Hyatt Hotels Corp [H] Filings

10-Q 1 h-20240630.htm 10-Q h-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-34521

HYATT HOTELS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware

20-1480589

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

150 North Riverside Plaza

8th Floor, Chicago, Illinois 60606

(Address of Principal Executive Offices) (Zip Code)

(312) 750-1234

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A Common Stock, $0.01 par value

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At July 31, 2024, there were 44,928,893 shares of the registrant's Class A common stock, $0.01 par value, outstanding and 55,390,830 shares of the registrant's Class B common stock, $0.01 par value, outstanding.

Table of Contents

HYATT HOTELS CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED JUNE 30, 2024

TABLE OF CONTENTS



	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	54

	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	58

Signatures		59

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

HYATT HOTELS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions of dollars, except per share amounts)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
REVENUES:
Base management fees	$	100	$	96	$	198	$	187
Incentive management fees	54		59		118		116
Franchise and other fees	121		91		221		174
Gross fees	275		246		537		477
Contra revenue	(16)		(12)		(29)		(22)
Net fees	259		234		508		455
Owned and leased	314		341		623		655
Distribution	278		275		597		603
Other revenues	10		71		45		159
Revenues for reimbursed costs	842		784		1,644		1,513
Total revenues	1,703		1,705		3,417		3,385
DIRECT AND GENERAL AND ADMINISTRATIVE EXPENSES:
General and administrative	117		134		286		289
Owned and leased	238		257		488		497
Distribution	234		226		508		484
Other direct costs	17		87		62		185
Transaction and integration costs	10		10		18		23
Depreciation and amortization	84		99		176		197
Reimbursed costs	853		789		1,689		1,538
Total direct and general and administrative expenses	1,553		1,602		3,227		3,213
Net gains (losses) and interest income from marketable securities held to fund rabbi trusts	4		17		28		35
Equity earnings (losses) from unconsolidated hospitality ventures	(30)		(1)		45		(3)
Interest expense	(40)		(31)		(78)		(64)
Gains (losses) on sales of real estate and other	350		—		753		—
Asset impairments	—		(5)		(17)		(7)
Other income (loss), net	28		12		82		67
Income before income taxes	462		95		1,003		200
Provision for income taxes	(103)		(27)		(122)		(74)
Net income	359		68		881		126
Net income attributable to noncontrolling interests	—		—		—		—
Net income attributable to Hyatt Hotels Corporation	$	359	$	68	$	881	$	126

EARNINGS PER CLASS A AND CLASS B SHARE:

Net income attributable to Hyatt Hotels Corporation—Basic	$	3.55	$	0.64	$	8.64	$	1.19

Net income attributable to Hyatt Hotels Corporation—Diluted	$	3.46	$	0.63	$	8.42	$	1.16

See accompanying Notes to condensed consolidated financial statements.

Table of Contents

HYATT HOTELS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions of dollars)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Net income	$	359	$	68	$	881	$	126
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments, net of tax of $(1) and $3 for the three and six months ended June 30, 2024, respectively, and $(1) for the three and six months ended June 30, 2023	(35)		19		(53)		34
Derivative instrument adjustments, net of tax of $(1) for the three and six months ended June 30, 2024 and June 30, 2023	1		1		1		2
Pension liabilities adjustments, net of tax of $— for the three and six months ended June 30, 2024 and June 30, 2023	(1)		—		(2)		—
Available-for-sale debt securities unrealized fair value adjustments, net of tax of $— and $1 for the three and six months ended June 30, 2024, respectively, and $— for the three and six months ended June 30, 2023	(1)		(3)		(4)		—
Other comprehensive income (loss)	(36)		17		(58)		36
Comprehensive income	323		85		823		162
Comprehensive income attributable to noncontrolling interests	—		—		—		—
Comprehensive income attributable to Hyatt Hotels Corporation	$	323	$	85	$	823	$	162

See accompanying Notes to condensed consolidated financial statements.

