San Francisco to add 7,100 hotel rooms by 2020

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July 13, 2017

By: Sonia Greenlee, Senior Vice President, JLL Hotels & Hospitality

It’s reset time for the San Francisco hospitality market. After 9 years of little or no new hotel construction, San Francisco is set to see four major hotels open this year. They are: Yotel SF in mid-Market; Hotel Via in SOMA; Virgin Hotel and the Marriott Mission Bay. Another six or so hotels are also in planning and due to open by 2020. In total, more than 7,100 rooms have been proposed or are under development in the San Francisco Market. More than 1,700 of those rooms are in the city’s urban core, raising the downtown inventory by five percent.

Pictured above: (top) Hilton San Francisco Union Square,  (bottom) The Ritz Carlton San Francisco. Photo credit: JLL. Project manager: Sonia Greenlee

Meanwhile, the $500M expansion of Moscone Center is well underway. Upon its completion in 2018, the expansion will more than double the amount of contiguous exhibition space at the venue, making it more competitive with other venues around the country. The downside:  projections suggest that local hoteliers will lose 490,000 room nights as a result of the closure.

Investment frenzy

There is an upside. As one of the top 10 markets in the country for hotel supply-demand performance, San Francisco has been a strong target for investors. Two of the nation’s significant single asset transactions in the first quarter were in San Francisco: the sales of the Intercontinental Mark Hopkins and Holiday Inn Fisherman’s Wharf. Many other properties have changed hands over the last few years and more trades are expected this year as we enter the late stages of the current economic cycle in the hotel market.

Three R’s

The downtime created by Moscone’s closure gives owners of downtown and SOMA hotels a perfect opportunity to invest in the future of their properties. By refreshing and renovating these properties, perhaps even repositioning for a new audience, existing hotels may compete on a more level playing field with the expected rash of new openings in the next cycle.

Some major renovations are already underway. The iconic Stanford Court on Nob Hill is in the midst of a $16 million renovation. The Hotel Nikko will complete an $80M renovation later this year and, so too, will the Westin St. Francis, Intercontinental Mark Hopkins and Four Seasons. The St. Regis and 1,500-room Marriott Marquis are also slated for renovation. More will likely follow.

Rehab Trends

Some of the current trends in hotel renovations include:

  • Tub/shower conversions are becoming one of the more common major improvements to guest rooms. Many older hotels have tub/shower combos that aren’t so popular with today’s hotels guests, most of whom prefer just the shower. Creating more luxurious showers can elevate room ambiance and look, which can positively impact average daily room rates (ADRs).
  • Creating a more active lobby environment is a focus for many hotel owners, as they strive to drive the buzz of the entry experience as “the place to be” and, in turn, drive revenue. Adding communal tables, a bar, multimedia screens, and upgraded lighting, along with a design that tells a unique local story, creates an authentic experience for guests and develops a sense of place that adds to the hotel’s overall appeal.
  • Finally, installing healthy Grab’n’Go & Market Place venues in lobbies is an option for some hotels. This strategy works well for hotels trying move away from in-room dining service to help rein in operating costs, and feeds a need for business travelers who don’t have time for a sit down breakfast or are speeding to meetings.

Thanks to business expansion and tourism, San Francisco’s hotel market is still performing strongly. But, hotel operators and owners shouldn’t rest on their laurels. Owners who assess the anticipated competitiveness of their property now against the market’s future state will be well positioned for the market’s next phase of growth.

Visit jll.com/pdsnorthwest to read case studies about the projects pictured above. 

About me

Hospitality & hotel project execution is my passion. For more than 17 years I have led teams that successfully delivered multi-million dollar renovation projects on behalf of top hotel brands like Hilton, Hyatt, Ritz Carlton, and Marriott, plus several high-end boutique hotels. My teams collaborate across the entire JLL organization, leveraging our hospitality expertise and serving clients in major markets. I am based in the San Francisco JLL office and have been a featured speaker at NEWH, BisNow and Boutique Design West. 

You can contact me directly by phone at +1(415) 457-7757 or via email at sonia.greenlee@am.jll.com.

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