Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition

v3.20.1
Revenue Recognition
3 Months Ended
Mar. 31, 2020
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 March 31, 2020 and December 31, 2019 are as follows:
 
 
March 31, 2020
 
December 31, 2019
Deferred initial franchise fee revenues
 
$
138

 
$
136

Deferred loyalty program revenues
 
88

 
86

Deferred co-branded credit card program revenues
 
28

 
34

Deferred hotel management fee revenues
 
1

 

Deferred other revenues
 
25

 
27

Total
 
$
280

 
$
283


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:
 
4/1/2020- 3/31/2021
 
4/1/2021- 3/31/2022
 
4/1/2022- 3/31/2023

Thereafter

Total
Initial franchise fee revenues
$
21

 
$
10

 
$
8

 
$
99

 
$
138

Loyalty program revenues
54

 
22

 
10

 
2

 
88

Co-branded credit card program revenues
28

 

 

 

 
28

Hotel management fee revenues
1

 

 

 

 
1

Other revenues
17

 
1

 
1

 
6

 
25

Total
$
121

 
$
33

 
$
19

 
$
107

 
$
280


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 March 31,
 
2020
 
2019
Hotel Franchising
 
 
 
Royalties and franchise fees
$
84

 
$
99

Marketing, reservation and loyalty
106

 
112

License and other revenues from former Parent
21

 
29

Other
32

 
29

Total Hotel Franchising
243

 
269

 
 
 
 
Hotel Management
 
 
 
Royalties and franchise fees
8

 
2

Marketing, reservation and loyalty

 
1

Owned hotel revenues
22

 
26

Management fees
10

 
13

Cost reimbursements
126

 
155

Other
1

 

Total Hotel Management
167

 
197

 
 
 
 
Corporate and Other

 
2

 
 
 
 
Net revenues
$
410

 
$
468


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 its franchisees, which are amortized over the remaining non-cancellable period of the franchise agreement. As of March 31, 2020 and December 31, 2019, capitalized contract costs were $32 million and $33 million, respectively, of which $8 million in both years, were included in other current assets, and $24 million and $25 million, respectively, were included in other non-current assets on its Condensed Consolidated Balance Sheets.