Officer Samson Chan said police ordered the crowd to disperse and gave them ample time to leave, but the workers remained in the street blocking traffic near Union Square.
Police began making arrests at about 6 p.m. in front of the hotel, which is located at 345 Stockton St.
A spokeswoman for Unite Here Local 2, the union representing the workers, said the protesters sat in the street to engage in nonviolent civil disobedience and were prepared to be arrested in order to send a strong message to the Hyatt Corp.
Contract negotiations between the workers and the Chicago-based company have been stalled since 2009.
"We want to signal to Hyatt Corp. that we're very serious and we're not going to go away," union spokeswoman Riddhi Mehta-Neugebauer. "We're willing to make some sacrifices."
More than 1,000 hotel workers marched from the Four Seasons Hotel on Market Street to the Grand Hyatt San Francisco to protest the stalled contract negotiations, Mehta-Neugebauer said.
She said the hotel giant is asking its low-wage earners to contribute a greater share of health care costs without increasing their pay, even though the company is projected to enjoy double-digit increases in revenue.
"The Hyatt Corp. continues to report record profits," she said. "When Hyatt is continuing to grow, it is unfair for them to ask workers to make concessions."
Hotel Council of San Francisco spokesman Sam Singer, of Singer Associates, said the requests were due to skyrocketing health care expenses.
"Health care costs have risen by 300 percent in the past 10 years," he said. "We are asking them to pay some portion of their health care costs to cover that."
Contract negotiations began in August 2009 but have stalled, resulting in two strikes in the past nine months: one at the Grand Hyatt San Francisco in November 2009, and the other at the Embarcadero Center's Hyatt Regency San Francisco in June.
"There has been no progress in terms of negotiations," Mehta-Neugebauer said. "Workers are at a crisis point."
The rally began at 4:15 p.m. and temporarily closed down part of Mason Street.
Officer Chan said the 300 block of Stockton Street was closed off as of 6:40 p.m.
