San Francisco’s Hotels Financial Struggles with Hilton Parc 55 and Hilton San Francisco Union Square Collectively Losing $1 Billion in Value

San Francisco’s once-thriving hotel industry is now facing a significant financial crisis as a sharp decline in tourism has left the city’s largest hotels burdened with substantial debt. According to the Kroll Bond Rating Agency, the combined value of the Hilton Parc 55 and Hilton San Francisco Union Square has plummeted by $1 billion, bringing their total worth down to $553.8 million.

This financial strain is further highlighted by a dramatic rise in the delinquency rate for commercial mortgage-backed security loans within the sector. Data from real estate analytics firm Trepp reveals that the rate surged to 41.6% in June, up from just 5.7% a year earlier.

The downturn in San Francisco’s tourism industry, which has struggled to recover to pre-pandemic levels, contrasts with the rebound seen in other parts of the country. Anna Marie Presutti, interim president of the San Francisco Travel Association, described 2024 as a particularly challenging year for the city. She expressed that a full recovery in visitor numbers might not occur until 2028 or 2029.

Data from CoStar Group indicates that weekend hotel occupancy in the San Francisco-San Mateo area, a key indicator of leisure travel, has decreased by 22% since 2019, compared to a 4% decline nationwide. The Wall Street Journal suggested that factors such as high living costs, open-air drug markets, a growing homeless population, and rising crime are deterring tourists from visiting the city.

The strong U.S. dollar has also contributed to the decline in tourism, encouraging more Americans to travel abroad and discouraging international visitors, particularly from China, due to economic uncertainties.

Business travel, a significant driver of hotel revenue, has not rebounded as expected. Major tech companies like Google and Meta have moved their events out of San Francisco’s Moscone Center, leading to a decline in both events and hotel bookings. The San Francisco Travel Association anticipates a 26% reduction in events and a 31% decrease in room nights at the Moscone Center this year compared to last.

The financial difficulties are also impacting hospitality workers, many of whom have seen their hours cut, forcing them to seek additional employment. Contracts for approximately 10,000 hotel workers in the Bay Area are set to expire soon, and 3,000 employees have voted to authorize a potential strike, according to their union.

Real estate investment trust Park Hotels & Resorts has responded to the financial strain by removing the Hilton Parc 55 and its Union Square hotel from its portfolio. The firm’s CEO, Tom Baltimore, stated during a first-quarter earnings call that this decision had significantly improved the company’s financial metrics. He added that the San Francisco market, along with Los Angeles, is likely to continue lagging behind for some time.

The decline in tourism has also been exacerbated by the relocation of major tech conferences to other cities, such as Las Vegas, reducing the number of business travelers who typically extend their trips to enjoy the Bay Area.

Despite these challenges, there are signs of recovery on the horizon. The San Francisco Travel Association has reported an increase in European vacationers returning to the Bay Area, as well as rising numbers of visitors from India.

Alex Bastian, CEO of the city’s hotel council, acknowledged the unprecedented challenges facing the industry but remains optimistic. He believes that San Francisco is making progress in addressing its issues and hopes the city will soon regain its status as a premier West Coast destination.

Have you read?
Best Fashion Schools.
Best Universities.
Best Medical Schools.
Best International High Schools.
Countries: Most Female Billionaires.