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Hotel Owners Start To Write Off San Francisco as Business Nosedives (wsj.com) 327

San Francisco's once thriving hotel market is suffering its worst stretch in at least 15 years, pummeled by the same forces that have emptied out the city's office towers and closed many retail stores. From a report: 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. The city's lodging business has been squeezed by crime and other quality-of-life issues that have kept many convention bookers away. Tech companies' embrace of remote work also undercuts business travel to the city and hotel activity.

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. In San Francisco's biggest potential hotel default yet, Park Hotels & Resorts last week said it has stopped making loan payments on debt secured by the Hilton San Francisco Union Square and Parc 55 San Francisco. The two hotels, with nearly 3,000 rooms between them, are in the heart of San Francisco's shopping and cultural district.

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Hotel Owners Start To Write Off San Francisco as Business Nosedives

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  • Neat (Score:5, Interesting)

    by DarkRookie2 ( 5551422 ) on Wednesday June 14, 2023 @11:26AM (#63601914)
    Neat, the city should buy them for cheap and turn in homeless shelters.
    • Re:Neat (Score:5, Funny)

      by Anonymous Coward on Wednesday June 14, 2023 @11:32AM (#63601936)

      And in turn that will attract more businesses to the area creating a success spiral of sorts. Three cheers for communism.

    • Re: (Score:3, Funny)

      by cayenne8 ( 626475 )

      Neat, the city should buy them for cheap and turn in homeless shelters.

      Well, I guess in a way, it would be better for them to be pooping and dropping their needles in the hallways rather than the open streets....

      See? There's always a way to put a positive spin on things!!

      Don't be so negative.

      • by nasch ( 598556 )

        Why would they crap in the hall when they have a bathroom in the room?

        • Re: (Score:3, Interesting)

          by cayenne8 ( 626475 )

          Why would they crap in the hall when they have a bathroom in the room?

          It was a bit tongue in cheek joke....but a bit in truth too.

          These people are defecating in the streets currently...when they have public restrooms they could be using.

          These are druggies...zombies for the most part that don't give a crap where they crap.

          If they open these hotels to them, they'll be totaled within weeks....if not on fire.

          But yes..they do and will poop where they live.

        • Why would they crap in the hall when they have a bathroom in the room?

          Maybe the toilets are clogged/broken. Maybe they're just too whacked out on drugs or mental problems to even find the toilet and just drop a turd wherever they want. NEVER underestimate how some humans can sink to sub-animal levels of behavior. An in-law's German Shepherd who I looked after for a week had the good sense to discreetly poop at one end of my back yard instead of doing it whenever and wherever the urge struck.

      • by wiggles ( 30088 )

        Remember - it's not a crack house, it's a crack home.

        https://www.theonion.com/its-n... [theonion.com]

    • by fermion ( 181285 )
      Been thinking about this. One big complaints is the short term rental market is moving to individuals renting their property through the apps. So, why not, have hotel pivot to small space long term rentals? In New York these would house tens of thousands of employed renters. I donâ(TM)t know what the situation is in San Francisco.

      In business when the market changes considerable you try to stay with your core but cater to the new paying customer. And cutting costs. -refits will sink, so if this is ju

      • So, the full process is:
        1. Landlords turn apartments into AirBNBs to make more money
        2. Renters have trouble finding long-term apartments, driving up rent prices
        3. Hotels go out of business due to lost income
        4. Landlords buy up hotels, turning them into long-term apartments
        5. Goto step 1

        • In many cases...banks could be getting the property handed back to them as landlords stop making payments.

          The Westfield folks did that with the mall that they operated. The banks are now responsible for that property.

    • Re: Neat (Score:4, Funny)

      by ArmoredDragon ( 3450605 ) on Wednesday June 14, 2023 @11:56AM (#63602038)

      And the best way to fund that is to reduce police funding. Just as we know for certain that UBI will make people want to work even more, something we're totally not speculating about, we also know that replacing police with social workers also reduces crime.

      Or better yet, if we simply legalize assault, shoplifting, and burglary, that will also reduce the crime rate, and the city will be better off for it. It's not as if those are actually prosecuted anyways.