Table of Contents

HYATT HOTELS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions of dollars, except share and per share amounts)

(Unaudited)


	June 30, 2024		December 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,253	$	881
Restricted cash	11		34
Short-term investments	704		15
Receivables, net of allowances of $49 and $50 at June 30, 2024 and December 31, 2023, respectively	866		883
Inventories	9		9
Prepaids and other assets	180		195
Prepaid income taxes	61		51

Assets held for sale	—		62
Total current assets	3,084		2,130
Equity method investments	279		211
Property and equipment, net	2,089		2,340
Financing receivables, net of allowances of $38 and $42 at June 30, 2024 and December 31, 2023, respectively	261		73
Operating lease right-of-use assets	336		369
Goodwill	2,272		3,205
Intangibles, net	1,561		1,670
Deferred tax assets	436		358
Other assets	2,439		2,477
TOTAL ASSETS	$	12,757	$	12,833
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt	$	1,201	$	751
Accounts payable	488		493
Accrued expenses and other current liabilities	468		468
Current contract liabilities	1,392		1,598
Accrued compensation and benefits	161		210
Current operating lease liabilities	34		41
Liabilities held for sale	—		17
Total current liabilities	3,744		3,578
Long-term debt	2,684		2,305
Long-term contract liabilities	789		1,759
Long-term operating lease liabilities	249		273
Other long-term liabilities	1,438		1,351
Total liabilities	8,904		9,266
Commitments and contingencies (see Note 12)

EQUITY:
Preferred stock, $0.01 par value per share, 10,000,000 shares authorized and none outstanding at both June 30, 2024 and December 31, 2023	—		—
Class A common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 44,767,316 issued and outstanding at June 30, 2024, and Class B common stock, $0.01 par value per share, 387,533,899 shares authorized, 55,539,487 shares issued and outstanding at June 30, 2024. Class A common stock, $0.01 par value per share, 1,000,000,000 shares authorized, 44,275,818 issued and outstanding at December 31, 2023, and Class B common stock, $0.01 par value per share, 390,751,535 shares authorized, 58,757,123 shares issued and outstanding at December 31, 2023	1		1
Additional paid-in capital	—		—
Retained earnings	4,082		3,738
Accumulated other comprehensive loss	(233)		(175)
Total stockholders' equity	3,850		3,564
Noncontrolling interests in consolidated subsidiaries	3		3
Total equity	3,853		3,567
TOTAL LIABILITIES AND EQUITY	$	12,757	$	12,833

See accompanying Notes to condensed consolidated financial statements.

Table of Contents

HYATT HOTELS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of dollars)

(Unaudited)


	Six Months Ended
	June 30, 2024		June 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	881	$	126
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	176		197

(Gains) losses on sales of real estate and other	(753)		—
Amortization of share awards	46		46
Amortization of operating lease right-of-use assets	19		19
Deferred income taxes	(90)		(27)
Asset impairments	17		7

Equity (earnings) losses from unconsolidated hospitality ventures	(45)		3



Contra revenue	29		22

Unrealized (gains) losses, net	2		(25)

Contingent consideration liability fair value adjustment	(11)		(1)

Working capital changes and other	148		4
Net cash provided by operating activities	419		371
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities and short-term investments	(1,013)		(230)
Proceeds from marketable securities and short-term investments	228		308
Contributions to equity method and other investments	(22)		(35)
Return of equity method and other investments	3		—
Acquisitions, net of cash acquired	(28)		(175)
Capital expenditures	(76)		(80)
Issuance of financing receivables	(85)		(20)




Proceeds from sales of real estate and other, net of cash disposed	687		—
Other investing activities	—		(6)
Net cash used in investing activities	(306)		(238)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt, net of issuance costs of $14 and $0, respectively	830		—

Repurchases of common stock	(522)		(214)
Dividends paid	(31)		(16)


Repayments and repurchases of debt	(2)		(20)



Payment of withholding taxes for stock-based compensation	(40)		(13)
Other financing activities	2		—
Net cash provided by (used in) financing activities	237		(263)
Effect of exchange rate changes on cash	(4)		(6)
Net increase (decrease) in cash, cash equivalents, and restricted cash, including cash, cash equivalents, and restricted cash classified within current assets held for sale	346		(136)
Net change in cash, cash equivalents, and restricted cash classified as assets held for sale	3		—
Net increase (decrease) in cash, cash equivalents, and restricted cash	349		(136)
Cash, cash equivalents, and restricted cash—Beginning of period	919		1,067

Cash, cash equivalents, and restricted cash—End of period	$	1,268	$	931

See accompanying Notes to condensed consolidated financial statements.

Table of Contents

HYATT HOTELS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions of dollars)

(Unaudited)

Supplemental disclosure of cash flow information:



	June 30, 2024		June 30, 2023
Cash and cash equivalents	$	1,253	$	882
Restricted cash (1)	11		45
Restricted cash included in other assets (1)	4		4
Total cash, cash equivalents, and restricted cash	$	1,268	$	931

(1) Restricted cash generally represents collateral for certain obligations, escrow deposits, and other arrangements.



