Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition

v3.23.2
Revenue Recognition
 6 Months Ended
Jun. 30, 2023
Revenue from Contract with Customer [Abstract]  
Revenue Recognition
3. REVENUE RECOGNITION
Deferred Revenues
Deferred revenues, or contract liabilities, generally represent payments or consideration received in advance for goods or services that the Company has not yet provided to the customer. Deferred revenues as of June 30, 2023 and December 31, 2022 are as follows:
June 30, 2023 December 31, 2022
Deferred initial franchise fee revenues
 $ 144  $ 143 
Deferred loyalty program revenues
 87  85 
Deferred other revenues
 34  19 
Total
 $ 265  $ 247 

Deferred initial franchise fees represent payments received in advance from prospective franchisees upon the signing of a franchise agreement and are generally recognized to revenue within 13 years. Deferred loyalty revenues represent the portion of loyalty program fees charged to franchisees, net of redemption costs, that have been deferred and will be recognized over time based upon loyalty point redemption patterns.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. The consideration received from a customer is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. The following table summarizes the Company’s remaining performance obligations for the twelve-month periods set forth below:
7/1/2023 - 6/30/2024 7/1/2024 - 6/30/2025 7/1/2025 - 6/30/2026

Thereafter

Total
Initial franchise fee revenues
 $ 17  $ 8  $ 7  $ 112  $ 144 
Loyalty program revenues
 54  22  9  2  87 
Other revenues
 28  1  1  4  34 
Total
 $ 99  $ 31  $ 17  $ 118  $ 265 
Disaggregation of Net Revenues

In the first quarter of 2023, the Company changed the composition of its reportable segments to reflect the recent changes in its Hotel Management segment due to the exit from the select-service management business, the sale of its two owned hotels and the exit from substantially all of its U.S. full-service management business in 2022. The remaining hotel management business, which is predominately the full-service international managed business, no longer meets the quantitative thresholds to be considered a reportable segment and as a result, the Company has aggregated, on a prospective basis, such management business within its Hotel Franchising segment.

The table below presents a disaggregation of the Company’s net revenues from contracts with customers by major services and products for each of the Company’s segments:
Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Hotel Franchising (a)
Royalties and franchise fees
 $ 142  $ 131  $ 263  $ 232 
Marketing, reservation and loyalty
 145  145  265  257 
Management fees 5  —  8  — 
License and other fees
 29  27  53  46 
Cost reimbursements 4  —  9  — 
Other
 37  32  76  71 
Total Hotel Franchising
 362  335  674  606 
Hotel Management
Royalties and franchise fees
 n/a 2  n/a 10 
Owned hotel revenues
 n/a 13  n/a 42 
Management fees
 n/a 3  n/a 9 
Cost reimbursements
 n/a 32  n/a 88 
Other
 n/a 1  n/a 2 
Total Hotel Management
 n/a 51  n/a 151 
Net revenues
 $ 362  $ 386  $ 674  $ 757 
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(a)    For 2023, the Hotel Franchising segment includes the former Hotel Management segment, which is primarily comprised of the Company's remaining international full-service managed business.
Capitalized Contract Costs
The Company incurs certain direct and incremental sales commissions costs in order to obtain hotel franchise contracts. Such costs are capitalized and subsequently amortized, beginning upon hotel opening, over the first non-cancellable period of the agreement. In the event an agreement is terminated prior to the end of the first non-cancellable period, any unamortized cost is immediately expensed. In addition, the Company also capitalizes costs associated with the sale and installation of property management systems to its franchisees, which are amortized over the remaining non-cancellable period of the franchise agreement. As of June 30, 2023 and December 31, 2022, capitalized contract costs were $35 million and $34 million, respectively, of which $4 million for both periods was included in other current assets and $31 million and $30 million, respectively, were included in other non-current assets on its Condensed Consolidated Balance Sheets.