Hilton Worldwide Holdings Inc.: 10-K Risk Factor Changes

The introduction of AI technologies, particularly generative and agentic AI, into new or existing offerings may also result in new or expanded risks and liabilities, including due to enhanced governmental or regulatory scrutiny, litigation, copyright 20 20 20 infringement, compliance issues, ethical concerns, security risks relating to private and/or confidential information, as well as other factors that could adversely affect our business, reputation, and financial results. In addition, it is possible that AI and machine learning-technology could, unbeknownst to us, be improperly utilized by employees while carrying out their responsibilities. The use of AI can lead to unintended consequences, including generating content that appears correct but is factually inaccurate, misleading or otherwise flawed, or that results in unintended biases and discriminatory outcomes, which could harm our reputation and business and expose us to risks related to inaccuracies or errors in the output of such technologies.

If we fail to keep pace with rapidly evolving technological developments in artificial intelligence, our competitive position and business results may suffer. The introduction of these technologies, particularly generative AI, into new or existing offerings may also result in new or expanded risks and liabilities, including due to enhanced governmental or regulatory scrutiny, litigation, copyright infringement, compliance issues, ethical concerns, security risks relating to private and/or confidential information, as well as other factors that could adversely affect our business, reputation, and financial results. In addition, it is possible that artificial intelligence and machine learning-technology could, unbeknownst to us, be improperly utilized by employees while carrying out their responsibilities. The use of artificial intelligence can lead to unintended consequences, including generating content that appears correct but is factually inaccurate, misleading or otherwise flawed, or that results in unintended biases and discriminatory outcomes, which could harm our reputation and business and expose us to risks related to inaccuracies or errors in the output of such technologies. 22 22 22

Our investments in leased real estate property (including through joint ventures) subject us to various risks that may not be applicable to managed or franchised properties, including: •governmental regulations relating to real estate ownership or operations, including tax, environmental, zoning and eminent domain laws; •fluctuations or loss in value of real estate or potential impairments in the value of our assets due to changes in market conditions and expectations of future hotel revenues and costs of operations in the area in which real estate or assets are located; •increased potential civil liability for accidents or other occurrences on leased properties; •the ongoing need for capital improvements and expenditures funded by us to maintain or upgrade properties, some of which were constructed many years ago, and contractual requirements to deliver properties back to lessors in a particular state of repair and condition at the end of a lease term; 18 18 18 •construction delays, lack of availability of required construction materials or cost overruns (including labor and materials) related to necessary capital improvements of leased properties; •periodic total or partial closures due to renovations and facility improvements; •risks associated with any mortgage debt, including the possibility of default, interest rate levels, particularly in a volatile interest rate environment, and uncertainties in the availability of replacement financing; •the inability to rebuild a property that has been damaged or destroyed by casualty, including a climate-related weather event, as a result of governmental regulations or other restrictions; •the inability to renew our leases on favorable terms or at all; •our limited ability to influence the decisions and operations of joint ventures in which we have a minority interest; •force majeure events, including earthquakes, tornadoes, hurricanes, wildfires, floods, tsunamis, climate-related weather events, outbreaks of pandemic or contagious diseases or acts of terrorism, civil unrest and other conflicts; •contingent liabilities that exist after we have exited a property; •costs linked to the employment and management of staff to run and operate a leased property; •increased operating costs including energy, insurance, food and beverage, supplies and other operating costs; and •the relative illiquidity of real estate compared to some other assets. The negative effect on profitability and cash flow from declines in revenues is more pronounced in leased properties because we, as the lessee, bear the risk of the costs required to lease and operate a hotel. Further, during times of economic distress, declining demand and declining earnings often result in declining asset values, and we or our joint ventures may not be able to sell properties or exit leasing arrangements on favorable terms or at all. Accordingly, we may not be able to adjust our leased property portfolio promptly in response to changes in economic or other conditions.

