Sep. 12, 2003 - There is room at the inn these days -- a little too much room, given the lagging demand for hotels among tourists and business travelers.

Today's abrupt closing of the Hyatt Orlando near Walt Disney World and the pending shutdown of the Four Points Sheraton in downtown Orlando -- with more than 1,100 rooms between them -- underscore the tough times still faced by the area's hospitality industry, particularly older city-center hotels and aging properties on the fringe of the tourist area.

"I'm not surprised," said Dave Theophilus, a longtime Orlando hotel consultant. "Obsolescence is the key here with these two hotels."

Despite getting a multimillion-dollar makeover a few years ago, the Sheraton -- formerly the Harley Hotel -- could not compete with newer hotels in downtown Orlando, Theophilus said. Similarly, the Hyatt Orlando, a 919-room, two-story motel built in the 1970s, has been undercut by nearby Disney hotels with rock-bottom pricing.

Disney, for example, is preparing to open its massive Pop Century Resort in December with room rates starting at $77 a night. The new complex will boost Disney's hotel stock to nearly 25,000 rooms, solidifying its position as Central Florida's largest hotel operator.

"Those numbers really tell the story -- $77 a night and 25,000 rooms. It's hard to compete with Disney," Theophilus said.

The downtown Sheraton was also a victim of growing competition as well as the ongoing business-travel slump, which has hurt urban hotels nationwide. "That segment has been the slowest to come back," Theophilus said.

Hotels in the "central Orlando" submarket, which includes downtown, have seen their combined occupancy rate plunge another 3.9 percent this year to an anemic 56.5 percent -- well below the overall market's average of 65.7 percent. The Sheraton was particularly hard hit.

"They saw a lot of red ink, I'm sure," said Orlando-based hotelier Richard Kessler, owner of the Westin Grand Bohemian on south Orange Avenue.

However, Kessler said he doesn't think other downtown hotels are in danger of folding, and the closing of the Sheraton will take more than 240 rooms out of the city center's inventory, making it somewhat easier on the remaining hotels.

Metropolitan Orlando has about 115,000 rooms, second only to Las Vegas.

In addition to the 2,880-room Pop Century Resort, which is in the value-priced category, several large, luxury hotels have recently opened their doors, including the 1,000-room JW Marriott and 500-room Ritz Carlton at the Grande Lakes Resort in south Orlando.

The Sheraton's owners reportedly have a sale in the works to an Atlanta buyer with plans to convert the property into an apartment complex, said Daisy Staniszkis, assistant director of Orlando's Downtown Development Board.

"More people living downtown -- that's really a plus, and these would be more affordable units," Staniszkis said.

The Sheraton's more than 100 employees were notified last week that their last day of work would be in early November.

The Hyatt's 330 employees did not learn until Thursday that the Osceola County hotel would shut its doors today.

The 30-year-old complex has been on shaky ground for some time. It filed for bankruptcy court protection in April 2002, and the franchise owners could not meet operating shortfalls after interim financing fell through, according to Chicago-based Hyatt Hotels Corp.

Representatives of the lender recently notified Hyatt and the franchise owner, Orlando Hyatt Hotel Associates Ltd., that it was withdrawing previously committed financing, which forced the property to close with little warning, Hyatt representatives said.

General Manager Mel Bettcher said he learned of the closing only Wednesday afternoon and had to scramble to find other accommodations for about 350 guests.

"It's hard to compete with a brand-new facility," Bettcher said.

Henriola Allen, 45, a switchboard operator at the hotel, was one of the workers told of the closing Thursday. Allen said she wasn't totally surprised. "We knew there was something going on."

Allen has worked at the Hyatt since she was 15 and was about to celebrate her 30th anniversary with the hotel in December.

"It's like a family. I'm really going to miss working here," she said.

"It's a huge loss for our community," said Jim Murphy, chairman of the Osceola County Tourist Development Council. The hotel paid over $590,000 in property taxes last year.

Many of the Hyatt workers will probably have trouble finding employment in the industry because of the ongoing soft travel market, said Abraham Pizam, dean of the University of Central Florida's Rosen School of Hospitality Management.

But Pizam and other industry experts said the closings are part of a natural cycle in which older properties must occasionally concede defeat, especially during economic slumps. "Let's face it, newer hotels are more attractive," Pizam said.

More hotels in Central Florida will likely close before the tide turns, said Domien Takx, chairman of the Orlando-Kissimmee Hotel & Motel Association.

"I'm afraid more will go under," Takx said, particularly in the U.S. Highway 192 corridor, where the Hyatt Orlando is located. "They are struggling. I'm just surprised it's taken this long," Takx said.

In the west Kissimmee submarket, where the Hyatt is located, hotels have limped along with occupancy rates below 60 percent this year, down 4.5 percent from a year ago. Daily room rates have averaged less than $52, off nearly 5 percent from last year -- and below the $55 break-even point that most hotels need to stay afloat.

Travelers trying to make a reservation for the Hyatt Orlando online on Thursday got a message directing them to Hyatt's other Orlando-area properties, including the Hyatt Regency Orlando International Airport and the Hyatt Regency Grand Cypress Resort.

A high school work-study program that met at the hotel was scrambling to find another home. Two teachers and about 35 students, mostly from Osceola High School, were participating in the Hyatt Works Academy, Principal Chuck Paradiso said. The school picked up its computers and desks and hauled them back to the main campus, where classes will meet until administrators can find another hotel, Paradiso said.

Students attended classes at the Hyatt Orlando and were trained in a variety of jobs, including front desk, personnel and landscaping.

By Jerry W. Jackson and Susan Jacobson. Rebecca Panoff of the Sentinel staff contributed to this report.

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