How Hilton’s Long-Term Debt Is Trending



Total debt

Total debt for Hilton (HLT) increased throughout 2016. The company started the year with $10.5 billion in debt and ended the year with $10.8 billion in debt. However, over the years, debt has fallen slightly. Hilton had a debt of ~$16 billion at the end of 2012, and it fell to $12.7 billion at the end of 2013, $11.7 billion at the end of 2014, and $10.5 billion at the end of 2015.

The hotel sector is capital intensive, and companies in the industry normally carry high debt. High debt affects valuation multiples, as debt is an important factor for investors. Reducing total debt helps Hilton reduce its interest expenses, achieve better investment ratings, and thus lower interest rates in the future.

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Net-debt-to-adjusted-EBITDA ratio

Despite the increase in total debt, the company’s net debt has improved. Hilton ended 2015 with a net debt of $9.8 billion, and this figure fell to $9.3 billion at the end of 2016. The debt reduction was due to increased cash on the company’s balance sheet. Cash rose to $1.4 billion at the end of 2016 as compared to $0.61 billion at the end of 2015. The increase has resulted in a slight decline in the net-debt-to-adjusted-EBITDA ratio from 16.5x at the start of 2016 to 16.4x at the end of 2016.

In the next article, we’ll discuss how valuation multiples have moved over the years for Hilton and its peers. Hilton and its peers such as Marriott (MAR), Wyndham (WYN), and Intercontinental Hotels (IHG) are part of various ETFs like the PowerShares Dynamic Leisure and Entertainment Portfolio (PEJ) and the Consumer Discretionary Select Sector SPDR Fund (XLY).


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