HYATT HOTELS CORP, 10-K filed on 2/16/2012
Annual Report
Document And Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Jun. 30, 2011
Jan. 31, 2012
Common Class A
Jan. 31, 2012
Common Class B
Document Type
10-K 
 
 
 
Amendment Flag
false 
 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
 
Document Fiscal Year Focus
2011 
 
 
 
Document Fiscal Period Focus
FY 
 
 
 
Current Fiscal Year End Date
--12-31 
 
 
 
Entity Central Index Key
0001468174 
 
 
 
Entity Registrant Name
Hyatt Hotels Corp 
 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
 
Trading Symbol
 
 
 
Entity Common Stock, Shares Outstanding
 
 
45,567,303 
119,614,584 
Entity Well-known Seasoned Issuer
Yes 
 
 
 
Entity Voluntary Filers
No 
 
 
 
Entity Current Reporting Status
Yes 
 
 
 
Entity Public Float
 
$ 1,809.9 
 
 
Consolidated Statements Of Income (Loss) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
REVENUES:
 
 
 
Owned and leased hotels
$ 1,879 
$ 1,859 
$ 1,780 
Management and franchise fees
288 
255 
223 
Other revenues
66 
45 
49 
Other revenues from managed properties
1,465 
1,368 
1,278 
Total revenues
3,698 
3,527 
3,330 
DIRECT AND SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:
 
 
 
Owned and leased hotels
1,468 
1,493 
1,460 
Depreciation and amortization
305 
279 
269 
Other direct costs
24 
13 
Selling, general, and administrative
283 
276 
261 
Other costs from managed properties
1,465 
1,368 
1,278 
Direct and selling, general, and administrative expenses
3,545 
3,419 
3,281 
Net gains and interest income from marketable securities held to fund operating programs
21 
29 
Equity earnings (losses) from unconsolidated hospitality ventures
(40)
(13)
Interest expense
(57)
(54)
(56)
Gain (loss) on sales of real estate
(2)
26 
   
Asset impairments
(6)
(44)
(12)
Other income (loss), net
(11)
71 
(48)
INCOME (LOSS) BEFORE INCOME TAXES
83 
88 
(51)
(PROVISION) BENEFIT FOR INCOME TAXES
28 
(37)
INCOME (LOSS) FROM CONTINUING OPERATIONS
111 
51 
(43)
DISCONTINUED OPERATIONS:
 
 
 
Loss from discontinued operations, net of income tax benefit of $0, $2, and $2 in 2011, 2010 and 2009, respectively
   
(3)
(3)
Gains on sales of discontinued operations, net of income tax expense of $0, $4, and $0 in 2011, 2010, and 2009, respectively
   
   
NET INCOME (LOSS)
111 
55 
(46)
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
11 
NET INCOME (LOSS) ATTRIBUTABLE TO HYATT HOTELS CORPORATION
$ 113 
$ 66 
$ (43)
EARNINGS PER SHARE - Basic
 
 
 
Income (loss) from continuing operations
$ 0.66 
$ 0.29 
$ (0.28)
Income (loss) from discontinued operations
   
$ 0.03 
$ (0.02)
Net income (loss) attributable to Hyatt Hotels Corporation
$ 0.67 
$ 0.38 
$ (0.28)
EARNINGS PER SHARE - Diluted
 
 
 
Income (loss) from continuing operations
$ 0.66 
$ 0.29 
$ (0.28)
Income (loss) from discontinued operations
   
$ 0.03 
$ (0.02)
Net income (loss) attributable to Hyatt Hotels Corporation
$ 0.67 
$ 0.38 
$ (0.28)
Consolidated Statements of Income (Loss) (Parentheticals) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Tax benefit on discontinued operations
$ 0 
$ 2 
$ 2 
Tax effect of gains on sale of discontinued operations
$ 0 
$ 4 
$ 0 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
ASSETS
 
 
Cash and cash equivalents
$ 534 
$ 1,110 
Restricted cash
27 
106 
Short-term investments
588 
524 
Receivables, net of allowances of $10 and $15 at December 31, 2011 and December 31, 2010, respectively
225 
199 
Inventories
87 
100 
Prepaids and other assets
78 
73 
Prepaid income taxes
29 
Deferred tax assets
23 
29 
Assets held for sale
   
18 
Total current assets
1,591 
2,165 
Investments
280 
245 
Property and equipment, net
4,043 
3,453 
Financing receivables, net of allowances
360 
375 
Goodwill
102 
102 
Intangibles, net
359 
280 
Deferred tax assets
197 
62 
Other assets
575 
561 
TOTAL ASSETS
7,507 
7,243 
LIABILITIES AND EQUITY
 
 
Current maturities of long-term debt
57 
Accounts payable
144 
145 
Accrued expenses and other current liabilities
306 
286 
Accrued compensation and benefits
114 
108 
Total current liabilities
568 
596 
Long-term debt
1,221 
714 
Other long-term liabilities
890 
802 
Total liabilities
2,679 
2,112 
Commitments and Contingencies (see Note 16)
   
   
EQUITY:
 
 
Preferred stock, $0.01 par value per share, 10,000,000 shares authorized and none outstanding as of December 31, 2011 and 2010
   
   
Common stock
Additional paid-in capital
3,380 
3,751 
Retained earnings
1,517 
1,404 
Treasury stock at cost, 36,273 shares at December 31, 2011 and 2010
(1)
(1)
Accumulated other comprehensive income (loss)
(80)
(38)
Total stockholders' equity
4,818 
5,118 
Noncontrolling interests in consolidated subsidiaries
10 
13 
Total equity
4,828 
5,131 
TOTAL LIABILITIES AND EQUITY
$ 7,507 
$ 7,243 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2011
Dec. 31, 2010
Allowance for receivables
$ 10 
$ 15 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
10,000,000 
10,000,000 
Treasury stock, shares
36,273 
36,273 
Common Class A
 
 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
1,000,000,000 
1,000,000,000 
Common stock, outstanding
44,683,934 
44,487,197 
Common Stock, Shares, Issued
44,720,207 
44,523,470 
Common Class B
 
 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
452,472,717 
461,460,412 
Common stock, outstanding
120,478,305 
129,466,000 
Common Stock, Shares, Issued
120,478,305 
129,466,000 
Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income (loss)
$ 111 
$ 55 
$ (46)
Gain on sale of discontinued operations
   
(7)
   
Loss from discontinued operations
   
Income (loss) from continuing operations
111 
51 
(43)
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
305 
279 
269 
Deferred income taxes
(137)
(8)
73 
Asset impairments
44 
12 
Provisions on hotel loans
Equity (earnings) losses from unconsolidated hospitality ventures, including distributions received
17 
54 
28 
Income (loss) from cost method investment
   
   
(22)
(Gain) loss on sales of real estate
(26)
   
Foreign currency (gains) losses
(5)
Gain on extinguishment of debt
   
(35)
   
Net unrealized (gains) losses from other marketable securities
13 
(19)
(10)
Other
32 
36 
47 
Increase (Decrease) in Accounts Receivables, net
(17)
22 
57 
Increase (Decrease) in Inventories
(10)
Increase (Decrease) in Prepaid Taxes
(6)
76 
(66)
Increase (Decrease) in Accounts Payable and Accrued Liabilities
10 
11 
(46)
Increase (Decrease) in Employee Related Liabilities
11 
Increase (Decrease) in Other Long Term Liabilities
62 
(11)
10 
Increase (Decrease) in Other Operating Assets and Liabilities, Net
(26)
(43)
(31)
Net cash provided by operating activities of continuing operations
393 
450 
276 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of marketable securities and short-term investments
(503)
(1,741)
(402)
Proceeds from marketable securities and short-term investments
417 
1,343 
321 
Contributions to investments
(44)
(84)
(51)
Acquisitions, net of cash acquired
(716)
   
(109)
Capital expenditures
(331)
(310)
(216)
Proceeds from sales of real estate
90 
233 
   
Real estate sale proceeds transferred to escrow as restricted cash
(35)
(210)
   
Proceeds from sale of assets held for sale
18 
   
   
Real estate sale proceeds transferred from escrow to cash and cash equivalents
132 
113 
   
(Increase) Decrease in restricted cash - investing
(25)
(1)
Other investing activities
(18)
(6)
21 
Net cash used in investing activities of continuing operations
(1,015)
(663)
(427)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from issuance of long-term debt, net of issuance costs
519 
   
