CORRECTED - UPDATE 4-Hyatt stock rises 12 pct in debut

(Corrects to show that the shares rose 12 pct in first paragraph and that $1.06 billion is Hyatt's market cap after first day of trading)

* Hyatt shares up 12 pct in NYSE debut

* Strong balance sheet, industry outlook spur shares

* Second-largest IPO on NYSE this year

* Based on EBITDA valuation, Hyatt trading at discount (Recasts with closing price, adds background on Hilton, detail about next week's IPOs, new analyst quotes)

By Deepa Seetharaman

NEW YORK, Nov 5 (Reuters) - Hyatt Hotels Corp (H.N) shares rose 12 percent in their debut on Thursday as investors snapped up the company's shares enticed by its rich store of cash and robust recovery prospects for the hotel industry.

Chicago-based Hyatt's shares rose to $28 on the New York Stock Exchange. It priced at $25 on Wednesday, within the expected range.

Hyatt's initial public offering is the second-largest on the NYSE this year after Banco Santander (BSBR.N). Ancestry.com Inc (ACOM.O) also went public on the Nasdaq and its shares closed more than 5 percent higher to $14.20. [ID:nN0589649]

"Finally we had two deals that were a lot better quality than what we had been seeing in the last several weeks," said Scott Sweet, a senior managing partner at advisory firm IPO Boutique. "It gives quality deals (next week) momentum."

Discount retailer Dollar General and youth clothing chain rue21 Inc are slated to go public next week.

Little more than half of Hyatt's shares exchanged hands Thursday, Sweet said. Typically 80 percent of shares or more trade in a stock's debut. Hyatt offered 38 million shares.

"Goldman did a good job locking these shares up and putting it in good hands that are likely to hold," Sweet said. "That would account for the reasoning behind why this stock has continued to advance from $27 to $28."

Proceeds from the sale of Class-A shares will go straight to Pritzker family, which controls the company. The company's underwriters, led by Goldman Sachs Group Inc (GS.N), will have one month to exercise an option to buy more shares. If so, that fresh capital will go straight to Hyatt.

The company's market capitalization after its first day of trading was $1.06 billion.

FIVE TIMES THE CASH

Hyatt's IPO comes just as lodging stocks are on the mend. The Dow Jones U.S. Hotels index has shot up 55 percent this year, as of Thursday, on signs of an economic recovery.

The debut may also be good news for privately-held Hilton Worldwide, should owner Blackstone Group (BX.N) decide to try and exit it in the future. Blackstone is in talks over reducing debt at the chain, according to a source. [ID:nN28299183]

Sluggish corporate demand has forced hotels to lower room rates and next year is unlikely to bring much reprieve. Both Marriott International Inc (MAR.N) and Starwood Hotels & Resorts (HOT.N), have forecast a lackluster 2010.

But analysts expect the industry to rebound sharply in the subsequent three years as the supply of new rooms slows and business demand recovers.

"People are assuming that there's going to be significant recovery in the outer years," said John Arabia, a lodging analyst with Green Street Advisors. "That's the only way we can make sense of these share prices."

This outlook coupled with Hyatt's strong cash position drove the company's shares in its debut, analysts said. Chicago-based Hyatt has $1.3 billion in cash, more than five times the combined cash of Marriott and Starwood.

Arabia noted that Hyatt's shares traded at a discount based on its valuation, due in part to concerns over the Pritzkers' control over the company. The family owns the bulk of Hyatt's Class B stock, which is worth 10 votes per share. Class A shares are worth one vote each.

Separately, several dozen strikers from Unite Here Local 2 marched in front of a Grand Hyatt in San Francisco on Thursday, marking the first day of a three-day strike focused on healthcare. The hotel is owned and operated by Hyatt.

In a statement, the president of Local 2, Mike Casey, said: "It's intended to send a clear signal to this corporation that they cannot use a temporary downturn to permanently drive down workers' living standards." (Reporting by Deepa Seetharaman; additional reporting by Peter Henderson in San Francisco; editing by John Wallace, Andre Grenon and Bernard Orr)