HYATT HOTELS CORP, 10-K filed on 2/18/2021
Annual Report
v3.20.4
Cover Page - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Jan. 31, 2021
Jun. 30, 2020
Document Information      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2020    
Current Fiscal Year End Date --12-31    
Document Transition Report false    
Entity File Number 001-34521    
Entity Registrant Name HYATT HOTELS CORP    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 20-1480589    
Entity Address, Address Line One 150 North Riverside Plaza    
Entity Address, Address Line Two 8th Floor,    
Entity Address, City or Town Chicago,    
Entity Address, State or Province IL    
Entity Address, Postal Zip Code 60606    
City Area Code 312    
Local Phone Number 750-1234    
Title of 12(b) Security Class A Common Stock, $0.01 par value    
Trading Symbol H    
Security Exchange Name NYSE    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Emerging Growth Company false    
ICFR Auditor Attestation Flag true    
Entity Shell Company false    
Entity Public Float     $ 1,871.4
Documents Incorporated by Reference Part III of this Annual Report on Form 10-K incorporates by reference portions of the registrant's Proxy Statement for its 2021 Annual Meeting of Stockholders to be held on May 19, 2021.    
Entity Central Index Key 0001468174    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Amendment Flag false    
Common Class A      
Document Information      
Entity Common Stock, Shares Outstanding   39,261,233  
Common Class B      
Document Information      
Entity Common Stock, Shares Outstanding   62,038,918  
v3.20.4
Consolidated Statements of Income (Loss) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
REVENUES:      
Revenue $ 2,066 $ 5,020 $ 4,454
DIRECT AND SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:      
Depreciation and amortization 310 329 327
Other direct costs 65 133 48
Selling, general, and administrative 321 417 320
Direct and selling, general, and administrative expenses 2,698 4,823 4,122
Net gains (losses) and interest income from marketable securities held to fund rabbi trusts 60 62 (11)
Equity earnings (losses) from unconsolidated hospitality ventures (70) (10) 8
Interest expense (128) (75) (76)
Gains (losses) on sales of real estate and other (36) 723 772
Asset impairments (62) (18) (25)
Other income (loss), net (92) 127 (49)
INCOME (LOSS) BEFORE INCOME TAXES (960) 1,006 951
BENEFIT (PROVISION) FOR INCOME TAXES 257 (240) (182)
NET INCOME (LOSS) (703) 766 769
NET INCOME (LOSS) AND ACCRETION ATTRIBUTABLE TO NONCONTROLLING INTERESTS 0 0 0
NET INCOME (LOSS) ATTRIBUTABLE TO HYATT HOTELS CORPORATION $ (703) $ 766 $ 769
EARNINGS (LOSSES) PER SHARE—Basic      
Net income (loss) - basic (in dollars per share) $ (6.93) $ 7.33 $ 6.79
Net income (loss) attributable to Hyatt Hotels Corporation - Basic (in dollars per share) (6.93) 7.33 6.79
EARNINGS (LOSSES) PER SHARE—Diluted      
Net income (loss) - diluted (in dollars per share) (6.93) 7.21 6.68
Net income (loss) attributable to Hyatt Hotels Corporation - Diluted (in dollars per share) $ (6.93) $ 7.21 $ 6.68
Owned and leased hotels      
REVENUES:      
Revenue $ 513 $ 1,848 $ 1,918
DIRECT AND SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:      
Costs incurred on behalf of managed and franchised properties 627 1,424 1,446
Management, franchise, and other fees      
REVENUES:      
Revenue 239 608 552
Contra revenue      
REVENUES:      
Revenue (30) (22) (20)
Net management, franchise, and other fees      
REVENUES:      
Revenue 209 586 532
Other revenues      
REVENUES:      
Revenue 58 125 48
Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties      
REVENUES:      
Revenue 1,286 2,461 1,956
Costs incurred on behalf of managed and franchised properties      
DIRECT AND SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:      
Costs incurred on behalf of managed and franchised properties $ 1,375 $ 2,520 $ 1,981
v3.20.4
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Comprehensive Income [Abstract]      
Net income (loss) $ (703) $ 766 $ 769
Other comprehensive income (loss), net of taxes:      
Foreign currency translation adjustments, net of tax (benefit) expense of $2, $—, and $(1) for the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively 38 8 52
Unrecognized pension (cost) benefit, net of tax (benefit) expense of $—, $(1), and $1 for the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively 2 (4) 2
Unrealized gains on available-for-sale debt securities, net of tax expense of $— for the years ended December 31, 2020, December 31, 2019, and December 31, 2018. 0 1 0
Unrealized losses on derivative activity, net of tax benefit of $(8), $(5), and $— for the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively (23) (14) (1)
Other comprehensive income (loss) 17 (9) 53
COMPREHENSIVE INCOME (LOSS) (686) 757 822
COMPREHENSIVE INCOME (LOSS) AND ACCRETION ATTRIBUTABLE TO NONCONTROLLING INTERESTS 0 0 0
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO HYATT HOTELS CORPORATION $ (686) $ 757 $ 822
v3.20.4
Consolidated Statements of Comprehensive Income (Loss) Parenthetical - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Comprehensive Income [Abstract]      
Foreign currency translation adjustments, net of tax (benefit) expense $ 2 $ 0 $ (1)
Unrecognized pension (cost) benefit, net of tax (benefit) expense 0 (1) 1
Unrealized gains on available-for-sale debt securities, net of tax expense 0 0 0
Unrealized losses on derivative activity, net of tax (benefit) expense $ (8) $ (5) $ 0
v3.20.4
Consolidated Balance Sheets - USD ($)
$ in Millions
Dec. 31, 2020
Dec. 31, 2019
CURRENT ASSETS:    
Cash and cash equivalents $ 1,207 $ 893
Restricted cash 11 150
Short-term investments 675 68
Receivables, net of allowances of $56 and $32 at December 31, 2020 and December 31, 2019, respectively 316 421
Inventories 9 12
Prepaids and other assets 64 134
Prepaid income taxes 281 28
Total current assets 2,563 1,706
Equity method investments 260 232
Property and equipment, net 3,126 3,456
Financing receivables, net of allowances of $114 and $100 at December 31, 2020 and December 31, 2019, respectively 29 35
Operating lease right-of-use assets 474 493
Goodwill 288 326
Intangibles, net 385 437
Deferred tax assets 207 144
Other assets 1,797 1,588
TOTAL ASSETS 9,129 8,417
CURRENT LIABILITIES:    
Current maturities of long-term debt 260 11
Accounts payable 102 150
Accrued expenses and other current liabilities 200 304
Current contract liabilities 282 445
Accrued compensation and benefits 111 144
Current operating lease liabilities 29 32
Total current liabilities 984 1,086
Long-term debt 2,984 1,612
Long-term contract liabilities 659 475
Long-term operating lease liabilities 377 393
Other long-term liabilities 911 884
Total liabilities 5,915 4,450
Commitments and contingencies (see Note 15)
EQUITY:    
Preferred stock, $0.01 par value per share, 10,000,000 shares authorized and none outstanding as of December 31, 2020 and December 31, 2019 0 0
Common stock, value 1 1
Additional paid-in capital 13 0
Retained earnings 3,389 4,170
Accumulated other comprehensive loss (192) (209)
Total stockholders' equity 3,211 3,962
Noncontrolling interests in consolidated subsidiaries 3 5
Total equity 3,214 3,967
TOTAL LIABILITIES AND EQUITY $ 9,129 $ 8,417
v3.20.4
Consolidated Balance Sheet Parentheticals - USD ($)
$ in Millions
Dec. 31, 2020
Dec. 31, 2019
Allowance for doubtful accounts receivable, current $ 56 $ 32
Financing receivable, allowance for credit loss $ 114 $ 100
Preferred stock, par or stated value per share (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 10,000,000 10,000,000
Preferred stock, shares outstanding (in shares) 0 0
Common stock, shares, issued (in shares) 0 0
Common Class A    
Common stock, par or stated value per share (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 1,000,000,000 1,000,000,000
Common stock, shares, outstanding (in shares) 39,250,241 36,109,179
Common stock, shares, issued (in shares) 39,250,241 36,109,179
Common Class B    
Common stock, par or stated value per share (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 394,033,330 397,457,686
Common stock, shares, outstanding (in shares) 62,038,918 65,463,274
Common stock, shares, issued (in shares) 62,038,918 65,463,274
v3.20.4
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income (loss) $ (703) $ 766 $ 769
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:      
(Gains) losses on sales of real estate and other 36 (723) (772)
Depreciation and amortization 310 329 327
Release of contingent consideration liability (1) (30) 0
Amortization of share awards 28 35 28
Amortization of operating lease right-of-use assets 31 35  
Deferred income taxes (59) 28 (33)
Asset impairments 62 18 47
Equity (earnings) losses from unconsolidated hospitality ventures 70 10 (8)
Contra revenue 30 22 20
Gain on sale of contractual right 0 (16) 0
Unrealized (gains) losses, net 13 (26) 47
Distributions from unconsolidated hospitality ventures 3 13 17
Other (27) (57) (22)
Increase (decrease) in cash attributable to changes in assets and liabilities and other      
Receivables, net 133 (29) 14
Prepaid income taxes (241) 10 (5)
Accounts payable, accrued expenses, and other current liabilities (249) (23) (130)
Contract liabilities 73 131 94
Operating lease liabilities (23) (34)  
Accrued compensation and benefits (47) (1) 6
Other long-term liabilities (27) (9) 7
Other, net (23) (53) (65)
Net cash provided by (used in) operating activities (611) 396 341
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of marketable securities and short-term investments (1,143) (350) (665)
Proceeds from marketable securities and short-term investments 542 349 624
Contributions to equity method and other investments (65) (48) (60)
