Fair Value Measurements

12 Months Ended

Dec. 31, 2022

The fair values of certain financial instruments and the hierarchy level we used to estimate the fair values are shown below:


	December 31, 2022
			Hierarchy Level
	Carrying Value(1)		Level 1		Level 2		Level 3
	(in millions)
Assets:
Cash equivalents	$	338	$	—	$	338	$	—
Interest rate swap(2)	108		—		108		—
Liabilities:
Long-term debt(3)	8,619		5,292		—		2,616


	December 31, 2021
			Hierarchy Level
	Carrying Value(1)		Level 1		Level 2		Level 3
	(in millions)
Assets:
Cash equivalents	$	622	$	—	$	622	$	—
Liabilities:
Long-term debt(3)	8,619		6,180		—		2,599
Interest rate swaps(2)	41		—		41		—

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(1)The fair values of financial instruments not included in these tables are estimated to be equal to their carrying values.

(2)Interest rate swaps are included in other non-current assets or other long-term liabilities in our consolidated balance sheet depending on their value to us as of the balance sheet date. During the year ended December 31, 2022, one of the interest rate swaps that was outstanding as of December 31, 2021 matured. The remaining interest rate swap outstanding as of December 31, 2022 will mature in March 2026.

(3)The carrying value and fair values exclude the deduction for unamortized deferred financing costs and any applicable discounts, as well as all finance lease liabilities and other debt of consolidated VIEs; refer to Note 8: Debt for additional information.

We measure our interest rate swaps at fair value, which was determined using a discounted cash flow analysis that reflects the contractual terms of the interest rate swaps, including the period to maturity, and uses observable market-based inputs of similar instruments, including interest rate curves, as applicable.

Our nonfinancial assets that were measured at fair value on a non-recurring basis during the year ended December 31, 2020, and for which we recorded impairment losses as a result of the COVID-19 pandemic, were primarily related to certain hotel properties under operating and finance leases and goodwill, all of which were part of our ownership reporting unit. See Note 5: "Goodwill and Intangible Assets," Note 6: "Property and Equipment" and Note 11: "Leases" for additional information on these impairment losses.

For the quantitative analysis of goodwill that was performed during the year ended December 31, 2020, we estimated the fair value of the ownership reporting unit using discounted cash flow analyses and significant level 3 unobservable inputs, which included an estimate of the impact of the COVID-19 pandemic on the reporting unit's expected future cash flows, a stabilized growth rate after recovery and the present value of the reporting unit's terminal value. The expected future cash flows were discounted using a discount rate that reflected the market rate of return. As a result of the non-recurring fair value measurement, we fully impaired the goodwill attributable to our ownership reporting unit, recognizing impairment losses of $104 million in our consolidated statement of operations for the year ended December 31, 2020.

During the year ended December 31, 2020, we estimated the fair value of assets related to certain hotel properties under operating and finance leases, including related lease intangible assets, operating and finance lease ROU assets and property and equipment, using discounted cash flow analyses and significant level 3 unobservable inputs, which included an estimate of the impact of the COVID-19 pandemic on each leased property based on the expected recovery term, stabilized growth rates after recovery and discount rates reflecting the risk profile of the underlying cash flows and the individual markets where the assets are located. As a result of these non-recurring fair value measurements, we recognized impairment losses on these assets of $139 million in our consolidated statement of operations during the year ended December 31, 2020.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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