion of our deductibles. In general, our insurance provides coverage related to any claims or losses arising out of the design, development and operation of our hotels.

Corporate Responsibility

The success of our business is linked to the success of communities in which our hotels operate - from the local owners who partner with us to build hotels, to the local talent that operate the hotels, to the local economies and businesses our hotels support through sourcing products serving guests.

Travel with Purpose, our corporate responsibility strategy, is a holistic approach that leverages our global footprint and scale coupled with local insights and partnerships to address global and local challenges. Our strategy was developed by mapping social and environmental issues that are impacted by our business and will continue to be critical to our long-term success. We ranked the issues based on our influence and the relative importance to our business operations and stakeholder groups. We also engaged with both internal and external stakeholders to identify interests and concerns that should be taken into consideration as we continue to grow. We revisited our materiality results in 2015 and based on these results, we have identified the priority issue areas for our corporate responsibility efforts and forthcoming goals and targets. Creating shared value for hotel employees, guests, owners, communities and overall business is a strategic priority we strive to achieve by focusing on advancing three priority, material issue areas:

•	Creating opportunities - Youth Opportunity, Great Place to Work, Inclusive Economies: we have a passion and a responsibility to invest in current and future employees. We open doors that help individuals build meaningful job and life skills through the hospitality industry.

•	Strengthening communities - Skills-based Volunteering, Human Rights, Disaster Support: we encourage and enable our employees to deliver hospitality to our communities. We are committed to having a positive economic and social impact on the millions of communities and lives we touch.

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Preserving environment - Climate Changes, Energy, Carbon, Water, Waste, Responsible Sourcing: as environmental stewards for the wellbeing of people and ecosystems in our communities, we protect the environment through efficient and responsible operations and sourcing. Hilton has achieved a company-wide certification to ISO 14001 (Environmental Management) and ISO 50001 (Energy Management) standards.

LightStay, our proprietary corporate responsibility performance measurement platform, is a global brand standard that allows us to manage the impact of our hotels on the environment and global community through the measurement, analysis and improvement of our use of natural resources, opportunities created and community service. This year, for the first time, Hilton was named to the Dow Jones Sustainability Index North America as an industry leader across economic, social and environmental criteria.

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 corporate operations in 1946.

Employees

As of December 31, 2017, more than 163,000 people were employed at our managed, owned and leased properties and at our corporate locations.

As of December 31, 2017, approximately 31 percent of our employees globally (or 35 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.

Where You Can Find More Information

We file annual, quarterly and current reports, proxy statements and other information with the U.S. 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 newsroom.hilton.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.

We maintain an internet site at newsroom.hilton.com. Our website and the information contained on or connected to that site are not incorporated into this Annual Report on Form 10-K.