Convention bookers choose cities like Las Vegas for events over San Francisco due to the crime and homelessness that are rife in the City by the Bay.
That’s one of the main reasons why the city’s lodging industry continues to struggle in the wake of the Covid-19 pandemic with revenue per available room nearly 23 percent lower than in 2019, reports the Wall Street Journal.
The Journal’s report notes that the Yotel San Francisco hotel was sold at a foreclosure auction, while the owners of the Huntington Hotel also sold, despite the foreclosure. Club Quarters San Francisco could also head in the same direction as it has defaulted on its loan since 2020.
Company data Co-star said more than 20 hotels in San Francisco have loans through 2025. The hotels or the exact amount they owe has not been made public.
Tom Baltimore, the chairman and CEO of Park Hotels and Resorts, told WSJ that San Francisco’s “path to recovery remains clouded and elongated by major challenges — both old and new.”
That comes amid a retail crisis that worsened in May when Nordstrom announced the impending closures of its flagship store and Nordstrom Rack.
In a statement, the company made a diplomatic reference to the “drastically” changed “dynamics” of downtown San Francisco, “affecting customer foot traffic…and our ability to operate successfully.”
Hotel consultancy AVE CEO Michelle Russo told the Journal that security concerns have made San Francisco a no-go area for convention organizers. Russo said the impact of a lack of convention will be felt for some time, as most organizers book a space years in advance.
For this reason, “hotels today aren’t worth as much as they were in San Francisco before Covid,” Russo said.
Park Hotels and Resorts is no longer paying back a loan that was guaranteed by the Hilton San Francisco Union Square and Parc 55 San Francisco. The two together have 3,000 rooms.
Top retailers such as Nordstrom, H&M and Gap have pulled out of the city in recent months, with companies blaming concerns over staff and customer safety in the “deteriorating” downtown area, where drug use and crime are rife.
The situation is exacerbated by data showing visitor numbers in the struggling center of the city are just 32 percent of pre-Covid levels. According to official forecasts, the public transport network is also on the verge of catastrophic failure as passenger numbers remain equally poor.
Leaders estimate the situation will contribute to a budget deficit of $1.3 billion over five years. The drop in property tax revenues alone could cost nearly $200 million a year, according to a worst-case scenario prepared by the city’s chief accountant.
DailyMail.com has repeatedly highlighted these grim hotspots and their devastating impact on communities.
Compared to 2019, the number of overnight stays in the city has fallen by 31 percent, while Chinese visitor numbers are still low. The Journal reports that the number of domestic tourists in the city has increased slightly overall.
The Huntington on Nob Hill was sold at a foreclosure auction earlier this year after its owners defaulted on a $56.2 million mortgage
Facing a $97 million loan due in 2024, the Hilton San Francisco Financial District could be the next San Francisco hotel whose owners leave
San Francisco’s largest hotel, the Hilton Union Square, left, will be foreclosed as the owner of the hotel and Parc 55, right, announced Monday that it will no longer pay its $725 million loan
Traveler numbers in San Francisco remain low and have not returned to pre-pandemic numbers
Chart of hotel room price in San Francisco against other major US markets. San Francisco is the only city that has not yet returned to 2019 levels
Westfield, which operates the mall where Nordstrom was located, was less delicate in its assessment. It blamed the “worsening situation in downtown San Francisco” and “unsafe conditions for customers, retailers and employees.”
H&M closed its flagship store in 2020 and the lease on its Westfield property expires in January.
A damning report published in May said 95 shops in the city center have closed since the start of the Covid pandemic. Departing companies include coveted brands such as Lululemon, Ray Ban and Christian Louboutin.
Emmy Hise, senior director of hospitality at CoStar, said so the San Francisco Chronicle That the issue of crime and stores leaving the area has influenced the public’s view of the Bay Area.
“Most boroughs are struggling with this problem,” she said. “San Francisco gets a lot of attention from the national press.”
The Huntington has been sold to two hotel investment and management firms that say they intend to ‘restore and elevate every aspect’ of the hotel, “returning it to its original glory and re-establishing it as the premier luxury hotel in San Francisco.”
The hotel defaulted on its $56.2 million mortgage.
Major stores continue to pull out of crime-ridden San Francisco, with a disturbing report showing 95 downtown retailers — more than half — have closed since the start of the COVID pandemic. This card shows a small selection of the departing big names
San Francisco has experienced widespread crime, homelessness and drug use that have displaced businesses and consumers
The number of homeless people in San Francisco was counted at nearly 8,000 in February last year
The city’s homicide rate is now up 5 percent from the same time last year, while robberies are up more than 16 percent
The Yotel on Market Street, a tech-savvy hotel with micro-hotel rooms, was bought last year for $62 million at a foreclosure auction.
The owner, Synapse Development Group, defaulted on $64.5 million in loans last March. It was purchased by New York-based investment firm Monarch Alternative Capital.
San Francisco is struggling to recover from the pandemic, much more so than other major cities. The daily hotel room price of $234 over the course of the past year is below 2019 levels. While every other major market is above 2019 numbers – partly due to inflation.
The city’s highest-spending group of leisure tourists came from China, and they weren’t allowed to return until the Chinese government ended its strict travel controls earlier this year.
Business travel has also taken a hit as technology companies reduce company size and try to cut costs. Some major conferences formerly held in San Francisco have also chosen new cities due to rising crime.
A significant handful of high-profile criminal episodes, in addition to a number of store closures due to rampant and unprosecuted theft, have tarnished the city’s image with potential visitors.
According to an analysis, San Francisco is suffering the slowest downtown recovery of all 62 largest cities in the US and Canada after the pandemic.
Making that recovery even slower are the stores that have announced they are leaving downtown.
Nordstrom, Whole Foods, Saks Off 5th, Anthropologie, Banana Republic, Old Navy and Office Depot have all decided to leave their downtown locations. Williams-Sonoma also announced it will close in 2024.
Of the 203 retailers that opened in the city’s Union Square area in 2019, only 107 are still operating, a 47 percent drop in just a few pandemic-ravaged years.