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Restaurant, Hotel Industry Bounces Back in Bay Area in California

By George Avalos, Contra Costa TimesMcClatchy-Tribune Regional News

May 28--Restaurants and hotels in the Bay Area have rebounded strongly from the economic downturn, and a boost in sales from free-spending customers has led to more hiring -- fresh indicators of the resurgence of the region's economy.

Since the depths of the dining sector's downturn in spring 2010, restaurants and drinking places have added 33,400 jobs, a 15 percent increase. Over the same period, the hotel industry has added 2,800 jobs, a 6 percent increase.

It's a sign of the gathering strength of the economy's rebound. Experts point out that spending on things such as hotels and restaurants is the first expenditure that consumers cut amid a downturn and the last to come back as the economy rebounds, until people are certain their jobs are secure.

"People are no longer putting their lives on hold," said Scott Anderson, chief economist with San Francisco-based Bank of the West. "They are going on with their lives. And that means more discretionary spending."

Take Shuzair Melik, of Pleasanton, who eats out often. "A lot of my friends say they are dining out a lot more these days," he said. "People are getting back to restaurants."

Hotels are seeing a similar trend.

Hotels and motels in the Bay Area added 900 jobs over the past 12 months, a 2 percent increase. Room rates are up 8.2 percent in the South Bay-Peninsula area, 5.5 percent in the East Bay and 2.8 percent in San Francisco.

During the first three months of this year compared with the first quarter of last year, revenue that hotel owners capture from their rooms is up 7.9 percent in the South Bay, 6.1 percent in San Francisco and 5.9 percent in the East Bay. Those rising revenues reflect both higher room rates and higher occupancy levels.

"Things are not just getting a little better with the hotel industry -- they are getting a lot better," said Alan Reay, president of Irvine-based Atlas Hospitality Group, which analyzes the lodging industry in California. "Silicon Valley, San Francisco -- those hotel markets are on fire right now."

Added Marshall Jones, sales and marketing manager with the Fairmont San Jose: "Last year, the hotel was mainly busy midweek. Now, the hotel is busy all week and on weekends."

The improvement in the economy is drawing both leisure and business travelers to the region.

"The Bay Area is one of the strongest hotel markets in the entire country," said Ashish Patel, a consultant with the San Francisco office of PKF Consulting, a firm that tracks the national hotel market. "Silicon Valley is a hub for technology. San Francisco has the leisure market."

In a sign that tourist travel is sturdy, Napa County hotels have experienced a 7.8

percent increase in revenue per available room, PKF reported.

The hotel market has improved so much that Atlas Hospitality has shifted its focus from tracking hotel foreclosures to keeping tabs on construction of new hotels.

"There is a shortage of new hotel development in San Jose and San Francisco, and those markets are hot," said Reay of Atlas Hospitality Group. "We are getting a lot of calls from developers who want to build hotels."

In San Jose, developers are planning to build 650 new hotel rooms, which, by Reay's estimates, is the largest current burst of lodging construction in a Bay Area city.

"We are feeling good about the hotel market," said David Gibbons, a senior vice president with Barry Swenson Builder, which is developing hotel projects in San Jose and Santa Clara. "I'm very optimistic."

The upswing in hotels is benefiting from a consumer bounce-back amid improved job prospects in the Bay Area overall.

"Consumer spending has been rising," said Jordan Levine, director of research and an economist with Beacon Economics. "Domestic residents are going out to drink and eat and visit hotels and loosen the purse strings."

K.C. Burney, an Atlanta resident who recently made a business trip to San Jose, is among those experiencing better economic times.

"I'm traveling more for work," she said. "I'm going to a lot of the restaurants downtown."

Contact George Avalos at 408-373-3556 or 925-977-8477. Follow him at


(c)2013 the Contra Costa Times (Walnut Creek, Calif.)

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