What are the primary sources of earnings for the Management and franchising segment of Caption By Hyatt?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
n stock authorized and outstanding by the repurchased share amount.
Charitable Contribution—During the year ended December 31, 2022, we contributed $5 million to the Hyatt Hotels Foundation. The charitable contribution was recognized in general and administrative expenses on our consolidated statements of income.
19. SEGMENT AND GEOGRAPHIC INFORMATION
Our reportable segments are components of the business which are managed discretely and for which discrete financial information is reviewed regularly by the CODM to assess performance and make decisions regarding the allocation of resources. Our CODM is our President and Chief Executive Officer. We define our operating and reportable segments as follows:
- • Management and franchising—This segment derives its earnings primarily from the provision of management, franchising, and hotel services, or the licensing of our intellectual property to, (i) our property portfolio, (ii) our cobranded credit card programs, and (iii) other hospitality-related businesses, including the Unlimited Vacation Club following the UVC Transaction. This segment also includes revenues for reimbursed costs primarily related to payroll at managed properties where we are the employer, as well as costs associated with system-wide services and the loyalty program operated on behalf of owners of managed and franchised properties. The intersegment revenues relate to management fees earned from our owned and leased hotels and commission fees earned from certain ALG Vacations bookings, both of which are eliminated in consolidation.
- Owned and leased—This segment derives its earnings from owned and leased hotel properties located predominantly in the United States but also in certain international locations, and for purposes of segment Adjusted EBITDA, includes our pro rata share of unconsolidated hospitality ventures' Adjusted EBITDA, based on our ownership percentage of each venture. Adjusted EBITDA includes intercompany management fee expenses paid to our management and franchising segment, which are eliminated in consolidation. Intersegment revenues relate to promotional award redemptions earned by our owned and leased hotels related to our co-branded credit card programs and are eliminated in consolidation.
- • Distribution—This segment derives its earnings from distribution and destination management services offered through ALG Vacations and the boutique and luxury global travel platform offered through Mr & Mrs Smith. Prior to the UVC Transaction, this segment also included earnings from a paid membership program offering benefits exclusively at certain all-inclusive resorts primarily in Latin America and the Caribbean. Adjusted EBITDA includes intercompany commission fee expenses paid to our management and franchising segment, which are eliminated in consolidation.
Within overhead, we include unallocated corporate expenses.
During the year ended December 31, 2024, we revised our definition of Adjusted EBITDA to exclude transaction and integration costs (see Note 1), and we recast prior-period results to provide comparability. The revised definition excludes integration costs, which were previously recognized in integration costs during the three months ended March 31, 2024 and general and administrative expenses during the years ended December 31, 2023 and December 31, 2022, and transaction costs, which were previously recognized in general and administrative expenses during the three months ended March 31, 2024 and the years ended December 31, 2023 and December 31, 2022. Previously, only transaction costs recognized in gains (losses) on sales of real estate and other and other income (loss), net were excluded from Adjusted EBITDA. As these costs may vary in frequency or magnitude, we believe the revised definition presents a more representative measure of our core operations, assists
in the comparability of results, and provides information consistent with how our management evaluates operating performance.
Our CODM evaluates performance based on gross fee revenues, owned and leased revenues, distribution revenues, other revenues, and Adjusted EBITDA. Our CODM uses these measures to evaluate trends and assess segment operating performance as compared to our industry and competitors in order to determine how to allocate resources to each segment. Significant segment expenses include Adjusted general and administrative expenses, owned and leased expenses, and distribution expenses. Our CODM does not evaluate our operating segments using discrete asset information.
We define Adjusted EBITDA as net income (loss) attributable to Hyatt Hotels Corporation plus net income (loss) attributable to noncontrolling interests and our pro rata share of unconsolidated owned and leased hospitality ventures'
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Caption By Hyatt's 2025 Franchise Disclosure Document, the Management and franchising segment primarily earns revenue through the provision of management, franchising, and hotel services. This includes licensing Caption By Hyatt's intellectual property to its property portfolio, co-branded credit card programs, and other hospitality-related businesses, such as the Unlimited Vacation Club. The segment also generates revenue from reimbursed costs, mainly related to payroll at managed properties where Caption By Hyatt acts as the employer. Additionally, it covers costs associated with system-wide services and the loyalty program operated on behalf of owners of managed and franchised properties.
Gross fees, a significant component of this segment's earnings, include base management fees, incentive management fees, and franchise and other fees. Base management fees are typically calculated as a percentage of gross revenues, while incentive management fees are based on a hotel's profitability. Franchise and other fees consist of initial franchise fees, ongoing royalty fees (calculated as a percentage of gross room revenues and, where applicable, food and beverage revenues), termination fees, and license fees from co-branded credit card programs and sales of branded residential units. They also include management and royalty fees related to the Unlimited Vacation Club and fees from hotel services provided to certain all-inclusive resorts.
For the year ended December 31, 2024, the Management and franchising segment reported several specific revenue streams. Base management fees amounted to $432 million, incentive management fees totaled $252 million, and franchise and other fees reached $465 million. Other revenues contributed $42 million, while revenues for reimbursed costs were substantial at $3,352 million. However, there was a contra revenue of $69 million. In total, the segment revenues amounted to $1,191 million, with total revenues reaching $4,474 million, reflecting the diverse sources of income within this segment.
Prospective Caption By Hyatt franchisees should understand that the financial performance of the Management and franchising segment is crucial for the overall health of the Caption By Hyatt brand. The ability to generate revenue through various streams, including management fees, franchise fees, and licensing agreements, directly impacts the resources available for system-wide services, marketing, and brand development. Franchisees benefit from a well-supported system, making these revenue sources essential for the long-term success of their individual Caption By Hyatt franchise.