Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
Return on Invested Capital (ROIC)
Hilton Worldwide Holdings Inc., ROIC 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 1,514) | 1,814) | 614) | (279) | 1,213) | |
| Invested capital2 | 10,493) | 11,342) | 11,581) | 12,956) | 11,409) | |
| Performance Ratio | ||||||
| ROIC3 | 14.43% | 16.00% | 5.30% | -2.15% | 10.63% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Airbnb Inc. | 28.43% | 30.02% | 7.92% | — | — | |
| Booking Holdings Inc. | 32.92% | 21.73% | 4.47% | — | — | |
| Chipotle Mexican Grill Inc. | 23.48% | 18.95% | 14.49% | — | — | |
| DoorDash, Inc. | -12.64% | -26.69% | -12.92% | — | — | |
| McDonald’s Corp. | 18.51% | 15.69% | 17.77% | — | — | |
| Starbucks Corp. | 20.76% | 18.24% | 19.53% | 6.42% | — | |
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 Invested capital. See details »
3 2023 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 1,514 ÷ 10,493 = 14.43%
4 Click competitor name to see calculations.
The five-year period analyzed reflects a significant volatility in operational profitability and capital efficiency, characterized by a sharp contraction in 2020 followed by a robust recovery and a subsequent stabilization at levels exceeding pre-disruption figures.
- Net Operating Profit After Taxes (NOPAT)
- A substantial decline is observed between 2019 and 2020, where NOPAT shifted from 1,213 million USD to a negative 279 million USD. This downturn was followed by a consistent recovery phase, with profits rising to 614 million USD in 2021 and peaking at 1,814 million USD in 2022. A moderate contraction occurred in 2023, with NOPAT settling at 1,514 million USD.
- Invested Capital
- Invested capital peaked in 2020 at 12,956 million USD, coinciding with the period of lowest profitability. From 2021 onward, a steady downward trend is evident, with capital decreasing sequentially to 11,581 million USD in 2021, 11,342 million USD in 2022, and reaching a five-year low of 10,493 million USD by December 31, 2023. This indicates a contraction of the capital base during the recovery phase.
- Return on Invested Capital (ROIC)
- ROIC mirrored the volatility of NOPAT, falling from 10.63% in 2019 to -2.15% in 2020. The recovery trajectory was steep, with ROIC climbing to 5.30% in 2021 and reaching a peak of 16.00% in 2022. This peak was driven by the simultaneous increase in NOPAT and the reduction in invested capital. Although ROIC dipped slightly to 14.43% in 2023, the figure remains significantly higher than the 2019 baseline, suggesting improved capital efficiency in the latter part of the period.
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Decomposition of ROIC
Hilton Worldwide Holdings Inc., decomposition of ROIC
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 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The return on invested capital (ROIC) exhibited significant volatility between 2019 and 2023, characterized by a sharp contraction in 2020 followed by a robust recovery. After declining from 10.63% to -2.15%, ROIC ascended to a peak of 16.00% in 2022 before settling at 14.43% in 2023. This trajectory indicates a successful restoration of value creation following a period of severe operational disruption.
- Operating Profit Margin (OPM)
- Operating profitability served as a primary driver of ROIC volatility. A drastic decline to -3.28% in 2020 aligned with the negative ROIC, reflecting a period of operational losses. However, a strong recovery ensued, with margins expanding to 26.30% in 2022. The slight contraction to 23.21% in 2023 suggests a stabilization of operating efficiency at a level higher than the 2019 baseline.
- Turnover of Capital (TO)
- Capital efficiency experienced a significant decline in 2020, dropping to 0.35. Unlike the operating margin, which fluctuated, capital turnover demonstrated a consistent and linear recovery from 2021 through 2023. By the end of 2023, the ratio reached 1.00, its highest point in the analyzed period, indicating a substantial improvement in the ability to generate revenue from the invested capital base.
- Effective Cash Tax Rate (1 – CTR)
- The tax component fluctuated throughout the period, reaching 100% in 2020, which is consistent with a year of negative taxable income. The rate remained relatively stable between 71% and 77% from 2019 to 2022, but dropped to a period low of 62.44% in 2023. This decline in the tax-shield component contributed to the slight reduction in ROIC observed between 2022 and 2023, despite the peak in capital turnover.
