Receivables and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2022

Accounts and Financing Receivable, after Allowance for Credit Loss [Abstract]

Receivables and Allowance for Credit Losses

Notes Receivable

The composition of notes receivable balances based on the level of security credit quality indicator and the allowances for credit losses is as follows:


	December 31,
(in thousands)	2022		2021
Senior	$	95,466	$	108,370
Subordinated	17,075		27,801
Unsecured	5,674		1,512
Total notes receivable	118,215		137,683
Total allowance for notes receivable credit losses	10,172		16,779
Total notes receivable, net of allowance	$	108,043	$	120,904
Current portion, net of allowance	$	52,466	$	54,453
Long-term portion, net of allowance	$	55,577	$	66,451

Amortized cost basis by year of origination and level of security credit quality indicator are as follows:


(in thousands)	2022		2021		2020		Prior		Total
Senior	$	—	$	7,909	$	—	$	87,557	$	95,466
Subordinated	—		—		—		17,075		17,075
Unsecured	466		2,149		983		2,076		5,674
Total notes receivable	$	466	$	10,058	$	983	$	106,708	$	118,215

The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses:


	December 31,
(in thousands)	2022		2021
Beginning balance	$	16,779	$	19,484
Provisions for credit losses	(938)		709

Write-offs	(5,669)		(3,414)

Ending balance	$	10,172	$	16,779

As of December 31, 2022 and December 31, 2021, one and two loans, respectively, with senior and/or subordinated tranches met the definition of collateral-dependent and are collateralized by membership interests in the borrowing entities and either the associated land parcels or an operating hotel. The Company used a discounted cash flow ("DCF") market approach via quoted market prices to value the underlying collateral. The Company reviewed the borrower's financial statements, economic trends, industry projections for the market, and comparable sales capitalization rates, which represent significant inputs to the cash flow projections. These nonrecurring fair value measurements are classified as level three of the fair value measurement hierarchy, as there are unobservable inputs which are significant to the overall fair value. Based on these analyses, the fair value of collateral secures substantially all of the carrying value of each loan. Allowances for credit losses attributable to collateral-dependent loans are $0.9 million and $6.3 million as of December 31, 2022 and December 31, 2021, respectively.

The write-offs recorded in the year ended December 31, 2022 and December 31, 2021 are primarily associated with loans previously classified as collateral-dependent that were settled in exchange for an operating hotel on April 14, 2022 and October 1, 2021, respectively. Refer to Note 24 regarding the second quarter 2022 and third quarter 2021 asset acquisition accounting. Additionally, one loan was settled under negotiated terms and therefore written off. Two loans had revised provisions as a result of loan repayments being made timely and a favorable reassessment of the underlying collateral's performance.

The Company considers loans to be past due when payments are not made when due in accordance with then current loan provisions or terms extended to borrowers, including loans with concessions or interest deferral. Although the Company considers loans to be past due if payments are not received on the due date, the Company does not suspend the accrual of interest until those payments are more than 30 days past due. The Company applies payments received for loans on non-accrual status first to interest and then to principal. The Company does not resume interest accrual until all delinquent payments are received based on then current loan provisions. The amortized cost basis of notes receivable on non-accrual status was $18.7 million and $44.1 million at December 31, 2022 and 2021, respectively.

The Company has identified loans totaling approximately $4.8 million and $7.5 million, respectively, with stated interest rates that are less than market rate, representing a total discount of $0.1 million and $0.3 million as of the years ended December 31, 2022 and 2021, respectively. These discounts are reflected as a reduction of the outstanding loan amounts and are amortized over the life of the related loan.

The past due status by credit quality indicator of the notes receivable amortized cost basis are as follows:


(in thousands)	1-30 days Past Due		31-89 days Past Due		> 90 days Past Due		Total Past Due		Current		Total Notes Receivable
As of December 31, 2022
Senior	$	—	$	15,200	$	—	$	15,200	$	80,266	$	95,466
Subordinated	—		—		2,209		2,209		14,866		17,075
Unsecured	20		40		40		99		5,574		5,674
	$	20	$	15,240	$	2,249	$	17,508	$	100,706	$	118,215
As of December 31, 2021
Senior	$	—	$	—	$	—	$	—	$	108,370	$	108,370
Subordinated	—		—		2,209		2,209		25,592		27,801
Unsecured	—		—		—		—		1,512		1,512
	$	—	$	—	$	2,209	$	2,209	$	135,474	$	137,683

The Company evaluated its off-balance-sheet credit exposure for loan commitments and determined the likelihood of having to perform is remote as of December 31, 2022. Refer to Note 23.

Variable Interest through Notes Issued

The Company has issued notes receivables to certain entities that have created variable interests in these borrowers totaling $103.2 million and $120.2 million at December 31, 2022 and 2021, respectively. The Company has determined that it is not the primary beneficiary of these VIEs. These loans have stated fixed and/or variable interest amounts. For collateral-dependent loans, the Company has no exposure to the borrowing VIE beyond the note receivable and limited commitments addressed in Note 23.

Accounts Receivable

Accounts receivable consist primarily of franchise and related fees due from hotel franchisees and are recorded at the invoiced amount.

During the year ended December 31, 2022, the Company recorded provisions for credit losses on accounts receivable of $0.4 million in SG&A expenses and $1.4 million in marketing and reservation system expenses. During the year ended December 31, 2021, the Company recorded reversals of provisions for credit losses on accounts receivable of $4.4 million in SG&A expenses and $7.3 million in marketing and reservation system expenses, after considering improved collection patterns and economic and credit conditions. During the years ended December 31, 2022 and December 31, 2021, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $12.4 million and $13.5 million, respectively. The Company assumed $41.7 million of trade accounts receivable as a result of the Radisson acquisition