How does Baymont Inn Suites recognize revenue related to the Wyndham Rewards loyalty program?
Baymont_Inn_Suites Franchise · 2025 FDDAnswer from 2025 FDD Document
GNITION**
The principal source of revenues from franchising hotels is ongoing royalty fees, which are typically a percentage of gross room revenues of each franchised hotel. The Company recognizes royalty fee revenues as and when the underlying sales occur. The Company also receives non-refundable initial franchise fees, which are recognized as revenues over the initial non-cancellable period of the franchise agreement, commencing when all material services or conditions have been substantially performed. This occurs when a hotel opens for business in the Company's system or when a franchise agreement is terminated after it has been determined that the hotel will not open. The Company's standard franchise agreement typically has a term of 10 to 20 years. Additionally, the Company recognizes occupancy taxes on a net basis.
The Company's franchise agreements also require the payment of marketing and reservation fees, which are intended to reimburse the Company for expenses associated with operating an international, centralized reservation system, e-commerce channels such as the Company's brand.com websites, as well as access to third-party distribution channels, such as online travel agents, advertising and marketing programs, global sales efforts, operations support, training and other related services. Marketing and reservation fees are recognized as revenue when the underlying sales occur. The Company is generally contractually obligated to spend the marketing and reservation fees it collects from franchisees, in accordance with the franchise agreements. Marketing and reservations costs are expensed as incurred, which may not occur in the same period as the recognition of marketing and reservation revenues.
The Company earns revenues from its Wyndham Rewards loyalty program when a member stays at a participating hotel, club resort or vacation rental. These revenues are derived from a fee the Company charges a franchised or managed hotel based upon a percentage of room revenues generated from a Wyndham Rewards member's stay. These fees are to reimburse the Company for expenses associated with member redemptions and activities that are related to the administering and marketing of the program. Revenues related to the loyalty program represent variable consideration and are recognized net of redemptions over time based upon loyalty point redemption patterns, which include an estimate of loyalty points that will expire or will never be redeemed.
The Company earns revenue from its Wyndham Rewards co-branded credit card program, which is primarily generated by cardholder spending and the enrollment of new cardholders. The advance payments received under the program are recognized as a contract liability.
Source: Item 23 — RECEIPTS (FDD pages 97–443)
What This Means (2025 FDD)
According to Baymont Inn Suites's 2025 Franchise Disclosure Document, revenue from the Wyndham Rewards loyalty program is recognized when a member stays at a participating hotel, club resort, or vacation rental. This revenue comes from a fee that Baymont Inn Suites charges the franchised or managed hotel, calculated as a percentage of room revenues generated by the Wyndham Rewards member's stay. These fees are intended to cover the expenses associated with member redemptions and the administration and marketing of the program. The revenue recognized is net of redemptions and is recognized over time based on loyalty point redemption patterns, which includes estimates of points that will expire or will never be redeemed. This means Baymont Inn Suites accounts for the actual usage of points and adjusts for anticipated non-usage.
Baymont Inn Suites also earns revenue from the Wyndham Rewards co-branded credit card program, primarily through cardholder spending and new cardholder enrollments. Advance payments received under this program are initially recorded as a contract liability. The program involves two main performance obligations: brand performance services and the issuance and redemption of loyalty points. Revenue from brand performance services is recognized evenly over the contract term. Revenue from loyalty points is recognized over time based on the redemption patterns of the points earned, including estimates of points that will expire or will never be redeemed. This approach ensures that revenue recognition aligns with the actual value provided to members and the costs associated with the loyalty program.
Furthermore, the FDD states that as members earn points, Baymont Inn Suites records a liability for the estimated future redemption costs. This liability is calculated based on an estimated cost per point and an estimated redemption rate of the overall points earned. A third-party actuarial firm assists in determining these estimates using historical experience, current trends, and actuarial analysis. The company projects the timing of future point redemptions based on historical levels, including an estimate of points that will expire or never be redeemed, to estimate the value of future redemption obligations. As of December 31, 2024, the recorded liability related to the program totaled $105 million, with $65 million included in accrued expenses and other current liabilities, and $40 million in other non-current liabilities. In 2023, the recorded liability related to the program totaled $117 million, with $75 million included in accrued expenses and other current liabilities, and $42 million in other non-current liabilities on the Company's Consolidated Balance Sheets.