Hyatt to Build Smaller Hotels in Small Cities

Hyatt Hotels Corp., best known for its towering hotels in many of America’s big cities, Thursday announced an about-face that would thrust the Chicago hotel operator into smaller cities with new, scaled-down hotels.

Hyatt officials said the company plans to spend $750 million during the next five years to build 200- to 300-room hotels in smaller cities and suburbs near large metropolitan areas. Most of the sites are still undecided, but construction of the first smaller-size Hyatt is scheduled to begin before mid-1986.

Hyatt will hardly find an open field, however. Other chains, such as Marriott Corp., have announced similar downsizing programs. Industry analysts contend that most of America’s major cities are already saturated with hotel rooms and that hotel developers and operators have little choice but to head for smaller towns.

“Everyone is looking for some new segment of the market,” said Joseph G. Kordsmeier, a former Hyatt executive who is now a hotel consultant in Carmel Valley, Calif. “Hyatt has to make this move to remain competitive,” he said.

Hyatt, which operates 120 hotels worldwide, has redesigned the new hotels so that construction costs will be held to about $85,000 per room instead of the typical $150,000 per room that it now costs to build most Hyatt Regencys.

“We’ve scaled down the building cost without scaling down Hyatt quality and service,” said Laurence Geller, executive vice president of Hyatt Development Corp., the chain’s development arm.

Hyatt officials said that 40 of these new model hotels will be built in the United States by 1990. Room rates will be considerably less, primarily because land costs are far less in the suburbs than in Hyatt’s more traditional central downtown locations.

“Corporate America is raising hell about these $130-per-day rooms,” Kordsmeier said. “Suddenly, everyone is listening.”