Wyndham Hotels & Resorts, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition

Revenue Recognition

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

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 September 30, 2019 and December 31, 2018 are as follows:



	September 30, 2019		December 31, 2018
Deferred initial franchise fee revenue	$	135	$	127
Deferred loyalty program revenue	85		74
Deferred co-branded credit card program revenue	—		30
Deferred hotel management fee revenue	3		21
Deferred other revenue	29		21
Total	$	252	$	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:



	10/1/2019- 9/30/2020		10/1/2020- 9/30/2021		10/1/2021- 9/30/2022		Thereafter		Total
Initial franchise fee revenue	$	22	$	14	$	12	$	87	$	135
Loyalty program revenue	53		21		9		2		85
Hotel management fee revenue	2		—		—		1		3
Other revenue	17		3		2		7		29
Total	$	94	$	38	$	23	$	97	$	252

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 September 30,					Nine Months Ended September 30,
	2019			2018		2019		2018
Hotel Franchising
Royalties and franchise fees	$	136		$	137	$	359	$	326
Marketing, reservation and loyalty	166			151		418		357
License and other revenues from former Parent	35			36		97		79
Other	42			24		105		78
Total Hotel Franchising	379			348		979		840

Hotel Management
Royalties and franchise fees	4			1		9		6
Marketing, reservation and loyalty	1			—		3		2
Hotel management - owned properties	18			17		67		58
Hotel management - managed properties	(6		)	15		21		32
Cost reimbursements	161			219		476		398
Other	2			—		2		1
Total Hotel Management	180			252		578		497

Corporate and Other	1			4		4		4

Net Revenues	$	560		$	604	$	1,561	$	1,341

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. In addition, the Company also capitalizes costs associated with the sale and installation of property management systems to our franchisees, which are amortized over the remaining non-cancellable period of the franchise agreement. As of September 30, 2019 and December 31, 2018, capitalized contract costs were $31 million and $24 million, respectively, of which $6 million and $8 million, respectively, were included in other current assets, and $25 million and $16 million, respectively, were included in other non-current assets on its Condensed Consolidated Balance Sheets.