San Francisco Hotels and Covid Five Years later: Part II

Five years ago, the Covid 19 Pandemic struck, upending all of our lives.  Be you Tom Hanks or an essential worker, we all had to start from scratch and figure out how to create a language for dealing with a once-in-a-century pandemic.  Now that it's been half a decade, I thought I would take this opportunity to see how the city, and hospitality, is faring in 2025.

The Great City of San Francisco

In July of 2022, the tourists started to return, and it filled my heart with joy to see the cable cars humming again. But this rush to get heads in beds didn't take into consideration that, although the hotel business was ramping up, the infrastructure to support those tourists was still devastated.  The Hilton's and Hyatt's may be open again, but not the snow globe/T-Shirt shops next door.  Or the high-end retail which visitors tend to only frequent when they travel, even though they have the same kinds of shops back home. 

And of those reopened Hilton’s and Hyatt’s, the service you would normally expect in an upscale hotel became a shell of their former selves.

One guy I know who is a room service attendant in a prominent name-brand hotel told me that when his hotel started to provide the pre-pandemic services the hotel offered, they were greatly augmented: The hours were reduced, the prices increased, and the menu looked more like the kind you find on a domestic flight than a fancy hotel.

In 2023, I remember walking down the first three blocks of Powell Street, one of the most (if not the most) popular thoroughfares for visitors to San Francisco, I counted no less than ten boarded-up storefronts. It is a macabre ghostly sight to see lines of people waiting to ride the cable cars, in front of block after block of vacant shops. And it speaks volumes to me that whatever normal is, we're not there yet, and I don't know when (if) we ever will. Not the normal I remember from 2019, anyway.

If you were a commercial property owner, do you hold out for the world of 2019 (which you based your investments on) will come back?  Or do you cut your losses, and put anything in that space?  Do you leave your property empty until that magical fantasy of the tech-workers returning in droves materializes?  Or do you face the splash-of-cold-water-reality, that those gastropubs and whisky bar-patrons are not coming back, and adopt the belief that any revenue is better than none?

Do you adopt the Broken Windows theory of fighting blight, or do you just let your windows get broken and take a loss?

The State of Post-Pandemic San Francisco Retail

San Francisco welcomed the APEC Conference in 2023, and like the 1915 Panama–Pacific International Exposition which signaled to the world San Francisco has rebuilt from the 1906 Earthquake and Fire, we are once again ready to join the pantheon of great world cities.

For months, the city prepared us for APEC - the Asia-Pacific Economic Cooperation summit, which welcomed 30 world leaders from around the Pacific in early November.  It was claimed the city welcomed more world leaders at one time, since the signing of the United Nations charter in 1945.  As it happened in Los Angeles during " Carmageddon," when the city had to shut down a major traffic artery, San Francisco was equally anxious over the impending traffic nightmare.  Like Los Angeles, residents and visitors alike were scared off by the possible artery-clog, and a prison-like atmosphere around the meeting venues.

Dignitaries came and went, historic deals were made, and flesh was pressed.  For one shiny moment, the planet saw San Francisco as one of the great international cities of the world, worthy of a major economic summit - as it should be.  Not the Fentynal-plagued homeless encampment it had been falsely portrayed as. It didn't help that our mayor, in defining her political strategy for the upcoming mayor's race the following year, double-downed on the false crime narrative.

In 2023 San Francisco had public corruption problems, Fentanyl deaths plagued our streets (like many American cities), and hyper-inflation made it more difficult to travel to San Francisco.  Despite all that, 23 million visitors still made the trek to our City-by-the-Bay.  The San Francisco Convention and Visitor's Bureau claimed that 2023 occupancy levers hovered just below our 2019 pre-pandemic numbers... Sort of.

Though it is true the city's occupancy numbers were higher than previous years, what the SFCVB omitted was that thousands of hotel rooms that had existed before the pandemic, were removed from the city's inventory as they were reclassified now as shelters. Or they simply went out of business and closes their doors forever.

When hundreds of smaller hotels were facing mass closures in 2020, as the entire hospitality industry worldwide shut down overnight (literally), many proprietors were able to keep their lights on because the state stepped in and foot the bill for those in the most vulnerable and susceptible demographic: homeless seniors and families. 

This is a good thing, lives were saved and hope became tangible for many people.  However, I am torn.  On the one hand I am grateful that the most underserved and vulnerable have a place to call home, that is not a back alley.  On the other hand, I mourn the loss of the many unique boutique hotels which were built a century ago and have storied histories.

The Diva, a theater-themed hotel in the heart of our theater district.  Like the Chinese Theater on Hollywood Blvd., the Diva even had its own Walk-of-Fame (of sorts) outside its front door.  Performance luminaries such as Billy Crystal and Joan Rivers, left their monikers in the cement grid on the sidewalk outside.  That great and rare piece of San Francisco theater history is now lost forever.

Or the original Carlton Hotel, where Marky Mark’s people (now Mark Wahlberg) mistook this Tenderloin- adjacent hotel for the Ritz-Carlton, which had not opened yet.

The Carlton opened during Prohibition and still had remnants of its Speakeasy/Flapper Girl-past.  World famous mountaineer, Sir Edmund Hillary (the first man to climb Mt. Everest with his Sherpa guide) was friends with the owners.  Their lone suite was named after him, and the Carlton was the only hotel he stayed in while in San Francisco for business or lectures.  I had the pleasure of working in of these Jazz-era/Atr-Deco gems and wonder if maybe a few of them will come back some day, but are sadly only bittersweet memory now.

As 2023 was a bumper crop for tourism in San Francisco, the industry was met with more challenges.  In June two of the city's biggest hotels, the Hilton San Francisco Union Square (the largest in the city with 3000 rooms) and the Parc 55 complex were valued at $1.6 Billion in 2015.  In 2023, they were reassessed and valued at just $550 million.  The official explanation was the bonds that backed that mortgage had been downgraded repeatedly. 

The hotels were placed into receivership, and more nails were bitten across San Francisco’s hospitality community.  Yet this fiduciary problem wasn't necessarily specific to San Francisco.  Worldwide, many hotels have yet to recover from the pandemic, the effects of which has not been accurately calculated.