San Francisco’s glitzy hotels have found themselves mired in massive debt following a dramatic drop in tourism to the Golden Gate City.
The California city’s two largest hotels, the Hilton Parc 55 and the Hilton San Francisco Union Square, have lost a combined $1 billion in value, according to bond rating agency Kroll.
Its value now stands at $553.8 million.
Meanwhile, the default rate on commercial mortgage-backed loans for 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 as San Francisco’s tourism industry struggles to recover to its pre-pandemic levels while other parts of the country are bouncing back.
Staff at the Hilton San Francisco Union Square (pictured) have had to take on second jobs after hours were drastically cut.
Anna Marie Presutti, interim president of the San Francisco Travel Association, said The Wall Street Journal that 2024 “is definitely a difficult year.”
He said he did not expect visitor numbers to recover until 2028 or 2029.
Weekend hotel occupancy in June, a rough indicator of leisure travel, is down 22 percent from 2019 in the San Francisco-San Mateo region, compared with 4 percent nationally, according to data firm CoStar Group.
The Journal suggested that tourists were put off by “quality of life issues.” The cost of living in San Francisco is notoriously high, and the Bay Area is the second wealthiest area in the U.S., behind New York City.
Open-air drug markets, a growing homeless population and rising crime have left many San Francisco neighborhoods in crisis.
The problem is exacerbated by the strength of the dollar, which encourages more Americans to travel abroad.
Meanwhile, Chinese tourists, a major source of visitors, are being deterred by the strong dollar and economic uncertainty.
Business travel has also rebounded since the pandemic, replacing the need for some to pay for expensive trips, according to CoStar.
Hospitality workers are now feeling the pinch: reduced hours are forcing many to seek second jobs.
Contracts covering the Bay Area’s roughly 10,000 hotel workers are set to expire this month, and 3,000 employees voted overwhelmingly to authorize a possible strike, their union announced.
San Francisco’s tourism industry is struggling to recover to its pre-pandemic levels, while other parts of the country are recovering
Weekend hotel occupancy in June, a rough indicator of leisure travel, is down 22 percent from 2019 in the San Francisco-San Mateo region, compared with 4 percent nationally.
Hannah Lin, a room attendant at the Union Square Hilton, said she took a second job at Oracle Ballpark after her hours were drastically reduced.
Real estate investment trust Park Hotels & Resorts has removed Hilton Parc 55 and its Union Square hotel from its portfolio.
Tom Baltimore, the company’s chief executive, said during a conference call on first-quarter results that doing so “significantly improved our balance sheet and operating metrics,” the WSJ reported.
San Francisco’s luxury hotels have been plunged into massive debt following a dramatic drop in tourism to the Golden Gate City.
The San Francisco market, along with that of Los Angeles, “will probably lag behind for some time,” he added.
Visitor numbers have also been affected by the decision of technology companies such as Google and Meta to move out of the Moscone Center, their main convention center.
Business travelers often extended their trips for a few days to enjoy the Bay Area in peace, but now conferences have moved to areas like Las Vegas.
Now, the city’s travel association expects 26 percent fewer events and 31 percent fewer overnight stays at those events at the Moscone Center this year compared to last year.
The city’s two largest hotels, the Hilton Parc 55 (pictured) and the Hilton San Francisco Union Square, have lost a combined $1 billion in value, according to bond rating agency Kroll.
Tourists are put off 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 attitude to crime, homelessness and open-air drug use.
Outdoor use of class A substances is widespread among the homeless population
However, there are some green shoots of recovery.
European tourists are starting to return to the Bay Area, while numbers from India are also increasing, according to the travel association.
Alex Bastian, executive director of the city’s hotel council, said the industry is facing “unprecedented challenges.”
But he remains optimistic that San Francisco is improving its image and will soon return to being the glittering West Coast attraction it once was.
“Things are moving in the right direction,” Bastian told the WSJ.
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