Hilton Grand Vacations Inc. · NYSE:HGV
Hilton Grand Vacations — Investor Day (December 2018)
159 slides from Hilton Grand Vacations's investor day presentation, Dec 4, 2018
Slide 1: 2018 Investor Day
2018 INVESTOR DAY GRAND VACATIONS,
Slide 2: Agenda
AGENDA 8:00 AM Welcome 8:15 AM tours 9:15 AM egy discussion 11:30 AM Lunch with ELT 12:30 PM Capital allocation & guidance 1:15 PM Q&A session 2:00 PM Closing remarks HILTON
Slide 3: Disclaimer
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Slide 6: We Deliver Consistently Great Vacations for a Lifetime
WE DELIVER CONSISTENTLY GREAT VACATIONS FOR A LIFETIME
Slide 7: Introductions
INTRODUCTIONS Sherri Silver Stan Soroka Dan Mathewes. Allen Klingsick Erin Day Robert LaFleur OSWG Gordon Gurnik — Barbara Hollkamp Charles Corbin Dennis DeLorenzo E > P, CHRC ne & HILTON
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Slide 10: The Timeshare Sales Model Has Evolved
THE TIME SHARE SALES MODEL HAS EVOLVED
Slide 11: Top Timeshare Companies Are Partnering with Leading Hotel Brands
TOP TIMESHARE COMPANIES ARE PARTNERING WITH LEADING HOTEL BRANDS, CREATING TRUST, CREDIBILITY, AND CONSISTENCY cerio © Be Gp @ se wed wh. Ww 7 ager CONRAD canopy [Hilton] HILTON
Slide 12: Timeshare Is Healthy and Growing
TIMESHARE IS HEALTHY AND GROWING USS. timeshare contract sales ($B) 10) 2009 2010 2001 2012 2013 2014 2015 2016 2017 HILTON
Slide 13: The Vacation Option
LE VACATION OPTION
Slide 14: One of the Fastest Growing Travel Leisure Categories
ONE OF THE FASTEST GROWING TRAVEL LEISURE CATEGORIES % sales growth since 2010! Cruise Timeshare Hotel Spas Casinos Se. Ne fl &B HILTON
Slide 15: Despite Continued Growth, Penetration Remains Low
DESPITE CONTINUED GROWTH, PENETRATION REMAINS LOW APPROX. APPROX. APPROX. APPROX. $6K 17% 7% 2% annual leisure growth in leisure timeshare branded travel spend spend over last penetration of timeshare per household! 5 years? US market penetration of US market HILTON
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Slide 26: IHU! ii HTH
IHU! ii HTH
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Slide 32: Agenda: What We Will Cover Today
AGENDA: WHAT WE WILL COVER TODAY We have a winning net owner growth driven demand strategy ina great industry We manage for strong returns through our unique capital efficient inventory strategy Our model is resilient and proven through market cycles We will take a dynamic approach to allocating cap
Slide 33: Key Takeaways from Our Presentation Today
KEY TAKEAWAYS FROM OUR PRESENTATION TODAY * Consistent and proven net owner growth driven strategy * Sustainable and predictable future growth from a disciplined focus on the embedded value of our owner base * Differentiated demand generation with market-leading topline growth and margins * Most glo
Slide 34: Our Net Owner Growth Driven Strategy
OUR NET OWNER ee ; (NOG): DRIVEN-STRA
Slide 35: NOG Is a Simple, Yet Powerful Concept at the Core of Our Strategy
NOG IS A SIMPLE, YET POWERFUL CONCEPT THAT IS THE CORE OF OUR STRATEGY ADD RETAIN Net new existing Owner owners owners GROWTH Create Deliver exceptional NOG is the y-o-y % demand vacation experiences change in members HILTON
Slide 36: NOG Creates the Most Value for Shareholders Over the Long-Term
NOG CREATES THE MOST VALUE FOR SHAREHOLDERS OVER THE LONG-TERM Ss Each new HGV owner is a source of highly predictable recurring EBITDA Ze Our net owner growth increases embedded value in the business year after year We realize substantial value in near-term due to faster upgrade cycles foe) We repl
