How does Hilton's expense structure compare between franchised and owned properties?

Hilton's expense structure differs between franchised and owned properties, primarily in terms of revenue components and operational costs.

1. **Revenue Components**:
- **Franchised Properties**: Franchisees contribute franchise and licensing fees, which are a significant portion of their revenue. These fees are typically a percentage of the franchisee's gross sales or a fixed amount per room sold.
- **Owned Properties**: Hilton incurs direct expenses related to the operation of its hotels, including salaries, wages, and benefits, utilities, and maintenance.
2. **Operational Costs**:
- **Franchised Properties**: The primary operational costs for franchised properties are related to the ongoing support and services provided by Hilton, such as marketing, training, and brand standards adherence.
- **Owned Properties**: Owned properties incur costs associated with hotel operations, including labor, energy, and maintenance, as well as depreciation and amortization of property and equipment.
3. **Profitability**:
- **Franchised Properties**: Franchisees generate profits from the difference between their revenue and the franchise fees they pay to Hilton, as well as from any additional revenue streams, such as ancillary services.
- **Owned Properties**: Hilton's owned properties generate profits from the difference between their revenue and their respective expense structures, including operating costs and capital expenditures.
4. **Growth and Development**:
- **Franchised Properties**: Franchisees can develop new properties within the Hilton system by adhering to brand standards and guidelines, which can lead to increased revenue and franchise fee contributions.
- **Owned Properties**: Hilton can develop new owned properties, but this requires significant capital investment and the assumption of operational risks.

In summary, Hilton's expense structure for franchised properties is characterized by revenue contributions to the company and operational costs that are largely independent of Hilton's direct expenses. In contrast, owned properties incur direct operational costs and require capital investments but offer more control over property-level decisions.