	Six Months Ended
	June 30, 2024		June 30, 2023
Cash paid during the period for interest	$	72	$	57
Cash paid during the period for income taxes	$	56	$	84
Cash paid for amounts included in the measurement of operating lease liabilities	$	22	$	23

Non-cash investing and financing activities are as follows:
Change in accrued capital expenditures	$	(1)	$	6
Non-cash contributions to equity method and other investments (Note 4)	$	35	$	—
Non-cash issuance of financing receivables (Note 6)	$	89	$	—

Non-cash redemption of financing receivable	$	—	$	20
Non-cash right-of-use assets obtained in exchange for operating lease liabilities	$	7	$	8









Non-cash contingent consideration liability assumed in acquisition (Note 6)	$	—	$	107

See accompanying Notes to condensed consolidated financial statements.

Table of Contents

HYATT HOTELS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(In millions of dollars, except share and per share amounts)

(Unaudited)


	Common Shares Outstanding		Common Stock Amount				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests in Consolidated Subsidiaries		Total
	Class	Class	Class		Class
	A	B	A		B
BALANCE—January 1, 2023	47,482,787	58,917,749	$	1	$	—	$	318	$	3,622	$	(242)	$	3	$	3,702
Total comprehensive income	—	—	—		—		—		58		19		—		77

Repurchases of common stock (1)	(1,018,931)	—	—		—		(98)		—		—		—		(98)
Liability for repurchases of common stock (2)	—	—	—		—		(8)		—		—		—		(8)

Employee stock plan issuance	13,925	—	—		—		1		—		—		—		1

Share-based payment activity	366,917	—	—		—		22		—		—		—		22


BALANCE—March 31, 2023	46,844,698	58,917,749	$	1	$	—	$	235	$	3,680	$	(223)	$	3	$	3,696
Total comprehensive income	—	—	—		—		—		68		17		—		85

Repurchases of common stock (1)	(968,629)	—	—		—		(101)		—		—		—		(101)


Employee stock plan issuance	18,337	—	—		—		2		—		—		—		2

Share-based payment activity	8,193	—	—		—		19		—		—		—		19

Cash dividends declared of $0.15 per share (see Note 13)	—	—	—		—		—		(16)		—		—		(16)
BALANCE—June 30, 2023	45,902,599	58,917,749	$	1	$	—	$	155	$	3,732	$	(206)	$	3	$	3,685












BALANCE—January 1, 2024	44,275,818	58,757,123	$	1	$	—	$	—	$	3,738	$	(175)	$	3	$	3,567
Total comprehensive income	—	—	—		—		—		522		(22)		—		500

Repurchases of common stock (1)	(528,427)	(1,987,229)	—		—		(2)		(387)		—		—		(389)


Employee stock plan issuance	13,475	—	—		—		2		—		—		—		2
Share-based payment activity	635,482	—	—		—		—		(5)		—		—		(5)

Cash dividends declared of $0.15 per share (see Note 13)	—	—	—		—		—		(15)		—		—		(15)
Class share conversions	766,296	(766,296)	—		—		—		—		—		—		—
BALANCE—March 31, 2024	45,162,644	56,003,598	$	1	$	—	$	—	$	3,853	$	(197)	$	3	$	3,660
Total comprehensive income	—	—	—		—		—		359		(36)		—		323

Repurchases of common stock (1)	(906,875)	—	—		—		(21)		(114)		—		—		(135)


Employee stock plan issuance	14,553	—	—		—		2		—		—		—		2
Share-based payment activity	32,883	—	—		—		19		—		—		—		19
Cash dividends declared of $0.15 per share (see Note 13)	—	—	—		—		—		(16)		—		—		(16)
Class share conversions	464,111	(464,111)	—		—		—		—		—		—		—

BALANCE—June 30, 2024	44,767,316	55,539,487	$	1	$	—	$	—	$	4,082	$	(233)	$	3	$	3,853












(1) Includes a $1 million liability for the 1% U.S. federal excise tax on certain share repurchases enacted by the Inflation Reduction Act of 2022.
(2) Represents repurchases of 73,368 shares for $8 million that were initiated prior to March 31, 2023, but settled in the second quarter of 2023.

