San Francisco’s glamorous hotels have plunged into massive debt following the dramatic decline in tourism in the Golden Gate City.
The city’s two largest hotels, the Hilton Parc 55 and the Hilton San Francisco Union Square, have lost a total of one billion dollars in value, according to the Kroll Bond Rating Agency.
Its value is now $553.8 million.
Meanwhile, the default rate on commercial mortgage-backed loans in the sector rose to 41.6 percent in June from 5.7 percent in the same period last year, according to data from real estate analytics firm Trepp.
This comes at a time when San Francisco’s tourism industry is struggling to return to pre-pandemic levels while other parts of the country are recovering.
San Francisco’s glamorous hotels have plunged into massive debt following a dramatic decline in tourism in the Golden Gate City
The city’s two largest hotels, the Hilton Parc 55 (pictured) and the Hilton San Francisco Union Square, have lost a total of $1 billion in value, according to the Kroll Bond Rating Agency.
The employees of the Hilton San Francisco Union Square (pictured) had to take on a second job after a drastic reduction in working hours
Anna Marie Presutti, interim president of the San Francisco Travel Association, told the Wall Street Journal that 2024 is “definitely a difficult year.”
She said she does not expect visitor numbers to recover until 2028 or 2029.
June weekend hotel occupancy, a rough indicator of leisure travel, has fallen 22 percent in the San Francisco-San Mateo region since 2019, compared with 4 percent nationwide, according to data firm CoStar Group.
The Journal suggested that tourists were being deterred by “quality of life issues.” The cost of living in San Francisco is notoriously high, while open drug markets and a growing homeless population have caused unrest in many neighborhoods.
Making matters worse is the strong dollar, which is encouraging more and more Americans to travel abroad.
Meanwhile, Chinese tourists, who make up a large proportion of visitors, are deterred by the strong dollar and economic uncertainty.
According to CoStar, business travel has also recovered since the pandemic, meaning some people no longer need to take expensive trips.
Employees in the hospitality industry are currently feeling the effects of the crisis particularly hard: due to reduced working hours, many are forced to take on a second job.
The contracts of about 10,000 hotel workers in the Bay Area expire this month and 3,000 employees have voted overwhelmingly in favor of a possible strike, their union announced.
San Francisco’s tourism industry struggles to return to pre-pandemic levels as other parts of the country recover
June weekend hotel occupancy, a rough indicator of leisure travel, has declined 22 percent in the San Francisco-San Mateo region since 2019, compared with 4 percent nationwide.
Hannah Lin, a housekeeper at the Union Square Hilton, said she took a second job at Oracle Ballpark after her hours were drastically cut.
The real estate investment fund Park Hotels & Resorts has now removed Hilton Parc 55 and the associated Hotel Union Square from its portfolio.
Tom Baltimore, the company’s chief executive, said during a first-quarter conference call that this “has significantly improved our balance sheet and operating metrics,” the WSJ reported.
The San Francisco market, like Los Angeles, will “probably lag for a while,” he added.
Attendance also declined due to the decision by technology companies such as Google and Meta to move out of the Moscone Center, the country’s premier convention center.
Business travelers used to often extend their trips by a few days to enjoy the Bay Area in peace, but conferences are now more likely to take place in areas like Las Vegas.
Now the city’s travel association expects 26% fewer events and 31% fewer room nights from those events at the Moscone Center this year compared to last year.
Tourists are being deterred by ‘quality of life issues’ Pictured: San Francisco’s once bustling Union Square is facing an exodus of businesses, residents and tourists caused by the city’s lax approach to crime, homelessness and outdoor drug use
Outdoor use of Class A substances is widespread among homeless people
However, there are initial signs of recovery.
According to the travel association, more and more European vacationers are returning to the Bay Area and the number of Indians is also increasing.
Alex Bastian, managing director of the city’s hotel association, said the industry was facing “unprecedented challenges.”
However, he remains optimistic that San Francisco is well on its way to recovery and will soon become the shining West Coast attraction of its heyday.
“Things are moving in the right direction,” Bastian told the WSJ.
