Franchising, Marketing and Reservation Activities |
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| Franchisors [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchising and Marketing and Reservation Activities |
Royalties and franchise fee revenues on the Consolidated Statements of Income/(Loss) include initial franchise fees of $14 million, $20 million and $18 million in 2021, 2020 and 2019, respectively.
In accordance with its franchise agreements, the Company is generally contractually obligated to expend the marketing and reservation fees it collects from franchisees for the operation of an international, centralized, brand-specific reservation system and for marketing purposes such as advertising, promotional and co-marketing programs, and training for the respective franchisees.
Development Advance Notes
The Company may, at its discretion, provide development advance notes to certain franchisees or hotel owners in order to assist them in converting to one of its’ brands, in building a new hotel to be flagged under one of its’ brands or in assisting in other franchisee expansion efforts. Provided the franchisee/hotel owner is in compliance with the terms of the franchise/management agreement, all or a portion of the development advance notes may be forgiven by the Company over the period of the franchise/management agreement, which typically ranges from 10 to 20 years. Otherwise, the related principal is due and payable to the Company. In certain instances, the Company may earn interest on unpaid franchisee development advance notes.
As a result of COVID-19 and the significant negative impact it had on travel demand in 2020, the Company performed a quantitative assessment on its development advance notes and determined that it was more likely than not that the carrying value of those assets were recoverable from future expected cash flows as of December 31, 2020. Due to the ongoing recovery of travel demand in 2021 and the favorable impact it had on the Company’s operations, the Company believes there were no events that would indicate that an impairment to such development advance notes may have occurred in 2021.
The Company’s Consolidated Financial Statements include the following with respect to development advances:
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(a) Amounts are recorded as a reduction of royalties and franchise fees and marketing, reservation and loyalty revenues.
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