    • Or, just renovate them and convert them to apartments. Shouldn't be too hard to make a hotel into an apartment building.

      • Oh really?

        So you just think that wiring and plumbing exists in every hotel room for a full kitchen? Or would you be happy renting an apartment that doesn't have a kitchen?

        Just rewiring a hotel to have 240VAC in each room for an oven would sink the project.

    • Re: Neat (Score:3, Interesting)

      by PPH ( 736903 )

      homeless shelters

      Sounds good. But that might not work. Here, in Seattle, the homeless will attempt to burn down anything that doesn't meet their expectations. A few converted hotels have been closed due to fire damage.

      The current thinking is that homeless shelter has to be "non congregate". Which originally meant that dormitory style shelter will not do. But advocates for the homeless-industrial complex have been pushing the idea that it has to be single family type housing. Mixed in to upper middle class neighborhoods. Or

      • The current thinking is that homeless shelter has to be "non congregate". Which originally meant that dormitory style shelter will not do. But advocates for the homeless-industrial complex have been pushing the idea that it has to be single family type housing. Mixed in to upper middle class neighborhoods. Or the homeless' self esteem will be harmed.

        In short...Fuck That.

        All that will do, is bring down home values, and raise crime and make normal neighborhoods more dangerous.

        Is your idea of "equity" makin

      • Re: Neat (Score:5, Interesting)

        by quantaman ( 517394 ) on Wednesday June 14, 2023 @04:47PM (#63603112)

        homeless shelters

        Sounds good. But that might not work. Here, in Seattle, the homeless will attempt to burn down anything that doesn't meet their expectations. A few converted hotels have been closed due to fire damage.

        The current thinking is that homeless shelter has to be "non congregate". Which originally meant that dormitory style shelter will not do. But advocates for the homeless-industrial complex have been pushing the idea that it has to be single family type housing. Mixed in to upper middle class neighborhoods. Or the homeless' self esteem will be harmed.

        Personally, if I were homeless, I wouldn't want to live in a high rise building with questionable escape options next door to a tweaker who will set his room on fire if housekeeping doesn't replenish his toilet paper fast enough.

        It's not about self esteem, it's about influences.

        You stick people around a bunch of drug addicts they're probably going to stay/become a drug addict.

        If you stick them into a middle class (more likely lower than upper middle class) neighbourhood, they have a much better chance of escaping addiction.

        The downside is you're also bringing those influences into that lower middle class neighbourhood.

        You're free to disagree, but try not to deliberately misunderstand.

  • euphemisms (Score:3, Insightful)

    by Jodka ( 520060 ) on Wednesday June 14, 2023 @11:30AM (#63601926)

    from the /. summary:

    "...pummeled by the same forces that have emptied out the city's office towers and closed many retail stores.

    "pummeled by the same forces" means run by Democrats.

    • by BigFire ( 13822 )

      That and the urine and feces on the street to give you that extra authentic sense urban environment.

    • Re:euphemisms (Score:5, Informative)

      by Darinbob ( 1142669 ) on Wednesday June 14, 2023 @12:12PM (#63602094)

      That's just the spin their putting on the story. Bad news in a blue state - hype it as caused by wrong headed state politics! Bad news in a red state - a sad time due to wrong headed federal politics.

      And no, the feces on the street is rare, and you'll see that in Dallas as well, it's just not hyped. Homelessness is a problem *everywhere*, only some states cover it up. And when someone is homeless, where do they go? Not to a conservative rural area where they'll starve in a field unseen by anyone; but to a city, one with services, somewhere to park the car, somewhere with a public restroom close by, etc.

      It's tough times for hotels, period. Yes, it might be rising somewhere. But the pandemic has seriously hit the tourist towns and the convention towns. Except in red states where they think the virus was a hoax. Tech travel is down, more so with techies refusing to even go to the normal office, and that's the big money maker for many hotels in S.F; and with travel plus inflation people are looking for a bargain in the vacation, which means budget hotels. This problem isn't due to bad politics.

      • Re: (Score:2, Troll)

        by cayenne8 ( 626475 )

        But the pandemic has seriously hit the tourist towns and the convention towns. Except in red states where they think the virus was a hoax.

        I just saw this part after original post.