Return of equity method and other investments 5 28 51
Acquisitions, net of cash acquired 0 (18) (678)
Capital expenditures (122) (369) (297)
Issuance of financing receivables (32) (18) (2)
Proceeds from financing receivables 0 46 0
Proceeds from sales of real estate and other, net of cash disposed 85 940 1,382
Proceeds from sale of contractual right 0 21 0
Other investing activities (6) 4 19
Net cash provided by (used in) investing activities (736) 585 374
CASH FLOWS FROM FINANCING ACTIVITIES:      
Proceeds from long-term debt, net of issuance costs of $15, $—, and $4, respectively 2,035 400 416
Repayments of debt (406) (409) (231)
Repurchase of common stock (69) (421) (946)
Contingent consideration paid 0 (24) 0
Dividends paid (20) (80) (68)
Other financing activities (15) (7) (21)
Net cash provided by (used in) financing activities 1,525 (541) (850)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (4) 1 5
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 174 441 (130)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—BEGINNING OF YEAR 1,063 622 752
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—END OF PERIOD 1,237 1,063 622
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:      
Total cash, cash equivalents, and restricted cash 1,237 1,063 752
Cash paid during the period for interest 105 79 73
Cash paid during the period for income taxes 63 175 292
Cash paid for amounts included in the measurement of operating lease liabilities 42 50  
Non-cash investing and financing activities are as follows:      
Non-cash contributions to equity method investments (see Note 4, Note 15) 35 9 61
Non-cash issuance of financing receivables (see Note 6, Note 7) 0 1 45
Change in accrued capital expenditures (12) (7) $ 13
Non-cash right-of-use assets obtained in exchange for operating lease liabilities $ 14 $ 8  
v3.20.4
Consolidated Statements of Cash Flows - Parenthetical - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Cash Flows [Abstract]      
Debt issuance cost $ 15 $ 0 $ 4
v3.20.4
Consolidated Statements of Changes in Stockholders' Equity - USD ($)
$ in Millions
Total
Cumulative Effect, Period of Adoption, Adjustment
Cumulative Effect, Period of Adoption, Adjusted Balance
Common Stock Amount
Additional Paid-in Capital
Additional Paid-in Capital
Cumulative Effect, Period of Adoption, Adjusted Balance
Retained Earnings
Retained Earnings
Cumulative Effect, Period of Adoption, Adjustment
Retained Earnings
Cumulative Effect, Period of Adoption, Adjusted Balance
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
Cumulative Effect, Period of Adoption, Adjustment
[1]
Accumulated Other Comprehensive Loss
Cumulative Effect, Period of Adoption, Adjusted Balance
Noncontrolling Interests in Consolidated Subsidiaries
Noncontrolling Interests in Consolidated Subsidiaries
Cumulative Effect, Period of Adoption, Adjusted Balance
Common Class A
Common Class A
Common Stock Amount
Common Class B
Common Class B
Common Stock Amount
Balance, beginning of period (in shares) at Dec. 31, 2017                               48,231,149   70,753,837
Balance, beginning of period at Dec. 31, 2017 $ 3,843 $ (4) [1] $ 3,839 $ 1 $ 967 $ 967 $ 3,054 $ 64 [1] $ 3,118 $ (185) $ (68) $ (253) $ 6 $ 6        
Total comprehensive income 822           769     53                
Noncontrolling interests 1                       1          
Repurchase of common stock (in shares)                               (10,293,241)   (2,430,654)
Repurchase of common stock (946)       (946)                       $ (190)  
Directors compensation 2       2                          
Employee stock plan issuance (in shares)                               61,900    
Employee stock plan issuance 5       5                          
Share-based payment activity (in shares)                               300,654    
Share-based payment activity 22       22                          
Class share conversions (in shares)                               1,207,355   (1,207,355)
Cash dividends (68)           (68)               $ (27)   (41)  
Balance, beginning of period (in shares) at Dec. 31, 2018                               39,507,817   67,115,828
Balance, end of period at Dec. 31, 2018 $ 3,677     1 50   3,819     (200)     7          
Accounting Standards Update [Extensible List] us-gaap:AccountingStandardsUpdate201613Member                                  
Total comprehensive income $ 757           766     (9)                
Noncontrolling interests (2)                       (2)          
Repurchase of common stock (in shares)                               (4,943,897)   (677,384)
Repurchase of common stock (421)       (86)   (335)                   (50)  
Directors compensation 2       2                          
Employee stock plan issuance (in shares)                               79,700    
Employee stock plan issuance 5       5                          
Share-based payment activity (in shares)                               490,389    
Share-based payment activity 29       29                          
Class share conversions (in shares)                               975,170   (975,170)
Cash dividends (80)           (80)               (29)   (51)  
Balance, beginning of period (in shares) at Dec. 31, 2019                               36,109,179   65,463,274
Balance, end of period at Dec. 31, 2019 3,967 $ (1) [2] $ 3,966 1 0 $ 0 4,170 $ (1) [2] $ 4,169 (209)   $ (209) 5 $ 5        
Total comprehensive income (686)           (703)     17                
Noncontrolling interests (2)                       (2)          
Repurchase of common stock (in shares)                               (827,643)    
Repurchase of common stock (69)       (12)   (57)                      
Directors compensation 1       1                          
Employee stock plan issuance (in shares)                               75,763    
Employee stock plan issuance 4       4                          
Share-based payment activity (in shares)                               468,586    
Share-based payment activity 20       20                          
Class share conversions (in shares)                               3,424,356   (3,424,356)
Cash dividends (20)           (20)               $ (7)   $ (13)  
Balance, beginning of period (in shares) at Dec. 31, 2020                               39,250,241   62,038,918
Balance, end of period at Dec. 31, 2020 $ 3,214     $ 1 $ 13   $ 3,389     $ (192)     $ 3          
[1] Cumulative adjustment due to adoption of Accounting Standards Update No. 2016-01 ("ASU 2016-01"), Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, and Accounting Standards Update No. 2016-01 ("ASU 2016-01"), Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Upon the adoption of ASU 2016-01, unrealized gains and losses on our equity securities, previously classified as available-for-sale, are recognized in other income (loss), net.
[2] Cumulative adjustment due to adoption of Accounting Standards Update No. ASU 2016-13 ("ASU 2016-13"), Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (see Note 2).
v3.20.4
Consolidated Statements of Changes in Stockholders' Equity Parenthetical - $ / shares
12 Months Ended
Mar. 09, 2020
Dec. 09, 2019
Sep. 09, 2019
Jun. 10, 2019
Mar. 11, 2019
Dec. 10, 2018
Sep. 20, 2018
Jun. 28, 2018
Mar. 29, 2018
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement of Stockholders' Equity [Abstract]                        
Cash dividend (in dollars per share) $ 0.20 $ 0.19 $ 0.19 $ 0.19 $ 0.19 $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.20 $ 0.19 $ 0.15
v3.20.4
Organization
12 Months Ended
Dec. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization ORGANIZATIONHyatt Hotels Corporation, a Delaware corporation, and its consolidated subsidiaries (collectively "Hyatt Hotels Corporation") provides hospitality and other services on a worldwide basis through the operation, management, franchising, ownership, development, and licensing of hospitality businesses. We operate, manage, franchise, own, lease, develop, license, or provide services to a portfolio of properties, consisting of full service hotels, select service hotels, resorts, and other properties, including timeshare, fractional, and other forms of residential, vacation, and condominium ownership units. At December 31, 2020, (i) we operated or franchised 471 full service hotels, comprising 162,801 rooms throughout the world, (ii) we operated or franchised 503 select service hotels, comprising 72,471 rooms, of which 421 hotels are located in the United States, and (iii) our portfolio included 8 franchised all-inclusive Hyatt-branded resorts, comprising 3,153 rooms. At December 31, 2020, our portfolio of properties operated in 69 countries around the world. Additionally, through strategic relationships, we provide certain reservation and/or loyalty program services to hotels that are unaffiliated with our hotel portfolio and which operate under other tradenames or marks owned by such hotel or licensed by third parties.
v3.20.4
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation—Our consolidated financial statements present the results of operations, financial position, and cash flows of Hyatt Hotels Corporation and its majority owned and controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Impact of the COVID-19 Pandemic—The COVID-19 pandemic and related travel restrictions and containment efforts have had a significant impact on the travel industry and as a result, on our business. The impact began in the first quarter of 2020 and has continued throughout the year ended December 31, 2020. As a result, our financial results for 2020, and for the foreseeable future, are not comparable to past performance or indicative of long-term future performance.
