- 107 - guideline transactions rather than on the entities’ comparative asset holdings. BVS selected certain Hyatt International agreements as guideline transactions and concluded that there were implied royalties of 33 percent in the Aryaduta agreement and 25 percent in the HESA agreements. The 33-percent royalty derives from the potential decrease of revenue that would have occurred had the name change negotiated in January of 1986 been implemented for 1988 and 1989. The name, however, did not change until 1991 when the second Hyatt International hotel opened in Jakarta. Given that the Hyatt International group needed the hotel owners of the Aryaduta to agree to drop the name in order to secure the deal for the newer and potentially more profitable Grand Hyatt, the transaction should not be considered an arm’s-length transaction with neutral parties who are under no compulsion to engage in the transaction. Further complicating the Aryaduta transaction, the management fee rates were negotiated downward to reflect removal of the Hyatt name, and the hotel owners agreed to add rooms to their hotel, thus increasing the revenue base by the time the name change occurred. There were other similar instances where fees, expressed in percentages, were scheduled to decrease when the number of rooms managed increased; e.g., the HESA agreements and agreements with owners of multiple hotels. The BVS reportPage: Previous 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 Next
Last modified: May 25, 2011