Hilton Hotels Corp. 4th Quarter Profit Up 62%

Strong Demand Brings Double-digit RevPAR Growth in All Major Markets

. October 14, 2008

BEVERLY HILLS, CA, January 31, 2006. Hilton Hotels Corporation (NYSE:HLT) today reported financial results for the fourth quarter and fiscal year ended December 31, 2005. Fourth quarter highlights:

Reported diluted EPS of $.26 versus $.16 in 2004 period, an increase of 63 percent; recurring EPS $.22 versus $.17 in 2004 period, an increase of 29 percent.

Comparable owned hotel RevPAR up 13.5 percent; double-digit RevPAR growth in virtually all major markets; comparable owned hotel margins increase 230 basis points from Q4 2004 to 31.4 percent (New Orleans excluded from comparable numbers.)

Fees up 19 percent from RevPAR gains, new units.

Timeshare revenues up 24 percent; profitability declines 14 percent due to comparatively higher costs.

All-cash acquisition of the lodging assets of Hilton Group plc expected to be completed in the first quarter 2006.

Hilton reported fourth quarter 2005 net income of $105 million compared with $65 million in the 2004 quarter. Diluted net income per share was $.26 in the 2005 fourth quarter, versus $.16 in the 2004 period. Two non-recurring items in the 2005 quarter impacted earnings per share by $.04: 1) a net gain of $.06 per share from asset dispositions, and 2) a $.02 per share hedging loss. EPS in the 2004 fourth quarter was impacted by $.01 as a result of an impairment charge on a Red Lion hotel and the sale of two Doubletree properties.

The company reported fourth quarter 2005 total operating income of $193 million (a 15 percent increase from $168 million in the 2004 period,) on total revenue of $1.083 billion (a 3 percent increase from $1.054 billion in the 2004 quarter.) Total company earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") were $273 million, an increase of 2 percent from $267 million in the 2004 quarter.

For full-year 2005, Hilton reported net income of $460 million versus $238 million in 2004; diluted net income per share was $1.13 compared with $.60 in 2004. Non-recurring items benefited the 2005 full year by $.28 per share, and benefited the 2004 year by $.02 per share. Total company operating income was $805 million in 2005 (a 22 percent increase from $658 million in 2004,) on revenue of $4.437 billion (up 7 percent from $4.146 billion in 2004.) Total company Adjusted EBITDA was $1.140 billion, a 12 percent increase from $1.021 billion in 2004.

Fourth quarter and full-year 2005 revenue, operating income and Adjusted EBITDA were impacted by asset sales completed during the year.

Owned Hotel Results

Increases in room nights and average daily rate (ADR) across all business segments - particularly in the business transient category - resulted in double-digit revenue-per-available-room (RevPAR) gains in the fourth quarter at the company's owned hotels in New York City, Honolulu, Boston, Washington, D.C., Chicago and the San Francisco/San Jose area.

Across all brands, revenue from the company's owned hotels (majority owned and controlled hotels) was $490 million, a 10 percent decrease from $542 million in the 2004 period. Total revenue from comparable owned hotels (excluding New Orleans and the impact of 22 property sales dating back to October 1, 2004) was up 10 percent. RevPAR from comparable owned hotels increased a strong 13.5 percent. Comparable owned hotel occupancy increased 2.5 points to 74.2 percent, while ADR increased 9.7 percent to $195.53. Approximately 75 percent of the quarterly RevPAR increase at the comparable owned hotels was attributable to the ADR gains.

Total owned hotel expenses were down 11 percent in the quarter to $342 million. Expenses at the comparable owned hotels increased 6 percent, due primarily to an increase in occupied rooms. Cost-per-occupied-room (CPOR) increased 2.9 percent in the quarter.

Comparable owned hotel margins in the fourth quarter increased 230 basis points to 31.4 percent.

For full-year 2005, revenue from the company's owned hotels (majority owned and controlled hotels) was $2.049 billion, compared with $2.062 billion in 2004. Total revenue from comparable owned hotels (excluding New Orleans and the impact of 25 property sales dating back to January 1, 2004) was up 10 percent from 2004. RevPAR from comparable owned hotels (also excluding New Orleans and the aforementioned property sales) increased 11.9 percent for full-year 2005 when compared with full-year 2004; occupancy increased 2.2 points to 77.3 percent, and ADR showed an 8.7 percent increase to $178.35. Total owned hotel expenses in 2005 were down 3 percent to $1.459 billion; expenses at the comparable owned hotels increased 7 percent in 2005. Comparable owned hotel margins increased 180 basis points in 2005 to 28.8 percent.