Use of Estimates—We are required to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying Notes. Our estimates and assumptions are subject to inherent risk and uncertainty due to the ongoing impact of the COVID-19 pandemic, and actual results could differ materially from our estimated amounts.
Reclassifications—Certain prior year amounts have been reclassified to conform to the current year presentation.
Revenue Recognition—Our revenues are primarily derived from the products and services provided to our customers and generally recognized when control of the product or service has transferred to the customer. Our customers include third-party hotel owners and franchisees, guests at owned and leased hotels, a third-party partner through our co-branded credit card program, and owners and guests of the condominium ownership units. A summary of our revenue streams is as follows:
Owned and leased hotels revenues—Owned and leased hotels revenues are derived from room rentals and services provided at our owned and leased hotels. We present revenues net of sales, occupancy, and other taxes. Taxes collected on behalf of and remitted to governmental taxing authorities are excluded from the transaction price of the underlying products and services.
Management, franchise, and other fees—Management fees primarily consist of a base fee, which is generally calculated as a percentage of gross revenues, and an incentive fee, which is generally computed based on a hotel profitability measure. Included within the management fees are royalty fees that we earn in exchange for providing access to Hyatt's intellectual property ("IP"). Franchise fees consist of an initial fee and ongoing royalty fees computed as a percentage of gross room revenues and as applicable, food and beverage revenues. Other fees include license fee revenues associated with the licensing of the Hyatt brand names through our co-branded credit card program and sales of our branded residential ownership units as well as termination fees.
Net management, franchise, and other fees—Management, franchise, and other fees are reduced by the amortization of management and franchise agreement assets and performance cure payments, which constitute payments to customers. Consideration provided to customers related to management and franchise agreement assets is recorded in other assets and amortized to Contra revenue over the expected customer life, which is typically the initial term of the management or franchise agreement.
Other revenues—Other revenues include revenues from our residential management operations for our condominium ownership units, the sale of promotional awards through our co-branded credit card program, and spa and fitness revenues from Exhale, which was sold during the year ended December 31, 2020 (see Note 7).
Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties—Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties represent the reimbursement of costs incurred on behalf of the owners of properties. These reimbursed costs relate primarily to payroll at managed properties where the Company is the employer, as well as system-wide services and the loyalty program operated on behalf of owners of managed and franchised properties.
The products and services we offer to our customers are comprised of the following performance obligations:
Management and franchise agreements
License to Hyatt's IP, including the Hyatt brand names—We receive variable consideration from third-party hotel owners in exchange for providing access to our IP, including the Hyatt brand names. The license represents a license of symbolic IP and in exchange for providing the license, Hyatt receives sales-based royalty fees. Fees are generally payable on a monthly basis as the third-party hotel owners and franchisees derive value from access to our IP. Royalty fees are recognized over time as services are rendered. Under our franchise agreements, we also receive initial fees from third-party hotel owners and franchisees. The initial fees do not represent a distinct performance obligation, and therefore, are combined with the royalty fees and deferred and recognized through management, franchise, and other fees over the expected customer life, which is typically the initial term of the franchise agreement.
System-wide services—We provide system-wide services on behalf of owners of managed and franchised properties. The promise to provide system-wide services is not a distinct performance obligation because it is attendant to the license of our IP. Therefore, this promise is combined with the license of our IP to form a single performance obligation. We have two accounting models depending on the terms of the agreements:
Cost reimbursement model—Hotel owners and franchisees are required to reimburse us for all costs incurred to operate the system-wide programs with no added margin. The reimbursements are recognized over time within revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. We have discretion over how we spend program revenues, and therefore, we are the principal. Expenses incurred related to the system-wide programs are recognized within costs incurred on behalf of managed and franchised properties. The reimbursement of system-wide services is billed monthly based on an annual estimate of costs to be incurred and recognized as revenue commensurate with incurring the cost. Any amounts collected and not yet recognized as revenues are deferred and classified as contract liabilities. Any costs incurred in excess of revenues collected are classified as receivables to the extent we expect to recover the costs over the long term.
Fund model—Hotel owners and franchisees are invoiced a system-wide assessment fee primarily based on a percentage of hotel revenues on a monthly basis. We recognize the revenues over time as services are provided through revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. We have discretion over how we spend program revenues, and therefore, we are the principal. Expenses related to the system-wide programs are recognized as incurred through costs incurred on behalf of managed and franchised properties. Over time, we intend to manage the system-wide programs to break-even and not earn a profit on these services, but the timing of the revenue received from the owners may not align with the timing of the expenses to operate the programs. Therefore, the difference between the revenues and expenses will impact our net income (loss).
Hotel management agreement services—Under the terms of our management agreements, we provide hotel management agreement services, which form a single performance obligation that qualifies as a series. In exchange, we receive variable consideration in the form of management fees which are comprised of base and/or incentive fees. Incentive fees are typically subject to the achievement of certain profitability targets, and therefore, we apply judgment in determining the amount of incentive fees recognized each period. Incentive fees revenue is recognized to the extent it is probable that we will not reverse a significant portion of the fees in a subsequent period. We rely on internal financial forecasts and historical trends to estimate the amount of incentive fees revenue recognized and the probability that incentive fees will reverse in the future. Generally, base management fees are due and payable on a monthly basis as services are provided, and incentive fees are due and payable based on the terms of the agreement, but at a minimum, incentive fees are billed and collected annually. Revenue is recognized over time as services are rendered.
Under the terms of certain management agreements, primarily within the U.S., we are the employer of hotel employees. When we are the employer, we are reimbursed for costs incurred related to the employee management services with no added margin, and the reimbursements are recognized over time as services are rendered within revenues for the reimbursement of costs incurred on behalf of managed and franchised properties. In jurisdictions in which we are the employer, we have discretion over how employee management services are provided, and therefore, we are the principal.
Loyalty program administration—We administer the loyalty program for the benefit of Hyatt's portfolio of properties during the period of their participation in the loyalty program. Under the program, members earn points based on their spend at our properties, by transacting with our strategic loyalty alliances, or in connection with spend on a Hyatt co-branded credit card, which may be redeemed for the right to stay at participating properties, as well as for other goods and services from third parties. Points earned by loyalty program members represent a material right to free or discounted goods or services in the future.
The loyalty program has one performance obligation that consists of marketing and managing the program and arranging for award redemptions by members. These two promises are not distinct because the promise to market and manage the program does not benefit the customer without the related arrangement for award redemptions. The costs of administering the loyalty program are charged to the properties through an assessment fee based on members' qualified expenditures. The assessment fee is billed and collected monthly, and the revenue received by the program is deferred until a member redeems points. Upon redemption of points at managed and franchised properties, we recognize the previously deferred revenue through revenues for the reimbursement of costs incurred on behalf of managed and franchised properties, net of redemption expense paid to managed and franchised hotels. 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 with respect to this performance obligation for managed and franchised hotels, and we are the principal with respect to owned and leased hotels. A portion of our owned and leased hotels revenues is deferred upon initial stay as points are earned by program members at owned or leased hotels, and revenues are recognized upon redemption at owned or leased hotels.
We actuarially determine the amount to recognize as revenue based on statistical formulas that estimate the timing of future point redemptions based on historical experience. The revenue recognized each period includes an estimate of the loyalty points that will eventually be redeemed and includes an estimate of breakage for the loyalty points that will not be redeemed. Determining breakage involves significant judgment, and we engage third-party actuaries to estimate the ultimate redemption ratios used in the breakage calculations and the amount of revenue recognized upon redemption. Changes to the expected ultimate redemption assumptions are reflected in the current period. Any revenues in excess of the anticipated future redemptions are used to fund the other operational expenses of the program.
