Aug. 8, 2003 - As building additions go, the 33-story tower at the Manchester Grand Hyatt San Diego on the downtown waterfront is a whopper.

The grand opening today of the 750-room, $240 million expansion project is sending reverberations through the San Diego hotel industry. It has catapulted the Hyatt into prominence as not only the biggest hotel in town, but one with indisputable market sway.

The hotel has secured meeting bookings as far ahead as 2010 because of the expansion, said Rob Cameron, the Hyatt's director of sales and marketing.

"That's exactly what you want to see when you open a building like this," Cameron said. "It tells you that this will be a success."

The 1,625-room Hyatt now has the largest number of rooms of any hotel on the California coastline, and, with its 125,000 square feet of meeting space, it has the largest accommodations for corporate meetings in San Diego County.

The potential economic impact also is giant-sized. Hyatt officials estimate that with the addition it will now bring in about $10 million in hotel taxes, or about 9 percent of all Transient Occupancy Taxes expected to be collected citywide this fiscal year.

Its rooms also carry some of the heftiest prices around. Guest rooms are priced from $169 to $349 per night, far higher than the $140 average cost of a downtown hotel room. Suites start at $600, and the new tower's penthouse rents nightly for $4,250.

"For several years, the Hyatt has been the driving force of room rates in the downtown market," said Bob Rauch, director of San Diego State University's Center for Hospitality & Tourism Research. "It sort of sets the standard."

The Hyatt's expansion and the 511-room Omni Hotel that is scheduled to open in spring 2004 next to the downtown baseball park will likely cater to convention business at the expense of some older hotels located blocks away from the Convention Center, said Rauch.

He predicted that waterfront hotels will be fine, but that other downtown hotels might cut room rates to compete, which could hinder their profitability.

"Those hotels could find themselves in a difficult competitive situation," Rauch said.

An additional 2,800 hotel rooms are planned in the downtown area over the next three years. It's unlikely that all of those rooms will be built, however.

"Every time you put in a hotel room, it's going to hurt someone, somewhere," said Paul Denyer, a Rancho Santa Fe hotel investor with Magna Hospitality Group.

"I just don't know how we can absorb all those rooms. I'd hate to see us return to the situation we were in the early 1990s when hotels were going bankrupt."

Other observers think the Hyatt's interest in attracting corporate meetings that have bypassed San Diego for years because of lack of facilities will demand. Nationwide, the meetings business a $100 billion a year industry.

"The people at the Hyatt are re-creating their own market here," said Reint Reinders, president of the San Diego Convention & Visitors Bureau. "They have identified a national corporate incentive and meetings market out there and they are going after it. There are a lot of meetings that haven't come to San Diego because we can't handle them. Now, we can."

The Hyatt, which opened in 1992, was conceived as a convention hotel, situated between the Convention Center and Seaport Village on San Diego Bay. It had always planned a second tower, but the prospect of increasing its special meetings business was part of the rationale to go ahead now, Cameron said.

"Companies are not flying people to Tahiti for meetings these days," he said. "They are looking to staying closer to home. We now have the facilities and the attraction of San Diego being a desirable destination that work very much in our favor. Who wouldn't want to come to San Diego for a corporate meeting?"

About one-third of the Hyatt's business is directly linked to the Convention Center, Cameron said. That may grow with the expansion because of people's desire to stay as close to the convention site as possible.

The 1,301-room San Diego Marriott Hotel & Marina and the Hyatt are the primary headquarters hotels for convention groups. Their meeting facilities are often used for spillover events from large conventions or ancillary events put on by convention groups.

Hyatt said it has added 300 permanent workers to its payroll to accommodate the workload of the new structure.

"This is something we've needed for a while," Reinders said of the expansion. "We now have a full package for conventions, corporate meetings, business and leisure travelers."

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(c) 2003, The San Diego Union-Tribune. Distributed by Knight Ridder/Tribune Business News. MAR,