Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition

v3.19.2
Revenue Recognition
6 Months Ended
Jun. 30, 2019
Revenue from Contract with Customer [Abstract]  
Revenue Recognition
Revenue Recognition
Deferred Income
Deferred income, or contract liabilities, generally represents payments or consideration received in advance for goods or services that the Company has not yet provided to the customer. Deferred income amounts as of June 30, 2019 and December 31, 2018 are as follows:
 
 
June 30,
 2019
 
December 31, 2018
Deferred initial franchise fee revenue
 
$
130

 
$
127

Deferred loyalty program revenue
 
86

 
74

Deferred co-branded credit card program revenue
 
14

 
30

Deferred hotel management fee revenue
 
2

 
21

Deferred other revenue
 
37

 
21

Total
 
$
269

 
$
273


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 12 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. Deferred co-branded credit card program revenue represents payments received in advance from the Company’s co-branded credit card partners primarily for card member activity, which is typically recognized within one year.

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:
 
7/1/2019- 6/30/2020
 
7/1/2020- 6/30/2021
 
7/1/2021- 6/30/2022

Thereafter

Total
Initial franchise fee revenue
$
26

 
$
13

 
$
12

 
$
79

 
$
130

Loyalty program revenue
53

 
21

 
9

 
3

 
86

Co-branded credit card program revenue
14

 

 

 

 
14

Hotel management fee revenue
1

 

 

 
1

 
2

Other revenue
27

 
3

 
2

 
5

 
37

Total
$
121


$
37


$
23


$
88


$
269



Disaggregation of Net Revenues
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,
 
2019
 
2018
 
2019
 
2018
Hotel Franchising
 
 
 
 
 
 
 
Royalties and franchise fees
$
124

 
$
110

 
$
223

 
$
188

Marketing, reservation and loyalty
139

 
124

 
252

 
208

License and other revenues from former Parent
33

 
25

 
61

 
43

Other
35

 
30

 
64

 
52

Total Hotel Franchising
331

 
289

 
600

 
491

 
 
 
 
 
 
 
 
Hotel Management
 
 
 
 
 
 
 
Royalties and franchise fees
2

 
3

 
5

 
6

Marketing, reservation and loyalty
1

 

 
2

 

Hotel management - owned properties
23

 
19

 
49

 
42

Hotel management - managed properties
13

 
9

 
26

 
16

Cost reimbursements
160

 
114

 
315

 
180

Other
2

 
1

 
1

 
2

Total Hotel Management
201

 
146

 
398

 
246

 
 
 
 
 
 
 
 
Corporate and Other
1

 

 
3

 

 
 
 
 
 
 
 
 
Net Revenues
$
533

 
$
435

 
$
1,001

 
$
737

Capitalized Contract Costs
The Company incurs certain direct and incremental sales commissions costs in order to obtain hotel franchise and management 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. As of June 30, 2019 and December 31, 2018, capitalized contract costs were $30 million and $24 million, respectively, of which $7 million and $8 million, respectively, were included in other current assets, and $23 million and $16 million, respectively, were included in other non-current assets on its Condensed Consolidated Balance Sheets.