495 
Proceeds from revolver
   
   
675 
Payments on revolver
   
   
(705)
Repurchase of senior subordinated notes
   
   
(600)
Repayments of long-term debt
(54)
(39)
(257)
Repurchase of Class B common stock
(396)
   
   
Issuance of common stock, net of related costs
   
   
1,355 
Issuance of Class A common stock in IPO, net of underwriter fees
   
   
127 
Other financing activities
(13)
   
(34)
Net cash provided by (used in) financing activities of continuing operations
56 
(39)
1,056 
CASH PROVIDED BY DISCONTINUED OPERATIONS:
 
 
 
Proceeds from sale of discontinued operations
   
27 
   
Sale proceeds transferred from escrow as restricted cash
   
(22)
   
Sales proceeds transferred from escrow to cash and cash equivalents
   
22 
   
Net cash provided by investing activities of discontinued operations
   
27 
   
Net cash provided by discontinued operations
   
27 
   
EFFECT OF EXCHANGE RATE CHANGES ON CASH
(10)
(6)
NET DECREASE IN CASH AND CASH EQUIVALENTS
(576)
(217)
899 
CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR
1,110 
1,327 
428 
CASH AND CASH EQUIVALENTS—END OF PERIOD
534 
1,110 
1,327 
LESS CASH AND CASH EQUIVALENTS DISCONTINUED OPERATIONS
   
   
   
CASH AND CASH EQUIVALENTS CONTINUING OPERATIONS-END OF PERIOD
534 
1,110 
1,327 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
Cash paid during the period for interest
49 
57 
50 
Cash paid during the period for income taxes
60 
63 
60 
Non-cash investing activities are as follows:
 
 
 
Timeshare Inventory transfered to fixed assets (see Note 2)
   
   
47 
Acquisitions of treasury stock (see Note 17)
   
   
Purchase of land (see Note 6)
   
24 
   
Equity contribution of property and equipment, net (see Note 6)
10 
   
   
Equity contribution of long-term debt (see Note 8)
25 
   
   
Contribution to investment (see Note 3)
20 
   
   
Acquired capital lease (see Note 8)
$ 7 
    
    
Consolidated Statement of Cash Flows (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Underwriters' discounts and commissions, and offering expenses
$ 4 
 
$ 3 
Offering Costs
 
 
Underwriter Fees
 
 
Common Stock [Member]
 
 
 
Stock issuance costs
 
 
Class A Common Stock in IPO [Member]
 
 
 
Offering Costs
 
 
Underwriter Fees
 
 
Issuance of Debt [Member]
 
 
 
Underwriters' discounts and commissions, and offering expenses
$ 4 
    
$ 3 
Consolidated Statements of Changes in Stockholders' Equity (USD $)
In Millions, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Stock [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Noncontrolling Interest [Member]
Rights [Member]
Rights [Member]
Common Stock [Member]
Rights [Member]
Additional Paid-in Capital [Member]
2013 Notes [Member]
2013 Notes [Member]
Additional Paid-in Capital [Member]
IPO/Reclassification [Member]
IPO/Reclassification [Member]
Additional Paid-in Capital [Member]
Balance - at Dec. 31, 2008
$ 3,592 
$ 1 
$ 2,242 
$ 1,381 
 
$ (60)
$ 28 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
(46)
 
 
(43)
 
 
(3)
 
 
 
 
 
 
 
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax
 
 
 
 
 
 
 
 
 
 
 
 
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax
(1)
 
 
 
 
(1)
 
 
 
 
 
 
 
 
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax
 
 
 
 
 
 
 
 
 
 
 
 
Other Comprehensive Income (Loss), Net of Tax
(39)
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of Common Stock
 
 
 
 
 
 
 
755 
754 
587 
587 
 
 
Stock Issued During Period, Value, New Issues
 
 
 
 
 
 
 
 
 
 
 
 
127 
127 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
(1)
 
 
 
 
 
(1)
 
 
 
 
 
 
 
Issuance of common stock shares to directors
 
 
 
 
 
 
 
 
 
 
 
 
Issuance Of Common Stock Through Employee Stock Purchase Plan
 
 
 
(2)
 
 
 
 
 
 
 
 
 
Share-based payment activity
17 
 
17 
 
 
 
 
 
 
 
 
 
 
 
Balance - at Dec. 31, 2009
5,040 
3,731 
1,338 
(2)
(53)
24 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
55 
 
 
66 
 
 
(11)
 
 
 
 
 
 
 
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax
15 
 
 
 
 
15 
 
 
 
 
 
 
 
 
Other Comprehensive Income (Loss), Net of Tax
70 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
(1)
 
 
 
 
 
(1)
 
 
 
 
 
 
 
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Changes, Purchase of Interest by Parent
(2)
 
(3)
 
 
 
 
 
 
 
 
 
 
Issuance of common stock shares to directors
 
 
 
 
 
 
 
 
 
 
 
 
Issuance Of Common Stock Through Employee Stock Purchase Plan
 
 
 
 
 
 
 
 
 
 
 
 
Treasury stock issued, value
 
 
 
 
 
 
 
 
 
 
 
 
Share-based payment activity
21 
 
21 
 
 
 
 
 
 
 
 
 
 
 
Balance - at Dec. 31, 2010
5,131 
3,751 
1,404 
(1)
(38)
13 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
111 
 
 
113 
 
 
(2)
 
 
 
 
 
 
 
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax
(31)
 
 
 
 
(31)
 
 
 
 
 
 
 
 
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax
(2)
 
 
 
 
(2)
 
 
 
 
 
 
 
 
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax
(1)
 
 
 
 
(1)
 
 
 
 
 
 
 
 
Unrealized Gain (Loss) on Derivatives
(8)
 
 
 
 
(8)
 
 
 
 
 
 
 
 
Other Comprehensive Income (Loss), Net of Tax
69 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
(1)
 
 
 
 
 
(1)
 
 
 
 
 
 
 
Stock Repurchased During Period, Value
(396)
 
(396)
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock shares to directors
 
 
 
 
 
 
 
 
 
 
 
 
Issuance Of Common Stock Through Employee Stock Purchase Plan
 
 
 
 
 
 
 
 
 
 
 
 
Share-based payment activity
21 
 
21 
 
 
 
 
 
 
 
 
 
 
 
Balance - at Dec. 31, 2011
$ 4,828 
$ 2 
$ 3,380 
$ 1,517 
$ (1)
$ (80)
$ 10 
 
 
 
 
 
 
 
Consolidated Statements of Changes in Stockholdes Equity (Parentheticals) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2009
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax
$ 1 
$ (1)
$ (17)
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Tax
 
Other Comprehensive Income (Loss) Hedge Gains (Losses) Reclassified to Earnings, Tax
 
