Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Hilton Worldwide Holdings Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,514 – 18.04% × 10,493 = -379
An analysis of economic profit indicates a persistent inability to generate returns exceeding the cost of capital between 2019 and 2023. Despite a significant recovery in operational profitability following a sharp contraction in 2020, the organization remained in a state of economic value destruction throughout the observed period.
- Net Operating Profit After Taxes (NOPAT)
- A volatile trajectory is observed, characterized by a severe decline in 2020, where NOPAT fell to -279 million. A strong recovery followed, with figures peaking at 1,814 million in 2022 before moderating to 1,514 million in 2023.
- Cost of Capital
- The hurdle rate has exhibited a general upward trend, rising from 16.74% in 2019 to 18.04% by 2023. This incremental increase raises the threshold for value creation and exerts continuous downward pressure on the economic profit margin.
- Invested Capital
- Invested capital reached a peak of 12,956 million in 2020. Following this peak, a consistent reduction in the capital base has been observed, with the figure declining to 10,493 million by 2023, indicating a trend toward capital optimization or asset reduction.
- Economic Profit
- Economic profit remained negative across all five years, signaling that the return on invested capital did not meet the cost of capital. The most significant value destruction occurred in 2020, with a loss of 2,318 million. While the deficit narrowed substantially to 190 million in 2022, the trend reversed in 2023, with the loss widening to 379 million as a result of declining NOPAT and an increasing cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Hilton Worldwide Holdings Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in deferred revenues.
4 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Hilton stockholders.
5 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 924 × 4.33% = 40
6 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 504 × 21.00% = 106
7 Addition of after taxes interest expense to net income (loss) attributable to Hilton stockholders.
- Net Income (Loss) Attributable to Hilton Stockholders
- The net income exhibited considerable volatility during the observed period. In 2019, the company reported a positive net income of $881 million. However, in 2020, the net income turned negative, recording a loss of $715 million, indicative of significant financial challenges during that year. Subsequently, there was a recovery with net income returning to a positive value of $410 million in 2021. The upward trend continued strongly into 2022, with net income reaching $1,255 million, followed by a slight decrease to $1,141 million in 2023. Despite this recent decline, the net income remained substantially higher than pre-pandemic levels, reflecting an overall recovery and growth trajectory.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT followed a pattern similar to net income but demonstrated stronger growth in the latter years. Starting at $1,213 million in 2019, NOPAT decreased to a negative $279 million in 2020, illustrating operational challenges during that period. A recovery phase occurred in 2021 with NOPAT rising to $614 million. This positive trend accelerated markedly in 2022, where NOPAT increased significantly to $1,814 million, followed by a modest decline to $1,514 million in 2023. Despite the slight reduction, the NOPAT values for 2022 and 2023 were well above pre-pandemic levels, signaling improved operational efficiency and profitability post-2020.
- Summary of Trends
- Both net income and NOPAT experienced a sharp downturn in 2020, likely due to extraordinary external factors impacting financial performance. The subsequent years reveal a consistent recovery, with both metrics surpassing the levels observed in 2019 by a substantial margin in 2022 and 2023. The slight decreases observed in 2023 for both net income and NOPAT suggest a potential stabilization or minor pullback following robust growth. Overall, the company demonstrates resilience and an ability to return to, and exceed, prior profitability levels after a significant dip.
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Cash Operating Taxes
Hilton Worldwide Holdings Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
The financial data for the period from December 31, 2019, to December 31, 2023, exhibits notable fluctuations in the provision (benefit) for income taxes and cash operating taxes. The provision for income taxes, expressed in millions of US dollars, shows significant variability over the years. In 2019, the provision stood at a positive 358 million, indicating tax expense. However, in 2020, there was a marked reversal to a negative figure of -204 million, which suggests a tax benefit or credit during that year. This shift likely reflects the impact of extraordinary events or changes in profitability and tax strategy during the pandemic year. In the subsequent years, 2021 through 2023, the provision for income taxes rose steadily from 153 million to 541 million, indicating a return to tax expenses and an increasing tax burden over this period.
Conversely, cash operating taxes demonstrate a consistent upward trend throughout the five-year span. Starting at 474 million in 2019, cash taxes dropped sharply to 130 million in 2020, aligning with the overall decline in tax provision during that year. This decrease likely corresponds to reduced taxable income or enhanced tax reliefs during 2020. From 2021 onwards, cash operating taxes increased significantly each year—from 249 million in 2021, to 539 million in 2022, and reaching 911 million in 2023. The sharp increase in cash operating taxes in 2023 suggests a substantial rise in taxable income or changes in tax payment policies, possibly reflecting improved operational performance or changes in tax laws.
- Provision for Income Taxes
- 2019: Positive tax expense noted at 358 million.
- 2020: Shift to a tax benefit of -204 million, indicating reduced tax burden or credits.
- 2021-2023: Progressive increase from 153 million to 541 million, signaling rising tax expenses.
- Cash Operating Taxes
- 2019: Moderate cash tax payment of 474 million.
- 2020: Sharp decline to 130 million, reflecting reduced cash tax outflows amid challenging conditions.
