REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregated Revenues
See Note 19 for our revenues disaggregated by the nature of the product or service.
Contract Balances
Contract assets related to incentive management fees recorded in receivables, net on our consolidated balance sheets were insignificant at both December 31, 2025 and December 31, 2024.
In conjunction with the Tortuga sale (see Note 7), we recorded a $14 million contingent consideration receivable as a contract asset within other assets on our consolidated balance sheet. We estimate contingent consideration arising from asset dispositions on a recurring basis using the expected value method. During the year ended December 31, 2025, there were no changes in estimate recognized.
Contract liabilities were comprised of the following:
| | | | | | | | | | | |
| December 31, 2025 | | December 31, 2024 |
| Deferred revenue related to the loyalty program (1) | $ | 1,604 | | | $ | 1,333 | |
Deferred revenue related to distribution and destination management services | 643 | | | 705 | |
| Deferred revenue related to insurance programs | 102 | | | 112 | |
| Advanced deposits | 59 | | | 53 | |
| Initial application fees from franchisees | 50 | | | 47 | |
| Other deferred revenue | 138 | | | 146 | |
| Total contract liabilities | $ | 2,596 | | | $ | 2,396 | |
(1) At December 31, 2025, includes $1,533 million and $71 million, respectively, related to future point redemptions and free night awards as a result of the integration of the co-branded credit card programs into the loyalty program. |
Revenue recognized during the years ended December 31, 2025 and December 31, 2024 included in the contract liabilities balance at the beginning of each year was $1,303 million and $1,208 million, respectively. This revenue primarily related to distribution and destination management services and the loyalty program.
Revenue Allocated to Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted revenue expected to be recognized in future periods was approximately $135 million at December 31, 2025. This was primarily related to design services fees from third-party owners and initial application fees from franchisees. Design services fees are recognized as revenues over multiple years, typically over a period of less than five years, using the percentage-of-completion method based on the achievement of design and/or renovation or construction milestones, timing of which is inherently uncertain. Initial application fees are recognized as revenues using the straight-line method over the initial term of the franchise agreement, which is generally 20 years. Of the $135 million of contracted revenue, we expect to recognize approximately 10% within the next 12 months, with the remainder to be recognized thereafter.
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.