One of America’s richest cities is sinking into massive hotel debt – as tourists stop choosing it as a vacation destination
San Francisco’s luxury hotels have been left deeply in debt amid a dramatic decline in tourism to the Golden Gate City.
According to the Kroll Bond Rating Agency, 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.
Their net worth is now $553.8 million.
Meanwhile, the delinquency rate on commercial mortgage loans for the sector rose to 41.6 percent in the same period last year, from 5.7 percent in June, data from real estate analytics firm Trepp showed.
It comes as San Francisco’s tourism industry struggles to recover to pre-pandemic levels while other parts of the country recover.
Staff at the Hilton San Francisco Union Square (pictured) have had to take on second jobs after a drastic cut in work hours
Anna Marie Presutti, interim president of the San Francisco Travel Association, said The Wall Street Journal that 2024 ‘will certainly be a difficult year’.
She said she doesn’t expect visitor numbers to recover until 2028 or 2029.
According to data firm CoStar Group, weekend hotel occupancy, a rough gauge of holiday travel, fell 22 percent in June in the San Francisco-San Mateo region since 2019, compared with four percent nationwide.
The Journal suggested that tourists were being deterred by “quality issues.” The cost of living in San Francisco is notoriously high – the Bay Area is the second wealthiest area in the US, after New York City.
Open-air drug markets, a growing homeless population and increased crime are causing unrest in many San Francisco neighborhoods.
The problem is compounded by the strong dollar, which is encouraging more Americans to travel abroad.
Meanwhile, Chinese tourists, a major source of visitors, are being deterred by the strong dollar and economic uncertainty.
According to CoStar, work travel has also increased since the pandemic, meaning some no longer have to pay for expensive trips.
Hospitality industry employees are now having a hard time: due to the reduction in working hours, many people are forced to take on a second job.
The contracts of the approximately 10,000 hotel workers in the Bay Area expire this month and 3,000 workers voted overwhelmingly in favor of a possible strike, their union announced.
San Francisco’s tourism industry struggles to recover to pre-pandemic levels as other parts of the country recover
Weekend hotel occupancy in June, a rough gauge of holiday travel, fell 22 percent since 2019 in the San Francisco-San Mateo region, compared with 4 percent nationwide
Hannah Lin, a room attendant at the Union Square Hilton, said she took a second job at Oracle Ballpark after her hours were drastically cut.
Real estate investment company Park Hotels & Resorts has removed Hilton Parc 55 and the Union Square hotel from its portfolio.
Tom Baltimore, the company’s CEO, said during a first-quarter earnings presentation that this “significantly improved our balance sheet and operating metrics,” the WSJ reported.
San Francisco’s gleaming hotels have fallen into massive debt after a dramatic drop in tourism to the Golden Gate City
The San Francisco market, like Los Angeles, “will likely lag for some time,” he added.
Attendance has also declined due to the decision of technology companies like Google and Meta to move out of the Moscone Center, their main convention center.
Business travelers often extended their trips by a few days to enjoy the Bay Area at their leisure, but conferences are increasingly being held in areas like Las Vegas.
The city’s travel organization expects that there will be 26 percent fewer events and 31 percent fewer overnight stays at Moscone Center this year compared to last year.
According to the Kroll Bond Rating Agency, the city’s two largest hotels, the Hilton Parc 55 (pictured) and the Hilton San Francisco Union Square, have collectively lost $1 billion in value.
Tourists are being scared off by ‘quality issues’. Pictured: San Francisco’s once-bustling Union Square is facing an exodus of businesses, residents and tourists, sparked by the city’s inaction on crime, homelessness and outdoor drug use.
The use of Class A substances in the open air is widespread among the homeless population
However, there are signs of recovery.
According to the tour operator, European holidaymakers are returning to the Bay Area, while the number of visitors from India is also increasing.
Alex Bastian, general manager of the city’s hotel council, said the sector was facing “unprecedented challenges”.
Still, he is optimistic that San Francisco will get its act together and soon return to being the vibrant West Coast attraction it once was.
“Things are moving in the right direction,” Bastian told the WSJ.
