Last week we passed along the stunning news that two of the largest hotels in San Francisco have decided to walk away from their investment entirely, defaulting on $725 million in debt on the properties. Today the Wall Street Journal follows up with some comparisons with other cities. Short version: hotel traffic in other major cities has recovered, while hotel traffic in San Francisco has not:
Hotel owners in New York and Los Angeles are filling nearly as many rooms this year as they did in 2019, according to hotel-data firm STR. Their revenue per available room exceeds what it was before the pandemic.
But in San Francisco, hotels are still struggling badly in both occupancy and room rates compared with before the pandemic. Revenue per available room was nearly 23% lower in April compared with the same month in 2019. . .
Now, a growing number of San Francisco hoteliers are signaling they may be ready to give up. In recent months, the owner of the city’s Huntington Hotel sold the property after facing foreclosure and the Yotel San Francisco hotel sold in a foreclosure auction. Club Quarters San Francisco, which has been in default on its loan since 2020, may also be headed to foreclosure, according to data company Trepp.
Other lodging properties in the city are also vulnerable. More than 20 additional San Francisco hotels are facing loans due in the next two years, according to data company CoStar.
It’s not just hotels. This evening the Wall Street Journal reported about the major downtown shopping mall:
The owner of the Westfield San Francisco Centre said Monday it is turning the shopping center over to its lender, in another blow to the city’s struggling downtown.
The decision comes six weeks after the main anchor of the mall, Nordstrom, announced it was shutting down the location.
San Francisco Centre owner Unibail-Rodamco-Westfield cited “challenging operating conditions” in downtown San Francisco, which it said have led to declines in sales, occupancy and foot traffic. There has been an exodus of retailers and other businesses from the mid-Market Street area of downtown amid rampant public drug use and homelessness.
Nice going San Fransicko. I doubt the political class that runs the city will figure out even with this fresh blow. I’m reminded of an old joke about the Soviet Union that Reagan liked to tell: One Russian says to a pal on the street—”Is this it? Is this full Communism?” His pal responds: “Oh heck no. Things are going to have to get a lot worse.”