See accompanying Notes to condensed consolidated financial statements.

Table of Contents

HYATT HOTELS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in millions of dollars, unless otherwise indicated)

(Unaudited)

1. ORGANIZATION

Hyatt Hotels Corporation, a Delaware corporation, and its consolidated subsidiaries have offerings that consist of full service hotels and resorts, select service hotels, all-inclusive resorts, and other properties, including timeshare, fractional, and other forms of residential and vacation units. We also offer distribution and destination management services through ALG Vacations and a boutique and luxury global travel platform through Mr & Mrs Smith. At June 30, 2024, our hotel portfolio included 1,352 hotels, comprising 325,507 rooms throughout the world, of which 700 hotels are located in the United States, comprising 156,930 rooms, and 125 are all-inclusive resorts, comprising 42,749 rooms. At June 30, 2024, our portfolio of properties operated in 78 countries around the world. Additionally, we provide certain reservation and/or loyalty program services to hotels that are unaffiliated with our hotel portfolio and operate under other trade names or marks owned by such hotels or licensed by third parties.

Unless otherwise specified or required by the context, references in this Quarterly Report on Form 10-Q ("Quarterly Report") to "Hyatt," the "Company," "we," "us," or "our" mean Hyatt Hotels Corporation and its consolidated subsidiaries. As used in these Notes and throughout this Quarterly Report:

•"hospitality ventures" refer to entities in which we own less than a 100% equity interest;

•"hotel portfolio" refers to our full service hotels, including our wellness resorts, our select service hotels, and our all-inclusive resorts;

•"loyalty program" refers to the World of Hyatt guest loyalty program that is operated for the benefit of participating properties and generates substantial repeat guest business by rewarding frequent stays with points that can be redeemed for hotel nights and other valuable rewards;

•"properties," "portfolio of properties," or "property portfolio" refer to our hotel portfolio and residential and vacation units that we operate, manage, franchise, own, lease, develop, license, or to which we provide services or license our trademarks, including under the Park Hyatt, Grand Hyatt, Hyatt Regency, Hyatt, Hyatt Vacation Club, Hyatt Place, Hyatt House, Hyatt Studios, UrCove, Miraval, Alila, Andaz, Thompson Hotels, Dream Hotels, Hyatt Centric, Caption by Hyatt, The Unbound Collection by Hyatt, Destination by Hyatt, JdV by Hyatt, Impression by Secrets, Hyatt Ziva, Hyatt Zilara, Zoëtry Wellness & Spa Resorts, Secrets Resorts & Spas, Breathless Resorts & Spas, Dreams Resorts & Spas, Hyatt Vivid Hotels & Resorts, Alua Hotels & Resorts, and Sunscape Resorts & Spas brands;

•"residential units" refer to residential units that we manage, own, or to which we provide services or license our trademarks (such as serviced apartments and Hyatt-branded residential units) that are typically part of a mixed-use project and located either adjacent to or near a full service hotel that is a member of our portfolio of properties or in unique leisure locations; and

•"vacation units" refer to the fractional and timeshare vacation properties we license our trademarks to and that are part of the Hyatt Vacation Club.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information, the instructions to Form 10-Q, and Article 10 of Regulation S-X. Accordingly, they do not include all information or footnotes required by GAAP for complete annual financial statements. As a result, this Quarterly Report should be read in conjunction with the Consolidated Financial Statements and accompanying Notes in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the "2023 Form 10-K").

We have eliminated all intercompany accounts and transactions in our condensed consolidated financial statements. We consolidate entities under our control, including entities where we are deemed to be the primary beneficiary.

Management believes the accompanying condensed consolidated financial statements reflect all adjustments, which are all of a normal recurring nature, considered necessary for a fair presentation of the interim periods.

Table of Contents

Transaction and Integration Costs—During the three months ended June 30, 2024, we presented a new financial statement line item to provide enhanced visibility on our condensed consolidated statements of income and reclassified prior-period results for comparability. Transaction and integration costs include the following:

•integration costs, which were previously recognized in integration costs and include expenses incurred related to the integration of recently acquired businesses, including certain compensation expenses, professional fees, sales and marketing expenses, and technology expenses;

•transaction costs for pending transactions, primarily related to professional fees incurred for acquisitions and dispositions, which were previously recognized in general and administrative expenses; and

•transaction costs for completed transactions, primarily related to professional fees incurred for acquisitions, which were previously recognized in other income (loss), net. Transaction costs for completed dispositions are recognized in gains (losses) on sales of real estate and other.

