XML 49 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
Franchising And Marketing/Reservation Activities
12 Months Ended
Dec. 31, 2017
Franchising And Marketing/Reservation Activities [Abstract]  
Franchising And Marketing/Reservation Activities
Franchising and Marketing/Reservation Activities
Franchise fee revenues of $695 million, $677 million and $674 million on the Consolidated Statements of Income for 2017, 2016 and 2015, respectively, include initial franchise fees of $20 million, $15 million and $12 million, respectively.

As part of ongoing franchise fees, the Company receives marketing and reservation fees from its hotel group franchisees, which generally are calculated based on a specified percentage of gross room revenues. Such fees totaled $304 million, $310 million and $313 million during 2017, 2016 and 2015, respectively, and are recorded within franchise fees on the Consolidated Statements of Income. In accordance with the franchise agreements, generally the Company is contractually obligated to expend the marketing and reservation fees it collects from franchisees for the operation of an international, centralized, brand-specific reservation system and for marketing purposes such as advertising, promotional and co-marketing programs, and training for the respective franchisees. Additionally, the Company is required to provide certain services to its franchisees, including referrals, technology and purchasing programs.

The Company may, at its discretion, provide development advance notes to certain franchisees or hotel owners in its managed business in order to assist such franchisees/hotel owners in converting to one of the Company’s brands, building a new hotel to be flagged under one of the Company’s brands or in assisting in other franchisee expansion efforts. Provided the franchisee/hotel owner is in compliance with the terms of the franchise/management agreement, all or a portion of the development advance notes may be forgiven by the Company over the period of the franchise/management agreement, which typically ranges from 10 to 20 years. Otherwise, the related principal is due and payable to the Company. In certain instances, the Company may earn interest on unpaid franchisee development advance notes. Such interest was not significant during 2017, 2016 or 2015. Development advance notes recorded on the Consolidated Balance Sheets amounted to $64 million and $73 million as of December 31, 2017 and 2016, respectively, and are classified within other non-current assets on the Consolidated Balance Sheets. During 2017, 2016 and 2015, the Company recorded $6 million, $7 million and $8 million, respectively, related to the forgiveness of these notes. Such amounts are recorded as a reduction of franchise fees on the Consolidated Statements of Income. In 2017, the Company recorded an $8 million charge for the write-off of a development advance note associated with a hotel management agreement that the Company has determined is no longer recoverable. In addition, the Company received development advance note repayments of $7 million, $3 million and $6 million during 2017, 2016, and 2015, respectively, which are reported as proceeds from development advance notes on the Consolidated Statements of Cash Flows. Bad debt expenses related to development advance notes that were due and payable within its hotel group business were less than $1 million during 2017 and $1 million during both 2016 and 2015. Such expenses were reported within operating expenses on the Consolidated Statements of Income.