The Hadid Investment Group began construction this week on a $20 million, 12-story hotel in downtown Rockville, signaling the start of the city's long-awaited plan to give the Montgomery County seat a dramatic new face.

The 250-room hotel, which represents the first phase of Rockville's $100 million downtown redevelopment project, is considered by city officials to be the cornerstone of their ambitious plan to breathe new life into the dormant business district.

At the same time, officials are hoping the project will erase the area's negative image, created by the failure of the nearby Rockville Mall and an unsuccessful urban renewal project in the late 1960s.

"It's a step in the right direction of finally revitalizing downtown Rockville," said Douglas F. Horne, the city's economic and community development director. "The hotel will be an intricate piece of property that will provide activity not only during the day, but in the evening, too."

The hotel, expected to be completed in the summer of 1987, is being developed by the Rosslyn-based Hadid Investment Group on a 2.3-acre tract at North Washington Street and Middle Lane. It will be operated by Quality Inns International, one of the country's largest lodging chains.

The hotel, to be named Rockville Town Center Quality Inn, will feature a restaurant and cocktail lounge, enclosed swimming pool, health center and several conference rooms. More than 8,000 square feet of office space will be available off the hotel's main lobby.

David T. Haresign, an architect with Clark Tribble Harris & Li, the hotel's designers, said the facade "will be reminiscent to some of the European hotels that incorporate punched windows, awnings, French balconies at the upper levels, dormers and pitched roofs."

Along with the hotel, the downtown redevelopment project, based on a design by Washington architect Arthur Cotton Moore, calls for Hadid to develop an adjacent four-story building that will contain nearly 100,000 square feet of office and retail space.

Construction of the office-retail complex is expected to start next spring and be completed a year later, city officials said.

The hotel and office-retail complex are expected to complement the reconstruction of the defunct Rockville Mall, which is being rebuilt by a Bethesda developer into a major office-and-retail center with an entrance into the new Rockville Metro station.

City officials first proposed the hotel and office complex in 1982, but until now the hotel has emerged as one of the more elusive parts of the plan.

For nearly three years, the project has been plagued with delays, most of them resulting from the original partnership's failure to show proof of adequate financial backing for the hotel.

Frustrated by repeated delays, the city council voted last year to kill the 1982 development agreement with the partnership, New Rockville Town Center Partners, citing its failure to submit proof of adequate financing.

The city later negotiated an amended agreement with the group that called for construction of the hotel to begin by last June. But that deadline was extended to this fall to permit a partnership reorganization allowing Hadid to acquire a controlling interest in the project.