 
(1)
Rights Offering Costs
 
 
Subscription Agreement Costs
 
 
13 
Underwriter Fees
 
 
Offering Costs
 
 
Other Comprehensive Income (Loss), Available-for-sale Securities, Tax
 
 
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Tax
$ 5 
 
 
Organization
Organization
ORGANIZATION
Hyatt Hotels Corporation, a Delaware corporation, and its consolidated subsidiaries (“Hyatt Hotels Corporation”), provide hospitality services on a worldwide basis through the management, franchising and ownership of hospitality related businesses. We operate or franchise 245 full-service, Hyatt-branded hotels, consisting of 102,506 rooms, in 45 countries throughout the world. We hold ownership interests in certain of these hotels. We operate or franchise 215 select-service, Hyatt-branded hotels with 28,028 rooms in the United States. We hold ownership interests in certain of these hotels. We develop, operate, manage, license or provide services to Hyatt-branded timeshare, fractional and other forms of residential or vacation properties.
Our North American management and hotel ownership company, Hyatt Corporation, was founded in 1957. Our international management and hotel ownership company, Hyatt International Corporation, was founded in 1968. On August 4, 2004, our predecessor, Global Hyatt, Inc., was incorporated in Delaware as a holding company to combine our North American and international hospitality operations and increase the scale and scope of our company. Effective October 13, 2004, the name Global Hyatt, Inc. was changed to Global Hyatt Corporation. Effective June 30, 2009, Global Hyatt Corporation changed its name to Hyatt Hotels Corporation. On November 10, 2009, we completed our initial public offering (“IPO”) of Class A common stock in which a total of 43.7 million shares were sold at an initial public offering price of $25.00 per share. This included the sale of 38 million shares by selling stockholders and 5.7 million shares sold by us pursuant to the underwriters’ full exercise of their over-allotment option. See Note 17.
As used in these Notes, the terms “Company,” “HHC,” “we,” “us,” or “our” mean Hyatt Hotels Corporation and its consolidated subsidiaries.
As used in these Notes, the term “Pritzker family business interests” means (1) various lineal descendants of Nicholas J. Pritzker (deceased) and spouses and adopted children of such descendants; (2) various trusts for the benefit of the individuals described in clause (1) and trustees thereof; and (3) various entities owned and/or controlled, directly and/or indirectly, by the individuals and trusts described in (1) and (2).
Summary of Significant Accounting Policies (Notes)
Significant Accounting Policies [Text Block]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation—The 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.
Use of Estimates—We are required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from such estimated amounts.
Revenue Recognition—Our revenues are primarily derived from the following sources and are generally recognized when services have been rendered:
Owned and leased hotel revenues are derived from room rentals and services provided at our owned, leased, and consolidated hospitality venture properties and are recorded when rooms are occupied and services have been rendered. Sales and occupancy taxes are recorded on a net basis in the consolidated statements of income (loss).
Management and franchise fees earned from hotels managed and franchised worldwide:
Management fees primarily consist of a base fee, which is generally computed as a percentage of gross revenues, and an incentive fee, which is generally computed based on a hotel profitability measure. Base fee revenues are recognized when earned in accordance with the terms of the contract. We recognize incentive fees that would be due as if the contract were to terminate at that date, exclusive of any termination fees payable or receivable by us.
Realized gains from the sale of hotel real estate assets where we maintain substantial continuing involvement in the form of a long-term management contract are deferred and recognized as management fee revenue over the term of the underlying management contract.
Franchise fees are generally based on a percentage of hotel rooms’ revenues and are recognized as the fees are earned and become due from the franchisee when all material services or conditions relating to the sale have been substantially performed or satisfied by the franchisor.
Other revenues
Other revenues primarily include revenues from our vacation ownership business. We recognize vacation ownership revenue when a minimum of 10% of the purchase price for the interval has been received, the period of cancellation with refund has expired, and receivables are deemed collectible. For sales that do not qualify for full revenue recognition as the project has progressed beyond the preliminary stages but has not yet reached completion, all revenue and associated direct expenses are initially deferred and recognized in earnings through the percentage-of-completion method.
Other revenues also include revenues from our co-branded credit card launched in 2010. We recognize revenue from our co-branded credit card upon: (1) the sale of points to our third-party partner; and (2) the fulfillment or expiration of a card member's activation offer. We receive incentive fees from our third-party partner upon activation of each credit card, which we defer until the associated compensated nights awarded on member activation are redeemed or expired.
Other revenues from managed properties represent the reimbursement of costs incurred on behalf of the owners of hotel properties we manage. These costs relate primarily to payroll costs at managed properties where we are the employer. Since the reimbursements are made based upon the costs incurred with no added margin, these revenues and corresponding expenses have no effect on our net income.
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—We had restricted cash of $27 million and $106 million at December 31, 2011 and 2010, respectively. The 2011 balance relates primarily to a holdback escrow agreement of $20 million we entered into in conjunction with the acquisition of hotels and other assets from LodgeWorks, L.P. and its private equity partners (collectively, "LodgeWorks") (see Note 8). The 2010 balance relates primarily to like-kind exchange agreements of $97 million under which proceeds from sales were placed into an escrow account administered by an intermediary (see Note 8). The remaining $7 million and $9 million in 2011 and 2010, respectively, relates to secured real estate taxes, property insurance, escrow deposits on purchases of our vacation ownership intervals, security deposits, software contract deposits, property and equipment reserves, and long-term loans. These amounts are invested in interest-bearing accounts.
Investments—We consolidate entities under our control, including entities where we are deemed to be the primary beneficiary as a result of qualitative and/or quantitative characteristics. The primary beneficiary is the party who has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. Investments in unconsolidated affiliates over which we exercise significant influence, but do not control, including joint ventures, are accounted for by the equity method. In addition, our limited partnership investments in which we hold more than a minimal investment are accounted for under the equity method of accounting. Investments in unconsolidated affiliates over which we are not able to exercise significant influence are accounted for under the cost method.
We assess investments in unconsolidated affiliates for impairment quarterly. When there is indication that a loss in value has occurred, we evaluate the carrying value compared to the estimated fair value of the investment. Fair value is based upon internally developed discounted cash flow models, third-party appraisals, and if appropriate, current estimated net sales proceeds from pending offers. If the estimated fair value is less than carrying value, we use our judgment to determine if 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 values 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. For investments that are deemed other-than-temporary, impairments are charged to earnings.
Marketable Securities—Our investments in marketable securities are principally included within short-term investments and other assets in the consolidated balance sheets and are classified as either trading or available-for-sale (see Note 4). Marketable securities are recorded at fair value based on listed market prices or dealer price quotations where available.
Our marketable securities consist of various types of U.S. Treasury securities and agencies, mutual funds, common stock and fixed income securities, including government and corporate bonds. Realized and unrealized gains and losses on trading securities are reflected in the consolidated statements of income (loss) in other income (loss), net. Available-for-sale securities with unrealized gains and losses are reported as part of accumulated other comprehensive loss on the consolidated balance sheets. Realized gains and losses on available-for-sale securities are recognized in other income (loss), net based on the cost of the securities using specific identification. Available-for-sale securities are assessed for impairment quarterly. To determine if an impairment is other-than-temporary, we consider the duration and severity of the loss position, the strength of the underlying collateral, the term to maturity, credit rating and our intent to sell. For debt securities that are deemed other-than-temporarily impaired and there is no intent to sell, impairments are separated into the amount related to the credit loss, which is recorded in our consolidated statements of income (loss) and the amount related to all other factors, which is recorded in accumulated other comprehensive loss. For debt securities that are deemed other-than-temporarily impaired and there is intent to sell, impairments in their entirety are recorded in our consolidated statements of income (loss).
Derivative Instruments—Derivative transactions are executed only to manage exposures arising in the normal course of business and not for the purpose of creating speculative positions or trading. As a result of the use of derivative instruments, we are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, we only enter into contracts with carefully selected major financial institutions based upon their credit rating and other factors. Our derivative instruments do not contain credit-risk related contingent features.
All derivatives are recognized on the balance sheet at fair value. On the date the derivative contract is entered, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid (cash flow hedge), a hedge of the fair value of a recognized asset or liability (fair value hedge), or an undesignated hedge instrument. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge are recorded in accumulated other comprehensive loss on the consolidated balance sheets until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk are recorded in current earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged on the consolidated statements of cash flows. Cash flows from undesignated derivative financial instruments are included in the investing category on the consolidated statements of cash flows.
At the designation date, we formally document all relationships between hedging activities, including the risk management objective and strategy for undertaking various hedge transactions. This process includes matching all derivatives that are designated as cash flow hedges to specific forecasted transactions and linking all derivatives designated as fair value hedges to specific assets and liabilities on the consolidated balance sheets.
We also formally assess both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flow of hedged items. We discontinue hedge accounting prospectively, when the derivative is not highly effective as a hedge, the underlying hedged transaction is no longer probable, or the hedging instrument expires, is sold, terminated, or exercised.
Other Income (Loss), Net—Other income (loss), net includes interest income, gains (losses) on other marketable securities (see Note 4), income from cost method investments (see Note 3), foreign currency gains (losses) including gains (losses) on foreign currency exchange rate instruments (see Note 12), costs related to the repurchase of $600 million of 5.84% senior subordinated notes due 2013 and early settlement of a stock subscription agreement (see Notes 10 and 17), provisions on hotel loans (see Note 7), gain on extinguishment of debt (see Notes 8 and 10), and transaction costs incurred to acquire hotels and other assets (see Note 8). The table below provides a reconciliation of the components in other income (loss), net for the years ended December 31, 2011, 2010 and 2009, respectively:
 
 
For the years ended December 31,
2011
 
2010
 
2009
Interest income
$
23

 
$
21

 
$
21

Gains (losses) on other marketable securities
(13
)
 
19

 
10

Income from cost method investments

 

 
22

Foreign currency gains (losses)
(5
)
 
(3
)
 
5

Debt settlement costs

 

 
(93
)
Provisions on hotel loans
(4
)
 
(1
)
 
(9
)
Gain on extinguishment of debt

 
35

 

Transaction costs
(5
)
 

 

Other
(7
)
 

 
(4
)
Other income (loss), net
$
(11
)
 
$
71

 
$
(48
)

