While hotels in America’s other famous cities, such as New York and Los Angeles, managed to recover from the pandemic and fill rooms at about the rate they could in 2019, one city is facing a severe decline. In fact, the situation is so bad that a new report claims some of them are just giving up and scrambling to get out of the city.
That city would be San Francisco, where the Wall Street Journal reports that crime and quality of life issues have kept people and organizations that otherwise would be hosting events in the city from doing so, which in turn has led to a massive crash in hotel room bookings. Further, remote work and a growing acceptance of Zoom and other video conference software have limited the number of people that need to travel to the city for work. The effects of those changes are so bad that the WSJ reports that “Revenue per available room [in San Francisco] was nearly 23% lower in April compared with the same month in 2019.”
The result of those crashing sales numbers? Hotel owners are defaulting on loans or attempting to sell off their buildings as loans come due. For example, Park Hotels & Resorts just announced that it has stopped making the loan payments due on debt secured by two hotels with nearly 3,000 combined rooms in the heart of San Francisco’s once popular shopping district, the Hilton San Francisco Union Square and Parc 55 San Francisco.
Thomas J. Baltimore, Jr., Chairman and Chief Executive Officer of Park Hotels & Resorts, announced that in a press release on June 5, saying, in part, “This past week we made the very difficult, but necessary decision to stop debt service payments on our San Francisco CMBS loan. After much thought and consideration, we believe it is in the best interest for Park’s stockholders to materially reduce our current exposure to the San Francisco market.”
Continuing, Baltimore added that a San Fransisco recovery looks unlikely thanks to, among other things, “concerns over street condition.” In his words: “Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges – both old and new: record high office vacancy; concerns over street conditions; lower return to office than peer cities; and a weaker than expected citywide convention calendar through 2027 that will negatively impact business and leisure demand and will likely significantly reduce compression in the city for the foreseeable future.”
And that massive backout of San Francisco is far from the only one. As the WSJ reported, Huntington Hotel’s owners sold it to avoid foreclosure, Yotel San Francisco sold in a foreclosure sale, and Club Quarters San Francisco also appears to be headed toward foreclosure, with another 20 hotels in the city facing loans due within a few years that they likely won’t be able to repay.
All the city would have to do to recover and keep its hotel sector intact is clean up the streets by taking its crime and homeless problems more seriously. Unfortunately for hoteliers, those who need to travel to the city, and those who live in it and have to deal daily with the horrid conditions present in it, that looks unlikely to occur as the state drifts ever more to the left.
"*" indicates required fields