In summary, the recovery of ROIC was driven by a dual improvement in both operating margins and capital turnover. While the 2020 downturn was severe across all efficiency metrics, the subsequent growth in capital turnover specifically provided a steady upward momentum that offset the slight dip in operating margins and the increased tax burden observed in 2023.
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Operating Profit Margin (OPM)
Hilton Worldwide Holdings Inc., OPM 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 1,514) | 1,814) | 614) | (279) | 1,213) | |
| Add: Cash operating taxes2 | 911) | 539) | 249) | 130) | 474) | |
| Net operating profit before taxes (NOPBT) | 2,425) | 2,353) | 862) | (148) | 1,687) | |
| 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) | |
| Profitability Ratio | ||||||
| OPM3 | 23.21% | 26.30% | 15.23% | -3.28% | 17.88% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Airbnb Inc. | 17.09% | 24.64% | 9.31% | — | — | |
| Booking Holdings Inc. | 25.31% | 24.15% | 13.04% | — | — | |
| Chipotle Mexican Grill Inc. | 18.74% | 16.00% | 13.23% | — | — | |
| DoorDash, Inc. | -7.58% | -21.50% | -8.16% | — | — | |
| McDonald’s Corp. | 48.59% | 40.79% | 46.68% | — | — | |
| Starbucks Corp. | 17.05% | 14.97% | 20.82% | 7.99% | — | |
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 Cash operating taxes. See details »
3 2023 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenues
= 100 × 2,425 ÷ 10,450 = 23.21%
4 Click competitor name to see calculations.
The operating performance from 2019 to 2023 is characterized by a severe short-term contraction followed by a robust recovery that surpassed pre-crisis levels. A significant downturn in 2020 led to a transition from profitability to an operating loss, though subsequent years demonstrate a strong trend of revenue expansion and margin optimization.
- Revenue Trajectory
- Adjusted revenues experienced a sharp decline of approximately 52% between 2019 and 2020, falling from US$ 9,435 million to US$ 4,522 million. A consistent recovery followed, with revenues increasing annually to reach US$ 10,450 million by December 31, 2023, representing a total increase of approximately 11% over the 2019 baseline.
- Operating Profit Margin (OPM) Trends
- The operating profit margin exhibited extreme volatility, dropping from 17.88% in 2019 to -3.28% in 2020. The recovery phase saw the OPM rise to 15.23% in 2021 and peak at 26.30% in 2022. While the margin slightly moderated to 23.21% in 2023, it remains significantly higher than the 2019 level, suggesting improved operational efficiency or a change in the cost structure.
- Net Operating Profit Before Taxes (NOPBT) Growth
- NOPBT mirrored the volatility of revenues and margins, shifting from US$ 1,687 million in 2019 to a loss of US$ 148 million in 2020. Growth accelerated between 2021 and 2023, with NOPBT reaching a peak of US$ 2,425 million in the final year of the period. The growth in NOPBT from 2022 to 2023 remained positive despite the slight decline in the operating profit margin, indicating that absolute profit growth continued to scale with revenue increases.
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Turnover of Capital (TO)
Hilton Worldwide Holdings Inc., TO 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) | ||||||
| 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) | |
| Invested capital1 | 10,493) | 11,342) | 11,581) | 12,956) | 11,409) | |
| Efficiency Ratio | ||||||
| TO2 | 1.00 | 0.79 | 0.49 | 0.35 | 0.83 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Airbnb Inc. | 1.72 | 1.26 | 1.11 | — | — | |
| Booking Holdings Inc. | 1.87 | 1.25 | 0.73 | — | — | |
| Chipotle Mexican Grill Inc. | 1.65 | 1.61 | 1.38 | — | — | |
| DoorDash, Inc. | 1.65 | 1.24 | 1.54 | — | — | |
| McDonald’s Corp. | 0.51 | 0.51 | 0.49 | — | — | |
| Starbucks Corp. | 1.62 | 1.57 | 1.23 | 1.03 | — | |
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 Invested capital. See details »
2 2023 Calculation
TO = Adjusted revenues ÷ Invested capital
= 10,450 ÷ 10,493 = 1.00
3 Click competitor name to see calculations.
The analysis of capital turnover between 2019 and 2023 reveals a V-shaped recovery pattern, characterized by a severe contraction in efficiency during 2020 followed by a consistent upward trajectory. By the end of 2023, the company achieved its highest capital turnover ratio within the period, indicating a robust recovery in revenue generation relative to the capital employed.
