Share-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-based Payment Arrangement [Abstract]

We recognized share-based compensation expense of $162 million, $193 million and $97 million during the years ended December 31, 2022, 2021 and 2020, respectively, which included amounts reimbursed by hotel owners, and the related tax benefit recognized was $48 million, $54 million and $35 million, respectively. Share-based compensation expense recognized during the year ended December 31, 2020 included the reversal of expense recognized in prior years as a result of the determination that the performance conditions of our then-outstanding performance shares were no longer probable of achievement. Further, in December 2020, we modified our then-outstanding performance shares in response to the COVID-19 pandemic to reward for results achieved prior to the pandemic and incentivize our recovery efforts, with a portion of the awards modified to vest based on continued service and the remaining portion of the awards to vest based on new performance measures. As a result of this modification, our share-based compensation expense for the years ended December 31, 2022, 2021 and 2020 includes incremental share-based compensation of $25 million, $70 million and $44 million, respectively.

As of December 31, 2022, unrecognized compensation costs for unvested awards under the 2017 Plan were approximately $119 million, which are expected to be recognized over a weighted average period of 1.6 years on a straight-line basis. As of December 31, 2022, there were 11.4 million remaining shares authorized for awards under the 2017 Plan, including any shares subject to awards outstanding under the 2013 Omnibus Incentive Plan that will become available for issuance under the 2017 Plan if such outstanding awards expire or are terminated or are canceled or forfeited.

RSUs

The following table provides information about our RSU grants:


	Year Ended December 31,
	2022		2021		2020
Number of shares granted (in thousands)	507		589		942
Weighted average grant date fair value per share	$	150.58	$	123.13	$	93.48
Aggregate intrinsic value of shares vested (in millions)	$	97	$	94	$	97

The following table summarizes the activity of our RSUs during the year ended December 31, 2022:


	Number of Shares	Weighted Average Grant Date Fair Value per Share
	(in thousands)
Outstanding as of December 31, 2021	1,246	$	105.28
Granted	507	150.58
Vested	(682)	99.63
Forfeited	(58)	124.25
Outstanding as of December 31, 2022	1,013	130.68

Options

The following table provides information about our option grants:


	Year Ended December 31,
	2022		2021		2020
Number of options granted (in thousands)	318		361		755
Weighted average exercise price per share	$	150.67	$	123.13	$	93.33
Weighted average grant date fair value per share	$	51.15	$	41.15	$	21.47

The weighted average grant date fair value per share of the option grants for each year was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:


	Year Ended December 31,
	2022		2021		2020
Expected volatility(1)	33.28	%	33.13	%	23.69	%
Dividend yield(2)	0.41	%	—	%	0.55	%
Risk-free rate(3)	1.93	%	0.92	%	0.96	%
Expected term (in years)(4)	6.0		6.0		6.0

____________

(1)Estimated using a blended approach of historical and implied volatility. Historical volatility is based on the historical movement of Hilton's stock price for a look back period that corresponds to the expected term of the option.

(2)For options granted during the year ended December 31, 2020, dividend yield was estimated based on our historical quarterly dividends. However, after the 2020 options were granted, we suspended the declaration and payment of dividends, and, at the time of grant for the 2021 options, we could not estimate when the payment of dividends would resume. For the options granted during the year ended December 31, 2022, dividend yield was estimated based on the expectation, at the date of grant, of the resumption of a quarterly $0.15 per share dividend, which occurred in the second quarter of 2022. For option grants made during the years ended December 31, 2022 and 2020, the three month average stock price at the date of grant was also utilized in the dividend yield calculation.

(3)Based on the yields of U.S. Department of Treasury instruments with similar expected terms at the date of grant.

(4)Estimated using the midpoint of the vesting period and the contractual term of the options.

The following table summarizes the activity of our options during the year ended December 31, 2022:


	Number of Shares	Weighted Average Exercise Price per Share
	(in thousands)
Outstanding as of December 31, 2021	2,803	$	80.03
Granted	318	150.67
Exercised	(100)	69.88
Outstanding as of December 31, 2022(1)	3,021	87.61
Exercisable as of December 31, 2022(2)	2,246	74.39

____________

(1)The aggregate intrinsic value was $125 million and the weighted average remaining contractual term was 5.9 years.

(2)The aggregate intrinsic value was $117 million and the weighted average remaining contractual term was 5.1 years.

Performance Shares

As of December 31, 2022, we determined that all of the performance measures for the outstanding performance shares were probable of achievement, with the average of the applicable achievement factors estimated to be between the target and maximum achievement percentages.

The following table provides information about our performance share grants for the last three years:


	Year Ended December 31,
	2022		2021		2020(1)
Number of shares granted (in thousands)	216		241		348
Weighted average grant date fair value per share	$	150.67	$	123.13	$	93.33
Aggregate intrinsic value of shares vested (in millions)	$	42	$	36	$	58

____________

(1)In December 2020, 288,000 performance shares from the 2020 grant were modified with a modification date fair value per share of $102.95.

The following table summarizes the activity of our performance shares in aggregate for all of our performance measures during the year ended December 31, 2022, with the performance shares reflected at the target achievement percentage until completion of the performance period:


	Number of Shares	Weighted Average Grant Date Fair Value per Share
	(in thousands)
Outstanding as of December 31, 2021	848	$	97.63
Granted	216	150.67
Performance achievement share adjustments(1)	163	83.11
Vested	(496)	83.11
Forfeited	(1)	127.69
Outstanding as of December 31, 2022	730	119.87

____________

(1)Reflects the number of shares achieved above target, based on actual performance as determined at the completion of the respective three-year performance period.