April 28, 2004

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Palo Alto Online

Hyatt dump could leave space gap

by Don Kazak

The announced demise of the Hyatt Rickey's Hotel leaves a gaping hole for business conferences and service organizations seeking local accommodations in the heart of Silicon Valley.

Although a longtime destination for business and community groups, hotel officials said the current economy no longer supports facilities like the Hyatt Rickey's -- a stance that remains firm despite the city's hopes to the contrary.

The resulting loss in meeting space, 23,000 square feet to be exact, is expected to put a crimp in some organizations' plans.

Sandra Lonnquist, president and CEO of the Palo Alto Chamber of Commerce, said the announcement comes at a bad time.

"It makes it more difficult for the chamber to find space," she said. "It will impact us and other organizations looking for space ... and we're trying to grow our programs."

The gap will be filled to some degree by the other hotels, but still may leave a shortage.

The Crown Plaza Cabana, located just across El Camino Real from Hyatt Rickey's, is the logical successor. Its largest room can accommodate 800 people and recently hosted the Chamber of Commerce's Tall Tree Awards dinner, an event traditionally held at the Hyatt.

Group and business meetings "are one of our largest sources of income," said Josephine Chung, sales and marketing director for the Crown Plaza Cabana. The hotel has 14,000 square feet of meeting rooms, significantly less than the Hyatt.

Other hotels have much less group meeting capacity.

The Sheraton Hotel has 10,700 square feet of meeting space, while the adjacent and newer Westin Hotel has about 3,000 square feet of meeting space. Its largest room can accommodate only 60-70 people. Both hotels thrive on being near Stanford, on El Camino Real near University Avenue. A new Four Seasons Hotel is planned for East Palo Alto, but isn't expected to fill the same demand as the Hyatt.

"It's not going to be a heavy, group-meeting hotel," said Thomas Callahan, a hotel analyst for PFK Consulting in San Francisco who worked with East Palo Alto on planning the Four Seasons plan.

The downturn in business conventions has been attributed to such factors as the dot-com burst and Sept. 11. Yet much of the demand for local meeting space comes from community groups, not out-of-town visitors. For instance, the Palo Alto Rotary Club has a weekly lunch meeting at the Hyatt.

Hyatt Rickey's will be torn down to make way for about 200 housing units. Earlier renditions of the project included plans for a refurbished conference hotel, yet the housing plans proved to be controversial among residential activists. The plans were tied up for seven years for various reasons, before the Hyatt finally decided to dump the hotel last week.

Hyatt officials said neighborhood opposition and bureaucratic delays did not influence their decision.

Upon hearing the announcement, City Manager Frank Benest -- fearing a potentially major loss to the city's coffers -- said the issue was not finished. Reached Monday, Hyatt representative Mark Solit declined to confirm if the Hyatt decision is final.

Ironically, the Hyatt's announced abandonment of the market comes at a time when business may be looking up. "The first four months of the year have been really good, up at 70 percent (occupancy)" for both the Sheraton and Westin, said Jim Rebosio, general manager of the Sheraton. The occupancy rate for the Peninsula/San Jose hotel market in 2003 was 42.8 percent.

"We are seeing some promising signs of business starting to come back," said John Turner, general manager of the Westin.

Don Kazak can be e-mailed at dkazak@paweekly.com

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