Room rentals and other services provided at owned and leased hotels
We provide room rentals and other services to our guests, including but not limited to spa, laundry, and parking. These products and services each represent individual performance obligations, and in exchange for these services, we receive fixed amounts based on published rates or negotiated contracts. Payment is due in full at the time the services are rendered or the goods are provided. If a guest enters into a package including multiple goods or services, the fixed price is allocated to each distinct good or service based on the standalone selling price for each item. Revenue is recognized over time when we transfer control of the good or service to the customer. Room rental revenue is recognized on a daily basis as the guest occupies the room, and revenue related to other products and services is recognized when the product or service is provided to the guest.
Hotels commonly enter into arrangements with online travel agencies, trade associations, and other entities. As part of these arrangements, Hyatt may pay the other party a commission or rebate based on the revenue generated through that channel. The determination of whether to recognize revenues gross or net of rebates and commissions is made based on the terms of each contract.
Residential management operations
We provide residential management services pursuant to rental management agreements with individual property owners and/or homeowner associations whereby the property owners and/or homeowner associations participate in our rental program. The services provided include reservations, housekeeping, security, and concierge assistance to guests in exchange for a variable fee based on a revenue sharing agreement with the owner of the condominium ownership unit. The services represent an individual performance obligation. Revenue is recognized over time as services are
rendered or upon completion of the guest's stay at the condominium ownership unit. We are responsible for establishing pricing as well as fulfilling the services during the guest's stay, and as a result, we are deemed to be the principal in the transaction.
Co-branded credit card program
We have a co-branded credit card agreement with a third party and under the terms of the agreement, 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 the relative standalone selling prices. Significant judgment is involved in determining the relative standalone selling prices, and therefore, we engaged a third-party valuation specialist to assist us. We utilize a relief from royalty method to determine the revenue allocated to the license which is recognized over time as the licensee derives value from access to Hyatt's brand name. 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 upon redemption or expiration of a card member's promotional awards which is recognized 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: the license of Hyatt's symbolic IP, hotel management agreement services, administration of the loyalty program, and the license to our brand name through our co-branded credit card agreement. Each of these performance obligations is considered a sales-based royalty or a series of distinct services, and although the activities to fulfill each of these promises may vary from day to day, the nature of each promise is the same and the customer benefits from the services every day.
For each performance obligation satisfied over time, we recognize revenue using an output method based on the value transferred to the customer. Revenue is 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 hotel owners and franchisees derive;
revenues and operating profits of the hotels for the promise to provide management agreement services to the hotels;
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 program, as it is indicative of the value our partner derives from the use of our name.
Within our management agreements, we have two performance obligations: providing a license to Hyatt's IP and providing management agreement services. Although these constitute two separate performance obligations, both obligations represent services that are satisfied over time, and Hyatt recognizes revenue 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.
Revenue is 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.
We have applied the practical expedient that permits the omission of prior-period information about revenue allocated to future performance obligations.
We do not estimate revenues allocated to remaining performance obligations for the following:
Deferred revenue related to the loyalty program and revenue from base and incentive management fees as the revenue is allocated to a wholly unperformed performance obligation in a series;
Revenues related to royalty fees as they are considered sales-based royalty fees;
Revenues received for free nights granted through our co-branded credit card program as the awards have an original duration of 12 months; and
Revenues related to advanced bookings at owned and leased hotels as each stay has a duration of 12 months or less.
Contract Balances—Our payments from customers are based on the billing terms established in our contracts. Customer billings are recorded as accounts receivable when our right to consideration is unconditional. If our right to consideration is conditional on future performance under the contract, the balance is recorded as a contract asset. Due to certain profitability hurdles in our management agreements, incentive fees are considered contract assets until the risk related to the achievement of the profitability metric no longer exists. Once the profitability hurdle has been met, the incentive fee receivable balance will be recorded in accounts receivable. Contract assets are recorded in receivables, net on our consolidated balance sheets. Payments received in advance of performance under the contract are recorded as current or long-term contract liabilities on our consolidated balance sheets and recognized as revenue as we perform under the contract.
Cash Equivalents—We consider all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents.
Restricted Cash—Restricted cash generally represents sales proceeds pursuant to like-kind exchanges, debt service on bonds, escrow deposits, and other arrangements.
Equity Method Investments—We have investments in unconsolidated hospitality ventures accounted for under the equity method. These investments are an integral part of our business and strategically and operationally important to our overall results. When we receive a distribution from an investment, we determine whether it is a return on our investment or a return of our investment based on the underlying nature of the distribution. Certain of our equity method investments are reported on a lag of up to three months. When intervening events occur during the time lag, we recognize the impact in our consolidated financial statements.
We assess investments in unconsolidated hospitality ventures for impairment quarterly, and when there is an indication that a loss in value has occurred, we evaluate the carrying value in comparison to the estimated fair value of the investment. Fair value is based on internally developed discounted cash flow models, third-party appraisals, and if appropriate, current estimated net sales proceeds from pending offers. Under the discounted cash flow approach, we utilize various assumptions requiring judgment, including projected future cash flows, discount rates, and capitalization rates. Our estimates of projected future cash flows are based on historical data, various internal estimates, and a variety of external sources, and are developed as part of our routine, long-term planning process.
If the estimated fair value is less than carrying value, we apply judgment to determine whether the decline in value is other than temporary. In determining this, we consider factors including, but not limited to, the length of time and extent of the decline, loss of value as a percentage of the cost, financial condition and near-term financial projections, our intent and ability to recover the lost value, and current economic conditions. Impairments deemed other than temporary are recognized in equity earnings (losses) from unconsolidated hospitality ventures on our consolidated statements of income (loss).
For additional information about equity method investments, see Note 4.
Debt and Equity Securities—Excluding equity method investments, debt and equity securities consist of various investments:
Equity securities consist of interest-bearing money market funds, mutual funds, common shares, and preferred shares. Equity securities with a readily determinable fair value are recorded at fair value on our consolidated balance sheets based on listed market prices or dealer quotations where available. Equity securities without a readily determinable fair value are recorded at cost less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Net gains and losses, both realized and unrealized, and impairment charges on equity securities are recognized in other income (loss), net on our consolidated statements of income (loss).
Debt securities include preferred shares, time deposits, and fixed income securities, including U.S. government obligations, obligations of other government agencies, corporate debt, mortgage-backed and asset-backed securities,
and municipal and provincial notes and bonds. Debt securities are classified as trading, available-for-sale ("AFS"), or held-to-maturity ("HTM").
Trading securities—recorded at fair value based on listed market prices or dealer price quotations, where available. Net gains and losses, both realized and unrealized, on trading securities are recognized in net gains (losses) and interest income from marketable securities held to fund rabbi trusts or other income (loss), net, depending on the nature of the investment, on our consolidated statements of income (loss).
AFS securities—recorded at fair value based on listed market prices or dealer price quotations, where available. Unrealized gains and losses on AFS debt securities are recognized in accumulated other comprehensive loss on our consolidated balance sheets. Realized gains and losses on AFS debt securities are recognized in other income (loss), net on our consolidated statements of income (loss). AFS securities are assessed quarterly for expected credit losses which are recognized in other income (loss), net on our consolidated statements of income (loss). In determining the reserve for credit losses, we evaluate AFS securities at the individual security level and consider our investment strategy, current market conditions, financial strength of the underlying investments, term to maturity, credit rating, and our intent and ability to sell the securities.
HTM securities—investments that we have the intent and ability to hold until maturity are recorded at amortized cost, net of expected credit losses. HTM securities are assessed for expected credit losses quarterly, and credit losses are recognized in other income (loss), net on our consolidated statements of income (loss). We evaluate HTM securities individually when determining the reserve for credit losses due to the unique risks associated with each security. In determining the reserve for credit losses, we consider the financial strength of the underlying assets including the current and forecasted performance of the property, term to maturity, credit quality of the owner, and current market conditions.
We classify debt securities as current or long-term, based on their contractual maturity dates and our intent and ability to hold the investment.
Interest income on our preferred shares that earn a return is recognized in other income (loss), net.
For additional information about debt and equity securities, see Note 4.
Foreign Currency—The functional currency of our consolidated entities located outside the U.S. is generally the local currency. The assets and liabilities of these entities are translated into U.S. dollars at period-end exchange rates, and the related gains and losses, net of applicable deferred income taxes, are recorded in accumulated other comprehensive loss on our consolidated balance sheets. Gains and losses from foreign currency transactions are recognized in net income (loss) on our consolidated statements of income (loss). Gains and losses from foreign exchange rate changes related to intercompany receivables and payables of a long-term nature are generally recorded in accumulated other comprehensive loss. Gains and losses from foreign exchange rate movement related to intercompany receivables and payables that are not long-term are recognized in net income (loss) on our consolidated statements of income (loss).
