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

6 Months Ended

Jun. 30, 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 June 30, 2020 and December 31, 2019 are as follows:



	June 30, 2020		December 31, 2019
Deferred initial franchise fee revenues	$	139	$	136
Deferred loyalty program revenues	78		86
Deferred co-branded credit card program revenues	21		34
Deferred hotel management fee revenues	1		—
Deferred other revenues	22		27
Total	$	261	$	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 estimated 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.

As a result of the negative impact that the coronavirus pandemic (“COVID-19”) has had on travel demand, the Company’s assumptions related to redemptions, including estimated member redemption rate, member redemption pattern, and the estimated cost to satisfy such redemptions, have changed. Accordingly, the Company recognized a $16 million cumulative adjustment, which resulted in an increase to loyalty revenues during the second quarter of 2020. Such increase is included within marketing, reservation and loyalty and other revenues on the Condensed Consolidated Statement of Income during the three and six months ended June 30, 2020.

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:



	7/1/2020- 6/30/2021		7/1/2021- 6/30/2022		7/1/2022- 6/30/2023		Thereafter		Total
Initial franchise fee revenues	$	24	$	9	$	9	$	97	$	139
Loyalty program revenues	40		25		11		2		78
Co-branded credit card program revenues	21		—		—		—		21
Hotel management fee revenues	1		—		—		—		1
Other revenues	13		2		1		6		22
Total	$	99	$	36	$	21	$	105	$	261

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,
	2020		2019		2020		2019
Hotel Franchising
Royalties and franchise fees	$	59	$	124	$	144	$	223
Marketing, reservation and loyalty	82		139		187		252
License and other fees	21		33		42		61
Other	20		35		52		64
Total Hotel Franchising	182		331		425		600

Hotel Management
Royalties and franchise fees	2		2		10		5
Marketing, reservation and loyalty	—		1		1		2
Owned hotel revenues	2		23		23		49
Management fees	4		13		15		26
Cost reimbursements	66		160		192		315
Other	2		2		1		1
Total Hotel Management	76		201		242		398

Corporate and Other	—		1		—		3

Net revenues	$	258	$	533	$	667	$	1,001

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 June 30, 2020 and December 31, 2019, capitalized contract costs were $32 million and $33 million, respectively, of which $6 million and $8 million, respectively, were included in other current assets, and $26 million and $25 million, respectively, were included in other non-current assets on its Condensed Consolidated Balance Sheets.