- 2021-2023: Steady increase from 249 million to 911 million, highlighting growth in actual tax payments.
Overall, the data reveals that 2020 was an anomalous year with reduced tax liabilities, both on a reported and cash basis, likely influenced by external economic disruptions. Following this period, there was a clear recovery and escalation in both tax expenses provided for and taxes paid in cash, which points to improved profitability and potential normalization of tax obligations. The divergence between provision and cash taxes is less pronounced in later years, indicating closer alignment between accounting tax expense and cash tax outflow.
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Invested Capital
Hilton Worldwide Holdings Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of deferred revenues.
5 Addition of equity equivalents to total Hilton stockholders’ deficit.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction-in-progress.
The financial data reveals several distinct trends regarding the company's debt, equity position, and invested capital over the five-year period.
- Total Reported Debt & Leases
- The total reported debt and leases consistently fluctuated within a range between approximately $9.1 billion and $11.6 billion. A notable increase occurred in 2020, rising sharply from $9.2 billion to $11.6 billion, likely reflecting elevated borrowing or leasing activities during that year. Subsequently, the debt level declined in 2021 and 2022 but increased again in 2023, settling slightly above $10 billion. This pattern suggests the company managed its leverage actively, possibly in response to external conditions impacting its financing needs.
- Total Hilton Stockholders’ Deficit
- The stockholders’ deficit exhibited significant volatility across the period, with all reported values remaining negative, indicating persistent equity shortfall. The deficit deepened markedly in 2020, deteriorating from -$482 million to -$1.49 billion, which may denote accumulated losses or increased liabilities. While some improvement occurred in 2021, the deficit worsened again in 2022 and reached its peak negative value of -$2.36 billion in 2023. This trend reflects ongoing challenges in achieving positive equity and may raise concerns about the company's capital structure and financial stability.
- Invested Capital
- Invested capital showed a rising trend from 2019 to 2020, increasing from $11.4 billion to almost $13 billion. After 2020, there was a steady decline over the next three years, with invested capital decreasing to approximately $10.5 billion by 2023. This decline might indicate asset disposals, reductions in capital expenditures, or changes in operational investments, potentially reflecting a strategic shift or responses to external market pressures.
In summary, the data suggests that the company experienced elevated leverage and equity deficits during the analyzed timeframe, especially around 2020 and onwards. Despite managing invested capital levels, ongoing equity challenges may impact financial flexibility and risk profile. Close monitoring and possible strategic adjustments to improve equity and manage debt levels could be necessary to enhance overall financial health.
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Cost of Capital
Hilton Worldwide Holdings Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 49,431) | 49,431) | ÷ | 59,263) | = | 0.83 | 0.83 | × | 20.79% | = | 17.34% | ||
| Long-term debt3 | 8,908) | 8,908) | ÷ | 59,263) | = | 0.15 | 0.15 | × | 5.40% × (1 – 21.00%) | = | 0.64% | ||
| Operating lease liability4 | 924) | 924) | ÷ | 59,263) | = | 0.02 | 0.02 | × | 4.33% × (1 – 21.00%) | = | 0.05% | ||
| Total: | 59,263) | 1.00 | 18.04% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 40,181) | 40,181) | ÷ | 49,234) | = | 0.82 | 0.82 | × | 20.79% | = | 16.97% | ||
| Long-term debt3 | 8,109) | 8,109) | ÷ | 49,234) | = | 0.16 | 0.16 | × | 4.92% × (1 – 21.00%) | = | 0.64% | ||
| Operating lease liability4 | 944) | 944) | ÷ | 49,234) | = | 0.02 | 0.02 | × | 4.22% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 49,234) | 1.00 | 17.67% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 43,641) | 43,641) | ÷ | 53,664) | = | 0.81 | 0.81 | × | 20.79% | = | 16.91% | ||
| Long-term debt3 | 9,013) | 9,013) | ÷ | 53,664) | = | 0.17 | 0.17 | × | 3.65% × (1 – 21.00%) | = | 0.48% | ||
| Operating lease liability4 | 1,010) | 1,010) | ÷ | 53,664) | = | 0.02 | 0.02 | × | 3.87% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 53,664) | 1.00 | 17.45% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 30,934) | 30,934) | ÷ | 43,005) | = | 0.72 | 0.72 | × | 20.79% | = | 14.96% | ||
| Long-term debt3 | 10,930) | 10,930) | ÷ | 43,005) | = | 0.25 | 0.25 | × | 3.49% × (1 – 21.00%) | = | 0.70% | ||
| Operating lease liability4 | 1,141) | 1,141) | ÷ | 43,005) | = | 0.03 | 0.03 | × | 3.82% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 43,005) | 1.00 | 15.74% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 31,335) | 31,335) | ÷ | 40,831) | = | 0.77 | 0.77 | × | 20.79% | = | 15.96% | ||
| Long-term debt3 | 8,326) | 8,326) | ÷ | 40,831) | = | 0.20 | 0.20 | × | 4.36% × (1 – 21.00%) | = | 0.70% | ||
| Operating lease liability4 | 1,170) | 1,170) | ÷ | 40,831) | = | 0.03 | 0.03 | × | 3.76% × (1 – 21.00%) | = | 0.09% | ||
| Total: | 40,831) | 1.00 | 16.74% | ||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Hilton Worldwide Holdings Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (379) | (190) | (1,408) | (2,318) | (698) | |
| Invested capital2 | 10,493) | 11,342) | 11,581) | 12,956) | 11,409) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -3.61% | -1.68% | -12.15% | -17.89% | -6.11% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Airbnb Inc. | 9.30% | 10.94% | -11.17% | — | — | |
| Booking Holdings Inc. | 14.58% | 3.73% | -13.72% | — | — | |
| Chipotle Mexican Grill Inc. | 6.96% | 2.76% | -1.73% | — | — | |
| DoorDash, Inc. | -39.57% | -53.35% | -39.86% | — | — | |
| McDonald’s Corp. | 8.63% | 5.83% | 8.25% | — | — | |
| Starbucks Corp. | 5.15% | 2.75% | 4.01% | -8.54% | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -379 ÷ 10,493 = -3.61%