Financing Receivables—Financing receivables represent contractual rights to receive money either on demand or on fixed or determinable dates and are recorded on our consolidated balance sheets at amortized cost, net of expected credit losses. We recognize interest as earned and include accrued interest in the amortized cost basis of the asset.
Our financing receivables are composed of individual, unsecured loans and other types of unsecured financing arrangements provided to hotel owners. These financing receivables generally have stated maturities and interest rates, but the repayment terms vary and may be dependent on future cash flows of the hotel. We individually assess all financing receivables for credit losses quarterly and establish a reserve to reflect the net amount expected to be collected. We estimate credit losses based on an analysis of several factors, including current economic conditions, industry trends, and specific risk characteristics of the financing receivable, including capital structure, loan performance, market factors, and the underlying hotel performance. Adjustments to credit losses on financing receivables are recognized in other income (loss), net on our consolidated statements of income (loss).
We evaluate accrued interest allowances separately from the financing receivable assets. On an ongoing basis, we monitor the credit quality of our financing receivables based on historical and expected future payment activity. We determine our financing to hotel owners to be nonperforming if interest or principal is greater than 90 days past due based on the contractual terms of the individual financing receivables or if an allowance has been established for our other financing arrangements with that borrower. If we consider a financing receivable to be nonperforming, we place the financing receivable on nonaccrual status.
For financing receivables on nonaccrual status, we recognize interest income in other income (loss), net on our consolidated statements of income (loss) when cash is received. Accrual of interest income is resumed and potential reversal of any associated allowance for credit loss occurs when the receivable becomes contractually current and collection doubts are removed.
After an allowance for credit losses has been established, we may determine the receivable balance is uncollectible when all commercially reasonable means of recovering the receivable balance have been exhausted. We write off uncollectible balances by reversing the financing receivable and the related allowance for credit losses.
For additional information about financing receivables, see Note 6.
Accounts Receivable—Our accounts receivable primarily consist of trade receivables due from guests for services rendered at our owned and leased properties and from hotel owners with whom we have management and franchise agreements for services rendered and for reimbursements of costs incurred on behalf of managed and franchised properties. We assess all accounts receivable for credit losses quarterly and establish a reserve to reflect the net amount expected to be collected. The allowance for credit losses is based on an assessment of historical collection activity, the nature of the receivable, geographic considerations, and the current business environment. The allowance for credit losses is recognized in owned and leased hotels expenses or selling, general, and administrative expenses on our consolidated statements of income (loss), based on the nature of the receivable. For additional information about accounts receivable, see Note 6.
Inventories—Inventories are comprised of operating supplies and equipment that have a period of consumption of two years or less and food and beverage items at our owned and leased hotels, which are generally valued at the lower of cost (first-in, first-out) or net realizable value.
Property and Equipment and Definite-Lived Intangible Assets—Property and equipment is stated at cost, including interest incurred during development and construction periods, less accumulated depreciation. Definite-lived intangible assets are recorded at the acquisition-date fair value, less accumulated amortization. Depreciation and amortization are recognized over the estimated useful lives of the assets, primarily on the straight-line method.
Property and equipment are depreciated over the following:
Buildings and improvements
10–50 years
Leasehold improvementsThe shorter of the lease term or useful life of asset
Furniture and equipment
3–20 years
Computers
3–7 years
Definite-lived intangible assets are amortized over the following:
Management and franchise agreement intangibles
4–30 years
Advanced booking intangibles
1–3 years
We assess property and equipment and definite-lived intangible assets for impairment quarterly, and when events or circumstances indicate the carrying value may not be recoverable, we evaluate the net book value of the assets by comparing to the projected undiscounted future cash flows of the assets. The principal factor used in the undiscounted cash flow analysis requiring judgment is the projected future operating cash flows, which are based on historical data, various internal estimates, and a variety of external resources, and are developed as part of our routine, long-term planning process.
If the projected undiscounted future cash flows are less than the net book value of the assets, the fair value is determined based on internally developed discounted cash flows of the assets, third-party appraisals or broker valuations, and if appropriate, current estimated net sales proceeds from pending offers. Under the discounted cash flow approach, we utilize various assumptions requiring judgment, including projected future cash flows, discount rates, and capitalization rates. The excess of the net book value over the estimated fair value is recognized in asset impairments on our consolidated statements of income (loss).
We evaluate the carrying value of our property and equipment and definite-lived intangible assets based on our plans, at the time, for such assets and consider qualitative factors such as future development in the surrounding area, status of local competition, and any significant adverse changes in the business climate. Changes to our plans, including a decision to dispose of or change the intended use of an asset, may have a material impact on the carrying value of the asset.
For additional information about property and equipment and definite-lived intangible assets, see Notes 5 and 9, respectively.
Leases—We primarily lease land, buildings, office space, and equipment. We determine if an arrangement is an operating or finance lease at inception. For our hotel management agreements, we apply judgment in order to determine whether the contract is accounted for as a lease or management agreement based on the specific facts and circumstances of each agreement. In evaluating whether an agreement constitutes a lease, we review the contractual terms to determine which party obtains both the economic benefits and control of the assets. In arrangements where we control the assets and obtain the economic benefits, we account for the contract as a lease.
Certain of our leases include options to extend the lease term by 1 to 99 years. We include lease extension options in our operating lease ROU assets and lease liabilities when it is reasonably certain that we will exercise the options. The range of extension options included in our operating lease ROU assets and lease liabilities is approximately 1 to 20 years. Our lease agreements do not contain any significant residual value guarantees or restrictive covenants.
We assess operating lease ROU assets for impairment quarterly, and when events or circumstances indicate the carrying value may not be recoverable, we evaluate the net book value of the assets by comparing to the projected undiscounted future cash flows of the assets. If the carrying value of the assets is determined to not be recoverable and is in excess of the estimated fair value, we recognize an impairment charge in asset impairments on our consolidated statements of income (loss).
As our leases do not provide an implicit borrowing rate, we use our estimated IBR to determine the present value of our lease payments and apply a portfolio approach. We apply judgment in estimating our IBR including factors related to currency risk and our credit risk. We also give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when determining our IBR. 
Our operating leases may include the following terms: (i) fixed minimum lease payments, (ii) variable lease payments based on a percentage of the hotel's profitability measure, as defined in the lease, (iii) lease payments equal to the greater of a minimum or variable lease payments based on a percentage of the hotel's profitability measure, as defined in the lease, (iv) lease payments adjusted for changes in an index or market value, or (v) variable lease payments based on a percentage split of the total gross revenue, as defined in the leases, related to our residential management operations. Future lease payments that are contingent are not included in the measurement of the operating lease liability or in the future maturities table, see Note 8.
For office space, land, and hotel leases, we do not separate the lease and nonlease components, which primarily relate to common area maintenance and utilities. We combine lease and nonlease components for those leases where we are the lessor, and we exclude all leases that are twelve months or less from the operating lease ROU assets and lease liabilities.
We adopted Accounting Standards Update No. 2016-02, Leases (Topic 842), utilizing the optional transition approach under Accounting Standards Update No. 2018-11, Leases (Topic 842): Targeted Improvements, and applied the package of practical expedients beginning January 1, 2019. As a result of utilizing the optional transition method, our reporting for periods prior to January 1, 2019 continue to be reported in accordance with Leases (Topic 840).
Acquisitions—We evaluate the facts and circumstances of each acquisition to determine whether the transaction should be accounted for as an asset acquisition or a business combination.
Under the supervision of management, independent third-party valuation specialists estimate the fair value of the assets or businesses acquired using various recognized valuation methods including the income approach, cost approach, relief from royalty approach, and sales comparison approach, which are primarily based on Level Three assumptions. Assumptions utilized in determining the fair value under these approaches include, but are not limited to, historical financial results when applicable, projected cash flows, discount rates, capitalization rates, royalty rates, current market conditions, likelihood of contract renewals, and comparable transactions. In a business combination, the fair value is allocated to tangible assets and liabilities and identifiable intangible assets, with any remaining value assigned to goodwill, if applicable. In an asset acquisition, any difference between the consideration paid and the fair value of the assets acquired is allocated across the identified assets based on the relative fair value. When we acquire the remaining ownership interest in or the property from an unconsolidated hospitality venture in a step acquisition, we estimate the fair value of our equity interest using the assumed cash proceeds we would receive from sale to a third party at a market sales price, which is determined using the aforementioned fair value methodologies and assumptions.
The results of operations of properties or businesses have been included on our consolidated statements of income (loss) since their respective dates of acquisition. Assets acquired and liabilities assumed in acquisitions are recorded on our consolidated balance sheets at the respective acquisition dates based on their estimated fair values. In business combinations, the purchase price allocations may be based on preliminary estimates and assumptions. Accordingly, the allocations are subject to revision when we receive final information, including appraisals and other analyses.
