This excerpt taken from the WYN 8-K filed Jul 19, 2006.
The Company operates loyalty programs called TripRewards and RCI Elite Rewards and also offers a branded credit card as part of its TripRewards and RCI Elite Rewards loyalty programs.
TripRewards members accumulate points by staying in hotels franchised under one of the Companys worldwide lodging brands (excluding Wyndham Hotels and Resorts), and purchasing everyday products and services from the various businesses that participate in the program.
Members may redeem their points for hotel stays, airline tickets, rental cars, resort vacation, electronics, sporting goods, movie and theme park tickets, and gift certificates. The Company earns revenue when a TripRewards member stays at a participating hotel, and the Company charges a fee to the franchisees based upon a percentage of room revenue generated by such members. This fee is in addition to marketing and reservation fees that the Company earns. The costs of this TripRewards loyalty program relate to marketing expenses to promote the program, costs to administer the program and costs of members redemptions.
The branded credit cards also allow members to earn points that can be redeemed for similar items noted above. The Company earns revenue based upon a percentage of the members spending on the credit card and such revenue is paid to the Company by a third-party issuing bank.
As members earn points through the Companys loyalty programs, the Company records an estimated cost of the points, which is calculated from the cost per point and the estimated redemptions of the points based upon historical experience and current trends. The points cannot be redeemed for cash. Revenues relating to the loyalty programs are recorded in other revenue in the Combined Statements of Income and amounted to $56 million, $23 million and $1 million while total expenses amounted to $49 million, $23 million and $1 million for the years ended 2005, 2004 and 2003, respectively. The point liability as of December 31, 2005 and 2004 amounted to $39 million and $28 million, respectively, and are included in accrued expenses and other current liabilities and other non-current liabilities in the Combined Balance Sheets.