Foreign Currency—The functional currency of our consolidated and nonconsolidated entities located outside the United States of America is generally the local currency. The assets and liabilities of these entities are translated into U.S. dollars at year-end exchange rates, and the related gains and losses, net of applicable deferred income taxes, are reflected in stockholders’ equity. Gains and losses from foreign currency transactions are included in earnings. Income and expense accounts are translated at the average exchange rate for the period. Gains and losses from foreign exchange rate changes related to intercompany receivables and payables of a long-term nature are generally included in other comprehensive loss. Gains and losses from foreign exchange rate movement related to intercompany receivables and payables that are not of a long-term nature are reported currently in income.
Financing Receivables—We define financing receivables as financing arrangements that represent a contractual right to receive money either on demand or on fixed or determinable dates and that are recognized as an asset on our consolidated balance sheets. We record all financing receivables at amortized cost in current and long-term receivables. We recognize interest income as earned and provide an allowance for cancellations and defaults. We have divided our financing receivables into three portfolio segments based on the level at which we develop and document a systematic methodology to determine the allowance for credit losses. Based on their initial measurement, risk characteristics and our method for monitoring and assessing credit risk, we have determined the class of financing receivables to correspond to our identified portfolio segments, which are as follows:
Secured Financing to Hotel Owners
These financing receivables are senior, secured mortgage loans and are collateralized by underlying hotel properties currently in operation. We determine our secured financing to hotel owners to be non-performing if either interest or principal is greater than 90 days past due based on the contractual terms of the individual mortgage loans.
– We individually assess all loans in this portfolio for impairment. We determine a loan to be impaired if it is probable that we will be unable to collect all amounts due in accordance with the contractual terms of the individual loan agreement. This assessment is based on an analysis of several factors including current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including loan performance, individual market factors, hotel performance, and the collateral of the underlying hotel. We measure loan impairment based on either the present value of expected future cash flows discounted at the loan’s effective interest rate or estimated the fair value of the collateral. The measurement method used is based on which would be most appropriate given the nature of the loan, the underlying collateral, and the facts and circumstances of the individual loan. For impaired loans, we establish a specific loan loss reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows or the estimated fair value of the collateral. The loan loss reserve is maintained at a level deemed adequate by management based on a periodic analysis of the individual loans.
– If we consider secured financing to hotel owners to be non-performing or impaired, we place the financing receivable on non-accrual status. We will recognize interest income when received for non-accruing finance receivables. Accrual of interest income is resumed when the receivable becomes contractually current and collection doubts are removed. We write off secured financing to hotel owners when we determine that the loans are uncollectible and when all commercially reasonable means of recovering the loan balances have been exhausted.

Vacation Ownership Mortgage Receivables
These financing receivables are comprised of various mortgage loans related to our financing of vacation ownership interval sales. We record an estimate of uncollectibility as a reduction of sales revenue at the time revenue is recognized on a vacation ownership interval sale. We evaluate this portfolio collectively as we hold a large group of smaller-balance homogenous vacation ownership mortgage receivables and use a technique referred to as static pool analysis, which tracks uncollectibles over the entire life of those mortgage receivables. We use static pool analysis as the basis for determining our general reserve requirements on our vacation ownership mortgage receivables. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including defaults, aging and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio.
We determine our vacation ownership mortgage receivables to be non-performing if either interest or principal is greater than 120 days past due based on the contractual terms of the individual mortgage loans. We do not recognize interest income and write-off vacation ownership mortgage receivables that are over 120 days past due, the date on which we determine the mortgage receivables to be uncollectible.


Unsecured Financing to Hotel Owners
These financing receivables are primarily made up of individual loans and other types of unsecured financing arrangements provided to hotel owners. These financing receivables have stated maturities and interest rates. The repayment terms vary and may be dependent upon future cash flows of the hotel. We determine our unsecured financing to hotel owners to be non-performing if interest or principal is greater than 90 days past due or if estimates of future cash flows available for repayment of these receivables indicate that there is a collectibility risk. We do not recognize interest income on non-performing financing arrangements and only resume interest recognition if the financing receivable becomes current.
– We individually assess all financing receivables in this portfolio for collectability and impairment. We determine a loan to be impaired if it is probable that we will be unable to collect all amounts due according to the contractual terms of the individual loan agreement based on an analysis of several factors including current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including capital structure, individual hotel performance, and individual financing arrangement. We measure loan impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate. For impaired loans, we establish a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows. The impairment reserve is maintained at a level deemed adequate by management based on a periodic analysis of the individual loans.
We write off unsecured financing to hotel owners when we determine that the receivables are uncollectible and when all commercially reasonable means of recovering the receivable balances have been exhausted.
Inventories—Inventories are comprised principally of unsold vacation ownership intervals of $68 million and $85 million at December 31, 2011 and 2010, respectively, and food and beverage inventories at our owned and leased hotels. Vacation ownership inventory is carried at the lower of cost or market, based on relative sales value or net realizable value. Food and beverage inventories are generally valued at the lower of cost (first-in, first-out) or market. Vacation ownership interval products inventory, which has an operating cycle that exceeds 12 months, is classified as a current asset consistent with recognized industry practice. During 2011 and 2010, management changed its plans for future development of multi-phase vacation ownership properties. These changes resulted in impairment charges of $5 million and $30 million during 2011 and 2010, respectively, recorded to asset impairments. In certain of these vacation ownership properties in 2011 and 2010, respectively, our ownership interest is less than 100%. As a result, $1 million and $9 million of these impairment charges during 2011 and 2010, respectively, is attributable to our partners and is reflected in net loss attributable to noncontrolling interests. As a result, the net total impairment charge attributable to Hyatt Hotels Corporation is $4 million and $21 million during 2011 and 2010, respectively.
Property and Equipment—Property and equipment are stated at cost, including interest incurred during development and construction periods. Depreciation and amortization are provided over the estimated useful lives of the assets, primarily on the straight-line method. All repair and maintenance costs are expensed as incurred.
Useful lives assigned to property and equipment are as follows:
Buildings and improvements
15-50 years
Leasehold improvements
The shorter of the lease term or useful life of asset
Furniture and equipment
2-21 years
Computers
3-6 years

