Business Segments

We are a hospitality company with operations organized in two distinct operating segments: (i) management and franchise and (ii) ownership. These segments are managed and reported separately because of their distinct economic characteristics.

The management and franchise segment includes all of the hotels we manage for third-party owners, as well as all franchised hotels operated or managed by someone other than us. As of December 31, 2018, this segment included 689 managed hotels and 4,874 franchised hotels consisting of 882,873 total rooms. This segment also earns licensing fees from HGV and co-brand credit card arrangements, as well as fees for managing properties in our ownership segment.

As of December 31, 2018, the ownership segment included 71 properties totaling 21,720 rooms, comprising 62 hotels that we wholly owned or leased, one hotel owned by a consolidated non-wholly owned entity, two hotels leased by consolidated VIEs and six hotels owned or leased by unconsolidated affiliates.

The performance of our operating segments is evaluated primarily on operating income, without allocating other revenues and expenses or general and administrative expenses.

The following table presents revenues for our reportable segments, reconciled to consolidated amounts:



	Year Ended December 31,
	2018			2017			2016
	(in millions)
Franchise and licensing fees	$	1,537		$	1,326		$	1,095
Base and other management fees⁽¹⁾	385			379			284
Incentive management fees	235			222			142
Management and franchise	2,157			1,927			1,521
Ownership	1,484			1,432			1,434
Segment revenues	3,641			3,359			2,955
Amortization of contract acquisition costs	(27		)	(17		)	(16		)
Other revenues	98			105			82
Direct reimbursements from managed and franchised properties⁽²⁾	2,881			2,572			1,644
Indirect reimbursements from managed and franchised properties⁽²⁾	2,357			2,155			1,953
Intersegment fees elimination⁽¹⁾	(44		)	(43		)	(42		)
Total revenues	$	8,906		$	8,131		$	6,576

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⁽¹⁾	Includes management, royalty and IP fees charged to our ownership segment by our management and franchise segment, which were eliminated in our consolidated statements of operations.


⁽²⁾	Included in other revenues from managed and franchised properties in our consolidated statements of operations.

The following table presents operating income for our reportable segments, reconciled to consolidated income from continuing operations before income taxes:



	Year Ended December 31,
	2018			2017			2016
	(in millions)
Management and franchise⁽¹⁾	$	2,157		$	1,927		$	1,521
Ownership⁽¹⁾	108			120			113
Segment operating income	2,265			2,047			1,634
Amortization of contract acquisition costs	(27		)	(17		)	(16		)
Other revenues, less other expenses	47			49			16
Net other expenses from managed and franchised properties	(85		)	(172		)	(12		)
Depreciation and amortization	(325		)	(336		)	(353		)
General and administrative	(443		)	(439		)	(409		)
Gain on sales of assets, net	—			—			8
Operating income	1,432			1,132			868
Interest expense	(371		)	(351		)	(334		)
Gain (loss) on foreign currency transactions	(11		)	3			(16		)
Loss on debt extinguishment	—			(60		)	—
Other non-operating income, net	28			29			22
Income from continuing operations before income taxes	$	1,078		$	753		$	540

____________


⁽¹⁾	Includes management, royalty and IP fees charged to our ownership segment by our management and franchise segment, which were eliminated in our consolidated statements of operations.

The following table presents total assets for our reportable segments, reconciled to consolidated amounts:



	December 31,
	2018		2017
	(in millions)
Management and franchise	$	11,362	$	11,505
Ownership	927		964
Corporate and other	1,706		1,759
	$	13,995	$	14,228

The following table presents capital expenditures for property and equipment for our reportable segments, reconciled to consolidated capital expenditures of continuing operations:



	Year Ended December 31,
	2018		2017		2016
	(in millions)
Ownership	$	42	$	32	$	45
Corporate and other	30		26		17
	$	72	$	58	$	62

Total revenues by country were as follows:



	Year Ended December 31,
	2018		2017		2016
	(in millions)
U.S.	$	6,848	$	6,046	$	4,524
United Kingdom	545		544		942
All other	1,513		1,541		1,110
	$	8,906	$	8,131	$	6,576

Other than the countries included above, there were no countries that individually represented more than 10 percent of total revenues for the years ended December 31, 2018, 2017 and 2016.

Property and equipment, net by country was as follows:



	December 31,
	2018		2017
	(in millions)
U.S.	$	109	$	105
Japan	106		94
United Kingdom	75		82
Germany	40		36
All other	37		36
	$	367	$	353

Other than the countries included above, there were no countries that individually represented more than 10 percent of total property and equipment, net as of December 31, 2018 and 2017.