        You speak in terms sounding like you think the pandemic is still going on?

        It ended a long time ago my friend...most of us are past and and have been living 100% normal lives again.

        We did get hit hard initially...but once the virus mutated a time or two...it became basically harmless to most people alive.

        Are you still wearing

        • It ended a long time ago my friend...most of us are past and and have been living 100% normal lives again.

          As the summary stated: Work. From. Home. Tech CEOs don't want to bring investors to tumbleweed-filled offices.

  • How much is (Score:5, Interesting)

    by DarkOx ( 621550 ) on Wednesday June 14, 2023 @11:43AM (#63601972) Journal

    How much of this is really less revenu on rooms ( presumably mostly offset by less staff to manage and clean up after fewer guests) and how much is variable interest rate structures on the loans?

    Honestly I feel bad for the management. Its kind of the perfect storm of increased financing costs and declining revenue at the same time. In both cases the drivers behind those things are largely forces outside their control.

    The financial structure of these big hotels might be more vulnerable to than other commercial property but the trend seems to be getting clearer. We are NOT going back to office work as it was done pre-pandemic. Business should not want to either. There WILL be another pandemic and its likely to be as disruptive in terms of being able to cram large numbers of people into a cube farm, forcing everyone back to the office is actually a recipe for incurring huge costs down the line.

    The supply of short term housing and office space is mismatched to the new market. Its going to have to change, everyone needs to accept that means commercial defaults, it means cities are going to find parts of the transport networks are in the wrong places and improperly scaled, its going to mean changes to tax structure, its going to me everyone's favorite urban planning pet projects need a reevaluation. The more people dig in and refuse to accept reality the worse it will be.

    • Commercial property used to be financed via seven year loans amortized over 30 years. Much of it is now financed via interest-only loans. The "business plan" was that each property was basically not very profitable but you could leverage like crazy and own a lot of properties. That the party lasted this long is astonishing. If somebody could come buy that property using a 30 year, 7/1 ARM for half of the last sale price, they would make a good living.
      • I think THIS is the real reason why cities like SF are being deliberately allowed to go to shit.

        Let's watch and see who ends up buying all of these distressed properties at a discount. I bet it's the same people who pumped money into "progressive" political campaigns to get dingbats like London Breed and Chesa Boudin elected in the first place.

        Once they acquire the distressed assets, watch them suddenly throw their support around real leaders who will crack down on crime and filth and allow the city to be r

  • Those 2 and 37 more (Score:5, Informative)

    by iAmWaySmarterThanYou ( 10095012 ) on Wednesday June 14, 2023 @11:45AM (#63601986)

    Several of my family and friends work in hospitality in that area. They were all jaw dropped shocked that 2 of the biggest hotels were being abandoned.

    Apparently there are as many as *_37_* more in SF where the owners are considering the same.

    That's a catastrophe for the city and the hotel chains and the banks and the employees and the businesses in the area and yeah pretty much everyone.

  • by Virtucon ( 127420 ) on Wednesday June 14, 2023 @11:58AM (#63602052)

    I recently saw this video of Powell Street [youtube.com] one of the prime tourist sites in the city. Also, just the other day a major downtown mall operator indicated that it's defaulting on its loan payments and turning it back over to the lenders. [msn.com] This is in the past few days alone.

    All of this is because of crime, declining foot traffic/tourism, and therefore lack of businesses. Why would I want to go to San Francisco as a tourist? There aren't many compelling reasons considering the crime, the homeless issue, and a city government that has lost focus on what makes San Francisco desirable; congratulations you've turned a beautiful city into a shit hole.

  • by DeplorableCodeMonkey ( 4828467 ) on Wednesday June 14, 2023 @11:59AM (#63602058)

    Local retail is imploding [zerohedge.com] as well.

    It's ok, people. We can admit that Democratic policies in these cities are leading them off a cliff because Reaganomics was the driving force behind NAFTA which created the Rest Belt.

    The greatest "threat to Democracy" in the USA is the actual behavior of democratically elected politicians and how so much of it is driven by mindless ideology that never yields to evidence that it's destroying the common good in real time.

