Princess Shipped Out : Hyatt Will Run Garden Grove’s Alicante Hotel

The Alicante Princess, the $51-million, towering pink hotel in Garden Grove, has tossed out the hotel’s operator, Princess Cruises, and brought in Hyatt Corp. in an apparent effort to boost sagging profits and bring in more guests.

Starting Aug. 15, Century City-based Princess Cruises Resorts & Hotels--a relative neophyte in the hotel business--will be out and Hyatt will begin operating the renamed Hyatt Regency Alicante, Chicago-based Hyatt Corp. said Wednesday.

The management switch follows a search of several months by the hotel’s owners--Gateway Properties and a general partner, dentist Robert F. Beauchamp--to choose a hotel operator able to turn around what industry sources unanimously describe as poor returns from the 17-story, 400-room Alicante.

With the new arrangement, the Alicante qualifies for a $2-million bail-out loan from the Garden Grove Redevelopment Agency, plus possibly $250,000 to refurbish parts of the 2-year-old hotel. In return, the agency will receive a 5% interest in the hotel, Mayor Pro Tem Milt Krieger said.

For Garden Grove, Hyatt could spell relief from a hotel that financially has become a towering pink albatross since its opening in May, 1986. Garden Grove has already plowed an estimated $8 million into the hotel and “if we did nothing, apparently it could have been destructive,” Krieger said in an interview Wednesday.

Princess officials would not discuss any of the apparent problems at the hotel, but spokesman Hugh Scrimgeour said the break was “a mutual decision. . . . Both (Gateway and Princess) decided that it was in their best long-term interest to change the management arrangement.”

In late June, Beauchamp and Gateway began feuding with Princess over the hotel’s operation, and the owners tried to end the management contract through arbitration.

Garden Grove’s redevelopment agency stepped in, offering to lend $2 million, provided that one of four successful hoteliers took over the Alicante’s operation: Hyatt, Hilton, Sheraton or Ramada.

“They’re not really making it there,” Krieger said. “With one of those, we have a better calculated risk of success.”

Krieger said that Garden Grove will share any profits from the Alicante for 10 years. If the hotel is sold before then, the city will be repaid its loan, plus 10% interest.

The move came as no surprise to industry observers and competitors, who have long predicted that operating the Alicante would not be all smooth sailing for Princess Cruises.

The hotel operating division is a subsidiary of London-based Peninsular & Oriental Steam Navigation Co. and manages just two other hotels.

“There’s only so much business to go around,” said David Brudney, a Palos Verdes lodging consultant. “Hotel marketing is different from . . . cruises. I don’t think Princess ever had the resources.”

Although the Alicante is in a heavily trafficked area, it falls outside the bounds of Orange County’s traditional hotel markets. Disneyland and the Anaheim Convention Center are not within walking distance and John Wayne Airport is 15 miles away.

The lack of name recognition and poor location translated, competitors estimate, to a bleak occupancy rate last year in the low 50% range. Hyatt officials place that number at 65% to 70%, and Beauchamp Realty Vice President Tim Wagner said occupancy has been “in the mid-70s.”

Whatever occupancy has been, Hyatt is wagering that its broad reservation system and high name recognition will appeal to tourists and, more important, the business, group and convention markets.

“Most of their business has been tour and travel and not much commercial and meetings,” said Jim Howard, senior vice president of Hyatt’s western division.

One of the first things the new operator is doing is bringing in its own management. Ross Justice, the current general manager, will be replaced next week by Jerry Lewin, manager of the Hyatt Regency Dallas.

After that, Hyatt is looking into perking up the Alicante’s appearance with steps as simple as brightening up the lobby--they hope with the help of $250,000 from Garden Grove.

For Hyatt--the only hotelier without a big presence in Orange County--the Alicante is the first step in a new effort to build a bigger presence here. In February, Hyatt opened a regional office in Irvine to target sites in the Orange County market.

Jay Maxwell, senior vice president for Hyatt Development Corp., said the company could announce “two or three” more Orange County hotels within the next years and “could easily have four or five hotels” here by 1993.

Hyatt could build new hotels or take over existing ones, Maxwell said, eventually owning portions of some and operating others.

Hyatt now operates just one hotel in the county--the 25-year-old, 300-room Hyatt in Anaheim. Howard said that hotel will continue operating and may be refurbished.

“Hyatt has a very good networking system with a good national sales office system that the Princess organization didn’t have,” said Harold Quiesser, marketing director at the Anaheim Marriott, an area competitor.

“It’s a big plus for the Alicante.”