How does The Standardx determine the progress in satisfying performance obligations related to revenues and operating profits of the hotels?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
For each performance obligation satisfied over time, we recognize revenues using an output method based on the value transferred to the customer. Revenues are recognized based on the transaction price and the observable outputs related to each performance obligation. We deem the following to represent our progress in satisfying these performance obligations:
- revenues and operating profits earned by the hotels during the reporting period for access to Hyatt's IP as it is indicative of the value third-party owners and franchisees derive;
- revenues and operating profits of the hotels for the promise to provide services to the hotels under management and hotel services agreements;
- award night redemptions or point redemptions with third-party partners for the administration of the loyalty program performance obligation; and
- cardholder spend for the license to the Hyatt name through our co-branded credit card programs as it is indicative of the value our partner derives from the use of our name.
Within our management and hotel services agreements, we have two performance obligations: providing access to Hyatt's IP and providing management and hotel services. Although these constitute two separate performance obligations, both obligations represent services that are satisfied over time, and we recognize revenues using an output method based on the performance of the hotel. Therefore, we have not allocated the transaction price between these two performance obligations as the allocation would result in the same pattern of revenue recognition.
Revenues are adjusted for the effects of a significant financing component when the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year.
Source: Item 23 — Receipts (FDD pages 85–132)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the company recognizes revenues over time using an output method based on the value transferred to the customer. The revenues are based on the transaction price and observable outputs related to each performance obligation. The Standardx deems revenues and operating profits earned by the hotels during the reporting period as an indicator of the value that third-party owners and franchisees derive from access to The Standardx's intellectual property.
For management and hotel services agreements, The Standardx has two performance obligations: providing access to The Standardx's IP and providing management and hotel services. The Standardx does not allocate the transaction price between these two performance obligations because both represent services satisfied over time, and the allocation would result in the same pattern of revenue recognition. The company adjusts revenues for the effects of a significant financing component when the period between the transfer of goods or services and customer payment exceeds one year.
In cases where The Standardx offers direct booking access to properties unaffiliated with its hotel portfolio through Mr & Mrs Smith, the company receives variable consideration representing a commission fee from hotel owners. This fee is based on the total transaction value of the associated booking. The Standardx recognizes these commission fee revenues at the time of the guest's stay. For bookings requiring prepayment, the deposits are recorded as contract liabilities until the stay occurs, at which point revenues are recognized, net of amounts paid to hotel owners or third-party partners. This approach ensures that revenue recognition aligns with the actual delivery of services and the value derived by customers and partners.