Long-Lived Assets and Definite-Lived Intangibles—We evaluate the carrying value of our long-lived assets and definite-lived intangibles for impairment by comparing the expected undiscounted future cash flows of the assets to the net book value of the assets when events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value is charged to earnings. Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, appraisals, and, if appropriate, current estimated net sales proceeds from pending offers. We evaluate the carrying value of our long-lived assets and definite-lived intangibles based on our plans, at the time, for such assets and such qualitative factors as future development in the surrounding area and status of expected local competition. Changes to our plans, including a decision to dispose of or change the intended use of an asset, can have a material impact on the carrying value of the asset.
Acquisitions—Assets acquired and liabilities assumed in business combinations are recorded on our consolidated balance sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of businesses acquired by us have been included in the consolidated statements of income (loss) since their respective dates of acquisition. In certain circumstances, the purchase price allocations are based upon preliminary estimates and assumptions. Accordingly, the allocations are subject to revision when we receive final information, including appraisals and other analyses. There were no contingent payments, options, or commitments specified in any of the following acquisition agreements except as otherwise disclosed in Note 8.
Goodwill—As required, we evaluate goodwill for impairment on an annual basis, and do so during the fourth quarter of each year using balances as of the end of September and at an interim date if indications of impairment exist. Goodwill impairment is determined by comparing the fair value of a reporting unit to its carrying amount in a two-step process with an impairment being recognized only where the fair value is less than carrying value. We define a reporting unit at the individual property or business level. When determining fair value in step one, we utilize internally developed discounted future 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, including projections of revenues based on assumed long-term growth rates, estimated costs and appropriate discount rates based on the weighted-average cost of capital. The principal factors used in the discounted cash flow analysis requiring judgment are the projected future operating cash flow, the weighted-average cost of capital and the terminal value growth rate assumptions. The weighted-average cost of capital takes into account the relative weights of each component of our capital structure (equity and long-term debt) and is determined at the reporting unit level. Our estimates of long-term growth and costs 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 must determine our implied fair value of goodwill to measure if any impairment charge is necessary. The determination of our implied fair value of goodwill requires the allocation of the reporting unit’s estimated fair value to the individual assets and liabilities of the reporting unit as if we had completed a business combination. We perform the allocation based on our knowledge of the reporting unit, the market in which they operate, and our overall knowledge of the hospitality industry. See Note 9 for additional information about goodwill.
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. These estimates are based on judgments made with currently available information. 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 15.
Fair Value—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, involve matters of judgment, and, therefore, fair values cannot always be determined with precision. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accounting Principles Generally Accepted in the United States of America (“GAAP”) establishes a valuation hierarchy for prioritizing the inputs and the hierarchy places greater emphasis on the use of observable market inputs and less emphasis on unobservable inputs. When determining fair value, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of the 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;
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 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 fair value measurement 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 carrying values of cash equivalents, accounts receivable, financing receivable – current, accounts payable and current maturities of long-term debt approximate fair value due to the short-term nature of these items and their close proximity to maturity. For additional information about fair value, see Note 5. The fair value of marketable securities is discussed in Note 4; the fair value of financing receivable is discussed in Note 7; and the fair value of long-term debt is discussed in Note 10.
Hyatt Gold Passport Fund—The Hyatt Gold Passport Program (the “Program”) is our loyalty program. We operate the Program for the benefit of Hyatt branded properties, whether owned, operated, managed, or franchised by us. The Program is operated through the Hyatt Gold Passport Fund, which is an entity that is owned collectively by the owners of Hyatt branded properties, whether owned, operated, managed or franchised by us. The Hyatt Gold Passport Fund (the “Fund”) has been established to provide for the payment of operating expenses and redemptions of member awards associated with the Program. The Fund is maintained and managed by us on behalf of and for the benefit of Hyatt branded properties. We have evaluated our investment in the Fund and have determined that the Fund qualifies as a variable interest entity (“VIE”) and, as a result of the Company being the primary beneficiary, we have consolidated the Fund.
The Program allows members to earn points based on their spending at Hyatt branded properties. Points earned by members can be redeemed for goods and services at Hyatt branded properties, and to a lesser degree, through other redemption opportunities with third parties, such as the conversion to airline miles. Points cannot be redeemed for cash. We charge the cost of operating the Program, including the estimated cost of award redemption, to the hotel properties based on members’ qualified expenditures. Due to the requirements under the Program that the hotel properties reimburse us for the Program’s operating costs as incurred, we recognize this revenue from properties at the time such costs are incurred and expensed. We defer revenue received from the hotel properties equal to the fair value of our future redemption obligation. Upon the redemption of points, we recognize as revenue the amounts previously deferred and recognize the corresponding expense relating to the costs of the awards redeemed. Revenue is recognized by the hotel properties when the points are redeemed, and expenses are recognized when the points are earned by the members.
We actuarially determine the expected fair value of the future redemption obligation based on statistical formulas that project the timing of future point redemption based on historical experience, including an estimate of the “breakage” for points that will never be redeemed, and an estimate of the points that will eventually be redeemed. Actual expenditures for the Program may differ from the actuarially determined liability.
The Fund is financed by payments from the properties and returns on marketable securities. The Fund invests amounts received from the properties in marketable securities (see Note 4). As of December 31, 2011 and 2010, total assets of the Fund were $297 million and $279 million, respectively, including $52 million and $53 million of current assets, respectively. Marketable securities held by the Fund and included in other noncurrent assets were $245 million and $226 million as of December 31, 2011 and 2010, respectively (see Note 4). As of December 31, 2011 and 2010, total liabilities of the Fund were $297 million and $279 million, respectively, including $60 million and $53 million of current liabilities, respectively. The non-current liabilities of the Fund are included in other long-term liabilities (see Note 14).
Recently Issued Accounting Pronouncements
Adopted Accounting Standards
In January 2011, the Financial Accounting Standards Board (“FASB”) released Accounting Standards Update No. 2011-01 (“ASU 2011-01”), Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20, which deferred the disclosure requirements surrounding troubled debt restructurings. These disclosures became effective for the first reporting period beginning on or after June 15, 2011. The adoption of the disclosure requirements in ASU 2010-20 did not materially impact our consolidated financial statements.
In April 2011, the FASB released Accounting Standards Update No. 2011-02 (“ASU 2011-02”), Receivables (Topic 310): A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring. ASU 2011-02 clarifies the guidance for determining whether a restructuring constitutes a troubled debt restructuring. In evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must conclude that (1) the restructuring constitutes a concession and (2) the debtor is experiencing financial difficulties. ASU 2011-02 also requires companies to disclose the troubled debt restructuring disclosures that were deferred by ASU 2011-01. The guidance in ASU 2011-02 became effective for public companies in the first reporting period beginning on or after June 15, 2011, but the amendment must be applied retrospectively to the beginning of the annual period of adoption. The adoption of ASU 2011-02 did not materially impact our consolidated financial statements.
In December 2010, the FASB released Accounting Standards Update No. 2010-28 (“ASU 2010-28”), Intangibles-Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. The update requires a company to perform Step 2 of the goodwill impairment test if the carrying value of the reporting unit is zero or negative and adverse qualitative factors indicate that it is more likely than not that a goodwill impairment exists. The qualitative factors to consider are consistent with the existing guidance and examples in Topic 350, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. The requirements in ASU 2010-28 became effective for public companies in the first annual period beginning after December 15, 2010. The adoption of ASU 2010-28 on January 1, 2011 did not materially impact our consolidated financial statements.
In December 2010, the FASB released Accounting Standards Update No. 2010-29 (“ASU 2010-29”), Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations. ASU 2010-29 specifies that when a public company completes a business combination(s), the company should disclose revenue and earnings of the combined entity as though the business combination(s) occurred as of the beginning of the comparable prior annual reporting period. The update also expands the supplemental pro forma disclosures under Topic 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the pro forma revenue and earnings. The requirements in ASU 2010-29 became effective for business combinations that occur on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The adoption of ASU 2010-29 on January 1, 2011 did not materially impact our consolidated financial statements. See Note 8 for a discussion of business combinations.
In January 2010, the FASB released Accounting Standards Update No. 2010-06 (“ASU 2010-06”), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurement. The update require a company to (a) disclose significant transfers in and out of Levels One and Two, in addition to transfers in and out of Level Three and (b) separately disclose purchases, sales, issuances, and settlements of Level Three securities. Additionally, ASU 2010-06 clarifies the information we currently disclose regarding our valuation techniques, inputs used in those valuation models, and the level of detail at which fair value disclosures should be provided. We adopted the Level One and Two disclosure requirements of ASU 2010-06 as of January 1, 2010 with no material impact on our consolidated financial statements. As of January 1, 2011, we adopted the disclosure requirements related to Level Three activity on a gross basis, with no material impact on our fair value disclosures. See Note 5 for a discussion of fair value measurement.
Future Adoption of Accounting Standards
Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 is intended to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards. The amendments in ASU 2011-04 clarify the FASB's intent about the application of existing fair value measurement requirements and change some requirements for measuring or disclosing information about fair value measurements. The provisions of ASU 2011-04 are effective for public companies in the first reporting period beginning after December 15, 2011. When adopted, ASU 2011-04 is not expected to materially impact our consolidated financial statements.
In June 2011, the FASB released Accounting Standards Update No. 2011-05 (“ASU 2011-05”), Comprehensive Income (Topic 220): Presentation of Comprehensive Income. ASU 2011-05 requires companies to present total comprehensive income, the components of net income, and the components of other comprehensive income in either a continuous statement or in two separate but consecutive statements. The amendments of ASU 2011-05 eliminate the option for companies to present the components of other comprehensive income within the statement of changes of stockholders' equity. The provisions of ASU 2011-05 are effective for public companies in fiscal years beginning after December 15, 2011. When adopted, ASU 2011-05 will change our presentation of comprehensive income (loss) within our consolidated financial statements.
In September 2011, the FASB released Accounting Standards Update No. 2011-08 (“ASU 2011-08”), Intangibles-Goodwill and Other (Topic 350): Testing for Goodwill Impairment. ASU 2011-08 gives companies the option to perform a qualitative assessment before calculating the fair value of the reporting unit. Under the guidance in ASU 2011-08, if this option is selected, a company is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The provisions of ASU 2011-08 are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, but early adoption is permitted. We have elected not to early adopt the provisions of ASU 2011-08, but when adopted, we do not expect ASU 2011-08 to materially impact our consolidated financial statements.
In December 2011, the Financial Accounting Standards Board (“FASB”) released Accounting Standards Update No. 2011-10 (“ASU 2011-10”), Property, Plant and Equipment (Topic 360): Derecognition of in Substance Real Estate - a Scope Clarification (a consensus of the FASB Emerging Issues Task Force). ASU 2011-10 clarifies when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary's nonrecourse debt, the reporting entity should apply the guidance for Real Estate Sale (Subtopic 360-20). The provisions of ASU 2011-10 are effective for public companies for fiscal years and interim periods within those years, beginning on or after June 15, 2012. When adopted, ASU 2011-10 is not expected to materially impact our consolidated financial statements.
In December 2011, the Financial Accounting Standards Board (“FASB”) released Accounting Standards Update No. 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 requires companies to provide new disclosures about offsetting and related arrangements for financial instruments and derivatives. The provisions of ASU 2011-11 are effective for annual reporting periods beginning on or after January 1, 2013, and are required to be applied retrospectively. When adopted, ASU 2011-11 is not expected to materially impact our consolidated financial statements.
In December 2011, the Financial Accounting Standards Board (“FASB”) released Accounting Standards Update No. 2011-12 (“ASU 2011-12”), Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU 2011-12 defers only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The provisions of ASU 2011-12 are effective for public companies in fiscal years beginning after December 15, 2011. When adopted, ASU 2011-12 is not expected to materially impact our consolidated financial statements.
Equity And Cost Method Investments
Equity And Cost Method Investments
EQUITY AND COST METHOD INVESTMENTS
We have investments that are recorded under both the equity and cost methods.These investments are considered to be an integral part of our business and are strategically and operationally important to our overall results. Our equity and cost method investment balances recorded at December 31, 2011 and 2010 are as follows:
 
