Answer: There is not much for boys that age in Capitola. Its core is a small village with boutique shopping. The hotel itself is on busy 41st Avenue, not very near the village. The mall you speak of is considering going out of business and turning into something else. It has a couple of semi-fast food restaurants. It is not something the boys could walk to from the Fairfield Inn, or has anything of interest to them, IMO.
The Holiday Inn Express in Santa Cruz is not near anything for the boys except Denny's :~). It is on Ocean Street as you come into the town. The Paradox is a new remake of a Holiday Inn and it screams 'businessmen'. It is also on Ocean Avenue, but further down and just across San Lorenzo Park (about two or three blocks) from the main street of town, Pacific Avenue, with lots of restaurants of various kinds, two movie theaters, ice cream parlors, a cookie company, pizza, etc.
Have you looked into the Dream Inn? This is of the same quality as, or better than, the others but near the Wharf and a block from the Boardwalk, an old fashioned historic amusement park with no admission charge.
The hotel has a pool and faces a beach. Surfing lessons happen there. There are volleyball nets set up on part of the beach near the Boardwalk. During the summer there are free movies and concerts and aerial acts at various times on the main beach there. Of your choices, I really think this is the best. It is not inexpensive, but I think it might be in the same ballpark as the Paradox. The boys *could* walk to Pacific Avenue from here, but it is about 8 or 9 blocks to the main area .
The Hyatt is new and I know nothing about it except its location. It is on the west side and not really convenient to activities for the boys.
I am going to give you a link to a traveler article on Santa Cruz. Trip Advisor has stopped supporting these, so there is a disclaimer that the information may be outdated. The information in this article is not outdated. I will be re-writing it to put in my own files.
https://www.tripadvisor.com/Travel-g33048-c133677/Santa-Cruz:California:Santa.Cruz.Sights.And.Activities.html
Good luck and let me know if I can be of help....
Edit. The Paradox is not in a "shady area of town". Yes, homeless people do hang out in San Lorenzo Park, but there is no reason for the boys to go there. If you should pick that hotel they can walk on city streets, quite safely, to get to Pacific Avenue...