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international hotel chains, as adjusted to eliminate inclusion of
advertising or reservations fees. Mr. Burt located the rates he
thought to be comparable in a 1984 publication. Franchise rates
were expressed as a percentage of room revenues; however,
available data suggested that room revenues for international
hotels were equal to half of total hotel revenues. The other
half was attributable to food and beverage revenues.
Mr. Burt’s second report (Burt report two), dated November
11, 1989, covered the 1982 through 1984 tax years. Mr. Burt had
visited hotels in Hong Kong and Singapore during November 1988.
He observed that day-to-day operations were conducted under the
supervision of the general manager and staff, who made reports to
area and/or HIC personnel, but that “every Hyatt [sic] property
uses operating policies and procedures originally developed, or
modified and adapted, and then implemented by the Chicago-based
corporate parent and its staff.” Mr. Burt observed: “to the
extent management is exercised over hotel operations by HHK
and/or HS, it usually takes the form of ensuring correct
application of, or adherence to, HIC overall corporate philosophy
rather than direct management of each hotel’s day-to-day
operations.” Mr. Burt concluded that each Asian Hyatt
International hotel be allowed “remuneration equivalent to that
received by an independent (rather than chain) hotel management
company”, which he suggested was $62,000 per hotel per year, due
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