    • The Rust Belt happened in the 70s, pre-Regan. NAFTA was pushed and signed by Bill Clinton.
      No need to sugarcoat it. Democrats has ruined our cities, full stop.
    • I'll defend an Obama or Clinton when history is on their side, or a Reagan or Trump when it's on their side - we all need to face the reality that history is WHAT ACTUALLY HAPPENED or it's impossible to have sane discussions. In this case, you are WAY OFF when you tie Reaganomics to NAFTA.

      1. While Reagan (and thus by implication, Reaganomics) was indeed for "free trade" most people forget the most important details. At that time, it was ILLEGAL for American businesses to do business with a number of countri

  • by mtm10 ( 1530769 ) on Wednesday June 14, 2023 @12:03PM (#63602066) Homepage

    An contrarian view that this hotel mortgage 'crisis' is more strongly driven by the effects of poorly timed financial manipulation / leveraged buyout of old SF hotels by REITs

    https://wolfstreet.com/2023/06... [wolfstreet.com]

  • by Petersko ( 564140 ) on Wednesday June 14, 2023 @12:08PM (#63602082)

    I think that sometimes people forget that bankruptcy is a normal part of a business cycle. It'd be nice if markets and circumstances allowed a business to be viable forever, but that just isn't true. Knowing when to pull the plug is important.

    Sometimes the collateral damage is ugly. I'm sure there are a lot of service jobs involved that have no easy lateral move opportunities. But, make hay while the sun shines. It's a lot like layoffs. Lots of people get fixated the moment of the layoff and forget the personally profitable period that preceded it.

    • by DarkOx ( 621550 )

      The trouble is the ethos of 'make hay while the sun shines' has been entirely lost. The message in this country has been 'live life in the moment' for a long time now.

      Nobody puts anything away for a rainy day. We have had a culture of "full employment" as well. (This is another area where Unions have really f*'ed up how capital and labor was supposed to work ).

      Half the population walks around thinking a layoff is some kind of personal failing. The other half thinks its a personal attack on them, the little

  • If you refuse to enforce the law due to a malformed understanding of helping the poor, do not be surprised when reasonable people leave.

    Rational and serious people know that more policing helps the poor and disenfranchised the most, because those groups are disproportionately victims of crime. Public safety is fundamental to lifting people out of generational poverty.
  • Counter Point (Score:5, Interesting)

    by ink ( 4325 ) on Wednesday June 14, 2023 @12:24PM (#63602156) Homepage

    We just spent a week in San Francisco, and our hotel cost was actually reasonable. We were just a block away from the Presido, and had an amazing time all over the bay area. I'm not going to cry because "boutique" hotels can no longer charge $700/night for a studio room with Ikea furniture next to the ferry building.

  • The political hacks running the cities have abandoned that job. And the public is on their own. The bad news is the cities have not hit bottom yet. So hang on and watch the destruction.
  • Bunk houses with locks and guards are the answer. When they come to the bars and beg to be allowed to get a job and be a productive member of society, put them into social services, train them, and get them a job. If they screw it up, back to the bunk house they go. Just get them the hell away from the rest of us.

  • SF used to be a favorite place to visit. Our family has a lot of history with the city. But not until and unless they can get it under control.

    It makes me sad.

  • by argStyopa ( 232550 ) on Wednesday June 14, 2023 @02:51PM (#63602734) Journal

    Just so you understand context: Every major metro area in the US is a Democratic stronghold.

    However, San Francisco is - and has been for some time - a Democratic "utopia."
    Unconstrained by a state government with any interest in curtailing their policies, SFO has aggressively pursued the most liberal of policies protecting illegals, limiting police power (and now prosecution of the few the cops do arrest), expanding drug access, and generally advancing every liberal hobby-horse issue in American politics.*

    *with the awkward occasional program that they don't want to talk much about, like the "if you're homeless, SFO will buy you a bus ticket anywhere ELSE" which has become highly political and criticized since Republican city leaders in TX have now started doing the same thing. OOPS!

    To be clear I'm not saying that a completely Republican-run major city would be any better. Personally, I favor both parties in power to check each others' political excesses.

    Of course, one example might be NY under Giuliani and then the less dogmatic Bloomberg that basically rescued the city from decades-long catastrophic decline...

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