H Group Holding, Inc. and Subsidiaries - Page 40

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          and marketing.  Preopening activities were more important and                
          more elaborate for new hotels than for takeovers, although                   
          takeovers did require some preopening preparation.  For a new                
          hotel, a general manager was generally designated and assigned 12            
          to 18 months prior to opening.                                               
               The owner was responsible for paying preopening expenses,               
          including the cost of training.  After the opening, the owner was            
          responsible for paying management fees and hotel operating                   
          expenses.  The Hyatt International group’s management fees                   
          generally were expressed as a percentage of revenue and/or gross             
          operating profits.  To avoid certain countries’ local withholding            
          taxes, the management fees were characterized or described in a              
          few contracts as royalties.  Each hotel’s revenues, expenses                 
          (including payroll), and assets were carried on its own books and            
          were not recorded by or shown in the books of any Hyatt                      
          International entity.  The Hyatt International group, however,               
          was responsible for managing the employees and the assets and for            
          generating each hotel’s revenues.                                            
               Hyatt International’s ability to retain management contracts            
          was dependent upon two factors:  (1) Satisfying hotel owners and             
          (2) generating sufficient revenue to ensure a successful                     
          arrangement for both the owners and the Hyatt International                  
          group.  For both of these factors, the hotel general manager                 
          played a significant role.  Occasionally, management contracts or            

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Last modified: May 25, 2011