4 Click competitor name to see calculations.
An analysis of the five-year period reveals a consistent inability to generate positive economic value, as economic profit remained negative from 2019 through 2023. However, the data indicates a significant volatility peak in 2020 followed by a general recovery trend that peaked in 2022 before a slight regression in 2023.
- Economic Profit Performance
- Economic profit experienced a severe contraction in 2020, dropping to -2,318 million US$ from -698 million US$ in 2019. A steady recovery was observed over the subsequent two years, with the deficit narrowing to -1,408 million US$ in 2021 and reaching its most favorable level of -190 million US$ in 2022. In 2023, a slight reversal occurred, with economic profit widening to -379 million US$.
- Invested Capital Trends
- Invested capital peaked in 2020 at 12,956 million US$, representing an increase from the 11,409 million US$ reported in 2019. Following this peak, a consistent downward trend in the capital base is observed, with invested capital declining annually to 11,581 million US$ in 2021, 11,342 million US$ in 2022, and reaching a period low of 10,493 million US$ by the end of 2023.
- Economic Spread Ratio Analysis
- The economic spread ratio reflects the correlation between economic profit and invested capital. The ratio deteriorated sharply to -17.89% in 2020, marking the lowest point of efficiency in capital utilization. Significant improvement followed, with the ratio ascending to -12.15% in 2021 and nearly reaching a break-even state at -1.68% in 2022. The ratio declined again to -3.61% in 2023, suggesting that the return on invested capital remained below the cost of capital throughout the entire duration.
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Economic Profit Margin
Hilton Worldwide Holdings Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (379) | (190) | (1,408) | (2,318) | (698) | |
| Revenues | 10,235) | 8,773) | 5,788) | 4,307) | 9,452) | |
| Add: Increase (decrease) in deferred revenues | 215) | 173) | (128) | 215) | (17) | |
| Adjusted revenues | 10,450) | 8,946) | 5,660) | 4,522) | 9,435) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -3.62% | -2.13% | -24.87% | -51.25% | -7.39% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Airbnb Inc. | 5.41% | 8.69% | -10.10% | — | — | |
| Booking Holdings Inc. | 7.79% | 2.98% | -18.79% | — | — | |
| Chipotle Mexican Grill Inc. | 4.22% | 1.72% | -1.25% | — | — | |
| DoorDash, Inc. | -24.00% | -43.11% | -25.92% | — | — | |
| McDonald’s Corp. | 16.94% | 11.42% | 16.95% | — | — | |
| Starbucks Corp. | 3.19% | 1.75% | 3.26% | -8.33% | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -379 ÷ 10,450 = -3.62%
3 Click competitor name to see calculations.
The financial performance from 2019 to 2023 is characterized by a significant disruption in economic value creation, followed by a phased recovery in both top-line revenue and profit margins. Economic profit remained negative throughout the analyzed period, indicating that the returns generated were insufficient to cover the cost of capital.
- Economic Profit Trends
- A substantial increase in economic loss occurred in 2020, where the deficit widened to -2,318 million US dollars from -698 million US dollars in 2019. A progressive reduction in these losses followed, with the deficit narrowing significantly to -190 million US dollars by 2022, before experiencing a slight reversal to -379 million US dollars in 2023.
- Adjusted Revenue Trajectory
- Revenues experienced a sharp contraction in 2020, falling from 9,435 million US dollars to 4,522 million US dollars. A consistent upward trend was observed thereafter, with revenues surpassing 2019 levels by 2023, reaching a peak of 10,450 million US dollars.
- Economic Profit Margin Analysis
- The economic profit margin exhibited extreme volatility, plummeting from -7.39% in 2019 to -51.25% in 2020. A strong recovery trend ensued, with the margin improving to -24.87% in 2021 and reaching its highest point of -2.13% in 2022. However, a slight deterioration to -3.62% was observed in 2023, despite the increase in adjusted revenues, suggesting that the growth in revenue did not fully offset the factors contributing to the economic loss in the final year.
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