Our investments in owned and leased real property (including through joint ventures) subject us to various risks that may not be applicable to managed or franchised properties, including: •governmental regulations relating to real estate ownership or operations, including tax, environmental, zoning and eminent domain laws; •fluctuations or loss in value of real estate or potential impairments in the value of our assets due to changes in market conditions and expectations of future hotels revenues and costs of operations in the area in which real estate or assets are located; •increased potential civil liability for accidents or other occurrences on owned or leased properties; •the ongoing need for capital improvements and expenditures funded by us to maintain or upgrade properties, some of which were constructed many years ago, and contractual requirements to deliver properties back to landlords in a particular state of repair and condition at the end of a lease term; •construction delays, lack of availability of required construction materials or cost overruns (including labor and materials) related to necessary capital improvements of owned and leased properties; •periodic total or partial closures due to renovations and facility improvements; 20 20 20 •risks associated with any mortgage debt, including the possibility of default, interest rate levels, particularly in the current interest rate environment, and uncertainties in the availability of replacement financing; •the inability to rebuild a property that has been damaged or destroyed by casualty, including a climate-related weather event, as a result of governmental regulations or other restrictions; •the inability to renew our leases on favorable terms or at all; •our limited ability to influence the decisions and operations of joint ventures in which we have a minority interest; •force majeure events, including earthquakes, tornadoes, hurricanes, wildfires, floods, tsunamis, climate-related weather events, outbreaks of pandemic or contagious diseases or acts of terrorism; •contingent liabilities that exist after we have exited a property; •costs linked to the employment and management of staff to run and operate an owned or leased property; •increased operating costs including energy, insurance, food and beverage, supplies and other operating costs; and •the relative illiquidity of real estate compared to some other assets. The negative effect on profitability and cash flow from declines in revenues is more pronounced in owned and leased properties because we, as the owner or lessee, bear the risk of the costs required to own and operate a hotel. Further, during times of economic distress, declining demand and declining earnings often result in declining asset values, and we or our joint ventures may not be able to sell properties or exit leasing arrangements on favorable terms or at all. Accordingly, we may not be able to adjust our owned and leased property portfolio promptly in response to changes in economic or other conditions.

The hospitality industry demands the use of sophisticated technology and systems for property management, brand assurance and compliance, procurement, finance, human resources, reservation systems, distribution of hotel resources to current and future customers and guest amenities and the operation of the Hilton Honors guest loyalty program. These technologies may require maintenance or refinements and upgrades, and third parties may cease support of systems that are currently in use. The development and maintenance of these technologies has required and may further require significant investment by us. As various systems and technologies become outdated or new technology is required, we may not be able to replace or introduce them as quickly as needed or in a cost-effective and timely manner. If we fail to keep pace with rapidly evolving technological developments in AI, our competitive position and business results may suffer. Our competitors or other third parties may incorporate AI into their operations more quickly or successfully than us, or develop superior offerings with the aid of AI, which could impair our ability to compete effectively and adversely affect our results of operations. In some cases, hotel owners may refuse to upgrade systems or deploy new technology to replace aging or end-of-life software and/or hardware. As a result, our business operations could be disrupted and our competitive position could decline, adversely affecting our financial performance, or we may not achieve the benefits we may have been anticipating from any new technology or system.

The hospitality industry demands the use of sophisticated technology and systems for property management, brand assurance and compliance, procurement, finance, human resources, reservation systems, distribution of hotel resources to current and future customers and guest amenities and the operation of the Hilton Honors guest loyalty program. These technologies may require refinements and upgrades, and third parties may cease support of systems that are currently in use. The development and maintenance of these technologies has required and may further require significant investment by us. As various systems and technologies become outdated or new technology is required, we may not be able to replace or introduce them as quickly as needed or in a cost-effective and timely manner. In some cases, hotel owners may refuse to upgrade systems or deploy new technology to replace aging or end-of-life software and/or hardware. As a result, our business operations could be disrupted and our competitive position could decline, adversely affecting our financial performance, or we may not achieve the benefits we may have been anticipating from any new technology or system.