Franchising, Marketing and Reservation Activities |
9 Months Ended |
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Sep. 30, 2018 | |
| Franchisors [Abstract] | |
| Franchising and Marketing and Reservation Activities |
Franchising, Marketing and Reservation Activities
Royalties and franchise fee revenues on the Condensed Consolidated and Combined Statements of Income include initial franchise fees of $5 million and $4 million for the three months ended September 30, 2018 and 2017, respectively, and $14 million and $11 million for the nine months ended September 30, 2018 and 2017, respectively.
In accordance with its franchise agreements, generally Wyndham Hotels is 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. Additionally, the Company is required to provide certain services to its franchisees, including technology and purchasing programs.
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 Wyndham Hotels’ brands, building a new hotel to be flagged under one of Wyndham Hotels’ 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 Wyndham Hotels 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 Wyndham Hotels. In certain instances, Wyndham Hotels may earn interest on unpaid franchisee development advance notes. Such interest was not significant during the three months ended September 30, 2018 and 2017, and was $1 million during the nine months ended September 30, 2018 and 2017. Development advance notes recorded on the Condensed Consolidated and Combined Balance Sheets amounted to $76 million and $64 million as of September 30, 2018 and December 31, 2017, respectively, and are classified within other non-current assets on the Condensed Consolidated and Combined Balance Sheets. During the three months ended September 30, 2018 and 2017, the Company recorded $2 million related to the forgiveness of these notes. Further, during the nine months ended September 30, 2018 and 2017, the Company recorded $5 million related to the forgiveness of these notes. Such amounts are recorded as a reduction of franchise fees on the Condensed Consolidated and Combined Statements of Income. The Company recorded less than $1 million during both the three and nine months ended September 30, 2018 and 2017 of bad debt expenses related to development advance notes. Such expenses were reported within operating expenses on the Condensed Consolidated and Combined Statements of Income. The Company received $1 million and less than $1 million of proceeds from repayment of development advance notes during the three months ended September 30, 2018 and 2017, and issued $11 million and $1 million of development advance notes during the three months ended September 30, 2018 and 2017, respectively. The Company received $11 million and $4 million of proceeds from repayment of development advance notes during the nine months ended September 30, 2018 and 2017, respectively, and issued $22 million and $5 million of development advance notes during the nine months ended September 30, 2018 and 2017, respectively. These amounts are reflected net in operating activities on the Condensed Consolidated and Combined Statements of Cash Flows.
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