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Editor’s Note: This is the eleventh in a 15-part series (appearing on LodgingMagazine.com each Monday) examining the performance of various markets in the United States. The following is courtesy of Deloitte’s “Hospitality Vision US Performance Review.”
In 2011, San Francisco was a top-performing market in the US, with a nearly $8 billion tourism industry whose growth exceeded the national average.
As STR metrics make clear, San Francisco reported the highest revPAR increase — a 20.6 percent gain — among the top US markets for the year-to-November 2011. San Francisco also posted the largest average room rate (ADR) gain with double-digit growth (14.5 percent) to $156.23. The ADR increase drove the bulk of San Francisco’s revPAR growth.
Why did San Francisco come out ahead?
STR credits the city’s diverse demand base (since San Francisco is a financial center, convention market, and leisure destination), its role as a gateway for international travel (which prompts hotels like the Hilton Huanying to offer Chinese travelers authentic amenities), and its hospitable climate.
Another contributing factor was the lack of growth in room inventory: 2011 saw no new construction, and only six properties entered the planning phase, as reported by the Contra Costa Times. Because of the high cost of building in San Francisco, investors put their money into existing properties: as noted by the Atlas Hospitality Group, nine major hotels were sold for a total dollar volume of more than $780 million. At the same time, millions were spent on hotel renovations across the city and region. For example, according to the San Francisco Business Times, the Hilton San Francisco Union Square started its $50 million project to remake 550 of its 1,908 guest rooms. The hotel’s 20,000-square-foot ballroom and 31 of its meeting rooms will be expanded and updated with contemporary design features, as will the property's public spaces.
Also, the convention business was relatively strong. For example, the International Pow Wow travel convention — held in San Francisco again for the first time since 1992 — attracted 3,500 exhibitors, more than 1,000 foreign tour operators, and 450 travel writers to the Moscone Center with the aim of selling American vacation packages. Over the next three years, that convention alone could boost tourism by $350 million (bizjournals.com).
But when it came to recovery, not all parts of the city were equal. The San Francisco Chronicle reports that times were tough for hotels in San Francisco's Nob Hill area. The Stanford Court defaulted on an $89 million loan. The Mark Hopkins and Huntington Court were both put up for sale, while the Fairmont lost a protracted battle with the city over its plans to go part-condo.
Terminal 2 at San Francisco International Airport opened, offering such amenities as 350 power outlets, art exhibits with cell phone guided tours, and a play area for children. The transformation was described by The New York Times as a $383 million gutting of a drab 1950s-era building that last served as the international terminal before being shuttered more than a decade ago. Also, a city mandate had required that terminal 2 achieve at least LEED Silver status for its energy efficiency, water conservation, and other environment-friendly attributes.42 In November, The Arizona Republic reported that Allegiant Air will begin service to San Francisco in early 2012.
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