Slide 37: New Owners Generate Revenue Across All Four Business Segments
NEW OWNERS GENERATE REVENUE ACROSS ALL FOUR BUSINESS SEGMENTS Real Estate I poe d Financing i = Rental & Ancillary & HILTON usiness line margin
Slide 38: Three Revenue Streams Are Highly Predictable and/or Contractual
THREE REVENUE STREAMS ARE HIGHLY PREDICTABLE AND/OR CONTRACTUAL, ACTING AS EMBEDDED SOURCES OF VALUE Financing 65% of customers finance their real estate purchase, typically a 10-year, approximately 12% fixed rate secured loan Real Estate For every $1 of initial real estate purchase an owner makes,
Slide 39: +$1.0B +$1.4B +$0.9B+$1.0B +$1.4B +$0.9B
+$1.0B +$1.4B +$0.9B+$1.0B +$1.4B +$0.9B
Slide 40: The First Way to Grow Embedded Value Is to Grow Total Owners
THE FIRST WAY TO GROW EMBEDDED VALUE IS TO GROW THE TOTAL NUMBER OF OWNERS, WHICH WE HAVE DONE... Grow the total number of owners Hav owners 300,000 200,000 100,000 ° Sa 8 8 8 2 8°85 8 8 9 f 8 8s 8 8 8 6 888 6 66 8 © © § &6 § § § & & S& 8 $8 § 8 8 8 8 8 ge se 8 FF FF eR RB RR RRR HILTON
Slide 41: The Second Way to Grow Embedded Value Is to Grow Sales to Each Owner
THE SECOND WAY TO GROW EMBEDDED VALUE IS TO GROW SALES TO EACH OWNER, WHICH WE HAVE ALSO DONE Grow sales to each owner Sales to existing owners / owner base ($ / owner) 2,500 7099) 1,500 1,000 500 ° HILTON
Slide 42: We Also Have the Highest Relative Sales to Our Current Owner Base
WE ALSO HAVE THE HIGHEST RELATIVE SALES TO OUR CURRENT OWNER BASE 2017 owned sales / member ($M) $1,546 HILTON () 2017 sales to existing owners ! $650M $1,372M Members 269K 887K $1,325 $530M 400K HI
Slide 43: +$0.9B +$0.3B +$0.5B +$1.4B +$0.3B +$1.0B+$0.9B +$0.3B +$0.5B +$1.4B +$0.3B +$1.0B
+$0.9B +$0.3B +$0.5B +$1.4B +$0.3B +$1.0B+$0.9B +$0.3B +$0.5B +$1.4B +$0.3B +$1.0B
Slide 44: Deep Dive: Owner Upgrades Are Highly Predictable
DEEP DIVE | WE HAVE TRACKED OWNER UPGRADES FOR OVER 20 YEARS, AND THEY ARE HIGHLY PREDICTABLE i oe eaetilbe rebreseits Howe % of owners with additional purchase based on when they first purchased with HGV. 5 10 15 20 25 Years of ownership Year first. ——2017 —20n — 1095 purchased. —2016 HILTON
Slide 45: Deep Dive: Upgrades Have Accelerated
DEEP DIVE | UPGRADES HAVE ACCELERATED - OWNERS ARE UPGRADING FASTER AND MORE OFTEN % of owners with additional purchase 30% of ournew 50% ‘owners make an additional purchase 40% 30% 20% 10% 0% 5 10 16 20 25 ee Sse vnansaae psa HILTON
Slide 46: We Monetize Embedded Value in the Near Term, Then Embed More
WE MONETIZE EMBEDDED VALUE IN THE NEAR TERM, THEN EMBED EVEN MORE FUTURE VALUE BY ADDING NEW OWNERS Embedded value of owner base ($M) (Rounded to nearest $100!) 600 3,500 3,300 Eee «CC Finance -400 Club and Resort Real Estate 2017 Embedded value Embedded NOG Embedded 2018 Embedded value value realiz
Slide 47: Three Scenarios Illustrate the Long Term Value of NOG
THREE SCENARIOS ILLUSTRATE THE LONG TERM VALUE OF NOG Strong net owner growth HGV Strategy and a balanced mix Oo% No net owner growth NOG and a balanced mix 0% No net owner growth NOG and owner heavy mix HILTON
Slide 48: Our Strategy Grows Embedded Value for the Long-Term
OUR STRATEGY GROWS EMBEDDED VALUE FOR THE LONG-TERM... For illustrative purposes only Embedded value of owner base, net of annual realized value ($B) 7% 5 5-7% NOG 50% of sales to owners 0% NOG 50% of sales > to owner: 0% NOG 70% of sales to owners 207 Current Year! Year 2 Year 3 Year 4 Year 5 Year
Slide 49: Club & Resort Management Revenue Scenarios
