Park Hotels & Resorts, one of the nation’s largest hotel real estate investment trusts, is pulling out of two hotels in downtown San Francisco, saying it lacks confidence in the city’s ability to overcome “major challenges.”
Park Hotels said that it has stopped making payments toward a $725 million loan backed by two of its San Francisco properties, the 1,921-room Hilton San Francisco and the 1,024-room Parc 55 San Francisco.
Both hotels are located near the Moscone Center, a conference venue that prior to the pandemic drew throngs of professionals to the area. San Francisco hasn’t fully recovered since COVID-19 shut down the economy in 2020, with many office buildings still largely empty as workers continue to work remotely. A rash of thefts last year and rising homelessness have caused some retailers to.
Thomas J. Baltimore, Jr., the chairman and CEO of Park Hotels, cited empty offices and reduced business travel as factors that have made owning the hotels untenable.
“Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges,” Baltimore said in a statement this week.
He said the city’s challenges include: “record high office vacancy; concerns over street conditions; lower return to office than peer cities; and a weaker than expected citywide convention calendar through 2027 that will negatively impact business and leisure demand and will likely significantly reduce compression in the city for the foreseeable future.”
Both properties are expected to be removed from Park Hotels’ portfolio, which includes 46 hotels and resorts with more than 29,000 rooms.
Hit to business travel
Prior to the pandemic, San Francisco was a magnet for business travel. But since the crisis, event bookings have slowed down and foot traffic has receded.
In 2022, San Francisco will experience the steepest drop in revenue from business travel of any major metro area, according to data from the American Hotel & Lodging Association (AHLA). Revenue plunged nearly 69%, or $1.68 billion, compared to 2019.
To be sure, some businesses are still turning to the city for events, with JPMorgan holding its annual health care conference this year in the Union Square neighborhood after a two year pandemic-related hiatus. But other firms have canceled events, deterred in part by street conditions like graffiti and homelessness.
And some retailers have closed their San Francisco locations, citing crime and other issues. Whole Foods in Aprilone of its flagship stores just a year after it opened, citing concerns that crime in the area was endangering its staff. Other retailers that have announced downtown closures include Nordstrom, Anthropologie and Office Depot, according to local station KRON.