The company's two owned hotels in New Orleans - the Hilton New Orleans Riverside and the Hilton New Orleans Airport - are excluded from the comparable numbers due to interruptions in operations caused by Hurricane Katrina. Both hotels are currently fully operational.

System-wide RevPAR; Management/Franchise Fees

Each of the company's brands reported significant system-wide RevPAR increases, with particularly strong gains in ADR. On a system-wide basis (including managed and franchised properties,) the company's brands showed fourth quarter RevPAR gains as follows: Hilton, 12.5 percent; Doubletree, 10.7 percent; Hampton Inn, 9.8 percent; Embassy Suites, 9.4 percent; Hilton Garden Inn, 8.0 percent, Homewood Suites by Hilton, 7.5 percent.

Management and franchise fees increased 19 percent in the fourth quarter to $114 million, benefiting from both RevPAR gains and the addition of new units.

For full-year 2005, system-wide RevPAR at Hilton's brands improved as follows: Hilton, 11.8 percent; Hampton Inn, 11.1 percent; Doubletree, 10.4 percent; Embassy Suites, 9.3 percent; Hilton Garden Inn, 9.3 percent, Homewood Suites by Hilton, 7.2 percent.

Management and franchise fees in 2005 increased 18 percent from 2004 to a record $452 million.

Brand Development/Unit Growth

In the fourth quarter, the company added 48 properties and 6,970 rooms to its system as follows: Hampton Inn, 19 hotels and 1,690 rooms; Hilton Garden Inn, 14 hotels and 1,913 rooms; Doubletree, 6 hotels and 1,686 rooms; Homewood Suites by Hilton, 3 hotels and 302 rooms; Embassy Suites, 2 hotels and 538 rooms; Hilton, 1 hotel and 289 rooms; Conrad, 1 hotel and 311 rooms; Hilton Grand Vacations, 1 property and 22 units, and other non-branded, 1 hotel and 219 rooms. Seventeen hotels and 2,412 rooms were removed from the system during the quarter.

During the fourth quarter, the Hilton brand added a new full-service hotel in British Columbia, Canada (the Whistler Ski Resort and Spa), and in early 2006 added new hotels in Dallas (the Anatole Hotel) and in San Francisco's Financial District. Doubletree added hotels in the fourth quarter in Milwaukee, Atlanta, St. Louis, Rochester, Cleveland, Newark and Houston, and in early 2006 in Tampa, Detroit, Pittsburgh and Bloomington (Ill.) Also in the fourth quarter, Conrad Hotels added a new luxury property in Chicago.

In early 2006, the company introduced a new brand line, the Waldorf=Astoria Collection. This new, elite brand designation debuts with New York's legendary Waldorf=Astoria, along with three world-class luxury resorts newly managed by Hilton: the Grand Wailea Resort Hotel & Spa on the island of Maui in Hawaii; the Arizona Biltmore Resort & Spa in Phoenix, and La Quinta Resort & Club in La Quinta, California.

For full-year 2005, the company added 175 properties and 24,631 rooms to its system. Forty-six properties and 8,370 rooms were removed from the system during 2005.

At December 31, 2005, the Hilton system consisted of 2,388 hotels and 374,669 rooms. The company's current development pipeline is its biggest yet, with approximately 600 hotels and 78,000 rooms at December 31, 2005, not including potential international development.

Hilton Grand Vacations

Hilton Grand Vacations Company (HGVC), the company's vacation ownership business, reported a 14 percent decline in profitability in the fourth quarter owing primarily to higher costs. Results in the 2005 period reflect a comparatively higher cost of product, partially due to a change in the sales mix, and an increase in corporate overhead. Unit sales declined 6 percent in the quarter, and average unit sales price increased 7 percent, driven by Las Vegas, Orlando and Waikoloa. HGVC had fourth quarter revenue of $130 million, a 24 percent increase from $105 million in the 2004 quarter. Expenses were $111 million in the fourth quarter, compared with $83 million in the 2004 period.

For full-year 2005, HGVC revenue was $554 million, compared with $421 million in 2004; expenses were $420 million versus $316 million in 2004.

