Revenue

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

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 June 30, 2020 are as follows:

(in thousands)
Balance as of December 31, 2019	$	163,847
Increases to the contract liability balance due to cash received	31,948
Revenue recognized in the period	(35,093		)
Balance as of June 30, 2020	$	160,702

Remaining Performance Obligations

The aggregate amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $160.7 million as of June 30, 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
	June 30, 2020						June 30, 2019
(in thousands)	Over time		Point in time		Total		Over time		Point in time		Total
Royalty fees	$	50,152	$	—	$	50,152	$	106,427	$	—	$	106,427
Initial franchise and relicensing fees	6,676		—		6,676		6,675		—		6,675
Procurement services	10,161		536		10,697		19,648		1,181		20,829
Marketing and reservation system	54,436		25,241		79,677		130,203		42,262		172,465
Owned hotels	1,639		361		2,000		—		—		—
Other	2,163		—		2,163		10,886		141		11,027
Total Topic 606 revenues	$	125,227	$	26,138	151,365		$	273,839	$	43,584	317,423
Non-Topic 606 revenues					368						261
Total revenues					$	151,733					$	317,684
	Six Months Ended						Six Months Ended
	June 30, 2020						June 30, 2019
(in thousands)	Over time		Point in time		Total		Over time		Point in time		Total
Royalty fees	$	120,491	$	—	$	120,491	$	186,780	$	—	$	186,780
Initial franchise and relicensing fees	13,960		—		13,960		13,482		—		13,482
Procurement services	23,449		1,045		24,494		31,135		1,641		32,776
Marketing and reservation system	153,765		36,297		190,062		234,281		48,248		282,529
Owned hotels	9,660		1,654		11,314		—		—		—
Other	8,850		—		8,850		19,755		141		19,896
Total Topic 606 revenues	$	330,175	$	38,996	369,171		$	485,433	$	50,030	535,463
Non-Topic 606 revenues					737						541
Total revenues					$	369,908					$	536,004

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 $4.5 million and $4.1 million for the three months ended June 30, 2020 and 2019, respectively, $15.4 million and $7.4 million for the six months ended June 30, 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 $0.1 million in intersegment revenues for the three months ended June 30, 2020 and $0.9 million in intersegment revenues for the six months ended June 30, 2020, as described in Note 11.