Acquisition-related costs incurred in conjunction with a business combination are recognized in other income (loss), net on our consolidated statements of income (loss). In an asset acquisition, these costs are included in the total consideration paid and allocated to the acquired assets.
For additional information about acquisitions, see Note 7.
Goodwill—Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. We evaluate goodwill for impairment annually during the fourth quarter of each year using balances at October 1 and at interim dates if indicators of impairment exist. Goodwill impairment is determined by comparing the fair value of a reporting unit to its carrying amount.
We evaluate the fair value of the reporting unit either by performing a qualitative or quantitative assessment. In any given year, we can elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If it is not more likely than not that the fair value is in excess of the carrying value, or we elect to bypass the qualitative assessment, we proceed to the quantitative assessment.
When determining fair value, we utilize internally developed discounted future cash flow models, third-party valuation specialist models, third-party appraisals or broker valuations, and if appropriate, current estimated net sales proceeds from pending offers. Under the discounted cash flow approach, we utilize various assumptions requiring judgment, including projected future cash flows, discount rates, and capitalization rates. Our estimates of projected future cash flows are based on historical data, various internal estimates, and a variety of external sources, and are developed as part of our routine, long-term planning process. We then compare the estimated fair value to our carrying value. If the carrying value is in excess of the fair value, we recognize an impairment charge in asset impairments on our consolidated statements of income (loss) based on the amount by which the reporting unit's carrying value exceeded its fair value, limited to the carrying amount of goodwill. For additional information about goodwill, see Note 9.
Indefinite-Lived Intangible Assets—We have certain brand and other indefinite-lived intangible assets that were acquired through various business combinations. At the time of each acquisition, fair value was estimated using a relief from royalty method.
We evaluate indefinite-lived intangible assets for impairment annually during the fourth quarter of each year using balances at October 1 and at interim dates if indicators of impairment exist. We use the relief from royalty method to estimate the fair value. When determining fair value, we utilize internally developed discounted future cash flow models and third-party valuation specialist models, which include various assumptions requiring judgment, including projected future cash flows, discount rates, and market royalty rates. Our estimates of projected cash flows are based on historical data, various internal estimates, and a variety of external sources, and are developed as part of our routine, long-term planning process. We then compare the estimated fair value to our carrying value. If the carrying value is in excess of the fair value, we recognize an impairment charge in asset impairments on our consolidated statements of income (loss). For additional information about indefinite-lived intangible assets, see Note 9.
Guarantees—We enter into performance guarantees related to certain hotels we manage. We also enter into debt repayment and other guarantees with respect to unconsolidated hospitality ventures and certain managed and franchised hotels. We record a liability for the fair value of these guarantees at their inception date. In order to estimate the fair value, we use a Monte Carlo simulation to model the probability of possible outcomes. The valuation methodology requires that we make certain assumptions and judgments regarding discount rates, volatility, hotel operating results, and hotel property sales prices. The fair value is not revalued due to future changes in assumptions. The corresponding offset depends on the circumstances in which the guarantee was issued and is recorded to equity method investments, other assets, or expenses. We amortize the liability for the fair value of a guarantee into income over the term of the guarantee using a systematic and rational, risk-based approach. Guarantees related to our managed hotels are amortized into income in other income (loss), net on our consolidated statements of income (loss). Guarantees related to our unconsolidated hospitality ventures are amortized into equity earnings (losses) from unconsolidated hospitality ventures on our consolidated statements of income (loss).
Performance and other guarantees—On a quarterly basis, we evaluate the likelihood of funding under a guarantee. To the extent we determine an obligation to fund is both probable and estimable based on performance during the period, we record a separate contingent liability and recognize expense in other income (loss), net.
Debt repayment guarantees—At inception of the guarantee and on a quarterly basis, we evaluate the risk of funding under a guarantee. We assess credit risk based on the current and forecasted performance of the underlying property, whether the property owner is current on debt service, the historical performance of the underlying property, and the current market, and we record a separate liability and recognize expense in other income (loss), net or equity earnings (losses) from unconsolidated hospitality ventures based on the nature of the guarantee.
For additional information about guarantees, see Note 15.
Income Taxes—We account for income taxes to recognize the amount of taxes payable or refundable for the current year and the amount of deferred tax assets and liabilities resulting from the future tax consequences of differences between the financial statements and tax basis of the respective assets and liabilities. We recognize the financial statement effect of a tax position when, based on the technical merits of the uncertain tax position, it is more likely than not to be sustained on a review by taxing authorities. We review these estimates and make changes to recorded amounts of uncertain tax positions as facts and circumstances warrant. For additional information about income taxes, see Note 14.
Fair Value—We apply the provisions of fair value measurement to various financial instruments, which we measure at fair value on a recurring basis, and to various financial and nonfinancial assets and liabilities, which we measure at fair value on a nonrecurring basis. We disclose the fair value of our financial assets and liabilities based on observable market information where available or on market participant assumptions. These assumptions are subjective in nature and involve matters of judgment, and therefore, fair values cannot always be determined with precision. When determining fair value, we maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of the fair value hierarchy are as follows:
Level One—Fair values based on unadjusted quoted prices in active markets for identical assets and liabilities;
Level Two—Fair values based on quoted market prices for similar assets and liabilities in active markets, quoted prices in inactive markets for identical assets and liabilities, and inputs other than quoted market prices that are observable for the asset or liability; and
Level Three—Fair values based on inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. Valuation techniques could include the use of discounted cash flow models and similar techniques.
We typically utilize the market approach and income approach for valuing our financial instruments. The market approach utilizes prices and information generated by market transactions involving identical or similar assets and liabilities and the income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). For instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the classification within the fair value hierarchy has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of fair value assets and liabilities within the fair value hierarchy.
The fair value of debt and equity securities is discussed in Note 4; the fair value of financing receivables is discussed in Note 6; the fair value of long-term debt is discussed in Note 11; and the fair value of our guarantee liabilities is discussed in Note 15. Excluding the aforementioned assets and liabilities, the carrying values of our current financial assets and current financial liabilities approximate fair values. We recognize transfers in and transfers out of the levels of the fair value hierarchy as of the end of each quarterly reporting period.
Stock-Based Compensation—As part of our LTIP, we award SARs, RSUs, and PSUs to certain employees and non-employee directors:
SARs—Each vested SAR gives the holder the right to the difference between the value of one share of our Class A common stock at the exercise date and the value of one share of our Class A common stock at the grant date. The value of the SARs is determined using the fair value of our common stock at the grant date based on the closing stock price of our Class A common stock. SARs generally vest 25% annually over four years, beginning on the first anniversary after the grant date. Vested SARs can be exercised over their life as determined in accordance with the LTIP. All SARs have a 10-year contractual term, are settled in shares of our Class A common stock, and are accounted for as equity instruments.
We recognize the compensation expense on a straight-line basis from the date of grant through the requisite service period, which is generally the vesting period, unless the employee meets retirement eligibility criteria resulting in immediate recognition. We recognize the effect of forfeitures as they occur.
RSUs—Each vested RSU will generally be settled by delivery of a single share of our Class A common stock and therefore is accounted for as an equity instrument. In certain situations, we also grant a limited number of cash-settled RSUs, which are recorded as a liability instrument. The cash-settled RSUs represent an insignificant portion of certain previous grants.
The value of the RSUs is based on the fair value of our common stock at the grant date, based on a valuation of the Company prior to IPO or the closing stock price of our Class A common stock for the December 2009 award and all subsequent awards. Awards issued prior to our November 2009 IPO were deferred and settled once all tranches of the award vested in full or otherwise as provided in the relevant agreements. During the year ended December 31, 2020, all remaining November 2009 IPO awards vested in full. Awards issued in December 2009 and beyond will be settled as each individual tranche vests under the relevant agreements. We recognize compensation expense over the requisite service period of the individual grant, which is generally a vesting period of one to four years, unless the employee meets retirement eligibility criteria resulting in immediate recognition. We recognize the effect of forfeitures as they occur.
Under certain circumstances, we may issue time-vested RSUs with performance requirements, which vest based on the satisfaction of a continued employment requirement and the attainment of specified performance-vesting conditions that are established annually and eligible to be earned in tranches. Generally, these RSUs fully vest and settle in Class A common stock to the extent performance requirements for each tranche are achieved and if the requisite service period, which is generally three to five years, is satisfied. The value of the RSUs is determined using the fair value of our common stock at the grant date based on the closing stock price of our Class A common stock. Due to the fact that the performance conditions are established annually, each tranche may have its own grant date. We issued 51,400 and 140,000 of such RSUs during the years ended December 31, 2020 and December 31, 2019, respectively, for which, 148,690 RSUs have not met the grant date criteria and are therefore, not deemed granted as of December 31, 2020.
