Convention Center Deal
SAN ANTONIO, Texax (April 25, 2005) -- Hyatt Corp.'s proposal to manage the 1,000-room Convention Center hotel has so angered the owners of the downtown Hyatt Regency San Antonio that they've taken their case to arbitration.
The dispute jeopardizes the 30-year relationship between Hyatt Corp. and SA2000, the company that owns the Hyatt Regency. But SA2000 officials believe a Hyatt Corp.-operated Convention Center hotel would compete with their hotel.
In a series of letters to Hyatt Corp., Mayor Ed Garza and the City Council, SA2000 claims that Hyatt Corp. has breached its contractual and fiduciary obligations to SA2000.
But Hyatt Corp. Executive Vice President Steven R. Goldman said in a letter that the agreement between Hyatt Corp. and the Hyatt Regency doesn't include a geographic restriction and there's no court ruling preventing Hyatt Corp. from managing the hotel.
SA2000 officials wouldn't comment on the arbitration case. Hyatt Corp. did not return calls.
Convention Center hotel developer FaulknerUSA chose Hyatt to run the hotel in February over other hotel operators such as Hilton, Fairmont, Starwood and Loews.
Hilton, which also has a hotel downtown, had the same kind of competition problem that SA2000 is complaining about.
Back in 1999, Hixon Properties Inc. planned to build an Embassy Suites hotel downtown, but was sued by Palacio Del Rio Ltd., which operates a Hilton hotel downtown. Because Hilton and Embassy Suites are related -- and because Palacio Del Rio's contract with Hilton prohibited Hilton from managing other hotels in Bexar County -- Hixon's project was changed to a Hotel Contessa.
Assistant City Manager Chris Brady said Hyatt Corp. assured the city that there is no legal dispute and nothing preventing it from operating within the city. He said FaulknerUSA will make the final decision on the hotel management company.
The new Hyatt hotel, projected to open in 2008, could create 600 new jobs. Besides the Hyatt Regency, Hyatt Corp. is also a partial owner of the Hyatt Regency Hill Country Resort and Spa.
Hospitality consultant Henry Feldman of Martin Feldman Associates said some owners insist on specific geographic boundaries to protect their market when contracting with a hotel franchise.
"The real question for Hyatt and the owner of the existing hotel is to understand what market share the new Convention Center hotel will take away from the existing hotel," Feldman said. "You could argue that the Convention Center hotel is very different from the existing Hyatt in size, and its proximity to the Convention Center gives it a different market."
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|Also See:||FaulknerUSA Exclusively Negotiating with Hyatt Corporation to Operate Proposed 1,000 room Convention Headquarters Hotel in San Antonio / February 2005|
|FaulknerUSA Submits Guaranteed Fixed Price of $227.5 million for Proposed Hyatt Convention Center Hotel in San Antonio / March 2005|