Segment Realignment—During the six months ended June 30, 2024, we realigned our reportable segments to align with our business strategy, the organizational changes for certain members of our leadership team, and the manner in which our chief operating decision maker ("CODM") assesses performance and makes decisions regarding the allocation of resources. The segment realignment had no impact on our condensed consolidated financial position or results of operations. Prior-period segment results have been recast to reflect our new reportable segments. See Note 16 for a summary of our revised reportable segments and summarized consolidated financial information by segment.

In conjunction with the segment realignment, certain financial statement line item descriptions were revised within our condensed consolidated statements of income. With the exception of the new transaction and integration costs financial statement line item described above, the composition of the accounts within these financial statement line items remains unchanged. The changes include:


New financial statement line item						Previously-used financial statement line item
Owned and leased revenues						Owned and leased hotels revenues
Franchise and other fee revenues						Franchise, license, and other fee revenues
Revenues for reimbursed costs						Revenues for the reimbursement of costs incurred on behalf of managed and franchised properties
General and administrative expenses (1), (2)						Selling, general, and administrative expenses
Integration costs (2)						Selling, general, and administrative expenses
Owned and leased expenses						Owned and leased hotels expenses
Reimbursed costs						Costs incurred on behalf of managed and franchised properties
(1) Excludes integration costs.
(2) Transaction and integration costs are now presented within a new financial statement line item as described above, transaction and integration costs.

Additionally, distribution and destination management revenues and expenses are not presented as the accounts under these previously-used financial statement line items are now included in the following:

Distribution revenues—Represents revenues derived from the ALG Vacations business, which were previously recognized in distribution and destination management revenues, and commission fee revenues related to Mr & Mrs Smith, which were previously recognized in other fee revenues.

Distribution expenses—Consists of expenses related to the ALG Vacations business, which were previously recognized in distribution and destination management expenses, and general and administrative expenses related to Mr & Mrs Smith, which were previously recognized in selling, general, and administrative expenses.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Summary of Significant Accounting Policies

Our significant accounting policies are detailed in Part IV, Item 15, "Exhibits and Financial Statement Schedule—Note 2 to our Consolidated Financial Statements" within our 2023 Form 10-K. During the six months ended June 30, 2024, we completed a restructuring of the entity that owns the Unlimited Vacation Club paid membership

Table of Contents

program business and sold 80% of the entity to an unrelated third party for $80 million. As a result of the transaction, we deconsolidated the entity as we no longer have a controlling financial interest and accounted for our remaining 20% ownership interest as an equity method investment in an unconsolidated hospitality venture (the "UVC Transaction"). For additional information about the UVC Transaction, see Note 4. Our accounting policies have been updated as follows:

Variable Interest Entities—We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests is considered a variable interest entity ("VIE"). We consolidate VIEs when we are the primary beneficiary. We are the primary beneficiary of a VIE when we have the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. If we are not the primary beneficiary of a VIE, we account for the investment or other variable interests in a VIE in accordance with the applicable GAAP. On a quarterly basis, we determine whether any changes in the interest or relationship with the entity impact the determination of whether we are still the primary beneficiary.

Adopted Accounting Standards

Reference Rate Reform—In March 2020, the Financial Accounting Standards Board ("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 the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. In December 2022, the FASB issued Accounting Standards Update No. 2022-06 ("ASU 2022-06"), Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. ASU 2022-06 was effective upon issuance and defers the sunset date of Topic 848 by two years, extending the provisions of ASU 2020-04 through December 31, 2024. During the year ended December 31, 2023, we adopted the provisions of ASU 2020-04. We amended certain LIBOR-based contracts during both the six months ended June 30, 2024 and the year ended December 31, 2023. ASU 2020-04 did not materially impact our condensed consolidated financial statements upon adoption.

Future Adoption of Accounting Standards

Disclosure Improvements—In October 2023, the FASB issued Accounting Standards Update No. 2023-06 ("ASU 2023-06"), Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. ASU 2023-06 modifies the disclosure and presentation requirements for certain FASB Accounting Standards Codification topics to align with the regulations of the Securities and Exchange Commission ("SEC"). The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from its regulations becomes effective, if the SEC removes the disclosure by June 30, 2027. The provisions of ASU 2023-06 are to be applied prospectively, with early adoption prohibited. We do not expect the adoption of ASU 2023-06 to have a material impact on our condensed consolidated financial statements and accompanying Notes.