December 31, 2011
 
December 31, 2010
Equity method investments
$
207

 
$
175

Cost method investments
73

 
70

Total investments
$
280

 
$
245


Of our $280 million total investment balance as of December 31, 2011, $273 million was recorded in our Owned and Leased Hotels segment. Of our $245 million total investment balance as of December 31, 2010, $236 million was recorded in our Owned and Leased Hotels segment.
Our income (loss) from equity method investments included in the consolidated statements of income (loss) for the years ended December 31, 2011, 2010, and 2009, were $4 million, $(40) million, and $(13) million, respectively. We recorded insignificant income from our cost method investments for the years ended December 31, 2011 and 2010 and $22 million for the year ended December 31, 2009 within other income (loss), net in our consolidated statements of income (loss).
We have interests in certain non-hospitality related real estate investment companies from which we received insignificant income for the years ended December 31, 2011 and 2010, and $21 million for the year ended December 31, 2009 which is included in other income (loss), net in our consolidated statements of income (loss).
The carrying value and ownership percentages of our unconsolidated investments in hotel and vacation properties accounted for under the equity method as of December 31, 2011 and 2010 are as follows:
 
Ownership
Interests
 
Our Investment
December 31, 2011
 
December 31, 2010
Juniper Hotels Private Ltd
50.0%
 
$
41

 
$
44

Hotel Investments, LP
29.9%
 
22

 
25

Wailea Hotel and Beach Resort, LLC
28.1%
 
20

 
2

Noble Select JV
40.0%
 
18

 

Hedreen Hotel, LLC
49.9%
 
17

 
17

Nuevo Plaza Hotel Mendoza Limited
50.0%
 
15

 
17

Sao Paulo Investment Company Inc.
50.0%
 
13

 
12

Hedreen Hotel Two, LLC
49.9%
 
8

 
9

Austin Downtown Hotel Partners, LLC
50.0%
 
7

 

Grand Aspen Holdings, LLC & Top of Mill Investors, LLC
25.8%
 
6

 
7

Other
 
 
40

 
42

Total
 
 
$
207

 
$
175


The following tables present summarized financial information for all unconsolidated ventures in which we hold an investment that is accounted for under the equity method. 
 
Years Ended December 31,
2011
 
2010
 
2009
Total revenues
$
986

 
$
846

 
$
707

Gross operating profit
317

 
264

 
234

Income (loss) from continuing operations
22

 
(10
)
 
(49
)
Net income (loss)
$
22

 
$
(10
)
 
$
(49
)
 
 
As of December 31,
2011
 
2010
Current Assets
$
367

 
$
370

Noncurrent Assets
2,229

 
1,974

Total Assets
$
2,596

 
$
2,344

Current Liabilities
$
301

 
$
212

Noncurrent Liabilities
1,802

 
1,688

Total Liabilities
$
2,103

 
$
1,900


During 2011, we contributed $20 million to a newly formed joint venture with Noble Investment Group (“Noble”) in return for a 40% ownership interest in the venture (see Note 8). In addition, the Company and Noble agreed to invest in the strategic new development of select service hotels in the United States. Under that agreement, we are required to contribute up to a maximum of 40% of the equity necessary to fund up to $80 million (i.e. $32 million) of such new development (see Note 16).
In 2010, we entered into an agreement with an independent third party to acquire an interest in a hospitality venture that owns the Hyatt Regency New Orleans, which was closed in September 2005 due to damage from Hurricane Katrina. We contributed cash of $60 million for a preferred equity interest in this venture. The venture completed the renovation and the hotel was reopened during 2011. This investment is being accounted for under the cost method.
During 2011, 2010 and 2009 we recorded $1 million, $31 million and $14 million in total impairment charges in equity earnings (losses) from unconsolidated hospitality ventures. The impairment charge in 2011 relates to one property in our vacation ownership business that is accounted for as an equity method investment. We identified indicators in 2010 and 2009 relative to certain of our hospitality venture investments. Based on our assessments of these investments, we recorded $16 million and $11 million of impairment charges in 2010 and 2009, respectively, relating to two of these hospitality venture properties due to the carrying amount of the assets exceeding the fair value as calculated using discounted operating cash flows and a determination that the decline was other than temporary. Based on fair value estimates of our vacation ownership projects held through equity method investments, which reflected decreases in annual sales pace and/or price, we recorded $15 million in impairment charges for two vacation ownership equity method investments in 2010 and $3 million in impairment charges for one vacation ownership equity method investment in 2009.

Marketable Securities (Notes)
Marketable Securities [Text Block]
MARKETABLE SECURITIES
We hold marketable securities to fund certain operating programs and for investment purposes. Marketable securities held to fund operating programs are recorded in other assets and prepaids and other assets. Marketable securities held for investment purposes are recorded in short-term investments.
Marketable Securities Held to Fund Operating Programs—At December 31, 2011 and 2010, total marketable securities held for the Hyatt Gold Passport Fund (See Note 2) and certain deferred compensation plans (see Note 13), carried at fair value and included in the consolidated balance sheets were as follows: 
 
December 31, 2011
 
December 31, 2010
Marketable securities held by the Hyatt Gold Passport Fund
$
267

 
$
247

Marketable securities held to fund deferred compensation plans
242

 
244

Total marketable securities
$
509

 
$
491

Less current portion of marketable securities held for operating programs included in prepaids and other assets
(22
)
 
(22
)
Marketable securities included in other assets
$
487

 
$
469


Included in net gains and interest income from marketable securities held to fund operating programs in the consolidated statements of income (loss) are $4 million, $5 million and $4 million of realized and unrealized gains and interest income, net related to marketable securities held by the Hyatt Gold Passport Fund for the years ended December 31, 2011, 2010 and 2009, respectively. Also included are $(2) million, $16 million, and $25 million of net realized and unrealized gains (losses) related to marketable securities held to fund deferred compensation plans for the years ended December 31, 2011, 2010 and 2009, respectively.
Marketable Securities Held for Investment Purposes—In 2010 we began transferring cash and cash equivalent balances to investments in highly liquid and transparent commercial paper, corporate notes and bonds and U.S. treasuries and agencies. At December 31, 2011 and 2010, total marketable securities held for investment purposes, carried at fair value and included in the consolidated balance sheets were as follows: 
 
December 31, 2011
 
December 31, 2010
Available-for-sale investments
$
506

 
$
403

Time deposits
54

 
80

Other marketable securities
28

 
41

Total short-term investments
$
588

 
$
524


Gains (losses) on other marketable securities of $(13) million, $19 million and $10 million for the years ended December 31, 2011, 2010 and 2009, respectively are included in other income (loss), net (see Note 2).
Included in our portfolio of marketable securities are investments in debt and equity securities classified as available-for-sale. At December 31, 2011, these were as follows: 
 
December 31, 2011
 
Cost or Amortized
Cost
 
Gross Unrealized
Gain
 
Gross Unrealized
Loss
 
Fair Value
Corporate debt securities
$
406

 
$
5

 
$
(5
)
 
$
406

U.S. government agencies and municipalities
93

 

 

 
93

Equity securities
9

 

 
(2
)
 
7

Total
$
508

 
$
5

 
$
(7
)
 
$
506


Gross realized gains and losses on available-for-sale securities were insignificant for the years ended December 31, 2011, 2010 and 2009.
The table below summarizes available-for-sale fixed maturity securities by contractual maturity at December 31, 2011. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid with or without call or prepayment penalties. Securities not due at a single date are allocated based on weighted average life. Although a portion of our available-for-sale fixed maturity securities mature after one year, we have chosen to classify the entire portfolio as current. The portfolio’s primary objective is to maximize return, but it also is intended to provide liquidity to satisfy operating requirements, working capital purposes and strategic initiatives. Therefore, since these securities represent funds available for current operations, the entire investment portfolio is classified as current assets. 
 
