Market Report San Francisco

HVS San Francisco Lodging Market Report - By Aaron Solaimani

San Francisco’s growth and economic expansion continue. With near-peak demand levels and a limited pipeline of new supply, hotel performance has been outstanding and has fueled a healthy transaction market.

HVS San Francisco’s growth and economic expansion continue, with much of the momentum being generated by the tech sector. With near-peak demand levels and a limited pipeline of new supply, hotel performance has been outstanding and has fueled a healthy transaction market. Areas of concern include the dearth of quality hotel rooms relative to demand levels, the 2017 convention calendar and Moscone Convention Center expansion, and the long-term effects of Airbnb. Owners, operators, and investors remain bullish about the potential of San Francisco’s lodging market in 2015 and beyond. 

San Francisco is a major hub for high-tech employment, and is revered both as a tourist destination and as a gateway to the Asia Pacific region. As such, the city draws a considerable number of both leisure and convention guests. Its hotel stock is primarily clustered in five loosely defined districts near demand generators: Union Square and the Financial District, which although different submarkets, primarily play host to full-service hotels and conversions to lifestyle boutique hotels; South of Market (SoMa), which is home to the city’s convention center and has seen the most new development over the past two decades; the tourist beacon of Fisherman’s Wharf, which contains primarily branded hotels, of which a select few are undergoing major renovation or rebranding; and, finally, the Lombard Street/Van Ness Corridor, which features mostly limited-service hotels and value-oriented motels. 

San Francisco experienced unprecedented tourism levels in 2014, welcoming more than 18 million visitors—an increase of 6.5% from 2013. These visitors spent $10.7 billion in 2014, up 13.7% from the previous year. The tourism industry generated $665 million in taxes for the city in 2014, up 8% from the previous year. The number of jobs supported by tourism rose 13.2% to 87,005 jobs in 2014, with an annual payroll of $2.67 billion, an increase of 15.9%.

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