Segment Reporting—In November 2023, the FASB issued Accounting Standards Update No. 2023-07 ("ASU 2023-07"), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to evaluate segment performance. The provisions of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, and require retrospective adoption for all prior periods presented. We are currently assessing the impact of adopting ASU 2023-07.

Income Taxes—In December 2023, the FASB issued Accounting Standards Update No. 2023-09 ("ASU 2023-09"), Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires enhanced annual income tax disclosures, including (1) disaggregation of effective tax rate reconciliation categories, (2) additional information for reconciling items that meet a quantitative threshold, and (3) income taxes paid by jurisdiction. The provisions of ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and may be applied either prospectively or retrospectively for all prior periods presented. We are currently assessing the impact of adopting ASU 2023-09.

Table of Contents

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregated Revenues

See Note 16 for our revenues disaggregated by the nature of the product or service.

Contract Balances

Contract assets, included in receivables, net on our condensed consolidated balance sheets, were $2 million and insignificant at June 30, 2024 and December 31, 2023, respectively. As our profitability hurdles are generally calculated on a full-year basis, we expect our contract assets to be insignificant at year end.

Contract liabilities were comprised of the following:


	June 30, 2024		December 31, 2023
Deferred revenue related to the loyalty program	$	1,266	$	1,130
Deferred revenue related to distribution and destination management services	628		719
Advanced deposits	64		57
Deferred revenue related to co-branded credit card programs	60		49
Initial fees received from franchise owners	45		45
Deferred revenue related to insurance programs	30		75
Deferred revenue related to the paid membership program (1)	—		1,204
Other deferred revenue	88		78
Total contract liabilities	$	2,181	$	3,357
(1) The change from December 31, 2023 is due to balances written off to gains (losses) on sales of real estate and other on our condensed consolidated statements of income during the six months ended June 30, 2024 as a result of the UVC Transaction (see Note 4).

Revenue recognized during the three months ended June 30, 2024 and June 30, 2023 included in the contract liabilities balance at the beginning of each year was $227 million and $220 million, respectively. Revenue recognized during the six months ended June 30, 2024 and June 30, 2023 included in the contract liabilities balance at the beginning of each year was $850 million and $874 million, respectively. This revenue primarily relates to distribution and destination management services and the loyalty program.

Revenue Allocated to Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted revenue expected to be recognized in future periods was approximately $120 million at June 30, 2024, approximately 15% of which we expect to recognize over the next 12 months, with the remainder to be recognized thereafter.

4. DEBT AND EQUITY SECURITIES

We invest 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 $279 million and $211 million at June 30, 2024 and December 31, 2023, respectively.

During both the three and six months ended June 30, 2024, we recognized $10 million of impairment charges, primarily related to one of our unconsolidated hospitality ventures in equity earnings (losses) from unconsolidated hospitality ventures on our condensed consolidated statements of income as the estimated fair value was less than the carrying value, and the impairment was deemed other than temporary. The assumptions and judgments used in determining the fair value are classified as Level Three in the fair value hierarchy. During both the three and six months ended June 30, 2023, we did not recognize any impairment charges on our equity method investments.

Table of Contents

Unconsolidated hospitality venture in India—During the year ended December 31, 2023, one of our unconsolidated hospitality ventures in India publicly filed a draft red herring prospectus with the Securities and Exchange Board of India in conjunction with a proposed initial public offering ("IPO") of equity shares, subject to market conditions and regulatory approvals. On February 28, 2024, our unconsolidated hospitality venture completed its IPO on the BSE Limited and National Stock Exchange of India Limited stock exchanges and issued 50,000,000 equity shares. Both prior and subsequent to the IPO, we hold 86,251,192 equity shares in the entity. At June 30, 2024, the aggregate value of our equity shares was $438 million based on the price per share of the principal market.

As a result of the IPO, our ownership interest in the unconsolidated hospitality venture was diluted from 50.0% to 38.8%. As we maintain the ability to significantly influence the operations of the entity, we recorded an increase to our equity method investment and recognized a $79 million non-cash pre-tax dilution gain in equity earnings (losses) from unconsolidated hospitality ventures on our condensed consolidated statements of income during the six months ended June 30, 2024.

