Guests staying at the Innside Manchester hotel on Saturday night were asked to evacuate the building at 1am after a burst water pipe flooded parts of the hotel.
The 208-bedroom, design-led hotel on Manchester's First Street was opened by Melia hotels in June.
All guests had to be evacuated when the pipe burst and had to wait outside the hotel in the early hours before being found alternative accommodation.
Shelley Abbott, who was staying at the hotel, told Manchester Evening News: "They kept saying they were trying to resolve the situation but it took them two hours to tell us we wouldn't be allowed back to our rooms, but then didn't say what our options were or what hotel we would be moved to.
"The police turned up at one point and one woman had a panic attack. They gave out cups of tea and coffee but the communication was just shocking."
General manager Adam Munday said it had been a significant water leak.
"All guests were evacuated in accordance with safety policies and the emergency services attended the hotel. All guests were found alternative rooms in Manchester," he said.
"We offer our sincere apologies to all those affected by the leak. We are working to establish exactly what happened and will be in touch with guests directly as soon as we know more."
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