The Barceló Torre de Madrid hotel is set inside a 1957 building in the Spanish city.
Hayón, a Madrid native, wanted to show the city's "diversity and richness" through his design, and mixed traditional architectural elements and a jewel-toned colour palette with fantastical sculpture and art pieces.
"I was fully dedicated to the creation of a very special and unique space that would represent a new vision of Spain, a vision far from the traditional aesthetic," said Hayón.
"Aside from being my hometown – for me, Madrid represents Spain's diversity and richness."
When they enter the hotel's lobby, guests are greeted by a giant sculpture of a zebra-striped bear wearing a brass top hat, which is intended as a nod to Madrid's coat of arms.
Many of the furnishings and light fixtures used in the hotel are from Hayon's multiple collaborations with the likes of Fritz Hansen, &Tradition, Gubi, Arflex, Cassina and BD Barcelona.
In the bar, a series of Romanesque arch-shaped windows offer views of the city, while golden glazed ceramics hang from the ceiling.
"Each piece is part of a unified design language," said the hotel. "The curves of the sofa and chairs, the subtly elegant lighting, the sumptuousness of the colours, the wit and humour of the decorative details, across the hotel Hayon's trademark ingenuity is on display at its most effective and appealing heights."
Hayon has placed a series of small sculptures, masks and artworks throughout the public spaces and hallways in the hotel.
Among these is a series of commissioned pieces by photographers Klunderbie, who he asked to create a series of works based on the "richness and diversity" of Spain.
Hayón recently forayed into architecture with a pop-up pavilion at the Stockholm Furniture Fair, where he also revealed he has a large-scale project in the pipeline.