Franchising, Marketing and Reservation Activities |
12 Months Ended |
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Dec. 31, 2018 | |
| Franchisors [Abstract] | |
| Franchising and Marketing and Reservation Activities |
Franchising, Marketing and Reservation Activities
Royalties and franchise fee revenues on the Consolidated and Combined Statements of Income include initial franchise fees of $20 million, $14 million and $19 million in 2018, 2017 and 2016 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 $1 million during 2018, and was not significant during 2017 and 2016. Development advance notes recorded on the Consolidated and Combined Balance Sheets amounted to $78 million and $64 million as of December 31, 2018 and December 31, 2017, respectively, and are classified within other non-current assets on the Consolidated and Combined Balance Sheets. During 2018, 2017 and 2016 the Company recorded $7 million, $6 million and $7 million related to the forgiveness of these notes. Such amounts are recorded as a reduction of franchise fees on the Consolidated and Combined Statements of Income. The Company recorded $1 million during 2018, less than $1 million during 2017, and $1 million during 2016 of bad debt expenses related to development advance notes. Such expenses were reported within operating expenses on the Consolidated and Combined Statements of Income. The Company received $14 million, $7 million and $3 million of proceeds from repayment of development advance notes during 2018, 2017 and 2016 respectively, and issued $27 million, $8 million and $9 million of development advance notes during 2018, 2017 and 2016, respectively. These amounts are reflected gross in operating activities on the Consolidated and Combined Statements of Cash Flows.
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