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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 report
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