Revenue

3 Months Ended

Mar. 31, 2020

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 date 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, which was adjusted in the first quarter of 2020 to reflect an anticipated longer issuance to redemption period in light of impacts from the COVID-19 pandemic. Loyalty points are typically redeemed within three years of issuance.

Significant changes in the contract liabilities balances during the period December 31, 2019 to March 31, 2020 are as follows:



(in thousands)
Balance as of December 31, 2019	$	163,847
Increases to the contract liability balance due to cash received	20,137
Revenue recognized in the period	(19,068		)
Balance as of March 31, 2020	$	164,916

Remaining Performance Obligations

The aggregate amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $164.9 million as of March 31, 2020. This amount represents fixed transaction price that will be recognized as revenue in future periods, which is primarily captured in the consolidated 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
	March 31, 2020						March 31, 2019
(in thousands)	Over time		Point in time		Total		Over time		Point in time		Total
Royalty fees	$	70,339	$	—	$	70,339	$	80,353	$	—	$	80,353
Initial franchise and relicensing fees	7,284		—		7,284		6,807		—		6,807
Procurement services	13,288		509		13,797		11,487		460		11,947
Marketing and reservation system	99,329		11,056		110,385		104,078		5,986		110,064
Owned hotels	8,021		1,293		9,314		—		—		—
Other	6,687		—		6,687		8,869		—		8,869
Total Topic 606 revenues	$	204,948	$	12,858	217,806		$	211,594	$	6,446	218,040
Non-Topic 606 revenues					369						280
Total revenues					$	218,175					$	218,320

Non-Topic 606 revenues primarily represent revenue from leasing and are presented in Owned hotels and Other revenues in the consolidated statements of income.

As presented in Note 11, the Corporate & Other segment amounts represent $10.9 million and $3.3 million for the three months ended March 31, 2020 and 2019, respectively, and are included in the Over time column of Other revenues and the Owned Hotels and Non-Topic 606 revenues rows. The remaining revenues relate to the Hotel Franchising segment. Royalty fees and Marketing and reservation system revenues are presented net of $0.8 million in intersegment revenues for the three months ended March 31, 2020 as described in Note 11.