..AND ALLOWS US TO DIFFERENTIALLY DRIVE HIGH MARGIN CLUB & RESORT MANAGEMENT REVENUE Club & Resort mgmt. revenue ($M) Revenue! lll EBITDA $500 EY 5-7% NOG to owners $0 $300 @e———“— 0% NOG 50% of sales to owners $0 $300 Q % NOG 70% of sales to owners 2017 Current Year! Year2 Year3 Year4 YearS Year6 Y
Slide 50: NOG and Balanced Mix Creates Sustainable Growth
NOG AND BALANCED MIX CREATES SUSTAINABLE GROWTH Scenarios 5-7% NOG 50% of sales to owners 0% NOG 50% of sales to owners 0% NOG 70% of sales to owners Impact on margin and embedded value 32% (>) Overall real estate margin 32% (>) Overalll real estate margin 36% (>) Overall real estate margin Consiste
Slide 51: Our NOG Strategy Has Paid Off with Industry Leading Growth
OUR NOG STRATEGY HAS PAID OFF WITH INDUSTRY LEADING GROWTH OVER THE PAST DECADE NOG CAGR Revenue CAGR ('O7-'17) (07-17) HILTON 9% >) 10% GRAND VACATIONS MARRIOTT VACATIONS 1% 0) -2% WORLDWIDE QO «6 x eco bluegreenvacations 4% (>) 0% HILTON
Slide 52: Generated Stable EBITDA Growth Over the Past Eight Years
GENERATED STABLE EBITDA GROWTH OVER THE PAST EIGHT YEARS Adjusted EBITDA ($M) [ASC 605, Percent of completion (POC) 500 = 400 4 200 20n 2012 2013, 2014 2015 2016 2017 2018! HILTON
Slide 53: Fastest NOG Growth with the Best Margin Profile
WE COMBINE THE FASTEST NOG GROWTH IN THE INDUSTRY WITH THE BEST MARGIN PROFILE 2017 Adjusted EBITDA margin (%) HILTON GRAND VACATIONS MARRIOTT VACATIONS WORLDWIDE HILTON
Slide 54: Net Owner Growth Drivers
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Slide 55: NOG Is a Powerful, Self-Reinforcing Cycle
NOG IS A POWERFUL, SELF-REINFORCING CYCLE THAT FUELS SUSTAINABLE GROWTH AN) ransom fe) fo} generation New owners NOG VALUE CREATION CYCLE 4 a Growing uw S Strategic Inventory expansion
Slide 56: We Are Differentiated at Every Step of the NOG Cycle
WE ARE DIFFERENTIATED AT EVERY STEP OF THE NOG CYCLE Strong new customer n mix ix and Powerful Hilton highest VPG (volum Partnershi Tour demand guest) in the industry» Innovation and generation predictabii in State-of-the-art sales centers and processes tour sourcing Early investments in Diverse own
Slide 57: Industry Leading Tour Generation
Tour demand generation NOG VALUE CREATION CYCLE Strategic Inventory expansion INDUSTRY LEADING TOUR GENERATION We have a powerful and exclusive relationship with Hilton, the world’s most. valuable hotel brand We have multiple sourcing channels, and -70% orn new buyer tours are book advance, creating
Slide 58: Our Relationship with Hilton Provides Three Key Marketing Benefits
OUR RELATIONSHIP WITH HILTON PROVIDES US WITH THREE KEY MARKETING BENEFITS THAT WE FULLY LEVERAGE Hilton is the world's most valuable © hotel brand! HILTON
Slide 59: Trust: The Hilton Brand Is a Significant Influencer
TRUST | THE HILTON BRAND IS A SIGNIFICANT INFLUENCER WHEN CONSIDERING AND PURCHASING HGV VACATION OWNERSHIP “Why did you consider purchasing "Why did you purchase a a timeshare with HGV?” timeshare with HGV?” "| was offered a tour package” "| liked the amenities” "The properties were in places | wan
Slide 60: Access: Fastest Organic Growth Loyalty Program
ACCESS | WE SOURCE TOURS FROM THE FASTEST ORGANIC GROWTH LOYALTY PROGRAM IN THE WORLD WyNDHAM REWARDS 9 % Hilton Honors Members (M) ilton HONORS Annual growth 16% Annual growth arn RE 10% Annual growth! ott ROS ° 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Slide 61: Access: Hilton Digital Reach and Honors Database