PSUs—PSUs vest and are settled in Class A common stock based on the performance of the Company through the end of the applicable performance period relative to the applicable performance target and are generally subject to continued employment through the applicable performance period. The PSUs will vest at the end of the performance period only if the performance threshold is met and continued service requirements are satisfied; there is no interim performance metric except in the case of certain change in control transactions.
The value of the PSUs is determined using the fair value of our common stock at the grant date based on the closing stock price of our Class A common stock. We recognize compensation expense over the requisite performance period, which is generally a vesting period of approximately three to six years. Compensation expense recognized is dependent on management's quarterly assessment of the expected achievement relative to the applicable performance targets. We recognize the effect of forfeitures as they occur.
For additional information about stock-based compensation, see Note 17.
Loyalty Program—The loyalty program is funded through contributions from participating properties and third-party loyalty alliances based on eligible revenues from loyalty program members and returns on marketable securities. The funds are used for the redemption of member awards and payment of operating expenses. Operating costs are expensed as incurred through costs incurred on behalf of managed and franchised properties.
The program invests amounts received from the properties in marketable securities which are included in other current and long-term assets on our consolidated balance sheets (see Note 4). Deferred revenues related to the loyalty program are classified as current and long-term contract liabilities on our consolidated balance sheets (see Note 3). The costs of administering the loyalty program, including the estimated cost of award redemption, are charged to the participating properties and third-party loyalty alliances based on members' qualified expenditures.
Adopted Accounting Standards
Financial Instruments—Credit LossesIn June 2016, the Financial Accounting Standards Board ("FASB") released ASU 2016-13. ASU 2016-13 replaces the existing impairment model for most financial assets from an incurred loss model to a current expected credit loss model, which requires an entity to recognize allowances for credit losses equal to its current estimate of all contractual cash flows the entity does not expect to collect. ASU 2016-13 also requires credit losses relating to AFS debt securities to be recognized through an allowance for credit losses. We adopted ASU 2016-13 on January 1, 2020 utilizing the modified retrospective approach. Upon adoption, we recorded an adjustment of $1 million, net of tax, to opening retained earnings related to our credit loss for accounts receivable, a $12 million increase to our HTM debt securities, and a corresponding $12 million credit loss allowance on our consolidated balance sheets. The adoption of ASU 2016-03 did not materially affect our consolidated statements of income (loss) or our consolidated statements of cash flows, and the adoption adjustments do not reflect the impact of the COVID-19 pandemic.
Future Adoption of Accounting Standards
Reference Rate Reform—In March 2020, the FASB issued Accounting Standards Update No. 2020-04 ("ASU 2020-04"), Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions that we can elect to adopt, subject to meeting certain criteria, regarding contract modifications, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The relief provided in ASU 2020-04 is applicable to all entities, but is only available through December 31, 2022. We are still assessing the impact of adopting ASU 2020-04.
v3.20.4
Revenue from Contracts with Customers
12 Months Ended
Dec. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue from Contracts with Customers REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregated Revenues
The following tables present our revenues disaggregated by the nature of the product or service:
Year Ended December 31, 2020
Owned and leased hotelsAmericas management and franchisingASPAC management and franchisingEAME/SW Asia management and franchisingCorporate and otherEliminationsTotal
Rooms revenues$283 $— $— $— $— $(12)$271 
Food and beverage148 — — — — — 148 
Other 94 — — — — — 94 
Owned and leased hotels525 — — — — (12)513 
Base management fees— 72 26 13 — (15)96 
Incentive management fees— 14 — (1)22 
Franchise fees— 61 — — 63 
Other fees— 11 — 23 
License fees— 11 — 15 — 35 
Management, franchise, and other fees— 152 61 23 19 (16)239 
Contra revenue— (18)(2)(10)— — (30)
Net management, franchise, and other fees— 134 59 13 19 (16)209 
Other revenues— 42 — — 15 58 
Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties— 1,152 75 55 — 1,286 
Total$525 $1,328 $134 $68 $38 $(27)$2,066 
Year Ended December 31, 2019
Owned and leased hotels (a)Americas management and franchising (a)ASPAC management and franchisingEAME/SW Asia management and franchisingCorporate and other (a)Eliminations (a)Total
Rooms revenues$1,083 $— $— $— $— $(35)$1,048 
Food and beverage619 — — — — — 619 
Other181 — — — — — 181 
Owned and leased hotels1,883 — — — — (35)1,848 
Base management fees— 229 46 37 — (52)260 
Incentive management fees— 65 72 38 — (24)151 
Franchise fees— 136 — — 141 
Other fees— 14 — 32 
License fees— — — 20 — 24 
Management, franchise, and other fees— 439 136 83 26 (76)608 
Contra revenue— (15)(2)(5)— — (22)
Net management, franchise, and other fees— 424 134 78 26 (76)586 
Other revenues— 89 — — 35 125 
Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties— 2,268 113 74 — 2,461 
Total$1,883 $2,781 $247 $152 $67 $(110)$5,020 
(a) Amounts presented have been adjusted for changes within the segments effective on January 1, 2020 (see Note 19).
Year Ended December 31, 2018
Owned and leased hotels (a)Americas management and franchising (a)ASPAC management and franchisingEAME/SW Asia management and franchisingCorporate and other (a)Eliminations (a)Total
Rooms revenues$1,133 $— $— $— $— $(33)$1,100 
Food and beverage 646 — — — — — 646 
Other 172 — — — — — 172 
Owned and leased hotels1,951 — — — — (33)1,918 
Base management fees— 202 44 34 — (55)225 
Incentive management fees— 67 71 39 — (29)148 
Franchise fees— 123 — — 127 
Other fees— 10 — 31 
License fees— — — 18 — 21 
Management, franchise, and other fees— 405 127 80 24 (84)552 
Contra revenue— (13)(2)(5)— — (20)
Net management, franchise, and other fees— 392 125 75 24 (84)532 
Other revenues— — — — 43 48 
Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties— 1,787 95 68 — 1,956 
Total$1,951 $2,179 $220 $143 $73 $(112)$4,454 
(a) Amounts presented have been adjusted for changes within the segments effective on January 1, 2020 (see Note 19).
Contract Balances
Our contract assets are insignificant at December 31, 2020 and December 31, 2019.
Contract liabilities are comprised of the following:
December 31, 2020December 31, 2019
Deferred revenue related to the loyalty program$733 $671 
Deferred revenue related to insurance programs47 46 
Advanced deposits44 77 
Initial fees received from franchise owners41 41 
Other deferred revenue76 85 
Total contract liabilities$941 $920 

The following table summarizes the activity in our contract liabilities:
20202019
Beginning balance, January 1$920 $830 
Cash received and other564 1,025 
Revenue recognized(543)(935)
Ending balance, December 31$941 $920 
Revenue recognized during the years ended December 31, 2020 and December 31, 2019 included in the contract liabilities balance at the beginning of each year was $243 million and $375 million, respectively. This revenue primarily relates to the loyalty program, which is recognized net of redemption reimbursements paid to third parties.
Revenue Allocated to Remaining Performance ObligationsRevenue 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 $120 million at December 31, 2020, of which we expect to recognize approximately 10% of the revenue over the next 12 months and the remainder thereafter.
v3.20.4
Debt and Equity Securities
12 Months Ended
Dec. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
Debt and Equity Securities DEBT AND EQUITY SECURITIES
We make investments in debt and equity securities that we believe are strategically and operationally important to our business. These investments take the form of (i) equity method investments where we have the ability to significantly influence the operations of the entity, (ii) marketable securities held to fund operating programs and for investment purposes, and (iii) other types of investments.

Equity Method Investments
Equity method investments were $260 million and $232 million at December 31, 2020 and December 31, 2019, respectively, and are primarily recorded on our owned and leased hotels segment.
