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San Francisco Hotels Experiencing a Flood of Sales, Acquisitions and Renovations as
 Occupancy Rates for the City's 33,000 Hotel Rooms Topped 88% in August, 2007

By Janet Fullwood, The Sacramento Bee, Calif.McClatchy-Tribune Regional News

Nov. 18, 2007 - We first noticed the changes last spring, on what otherwise was a routine trip to San Francisco. The neighborhoods around Union Square and the Financial District buzzed with commerce as usual, yet here and there, things seemed curiously out of kilter.

After a few laps around the area, it hit me: Didn't the Pan Pacific Hotel used to be on the corner of Post and Mason? What was up with the new sign identifying it as a JW Marriott?

The more I looked, the more I saw: The Park Hyatt had morphed into a Le Meridien since I last took notice. The Argent had become a Westin, the Holiday Inn Financial District had been reflagged as a Hilton. And where did that fancy-looking Hotel Whitcomb come from? I'd never noticed a hotel on that block of Market Street before.

Turns out, the ownership changes that caught my eye were but flecks of foam on a tidal wave of investment that has swept the city's hotel industry in the past year and a half, resulting in a flood of sales, acquisitions and renovations. No wonder frequent visitors to the city are confused.

"There were more hotels sold in the last 18 months than have been sold in the last 10 years combined," confirmed Tom Callahan with PKF Consulting in San Francisco. "It's a confluence of events probably never to be relived."

A robust market for capital investment in commercial real estate, coupled with limited supply and high demand, are behind the unparalleled boom.

"Within real estate, hotels are considered quite attractive. And particularly in the Bay Area, there's no new construction coming in except for the InterContinental. It's a gateway city with nowhere to grow," Callahan said.

The $200 million, 550-room InterContinental San Francisco going up at Fifth and Howard, smack against the entrance to the Bay Bridge, is perhaps the most visible sign that San Francisco's hospitality industry has snapped out of the post-9/11 doldrums. But what's going on inside existing hotel buildings throughout the city is equally momentous. Dozens of establishments large and small have refreshed their guest rooms and lobbies in the past year, and some also have invested tens of millions in structural renovations.

"There's so much going on with hotels right now we can't even get the liquidators to come out -- there are so many renovations they don't even want the stuff," said Yvonne Lembi- Detert, president of Personality Hotels, a boutique group in the midst of refurnishing guest rooms at three of its existing properties and renovating two more it just purchased.

Evidently, the face-lifts are paying off: Citywide, occupancy rates for San Francisco's 33,000 hotel rooms topped 88 percent in August and are expected to average 79 percent for the year, according to PKF. That's up 6 percent over last year. Average daily room rates are heading up, too, from $167 last year to an anticipated $180 for 2007.

Travelers feeling the pinch can find solace in the fact that San Francisco is still a relative bargain so far as big cities go, especially when compared with world financial centers such as New York, Tokyo or London.

"The hotel room you get in San Francisco would cost 100 percent more in New York," notes Callahan, attributing the difference to the fact that New York is a major corporate market whereas San Francisco attracts mostly leisure and convention travelers.

Another difference between the coastal rivals: In New York, the end-of-year holiday season brings jacked-up rates and sold-out performance halls. San Francisco is just the opposite, with December and January drawing the fewest tourists and hotels offering their lowest rates and most attractive packages of the year.

It's a great time for visitors from outlying areas like Sacramento to partake of big-city shopping and entertainment opportunities. So uncrowded is the city during the winter months that locals as well as visitors often can hop on a cable car without waiting in line.

We recently spent several days in the City by the Bay taking a peek at some of the recent hotel renovations. Not having time to check out everything, we focused most of our time on properties owned or managed by the three main players in the city's boutique hotel sector.

All three companies -- Joie de Vivre Hospitality, Personality Hotels and the Kimpton Group -- are known for the innovative ways in which they distinguish themselves from the big-box, brand-name operators.

We also looked in on the new Orchard Garden Hotel, the first in the city to receive certification under the U.S. Green Building Council's stringent Leadership in Energy and Environmental Design program.

New names, new face-lifts

Here are more hotel changes taking place in San Francisco.

--The Hotel Savoy at 580 Geary St. is now the Best Western Hotel California. Guest rooms and public spaces were remodeled last summer.

--Campton Place Hotel at 430 Stockton St. has been acquired by Taj Resorts and Palaces.

--The Cartwright Hotel at 524 Sutter St. has been acquired by Larkspur Hotels; guest rooms have been redecorated.

--The Hotel Griffon at 155 Steuart St. has been acquired by Greystone Hospitality and the guest rooms remodeled.

--The Hilton San Francisco at 333 O'Farrell St. has been remodeled to the tune of $13 million.

--The former Holiday Inn at 750 Kearny St. is now the Hilton San Francisco Financial District. Remodel budget is $40 million.

--The Hyatt at Fisherman's Wharf at 555 North Point St. is undergoing a $6 million face-lift that includes a lobby redesign and renovation of all guest rooms.

--The InterContinental Mark Hopkins at One Nob Hill is getting a $400,000 infusion that includes a new bedding program.

--The InterContinental San Francisco will open in February with 550 rooms at 888 Howard St.

--The Inn at Union Square at 440 Post St. has completed room and lobby upgrades.

--The former Pan Pacific San Francisco at 500 Post St. is now the JW Marriott San Francisco. About $10 million is being spent to turn it into an "arts" hotel.

--The Park Hyatt San Francisco at 333 Battery St. has become the Le Meridien San Francisco.

--The Monticello Inn at 127 Ellis St. has been acquired by Larkspur Hotels and is getting a $6 million renovation.

--The Omni San Francisco at 500 California St. is soon to begin a $6 million remodel program.

--The La Quinta San Francisco Downtown at 1050 Van Ness Ave. is now the Opal San Francisco. A soft-goods renovation is under way.

--The Renaissance Parc 55 Hotel at 55 Cyril Magnin St. is now the Parc 55 Hotel. A $25 million infusion is planned to take guest rooms to a higher level.

--The San Francisco Marriott at 55 Fourth St. has redesigned its public spaces.

--The Stanford Court at 905 California St. is spending $32 million to renovate guest rooms, meeting rooms, lobby and other facilities.

--The Villa Florence Hotel at 225 Powell St. has been acquired by Larkspur Hotels. Plans call for a $5 million renovation.

--The W San Francisco at 181 Third St. is updating its guest rooms with modern furniture and additional storage.

--The Westin St. Francis at 335 Powell St. has been sold to Strategic Hotels & Resorts; remodel plans are pending.

--The Argent Hotel at 50 Third St. is now the Westin St. Francisco Market Street, with $30 million in capital improvements under way.

--The Ramada Plaza at 1231 Market St. is now the Hotel Whitcomb, with $5 million in upgrades planned.

Source: San Francisco Convention & Visitors Bureau


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