ACCESS | HILTON HAS A WIDE DIGITAL REACH, EXPANSIVE FOOTPRINT, AND LARGE AND GROWING HONORS DATABASE Unique website visits per year and one of the highest ~250M sens aes ° rated hospitality apps, downloaded every 8 seconds! ~5.4K Locations around the world across 106 countries! ~80M Hilton Honors me
Slide 62: Data: Multiple Data Sources Enhance Targeting
DATA | MULTIPLE DATA SOURCES ENHANCE OUR TARGETING CAPABILITIES Hilton stay data 3' party data We source data Hilton Honors database from Hilton and non-Hilton channels across multiple sources Other (surveys, owner HGV data feedback, etc.) HILTON
Slide 63: Travel Incentives Create a Steady Flow of Prospects
WE USE TRAVEL INCENTIVES TO CREATE A STEADY FLOW OF PROSPECTS FOR FACE TO FACE SALES PRESENTATIONS ay Future mini-vacations Same trip sales presentations Hilton reservations call transfer Hilton locations near sales centers Hilton hotels Offsite booths: Japan and Hawaiian village HILTON
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Slide 65: Ability to Source New Buyer Tours in Advance Drives Predictable Demand
OUR ABILITY TO SOURCE NEW BUYER TOURS IN ADVANCE FROM HILTON AND OTHER CHANNELS DRIVES PREDICTABLE DEMAND Distribution of tour sources in past three years 2015 2016 2017 Same trip tours _ Ill Tours booked in advance
Slide 66: We Have Used Our Channels to Drive Strong Tour Growth
WE HAVE USED OUR CHANNELS TO DRIVE STRONG TOUR GROWTH Tours (000s) 400 300 CAGR +9% 200 100 2005 2006» 2007-2008» 2009 2010 20-2012, 2013. 2014S 201520162017 «2018, HILTON
Slide 67: APPROX. ~49M APPROX. APPROX. 49M 107M 128M APPROX. 225K APPROX. ~49M APPROX. APPROX. 49M
APPROX. ~49M APPROX. APPROX. 49M 107M 128M APPROX. 225K APPROX. ~49M APPROX. APPROX. 49M 107M 128M APPROX. 225K
Slide 68: Three Areas to Continue to Expand Tour Flow
WE WILL FOCUS ON THREE AREAS TO CONTINUE TO EXPAND TOUR FLOW More sophisticated, frequent, and targeted marketing Increase the markets we have access to as we grow inventory and sales centers New Hilton channels (digital and physical) HILTON
Slide 69: New Owners Are the Start of a Long and Profitable Relationship
NEW OWNERS ARE THE START OF A LONG AND PROFITABLE RELATIONSHIP WITH HGV Tour demand generation NOG VALUE CREATION Strategic Inventory expansion value prop Highest VPG in industry, and strong new owner mix with 49% of our sales from new owners! Unique personalized sales process and innovative, next g
Slide 70: APPROX. $4,200APPROX. $4,200
APPROX. $4,200APPROX. $4,200
Slide 71: Invested Ahead of the Industry to Build Next Generation Sales Centers
INVESTED AHEAD OF THE INDUSTRY TO BUILD INNOVATIVE, NEXT GENERATION SALES CENTERS =— =
Slide 72: Enhancements to Transform Customer Tour Return
SIGNIFICAD ENHANCEMENTS TO TRANS CUSTOMER TOU URN
Slide 73: BETTER ES
BETTER ES VED CONVE
Slide 74: Our Owner Base Is Globally Diverse and Growing
OUR OWNER BASE IS GLOBALLY DIVERSE AND GROWING % OTHER INT'L ‘OWNERS noe sho cana g 8 8 S JAPANESE OWNERS. 2 106 = é U.S. OWNERS 2on 202 2015 2014 2015 2016 2017 HILTON
Slide 75: The US Owner Base Is Financially Strong
THE US OWNER BASE IS FINANCIALLY STRONG. 55 AVG. OWNER AGE? 92% HOMEOWNERS? Oo fo a fo g 64% COLLEGE EDUCATED? on 20% of US millennials plan to spend more on travel in coming year! ARE MILLENNIALS? N % ~$150K AVERAGE INCOME? 743 FICO i®» HILTON
Slide 76: And We Have Unique Strength in Japan
AND WE HAVE UNIQUE STRENGTH IN JAPAN Growing, upper income owner base Established presence and marketing channels oo soll ~JP¥13M 60K AVERAGE INCOME! owners vs) ze COLLEGE EDUCATED LEISURE DAYS PER YEAR Ste pte MARKETING EVENTS?