- Revenue Dynamics
- Adjusted revenues experienced a sharp decline in 2020, falling from 9,435 million USD to 4,522 million USD. A sustained recovery followed, with revenues increasing to 5,660 million USD in 2021 and 8,946 million USD in 2022. By December 31, 2023, revenues reached 10,450 million USD, surpassing pre-pandemic levels.
- Invested Capital Trends
- Invested capital peaked in 2020 at 12,956 million USD, coinciding with the period of lowest revenue. Subsequently, a consistent downward trend is observed, with invested capital decreasing to 10,493 million USD by 2023. This reduction indicates a contraction of the capital base and an improvement in capital discipline as operations normalized.
- Capital Turnover (TO) Efficiency
- The turnover of capital ratio plummeted to 0.35 in 2020, reflecting the dual impact of declining revenues and increased invested capital. The ratio improved steadily thereafter, rising to 0.49 in 2021 and 0.79 in 2022. The progression culminated in a ratio of 1.00 in 2023, demonstrating that the company has not only recovered but has improved its capital utilization efficiency beyond the 0.83 ratio recorded in 2019.
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Effective Cash Tax Rate (CTR)
Hilton Worldwide Holdings Inc., CTR 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 1,514) | 1,814) | 614) | (279) | 1,213) | |
| Add: Cash operating taxes2 | 911) | 539) | 249) | 130) | 474) | |
| Net operating profit before taxes (NOPBT) | 2,425) | 2,353) | 862) | (148) | 1,687) | |
| Tax Rate | ||||||
| CTR3 | 37.56% | 22.89% | 28.83% | — | 28.11% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Airbnb Inc. | 3.21% | 3.19% | 23.04% | — | — | |
| Booking Holdings Inc. | 30.52% | 28.16% | 53.06% | — | — | |
| Chipotle Mexican Grill Inc. | 23.97% | 26.20% | 20.54% | — | — | |
| DoorDash, Inc. | — | — | — | — | — | |
| McDonald’s Corp. | 25.22% | 24.66% | 21.80% | — | — | |
| Starbucks Corp. | 24.73% | 22.36% | 23.58% | 21.57% | — | |
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 Cash operating taxes. See details »
3 2023 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 911 ÷ 2,425 = 37.56%
4 Click competitor name to see calculations.
The financial trajectory from 2019 to 2023 reveals a cycle of disruption and recovery, characterized by significant volatility in both operating profitability and resulting cash tax obligations.
- Net Operating Profit Before Taxes (NOPBT) Performance
- A sharp contraction occurred in 2020, where NOPBT fell to negative 148 million US dollars. This was followed by a consistent upward trajectory, with profits recovering to 862 million US dollars in 2021 and reaching 2,425 million US dollars by 2023, indicating a robust return to operational profitability.
- Cash Operating Taxes Trends
- Cash tax payments mirrored the recovery of operating profits, decreasing from 474 million US dollars in 2019 to a low of 130 million US dollars in 2020. Payments then climbed steadily, increasing to 539 million US dollars in 2022 and peaking at 911 million US dollars in 2023.
- Effective Cash Tax Rate (CTR) Dynamics
- The CTR exhibited notable fluctuations over the five-year period. Following a period of negative profitability in 2020, the rate remained relatively stable around 28% in 2019 and 2021. A decrease to 22.89% in 2022 suggests a temporary increase in tax efficiency or the utilization of tax shields. Conversely, a significant spike to 37.56% in 2023 reflects a substantial increase in the cash tax burden relative to the operating profit generated.
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