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Tech and Tourists Help Spur Surge in California's Bay Area Hotel Business

San Francisco Market Generated a 20.6% Increase in Revenue

By George Avalos, Contra Costa Times, Walnut Creek, Calif.McClatchy-Tribune Regional News

Jan. 04, 2012--The hotel market has roared back in the Bay Area, an upswing that suggests the region's battered lodging sector is finally putting the devastation of the recession behind it.

"The Bay Area is having the strongest revenue growth in the nation," said Thomas Callahan, president of PKF Consulting, which tracks the hotel industry.

Tourists drawn to the region's attractions and business travelers working with the Bay Area's booming tech sector have powered a surge in revenue per available room, considered a vital metric of the health of a local hotel market.

The strongest upswing is occurring in the San Francisco-San Mateo-Marin market, which was the best performer in California. But the East Bay was nearly as strong, while the South Bay hotel sector also posted sturdy gains, according to a report prepared by Smith Travel Research.

In the first 11 months of 2011, the San Francisco hotel market generated a 20.6 percent increase in revenue compared with the same period in 2010, while the East Bay was up 15.8 percent and the South Bay had an 11.1 percent gain.

"We're seeing incredible revenue numbers," said Alan Reay, president of Atlas Hospitality Group, an Irvine-based firm that tracks the California lodging market. "This is a very robust and dramatic rebound for the hotel market in the whole Bay Area."

California hotels overall posted an 11.2 percent increase in revenue, while the United States was up 8.2 percent, Smith Travel


"No matter how you slice it, hoteliers have to be happy about these numbers," said Jeff Higley, editorial director with Hotel News Now. "These figures are pretty heady stuff."

Analysts believe that an improving economy and bustling technology industry are among the factors behind the improvement. But they also point to supply and demand as vital elements.

"There has been almost no new hotel supply developed in the Bay Area in the last five years," Callahan said.

With demand rising, hotel operators are able to charge more for their rooms.

The relatively weak U.S. dollar may also be playing a role, Reay said. Although the euro has plunged relative to the dollar, the American greenback is flabby enough that tourists from Asia might find their cash goes further in the United States. Plus, some U.S. residents who perceive their dollars might not stretch as far abroad may feel more inclined to vacation within the United States, Reay said. California would be a popular destination for travel within the country.

Analysts also predict a decent 2012 for the Bay Area hotel market, coming on top of strong gains in 2011. Measured by revenue per available room, the South Bay should experience an 8 percent increase in 2012, the East Bay should be up 7.8 percent and the San Francisco area is expected to increase 7.5 percent, according to predictions by PKF Consulting.

The improvement in hotel business has also created jobs. In the 12 months that ended in November, the Bay Area added 5,500 leisure and hospitality jobs, according to this newspaper's analysis of figures supplied by the state's Employment Development Department.

The strongest leisure and hospitality industry gains came in the San Francisco metro area, which added 3,900 jobs in the one-year period. The South Bay added 700 jobs in that industry, while the East Bay gained 300 jobs and Napa County added 400.

The trend is encouraging, but analysts cautioned that the region's hotel market hasn't regained the heights it scaled before the recession -- although the region is getting close to those revenue levels.

"We are in catch-up mode," Callahan said. "But by the end of this year, we should be back up to where we were in 2007."

Contact George Avalos at 925-977-8477. Follow him at


(c)2012 the Contra Costa Times (Walnut Creek, Calif.)

Visit the Contra Costa Times (Walnut Creek, Calif.) at

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