Slide 77: NOG Creates a Need for Inventory; Differentiated Approach
NET OWNER GROWTH CREATES A NEED FOR INVENTORY; WE HAVE A DIFFERENTIATED APPROACH Tour demand ol generation 6 NOG VALUE CREATION Growing stomer value prop Net owner growth requires us to add units Range of models and available deal structures allow: acquire the right inventory to support net owner gr
Slide 78: We've Built Our Footprint Where Owners Want to Be
WE’VE BUILT OUR FOOTPRINT BASED ON WHERE OUR OWNERS WANT TO BE... We ask owners what destinations ..and invested in those markets to they're most likely to book’... provide new, updated properties @ Florida > Las Palmeras (16) @ Hawaii } Ocean Tower ('18) © California >» Marbrisa? ('11, '19) (4) Sou
Slide 79: Fast Growing Markets Where We Can Continue to Create Demand
«AND ARE IN FAST GROWING MARKETS WHERE WE CAN CONTINUE TO CREATE DEMAND Top HGV strategic growth markets (annual visitors to market) New York 62M
Slide 80: Top Strategic Growth Markets Growing Faster Than Overall Tourism
OUR TOP STRATEGIC GROWTH MARKETS ARE GROWING FASTER THAN OVERALL TOURISM Annual inbound tourists in key US markets (millions) a 500 7 a Our top markets are growing at approximately 4% «——_ annually, national tourism average is approx. 2% 1 100 4 annual growth’ 2012 2013 2014 2015 2016 2017 HILTON
Slide 81: We Continue to Increase Our Customer Value Proposition & Experience
WE HAVE CONTINUED TO INCREASE OUR CUSTOMER VALUE PROPOSITION & EXPERIENCE Tour demand £ generation NOG VALUE CREATION CYCLE sx Strategic Inventory expansion — our owners with more optior increased | footprint with locations in new, global markets Exceptional Club & Resort Mgmt. Provide quality, cons
Slide 82: A Customer Who Buys Becomes a Club and HOA Member
WHEN A CUSTOMER BUYS AN HGV OWNERSHIP, THEY BECOME A CLUB AND HOMEOWNERS ASSOCIATION MEMBER * ae “—@ Foren Axx, \/ \, - OC © IVA aa — rN yr ~\~ Prospective HGV HGV club HOA owner ownership member member HILTON
Slide 83: Access to All Benefits of Ownership and Flexible Vacation Options
«WHICH HELPS THEM ACCESS ALL OF THE BENEFITS OF THEIR OWNERSHIPS AND OUR MANY FLEXIBLE VACATION OPTIONS HGV Club offers a variety of world-class non-resort vacation options with over 20,000 unique itineraries available 8OG0000 HILTON
Slide 84: Club and Resort Business Manages Our Growing Network of Properties
OUR CLUB AND RESORT BUSINESS MANAGES OUR GROWING NETWORK OF PROPERTIES ON BEHALF OF OUR OWNERS Domestic International Ce) ow \ mma Beach, resort and ski Urban destinations HILTON
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Slide 121: 2001 Great recession recession2001 Great recession recession
2001 Great recession recession2001 Great recession recession
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Slide 126: 340K 71M 177K 5.7% 4.1% 4.1% 106K 122K 23M340K 71M 177K 5.7% 4.1% 4.1%
340K 71M 177K 5.7% 4.1% 4.1% 106K 122K 23M340K 71M 177K 5.7% 4.1% 4.1% 106K 122K 23M
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Slide 159: Footnotes
1. All figures ASC 605 2. Represents contract sales from fee-for-service properties on which we earn commissions and brand fees. 3. Includes adjustments for revenue recognition, including percentage-of-completion deferrals and amounts in rescission, and sales incentives, as well as adjustments relat
Hilton Grand Vacations — Investor Day (December 2018) on 6ix