For Crowne Plaza, how are variable fees from agreements typically calculated?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
Fees from these agreements comprise fixed amounts normally payable at the beginning of the contract, and variable amounts paid on a monthly basis. Variable amounts are typically based on the number of points and free night certificates issued to members and the marketing services performed by the Company. Total fees are allocated to the performance obligations based on their estimated stand-alone selling prices. Revenue allocated to marketing and licensing obligations is recognized on a monthly basis as the obligations are satisfied. Revenue relating to points and free night certificates is recognized when the member has consumed the points or certificates at a participating hotel or has selected a reward from a third party, net of the cost of reimbursing the hotel or third party that is providing the benefit.
Judgment is required in estimating the stand-alone selling prices which are based upon generally accepted valuation methodologies regarding the value of the license provided and the number of points and certificates expected to be issued. However, the value of revenue recognized and the deferred revenue balance at the end of the year is not materially sensitive to changes in these assumptions.
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
According to the 2025 FDD, Crowne Plaza agreements include both fixed fees, usually at the beginning of the contract, and variable fees, which are paid monthly. These variable fees are typically based on the number of points and free night certificates issued to members, as well as the marketing services performed by the company. The total fees are allocated based on their estimated stand-alone selling prices.
Revenue from marketing and licensing is recognized monthly as the obligations are met. Revenue from points and free night certificates is recognized when a member uses them at a participating hotel or selects a reward from a third party, after deducting the cost of reimbursing the hotel or third party providing the benefit.
The FDD indicates that estimating these stand-alone selling prices requires judgment, using generally accepted valuation methods to assess the value of the license and the expected number of points and certificates issued. However, the FDD states that the value of revenue recognized and the deferred revenue balance at the end of the year is not materially sensitive to changes in these assumptions.