The carrying values and ownership interests of our investments in unconsolidated hospitality ventures accounted for under the equity method are as follows:
InvesteeExisting or future hotel propertyOwnership interestCarrying value
December 31, 2020December 31, 2019
Hyatt of Baja, S. de. R.L. de C.V.Park Hyatt Los Cabos50.0 %$50 $48 
HP Boston Partners, LLC Hyatt Place Boston / Seaport District50.0 %28 29 
Hotel am Belvedere Holding GmbH & Co KGAndaz Vienna Am Belvedere
50.0 %24 22 
H.E. Philadelphia HC Hotel, L.L.C.Hyatt Centric Center City Philadelphia42.3 %19 — 
San Jose Hotel Partners, L.L.C.Hyatt Place San Jose Airport, Hyatt House San Jose Airport40.0 %18 20 
33 Beale Street Hotel Company, LLCHyatt Centric Beale Street Memphis50.0 %15 11 
CBR HCN, LLCHyatt Centric Downtown Nashville 40.0 %15 12 
HC Lenox JV LLCHyatt Centric Atlanta / Buckhead50.0 %15 
Desarrolladora Hotelera Acueducto, S. de R.L. de C.V.Hyatt Regency Andares Guadalajara50.0 %13 14 
Portland Hotel Properties, L.L.C.Hyatt Centric Downtown Portland40.0 %13 
HH Nashville JV Holdings, L.L.C.Hyatt House Nashville at Vanderbilt50.0 %11 
OtherVarious45 51 
Total equity method investments
$260 $232 
The following tables present summarized financial information for all unconsolidated hospitality ventures in which we hold an investment accounted for under the equity method:
Year Ended December 31,
202020192018
Total revenues$243 $496 $513 
Gross operating profit30 179 182 
Loss from continuing operations(206)(24)(16)
Net loss(206)(24)(16)
December 31, 2020December 31, 2019
Current assets
$168 $231 
Noncurrent assets
1,754 1,417 
Total assets$1,922 $1,648 
Current liabilities
$177 $143 
Noncurrent liabilities
1,527 1,270 
Total liabilities$1,704 $1,413 
During the year ended December 31, 2020, we had no significant sales activity.
During the year ended December 31, 2019, we recognized $8 million of gains in equity earnings (losses) from unconsolidated hospitality ventures on our consolidated statements of income (loss) resulting from sales activity related to certain equity method investments within our owned and leased hotels segment and received $25 million of related sales proceeds.
During the year ended December 31, 2018, we had the following activity:
We recognized $40 million of net gains in equity earnings (losses) from unconsolidated hospitality ventures on our consolidated statements of income (loss) resulting from sales activity related to certain equity method investments primarily within our owned and leased hotels segment and received $43 million of related sales proceeds.
We completed an asset acquisition of our partner's interest in certain unconsolidated hospitality ventures in Brazil for a net purchase price of approximately $4 million. We recognized $16 million of impairment charges related to these investments in equity earnings (losses) from unconsolidated hospitality ventures in our owned and leased hotels segment on our consolidated statements of income (loss) as the carrying value was in excess of fair value.
During the years ended December 31, 2020, December 31, 2019, and December 31, 2018, we recognized $1 million, $7 million, and $16 million of impairment charges, respectively, in equity earnings (losses) from unconsolidated hospitality ventures on our consolidated statements of income (loss) as the carrying values were in excess of fair values. The fair values were determined to be Level Three fair value measures, and the impairments were deemed other-than-temporary.
Marketable Securities
We hold marketable securities with readily determinable fair values to fund certain operating programs and for investment purposes. We periodically transfer available cash and cash equivalents to purchase marketable securities for investment purposes.
Marketable Securities Held to Fund Operating Programs—Marketable securities held to fund operating programs, which are recorded at fair value and included on our consolidated balance sheets, were as follows:
December 31, 2020December 31, 2019
Loyalty program (Note 10)
$567 $483 
Deferred compensation plans held in rabbi trusts (Note 10 and Note 13)
511 450 
Captive insurance company (Note 10)
226 180 
Total marketable securities held to fund operating programs$1,304 $1,113 
Less: current portion of marketable securities held to fund operating programs included in cash and cash equivalents, short-term investments, and prepaids and other assets
(238)(219)
Marketable securities held to fund operating programs included in other assets$1,066 $894 
Net realized and unrealized gains and interest income from marketable securities held to fund the loyalty program are recognized in other income (loss), net on our consolidated statements of income (loss):
Year Ended December 31,
202020192018
Loyalty program (Note 21)
$29 $26 $
Our loyalty program holds marketable securities, including $25 million and $0 of AFS debt securities at December 31, 2020 and December 31, 2019, respectively, which are invested in U.S. government agencies and obligations, asset-backed securities, commercial mortgage-backed securities, municipal bonds, and corporate debt securities and have contractual maturity dates ranging from 2021 through 2069. The fair value of our AFS debt securities approximates amortized cost.
Net realized and unrealized gains (losses) and interest income from marketable securities held to fund rabbi trusts are recognized in net gains (losses) and interest income from marketable securities held to fund rabbi trusts on our consolidated statements of income (loss):
Year Ended December 31,
202020192018
Unrealized gains (losses)$24 $42 $(45)
Realized gains36 20 34 
Net gains (losses) and interest income from marketable securities held to fund rabbi trusts$60 $62 $(11)
Our captive insurance company holds marketable securities which include $70 million and $52 million of equity securities with a readily determinable fair value at December 31, 2020 and December 31, 2019, respectively. The fair value of the equity securities is classified as Level One in the fair value hierarchy as we are able to obtain market available pricing information. The remeasurement of our investment at fair value resulted in unrealized gains of $4 million and $0 during the years ended December 31, 2020 and December 31, 2019, respectively, which was recognized in other income (loss), net on our consolidated statements of income (loss) (see Note 21).
Our captive insurance company also holds $57 million and $65 million of AFS debt securities at December 31, 2020 and December 31, 2019, respectively, which are invested in U.S. government agencies and obligations, time deposits, and corporate debt securities and have contractual maturity dates ranging from 2021 through 2025. The fair value of our AFS debt securities approximates amortized cost.
Marketable Securities Held for Investment Purposes—Marketable securities held for investment purposes are recorded at cost or fair value, depending on the nature of the investment, and are included on our consolidated balance sheets as follows:
December 31, 2020December 31, 2019
Time deposits (a)$657 $37 
Interest-bearing money market funds (a)107 147 
Common shares of Playa N.V. (Note 10)
72 102 
Total marketable securities held for investment purposes$836 $286 
Less: current portion of marketable securities held for investment purposes included in cash and cash equivalents and short-term investments(764)(184)
Marketable securities held for investment purposes included in other assets$72 $102 
(a) A portion of proceeds from our Senior Notes issuances during the year ended December 31, 2020 were reinvested in interest-bearing money market funds and time deposits at December 31, 2020 (see Note 11).
We hold common shares of Playa Hotels & Resorts N.V. ("Playa N.V.") which are accounted for as an equity security with a readily determinable fair value as we do not have the ability to significantly influence the operations of the entity. The fair value of the common shares is classified as Level One in the fair value hierarchy as we are able to obtain market available pricing information. The remeasurement of our investment at fair value resulted in $30 million of unrealized losses, $15 million of unrealized gains, and $44 million of unrealized losses for the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively, recognized in other income (loss), net on our consolidated statements of income (loss) (see Note 21). We did not sell any shares of common stock during the years ended December 31, 2020 and December 31, 2019.
Other Investments
HTM Debt Securities—At December 31, 2020 and December 31, 2019, we held $81 million and $58 million, respectively, of investments in HTM debt securities, net of allowances of $21 million and $0, respectively, which are investments in third-party entities that own or are developing certain of our hotels and are recorded within other assets on our consolidated balance sheets. The securities are mandatorily redeemable between 2021 and 2027. We estimated the fair value of HTM debt securities to be approximately $100 million and $58 million at December 31, 2020 and December 31, 2019, respectively. The fair values, which are classified as Level Three in the fair value hierarchy, are estimated using internally developed discounted cash flow models based on current market inputs for similar types of arrangements. The primary sensitivity in these models is based on the selection of appropriate discount rates. Fluctuations in these assumptions could result in different estimates of fair value.
Equity Securities Without a Readily Determinable Fair Value—At December 31, 2020 and December 31, 2019, we had $12 million and $7 million, respectively, of investments in equity securities without a readily determinable fair value, which represent investments in entities where we do not have the ability to significantly influence the operations of the entity.
Due to ongoing operating cash flow shortfalls in the business underlying an equity security during the year ended December 31, 2018, we recognized a $22 million impairment charge for our full investment balance in other income (loss), net on our consolidated statements of income (loss) (see Note 21) as the carrying value was in excess of the fair value. The fair value was determined to be a Level Three fair value measure. During the year ended December 31, 2018, the entity in which we held our investment disposed of its assets.
Fair Value—We measured the following financial assets at fair value on a recurring basis:
December 31, 2020Cash and cash equivalentsShort-term investmentsPrepaids and other assetsOther assets
Level One - Quoted Prices in Active Markets for Identical Assets
Interest-bearing money market funds$327 $327 $— $— $— 
Mutual funds581 — — — 581 
Common shares72 — — — 72 
Level Two - Significant Other Observable Inputs
Time deposits662 — 659 — 
U.S. government obligations208 — — 205 
U.S. government agencies65 — — — 65 
Corporate debt securities159 — 13 — 146 
Mortgage-backed securities24 — — — 24 
Asset-backed securities35 — — — 35 
Municipal and provincial notes and bonds— — — 
Total $2,140 $327 $675 $— $1,138