UVC Transaction—During the six months ended June 30, 2024, we completed the UVC Transaction and accounted for the sale of our controlling financial interest in the entity as a business disposition. We received $41 million of proceeds, net of $39 million of cash disposed; recorded a $20 million equity method investment representing the fair value of our retained investment in the entity; and recorded $86 million of guarantee liabilities as described below. The transaction resulted in a $231 million pre-tax gain, which was recognized in gains (losses) on sales of real estate and other on our condensed consolidated statements of income during the six months ended June 30, 2024. We will continue to manage the Unlimited Vacation Club business under a long-term management agreement and license and royalty agreement. The operating results of the Unlimited Vacation Club business prior to the UVC Transaction are reported within our distribution segment.

The fair value of our retained investment in the entity was determined using a Black-Scholes-Merton option-pricing model of our common shares in the entity. The valuation methodology includes assumptions and judgments regarding volatility and discount rates, which are primarily Level Three assumptions.

In conjunction with the transaction, we agreed to guarantee up to $70 million of our hospitality venture partner's investment upon the occurrence of certain events, and we recorded a $25 million guarantee liability at fair value in other long-term liabilities on our condensed consolidated balance sheet. The fair value was estimated using the with and without method, which includes projected cash flows based on contract terms. The valuation methodology includes assumptions and judgments regarding discount rates and length of time, which are primarily Level Three assumptions.

Additionally, we agreed to indemnify the unconsolidated hospitality venture, the primary obligor to the foreign taxing authorities, for obligations the entity may incur as a result of uncertain tax positions. Following the transaction, we accounted for the indemnification as a guarantee. We derecognized the long-term income taxes payable related to the uncertain tax positions and recorded a $61 million guarantee liability at fair value in other long-term liabilities on our condensed consolidated balance sheet. The fair value of the indemnification was estimated using a probability-based weighting approach to determine the likelihood of payment of the tax liability, penalties, and interest related to the 2013 through 2018 tax years. The valuation methodology includes assumptions and judgments regarding probability weighting, discount rates, and expected timing of cash flows, which are primarily Level Three assumptions. At June 30, 2024, the indemnification for open tax years had a maximum exposure of $78 million.

The entity that owns the Unlimited Vacation Club business is classified as a VIE in which we hold a variable interest but are not the primary beneficiary, and we account for our common ownership interest as an equity method investment. At June 30, 2024, we had $8 million and $77 million recorded in equity method investments and other long-term liabilities (see Note 10), respectively, on our condensed consolidated balance sheet related to this unconsolidated VIE. At June 30, 2024, our maximum exposure to loss was $156 million, which includes the carrying amount of our equity method investment and the maximum exposure under the aforementioned guarantee and indemnification (see Note 12).

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.

Table of Contents

Marketable Securities Held to Fund Operating Programs—Marketable securities held to fund operating programs, which are recorded at fair value on our condensed consolidated balance sheets, were as follows:


	June 30, 2024		December 31, 2023
Loyalty program (Note 8)	$	851	$	807
Deferred compensation plans held in rabbi trusts (Note 8 and Note 10)	529		489
Captive insurance company (Note 8)	121		94
Total marketable securities held to fund operating programs	$	1,501	$	1,390
Less: current portion of marketable securities held to fund operating programs included in cash and cash equivalents and short-term investments	(297)		(320)
Marketable securities held to fund operating programs included in other assets	$	1,204	$	1,070

At June 30, 2024 and December 31, 2023, marketable securities held to fund operating programs included:

•$471 million and $330 million, respectively, of available-for-sale ("AFS") debt securities with contractual maturity dates ranging from 2024 through 2069. The amortized cost of our AFS debt securities approximates fair value;

•$25 million, in both periods, of time deposits classified as held-to-maturity ("HTM") debt securities with a contractual maturity date in 2025. The amortized cost of our time deposits approximates fair value;

•$17 million and $15 million, respectively, of equity securities with a readily determinable fair value.

Net unrealized and realized gains (losses) from marketable securities held to fund operating programs recognized on our condensed consolidated financial statements were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Unrealized gains (losses), net
Net gains (losses) and interest income from marketable securities held to fund rabbi trusts (1)	$	2	$	14	$	24	$	31
Revenues for reimbursed costs (2)	—		6		11		15
Other income (loss), net (Note 18)	1		(1)		1		5
Other comprehensive income (loss) (Note 13)	(2)		(3)		(6)		—

Realized gains, net
Net gains (losses) and interest income from marketable securities held to fund rabbi trusts (1)	$	2	$	3	$	4	$