What is the role of the third party in Caption By Hyatt's co-branded credit card agreements?
Caption_By_Hyatt Franchise · 2025 FDDAnswer from 2025 FDD Document
agent websites, in travel brochures, and via other media. Revenues from advertising are recognized in distribution revenues on our consolidated statements of income when the service is provided.
Co-branded credit card programs
We have co-branded credit card agreements with a third party, and under the terms of the agreements, we have various performance obligations: granting a license to the Hyatt name, arranging for the fulfillment of points issued to cardholders through the loyalty program, and awarding cardholders with free room nights upon achievement of certain program milestones. The loyalty points and free room nights represent material rights that can be redeemed for free or discounted services in the future.
In exchange for the products and services provided, we receive fixed and variable consideration which is allocated between the performance obligations based on their relative standalone selling prices. Significant judgment is involved in determining the relative standalone selling prices, and therefore, we engage a third-party valuation specialist for assistance. We utilize a relief from royalty method to determine the revenues allocated to the license, and the revenues are recognized over time as the licensee derives value from access to Hyatt's brand name in other revenues on our consolidated statements of income. We utilize observable transaction prices and adjusted market assumptions to determine the standalone selling price of a loyalty point, and we utilize a cost plus margin approach to determine the standalone selling price of the free room nights. The revenues allocated to loyalty program points and free night awards are deferred and recognized in revenues for reimbursed costs on our consolidated statements of income upon redemption or expiration of a card member's promotional awards, net of redemption expense when we are the agent. We are responsible for arranging for the redemption of promotional awards, but we do not directly fulfill the award night obligation except at owned and leased hotels. Therefore, we are the agent for managed and franchised hotels, and we are the principal with respect to owned and leased hotels.
We satisfy the following performance obligations over time: access to Hyatt's symbolic IP, services provided under management and hotel services agreements, administration of the loyalty program, and the license of our brand name through our co-branded credit card agreements.
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to the 2025 Caption By Hyatt Franchise Disclosure Document, Caption By Hyatt has co-branded credit card agreements with a third party. Under the terms of these agreements, Caption By Hyatt has several performance obligations. These include granting a license to use the Hyatt name, arranging for the fulfillment of loyalty points issued to cardholders, and awarding cardholders with free room nights when they reach certain program milestones. The loyalty points and free room nights are considered material rights that can be redeemed for free or discounted services in the future.
Caption By Hyatt recognizes revenues over time for each performance obligation satisfied, using an output method based on the value transferred to the customer. For the co-branded credit card programs, cardholder spending is indicative of the value the third-party partner derives from the use of the Hyatt name. When determining the relative standalone selling prices for these obligations, Caption By Hyatt engages a third-party valuation specialist for assistance. This specialist helps determine the revenues allocated to the license using a relief from royalty method.
Caption By Hyatt utilizes observable transaction prices and adjusted market assumptions to determine the standalone selling price of a loyalty point. They also use a cost plus margin approach to determine the standalone selling price of the free room nights. The revenues allocated to loyalty program points and free night awards are deferred and recognized as revenues for reimbursed costs upon redemption or expiration of a card member's promotional awards, net of redemption expense, when Caption By Hyatt acts as the agent. Caption By Hyatt is responsible for arranging for the redemption of promotional awards but does not directly fulfill the award night obligation except at owned and leased hotels. Therefore, for managed and franchised hotels, Caption By Hyatt acts as the agent, while for owned and leased hotels, they are the principal.