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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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