December 31, 2011
Contractual Maturity
Cost or Amortized
Cost
 
Fair Value
Due in one year or less
$
237

 
$
237

Due in one to two years
262

 
262

Total
$
499

 
$
499

Fair Value Measurement
Fair Value Disclosures [Text Block]
FAIR VALUE MEASUREMENT
We have various financial instruments that are measured at fair value including certain marketable securities and derivatives instruments. We currently do not have non-financial assets or non-financial liabilities that are required to be measured at fair value on a recurring basis.

As of December 31, 2011 and 2010, we had the following financial assets and liabilities measured at fair value on a recurring basis (refer to Note 2 for definitions of fair value and the three levels of the fair value hierarchy): 
 
December 31, 2011
 
Quoted Prices in
Active Markets for
Identical Assets
(Level One)
 
Significant Other
Observable Inputs
(Level Two)
 
Significant
Unobservable
Inputs
(Level Three)
Marketable securities included in short-term investments, prepaids and other assets and other assets
 
 
 
 
 
 
 
Mutual funds
$
242

 
$
242

 
$

 
$

Equity securities
35

 
35

 

 

U.S. government obligations
102

 

 
102

 

U.S. government agencies
132

 

 
132

 

Corporate debt securities
487

 

 
487

 

Mortgage-backed securities
23

 

 
21

 
2

Asset-backed securities
7

 

 
7

 

Municipal and provincial notes and bonds
14

 

 
14

 

Marketable securities recorded in cash and cash equivalents
 
 
 
 
 
 
 
Interest bearing money market funds
60

 
60

 

 

Derivative instruments
 
 
 
 
 
 
 
Interest rate swaps
7

 

 
7

 

Foreign currency forward contracts
(1
)
 

 
(1
)
 

 
December 31, 2010
 
Quoted Prices in
Active Markets for
Identical Assets
(Level One)
 
Significant Other
Observable Inputs
(Level Two)
 
Significant
Unobservable
Inputs
(Level Three)
Marketable securities included in short-term investments, prepaids and other assets and other assets
 
 
 
 
 
 
 
Mutual funds
$
244

 
$
244

 
$

 
$

Equity securities
50

 
41

 
9

 

U.S. government obligations
101

 

 
101

 

U.S. government agencies
61

 

 
61

 

Corporate debt securities
451

 

 
451

 

Mortgage-backed securities
16

 

 
14

 
2

Asset-backed securities
11

 

 
11

 

Municipal and provincial notes and bonds
1

 

 
1

 

Marketable securities recorded in cash and cash equivalents
 
 
 
 
 
 
 
Interest bearing money market funds
699

 
699

 

 

Commercial paper
3

 

 
3

 

Derivative instruments
 
 
 
 
 
 
 
Interest rate swaps
4

 

 
4

 

Foreign currency forward contracts
(4
)
 

 
(4
)
 


Our portfolio of marketable securities consists of various types of U.S. Treasury securities, mutual funds, common stock, and fixed income securities, including government agencies, municipal, provincial and corporate bonds. The fair value of our mutual funds and certain equity securities were classified as level one as they trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis. The remaining securities, except for certain mortgage backed securities, were classified as Level Two due to the use and weighting of multiple market inputs being considered in the final price of the security. Market inputs include quoted market prices from active markets for identical securities, quoted market prices for identical securities in inactive markets, and quoted market prices in active and inactive markets for similar securities. See Note 4 for further details on our marketable securities.
We invest a portion of our cash balance into short-term interest bearing money market funds that have a maturity of less than ninety days. Consequently, the balances are recorded in cash and cash equivalents. The funds are held with open-ended registered investment companies and the fair value of the funds are classified as Level One as we are able to obtain market available pricing information on an ongoing basis.
Our derivative instruments are foreign currency exchange rate instruments and interest rate swaps. The instruments are valued using an income approach with factors such as interest rates and yield curves, which represent market observable inputs and are generally classified as Level Two. Credit valuation adjustments may be made to ensure that derivatives are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality and our nonperformance risk. As of December 31, 2011 and 2010, the credit valuation adjustments were insignificant. See Note 12 for further details on our derivative instruments.
Due to limited observability of market data and limited activity during the years ended December 31, 2011 and 2010, we classified the fair value of certain of our mortgage-backed securities as Level Three.
During the year ended December 31, 2011, we requested that common shares we received as part of a private placement transaction be registered for resale. As a result of this registration, we transferred a $6 million equity security from Level Two to Level One in the fair value hierarchy. There were no transfers in and out of Level Three of the fair value hierarchy during the year ended December 31, 2011. During the year ended December 31, 2010, there were no transfers between levels of the fair value hierarchy. Our policy is to recognize transfers in and transfers out as of the end of each quarterly reporting period. As of January 1, 2011 and 2010, the balance of our Level Three mortgage backed securities was $2 million. During the years ended December 31, 2011 and 2010, there were insignificant purchases, issuances, settlements and gains or losses (realized or unrealized) related to our Level Three mortgage backed securities. As of December 31, 2011 and 2010, the balance of our Level Three mortgage backed securities was $2 million.
The amount of total gains (losses) included in net gains and interest income from marketable securities held to fund operating programs due to the change in unrealized gains or losses relating to assets still held at the reporting date for the years ended December 31, 2011 and 2010 were insignificant.
Property and Equipment (Notes)
Property, Plant and Equipment Disclosure [Text Block]
PROPERTY AND EQUIPMENT
Property and equipment at cost as of December 31, 2011 and 2010, consist of the following: 
 
December 31, 2011
 
December 31, 2010
Land
$
666

 
$
621

Buildings
3,878

 
3,365

Leasehold improvements
240

 
261

Furniture, equipment and computers
1,243

 
1,106

Construction in progress
56

 
84

 
6,083

 
5,437

Less accumulated depreciation
(2,040
)
 
(1,984
)
Total
$
4,043

 
$
3,453


Depreciation expense from continuing operations was $288 million, $265 million, and $254 million for the years ended December 31, 2011, 2010 and 2009, respectively. The net book value of capital leased assets at December 31, 2011 and 2010, is $191 million and $193 million, respectively, which is net of accumulated depreciation of $38 million and $25 million, respectively. During 2011, we acquired property and equipment of $594 million in the acquisition of properties and other assets from LodgeWorks. During 2010, we acquired two parcels of land in Latin America for future hotel developments for a net purchase price of $85 million. Interest capitalized as a cost of property and equipment totaled $4 million, $10 million and $13 million for the years ended December 31, 2011, 2010 and 2009, respectively, and is recorded net in interest expense. The year ended December 31, 2010 includes a $14 million charge to asset impairments in the consolidated statements of income (loss), related to an impairment of a Company owned airplane for $10 million recorded in Corporate and other and two impairments of property and equipment recorded in our owned and leased hotel segment and Corporate and other for $3 million and $1 million, respectively.
Financing Receivables
Financing Receivables
FINANCING RECEIVABLES
The three portfolio segments of financing receivables and their balances at December 31, 2011 and 2010 are as follows:
 
December 31, 2011
 
December 31, 2010
Secured financing to hotel owners
$
319

 
$
326

Vacation ownership mortgage receivables at various interest rates with varying payments through 2022 (see below)
50

 
55

Unsecured financing to hotel owners
91

 
87

 
460

 
468

Less allowance for losses
(90
)
 
(82
)
Less current portion included in receivables
(10
)
 
(11
)
Total long-term financing receivables
$
360

 
$
375


Secured Financing to Hotel Owners—These financing receivables are senior, secured mortgage loans and are collateralized by underlying hotel properties currently in operation. These loans consist primarily of a $278 million mortgage loan receivable to an unconsolidated hospitality venture, which is accounted for under the equity method, and was formed to acquire ownership of a hotel property in Waikiki, Hawaii. This mortgage receivable has interest set at 30-day LIBOR+3.75% due monthly and a stated maturity date of July 2012 with a one-year option to extend through 2013. We currently expect that the loan will be extended beyond 2012 and have classified it as long-term. Secured financing to hotel owners also includes financing provided to certain franchisees for the renovations and conversion of certain franchised hotels. These franchisee loans accrue interest at fixed rates ranging between 5.5% and 6.0%. Secured financing to hotel owners held by us as of December 31, 2011, are scheduled to mature as follows: 
Year Ending December 31,
Amount
2012
$
1