Asset Dispositions

During the fourth quarter, the company sold six hotels - the Hilton Dallas-Ft. Worth, Hilton Anchorage, Hilton Portland, Hilton San Diego Resort, Hilton Boston Back Bay and Hilton Southfield (Michigan) - for a total of approximately $420 million. Hilton is retaining management or franchise agreements on all six properties. In 2005, the company sold 20 owned hotels for more than $1 billion, retaining management or franchise contracts on all but one property.

Acquisition of Hilton International

On December 29, 2005, the company announced an agreement to acquire the lodging assets of Hilton Group plc (known collectively as Hilton International) for approximately GBP 3.3 billion. The company will finance the transaction with existing cash on hand at the time of the closing, and with borrowings under a new bank facility that is being arranged through a large consortium of banks.

The transaction received approval from Hilton Group shareholders January 27, and is on schedule to be completed in the first quarter 2006. Completion of the transaction remains subject to a number of conditions, including receipt of certain competition and governmental clearances.

Corporate Finance

At December 31, 2005, Hilton had total debt of $3.6 billion (net of $100 million of debt resulting from the consolidation of a managed hotel, which is non-recourse to Hilton.) Approximately 13 percent of the company's debt is floating rate debt. Total cash and equivalents (including restricted cash) were approximately $1.3 billion at December 31, 2005.

The company's average basic and diluted share counts for the fourth quarter were 382 million and 415 million, respectively. For full-year 2005, the company's average basic and diluted share counts were 383 million and 417 million, respectively.

Hilton's debt currently has an average life of 7.9 years, at an average cost of approximately 7.1 percent.

The company's effective tax rate in the fourth quarter 2005 was 35 percent. The effective tax rate benefited from tax credits associated with the company's synthetic fuel investment.

Total hotel capital expenditures in the fourth quarter were $101 million, with an additional $54 million expended for timeshare development. For full-year 2005, total capital expenditures were $602 million, including $179 million expended for timeshare development and $180 million related to land acquisition on Hawaii's Big Island.

Updated 2006 Outlook

The company provided the following estimates for full-year 2006, noting that the estimates are for Hilton Hotels Corporation as a stand-alone company and do not include any impact from the pending Hilton International transaction. More detailed guidance will be provided in the company's first quarter 2006 earnings report if, as expected, the Hilton International acquisition is completed in the first quarter.

Comparable U.S. owned hotel RevPAR - Increase of 8 - 10%

Comparable U.S. owned hotel margin growth - 100 - 200 basis points

North America management/franchise fee growth - Approximately 15%

Timeshare profitability growth - Approximately 10%

Total domestic capital spending in 2006 is expected to be approximately $495 million, broken out as follows: approximately $125 million for routine improvements, $195 million for timeshare projects, and $175 million in hotel renovation, ROI or special projects.

The company anticipates adding approximately 200 hotels and 28,000 rooms to its system in 2006, not including potential international development.

"While 2005 will be remembered for our historic agreement to acquire Hilton International, we are also very pleased that in the fourth quarter and full-year 2005 we achieved exceptional financial results, experienced strong performance across our owned hotels, opened more hotels in the U.S. than anyone in the industry, saw record results in our timeshare and fee businesses, and introduced a number of exciting product, service and marketing initiatives," said Stephen F. Bollenbach, co-chairman and chief executive officer of Hilton Hotels Corporation.

"Demand for hotel rooms, particularly among business travelers, continued to accelerate in 2005. Occupancy levels of 90 percent were the norm at some of our large hotels in New York and Hawaii, and the increase in business travel -- coupled with little new full-service supply -- enabled us to once again significantly increase room rates.

"Unit growth continues to be strong across all of our brands. We were pleased in 2005 to mark the opening of the 1,300th Hampton Inn and the 250th Hilton Garden Inn, while also seeing outstanding growth in our full-service Hilton and Doubletree brands. Our development pipeline has never been bigger, which speaks to the appeal of our brands to hotel owners."

Mr. Bollenbach continued: "Our decision to increase our investment in timeshare has paid off as our selective approach to development, along with high quality product, has generated strong returns, the best in the industry.

"In 2006, we look forward to a continuation of the strong business trends we experienced in 2005, along with the new worldwide growth opportunities presented by our acquisition of Hilton International. We had an exciting and productive year in 2005, and anticipate a great future in 2006 and beyond for our customers, team members, owners and shareholders."

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