Revenue

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Contract Liabilities

Contract liabilities relate to (i) advance consideration received, such as initial franchise and relicensing fees paid when a franchise agreement is awarded and system implementation fees paid at time of installation, for services considered to be part of the brand intellectual property performance obligation and (ii) amounts received when Choice Privileges points are issued but for which revenue is not yet recognized since the related points have not been redeemed.

Initial and relicensing fees are charged when (i) new hotels enter the franchise system; (ii) there is a change of ownership; or (iii) existing franchise agreements are extended. These revenues are recognized as revenue ratably as services are provided over the enforceable period of the franchise agreement. System implementation fees charged to franchisees are also deferred and recognized as revenue over the enforceable period of the franchise agreement. The enforceable period is the period from hotel opening to the first point the franchisee or the Company can terminate the franchise agreement without incurring a significant penalty. Deferred revenues from initial and relicensing fees and system implementation fees will typically be recognized over a five- to ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby remaining deferred amounts will be recognized to revenue in the period of termination.

Loyalty points represent a performance obligation attributable to usage of the points, and thus revenues are recognized at the point in time when the loyalty points are redeemed by members for benefits. The estimated fair value of future redemptions is reflected in current and non-current Liability for guest loyalty program in the consolidated balance sheets. The amount of the loyalty program fees in excess of the point liability represents current and non-current Deferred revenue, which is recognized to revenue as points are redeemed including an estimate of future forfeitures. The anticipated redemption pattern of the points is the basis for current and non-current designation of each liability. Loyalty points are typically redeemed within three years of issuance.

Significant changes in the contract liabilities balances during the period December 31, 2018 to June 30, 2019 are as follows:



	(in thousands)
Balance as of December 31, 2018	$	153,180
Increases to the contract liability balance due to cash received	46,959
Revenue recognized in the period	(43,652		)
Balance as of June 30, 2019	$	156,487

Remaining Performance Obligations

The aggregate amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $156.5 million as of June 30, 2019. This amount represents fixed transaction price that will be recognized as revenue in future periods, which is primarily captured in the balance sheet as current and non-current deferred revenue.

Based on practical expedient elections permitted by Topic 606, the Company does not disclose the value of unsatisfied performance obligations for (i) variable consideration subject to the sales or usage-based royalty constraint or comprising a component of a series (including franchise, partnership, qualified vendor, and software as a service ("SaaS") agreements), (ii) variable consideration for which we recognize revenue at the amount to which we have the right to invoice for services performed, or (iii) contracts with an expected original duration of one year or less.

Disaggregation of Revenue



	Three Months Ended						Three Months Ended
	June 30, 2019						June 30, 2018
	Over time		Point in time		Total		Over time		Point in time		Total
Revenues:	(in thousands)						(in thousands)
Royalty fees	$	106,427	$	—	$	106,427	$	103,219	$	—	$	103,219
Initial franchise and relicensing fees	6,675		—		6,675		6,481		—		6,481
Procurement services	19,648		1,181		20,829		16,919		914		17,833
Marketing and reservation system	130,203		42,262		172,465		130,616		26,731		157,347
Other	10,886		141		11,027		10,024		185		10,209
Total Topic 606 revenues	$	273,839	$	43,584	317,423		$	267,259	$	27,830	295,089
Non-Topic 606 revenues					261						352
					$	317,684					$	295,441

	Six Months Ended						Six Months Ended
	June 30, 2019						June 30, 2018
	Over time		Point in time		Total		Over time		Point in time		Total
Revenues:	(in thousands)						(in thousands)
Royalty fees	$	186,780	$	—	$	186,780	$	179,917	$	—	$	179,917
Initial franchise and relicensing fees	13,482		—		13,482		12,695		—		12,695
Procurement services	31,135		1,641		32,776		26,484		1,287		27,771
Marketing and reservation system	234,281		48,248		282,529		231,744		32,604		264,348
Other	19,755		141		19,896		18,544		857		19,401
Total Topic 606 revenues	$	485,433	$	50,030	535,463		$	469,384	$	34,748	504,132
Non-Topic 606 revenues					541						703
					$	536,004					$	504,835

Non-Topic 606 revenues primarily represent revenue from leasing an office building (refer to Note 7) and are presented in Other revenues in the consolidated statements of income.

As presented in Note 14, the Corporate & Other segment amounts represent $4.1 million and $3.3 million for the three months ended June 30, 2019 and 2018, respectively, and $7.4 million and $7.0 million for the six months ended June 30, 2019 and 2018, respectively, and are included in the Over time column of Other revenues and Non-Topic 606 revenues row. The remaining revenues relate to the Hotel Franchising segment.