2013
289

2014

2015
29

2016

Thereafter

Total secured financing to hotel owners
319

Less allowance
(7
)
Net secured financing to hotel owners
$
312


Vacation Ownership Mortgages Receivables—These financing receivables are comprised of various mortgage loans related to our financing of vacation ownership interval sales. As of December 31, 2011, the weighted-average interest rate on vacation ownership mortgages receivable was 14.0%. Vacation ownership mortgage receivables held by us as of December 31, 2011, are scheduled to mature as follows: 
Year Ending December 31,
Amount
2012
$
7

2013
7

2014
8

2015
8

2016
7

Thereafter
13

Total vacation ownership mortgage receivables
50

Less allowance
(8
)
Net vacation ownership mortgages receivable
$
42


Unsecured Financing to Hotel Owners—These financing receivables are primarily made up of individual unsecured loans and other types of financing arrangements provided to hotel owners. These financing receivables have stated maturities and interest rates. The repayment terms vary and may be dependent on the future cash flows of the hotel.

Analysis of Financing Receivables—The following table includes our aged analysis of past due financing receivables by portfolio segment, the gross balance of financing receivables on non-accrual status and the allowance for credit losses and the related investment balance as of December 31, 2011 and 2010, based on impairment method: 
Analysis of Financing Receivables
December 31, 2011
 
Total
Past Due
 
Current
 
Total
Financing
Receivable
 
Receivables on
Non-Accrual
Status
 
Related
Allowance
for Credit
Losses
 
Recorded
Investment >90
Days and
Accruing
Secured financing to hotel owners
$

 
$
319

 
$
319

 
$
41

 
$
(7
)
 
$

Vacation ownership mortgage receivables
3

 
47

 
50

 

 
(8
)
 

Unsecured financing to hotel owners
6

 
85

 
91

 
76

 
(75
)
 

Total
$
9

 
$
451

 
$
460

 
$
117

 
$
(90
)
 
$

Analysis of Financing Receivables
December 31, 2010
 
Total
Past Due
 
Current
 
Total
Financing
Receivable
 
Receivables on
Non-Accrual
Status
 
Related
Allowance
for Credit
Losses
 
Recorded
Investment >90
Days and
Accruing
Secured financing to hotel owners
$

 
$
326

 
$
326

 
$
41

 
$
(4
)
 
$

Vacation ownership mortgage receivables
3

 
52

 
55

 

 
(10
)
 
1

Unsecured financing to hotel owners
13

 
74

 
87

 
69

 
(68
)
 

Total
$
16

 
$
452

 
$
468

 
$
110

 
$
(82
)
 
$
1



Credit Monitoring—On an ongoing basis, we monitor the credit quality of our financing receivables based on payment activity. We determine financing receivables to be past-due based on the contractual terms of each individual financing receivable agreement. We consider receivables non-performing if interest or principal is greater than 90 days past due for secured financing to hotel owners and unsecured financing to hotel owners or 120 days past due for vacation ownership mortgage receivables. The following table summarizes the financing receivables considered to be non-performing as of December 31, 2011 and 2010:
Non-Performing Financing Receivables
 
December 31, 2011
 
December 31, 2010
Secured financing to hotel owners

 

Vacation ownership mortgage receivables

 
1

Unsecured financing to hotel owners
6

 
13


Allowance for Credit Losses—The following table summarizes the activity in our financing receivables reserve for the year ended December 31, 2011:
Allowance for Credit Losses
For the Year Ended December 31, 2011
 
Beginning Balance January 1, 2011
 
Provisions
 
Write-offs
 
Recoveries
 
Ending Balance December 31, 2011
Secured financing to hotel owners
$
4

 
$
4

 
$
(1
)
 
$

 
$
7

Vacation ownership mortgage receivables
10

 
4

 
(6
)
 

 
8

Unsecured financing to hotel owners
68

 
8

 

 
(1
)
 
75

Total
$
82

 
$
16

 
$
(7
)
 
$
(1
)
 
$
90


The following table summarizes the provisions recorded for our financing receivables for the years ended December 31, 2011, 2010, and 2009:
Provisions
 
Years Ended December 31,
 
2011
 
2010
 
2009
Secured financing to hotel owners
4

 
2

 
2

Vacation ownership mortgage receivables
4

 
2

 
5

Unsecured financing to hotel owners
8

 
7

 
16


Our unsecured financing to hotel owners consists primarily of receivables due on future contractual maturity dates. The payments under these contractual agreements are contingent upon future cash flows of the underlying hospitality properties. Although the majority of these payments are not past due, these receivables have been placed on non-accrual status and we have provided allowances for these owner receivables based on estimates of the future cash flows available for payment of these receivables. We consider the provisions on all of our portfolio segments to be adequate based on the economic environment and our assessment of the future collectability of the outstanding loans.
Impaired Loans—During the year ended December 31, 2011, we established an allowance of $4 million for loans to hotel owners that we deemed to be impaired, which was recognized within other income (loss), net in the accompanying consolidated statements of income (loss).
An analysis of impaired loans at December 31, 2011 and 2010, all of which had a related allowance recorded against them, was as follows: 
Impaired Loans
December 31, 2011
 
Gross
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Average
Recorded
Investment
Secured financing to hotel owners
$
41

 
$
40

 
$
(7
)
 
$
40

Unsecured financing to hotel owners
51

 
46

 
(46
)
 
51


Impaired Loans
December 31, 2010
 
Gross
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Average
Recorded
Investment
Secured financing to hotel owners
$
41

 
$
40

 
$
(4
)
 
$
40

Unsecured financing to hotel owners
47

 
43

 
(42
)
 
45


Interest income recognized within other income (loss), net on our consolidated statements of income (loss) on the related loans for the year ended December 31, 2011 and 2010 was as follows:
Interest Income
 
Years Ended December 31,
 
2011
 
2010
Secured financing to hotel owners
$
2

 
$
2

Unsecured financing to hotel owners
1

 



Fair Value—We estimated the fair value of financing receivables to approximate $368 million and $392 million as of December 31, 2011 and December 31, 2010, respectively. We estimated the fair value of financing receivables using discounted cash flow analysis based on current market assumptions for similar types of arrangements. The primary sensitivity in these calculations is based on the selection of appropriate interest and discount rates. Fluctuations in these assumptions will result in different estimates of fair value.
Acquisitions, Dispositions, And Discontinued Operations
Acquisitions, Dispositions, And Discontinued Operations
    ACQUISITIONS, DISPOSITIONS, AND DISCONTINUED OPERATIONS
Acquisitions
LodgeWorks—During 2011, we acquired 20 hotels from LodgeWorks, branding and management rights to an additional four hotels, and other assets for a purchase price of approximately $661 million. The acquired hotels are located throughout the United States operating under the Hotel Sierra, Avia, Hyatt Place, and Hyatt Summerfield Suites brand names (the change of brand identity from Hotel Sierra, Avia and Hyatt Summerfield Suites to other Hyatt brands is underway at this time). Of the four hotels for which we acquired management rights, three joined our portfolio in 2011 and one is expected to join our portfolio in the first half of 2012.
 In conjunction with the acquisition, we entered into a holdback escrow agreement with LodgeWorks. Pursuant to the holdback escrow agreement, we withheld approximately $20 million from the purchase price and placed it into an escrow account, which is classified as restricted cash on our consolidated balance sheet. The funds in the escrow account will be released, less any indemnity claims, to LodgeWorks upon the hotels meeting certain profitability measures per the holdback escrow agreement after a minimum of 18 months following the acquisition close date. Because we expect the hotels to meet the profitability measures, we have recorded a corresponding long-term liability on our consolidated balance sheet. The hotels have through calendar year 2018 to meet the profitability measures set forth in the holdback escrow agreement. If the measures are not met at that time, the funds will be returned to us.
The following table summarizes the estimated fair value of the assets acquired and liabilities assumed in our acquisition of the LodgeWorks properties (in millions):
Property and equipment
 
$
594

Franchise and management intangibles
 
73

Acquired lease rights
 
3

Total assets
 
670

Capital lease obligations
 
7

Other long-term liabilities
 
2

Total liabilities