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Business Segments
 3 Months Ended 12 Months Ended
Jun. 30, 2019
Dec. 31, 2018
Segment Reporting [Abstract]    
Business Segments 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 June 30, 2019, this segment included 691 managed hotels and 5,059 franchised hotels consisting of 909,453 total rooms. This segment also earns licensing fees from Hilton Grand Vacations and co-brand credit card arrangements for the exclusive right to use certain Hilton marks and IP, as well as fees for managing properties in our ownership segment.

As of June 30, 2019, the ownership segment included 67 properties totaling 20,928 rooms, comprising 59 hotels that we wholly owned or leased, one hotel owned by a consolidated non-wholly owned entity, two hotels leased by consolidated VIEs and five 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:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Franchise and licensing fees
$
445

 
$
405

 
$
830

 
$
738

Base and other management fees(1)
106

 
101

 
198

 
191

Incentive management fees
58

 
59

 
113

 
114

Management and franchise
609

 
565

 
1,141

 
1,043

Ownership
387

 
392

 
699

 
726

Segment revenues
996

 
957

 
1,840

 
1,769

Amortization of contract acquisition costs
(7
)
 
(7
)
 
(14
)
 
(14
)
Other revenues
26

 
22

 
52

 
45

Direct reimbursements from managed and franchised properties(2)
789

 
730

 
1,564

 
1,429

Indirect reimbursements from managed and franchised properties(2)
691

 
600

 
1,265

 
1,155

Intersegment fees elimination(1)
(11
)
 
(11
)
 
(19
)
 
(19
)
Total revenues
$
2,484

 
$
2,291

 
$
4,688

 
$
4,365

____________
(1) 
Includes management, royalty and IP fees charged to our ownership segment by our management and franchise segment, which were eliminated in our condensed consolidated statements of operations.
(2) 
Included in other revenues from managed and franchised properties in our condensed consolidated statements of operations.

The following table presents operating income for our reportable segments, reconciled to consolidated income before income taxes:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Management and franchise(1)
$
609

 
$
565

 
$
1,141

 
$
1,043

Ownership(1)
42

 
29

 
48

 
35

Segment operating income
651

 
594

 
1,189

 
1,078

Amortization of contract acquisition costs
(7
)
 
(7
)
 
(14
)
 
(14
)
Other revenues, less other expenses
11

 
10

 
17

 
19

Net other revenues (expenses) from managed and franchised properties

22

 
3

 
(12
)
 
(18
)
Depreciation and amortization
(86
)
 
(79
)
 
(170
)
 
(161
)
General and administrative
(113
)
 
(115
)
 
(220
)
 
(219
)
Operating income
478

 
406

 
790

 
685

Interest expense
(101
)
 
(95
)
 
(199
)
 
(178
)
Loss on foreign currency transactions
(3
)
 
(12
)
 
(3
)
 
(1
)
Other non-operating income (loss), net
(12
)
 
(1
)
 
(8
)
 
13

Income before income taxes
$
362

 
$
298

 
$
580

 
$
519

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

The following table presents total assets for our reportable segments, reconciled to consolidated amounts:
 
June 30,
 
December 31,
 
2019
 
2018
 
(in millions)
Management and franchise
$
11,399

 
$
11,362

Ownership
1,731

 
927

Corporate and other
2,010

 
1,706

 
$
15,140

 
$
13,995



The following table presents capital expenditures for property and equipment for our reportable segments, reconciled to consolidated amounts:
 
Six Months Ended
 
June 30,
 
2019
 
2018
 
(in millions)
Ownership
$
25

 
$
19

Corporate and other
21

 
9

 
$
46

 
$
28


 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

____________
(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.