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Another variable here is that HIC acted as both management
entity and parent (individually), so that some of its expenses
were related to its activity as a parent company. In addition,
HIC incurred expenses with respect to its involvement with hotels
in Brussels and Nice. Respondent’s experts generally did not
recognize the contributions made by HHK and HS, because their
efforts were not evidenced by expenditures recorded on those
management subsidiaries’ books. On those occasions where the
efforts of HHK and HS personnel were recognized, respondent’s
experts considered them to be performed on HIC’s behalf. We now
consider, in particular, whether any of respondent’s
determinations were arbitrary, capricious, or unreasonable.
1. Allocations Between HIC and Hyatt Domestic
HIC and Hyatt Domestic entered into a 1974 agreement for the
purpose of sharing the services of each other’s sales offices.
HIC billed Hyatt Domestic for a contractually agreed level of
support from the Hyatt International sales offices. Hyatt
Domestic included these costs as part of its chain expenses and
billed each of its hotels and those of the Hyatt International
group for a share of the overall chain expenses. The chain
allocation formula was based on the number of guest rooms. In
accordance with the 1974 chain services sharing agreement, Hyatt
International hotels paid either 50, 75, or 100 percent of a full
chain allocation depending on the hotel’s geographical location.
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