Lack of International, Business Travel Is Holding the
Market Back

By Trevor Simpson
Hotel News Now
December 20, 2022 | 8:08 AM
The San Francisco market had positive growth in
occupancy, average daily rate and revenue per available
room in 2022, but still remains significantly behind its
peers on the top 25 market list and its pre-pandemic
levels from 2019.
According to data from STR, CoStar’s hospitality analytics
firm, San Francisco in 2022 — through November — had
an occupancy of 64.7%, an ADR of $208.96 and a RevPAR
of $138.18, all stark improvements compared to 2021
levels but a sharp decrease from 2019 levels. In 2019, the
market had an occupancy of 81.9%, an ADR of $249.30
and a RevPAR of $204.13.

Krishelle Cruz, vice president of national sales for Island
Hospitality, said some of the increases can be attributed
to inflation, but San Francisco's hotel market still has a
ways to go.
“The San Francisco market continued to see its gradual or
slow or minimal growth year over year in terms of
occupancy, and then you did see decent rise in the
average daily rate, naturally due to inflation, but
compared to pre-pandemic levels, the market still hasn’t
fully recovered,” Cruz said.
Richard Sandoval, vice president of operations for Spire
Hospitality, said San Francisco began recovering in
September and is in a better spot now than it was a year
ago, but compared to other big markets, it’s recovering
much more slowly.
“Obviously there are 25 major markets tracked in the U.S.,
and in 2019, San Francisco was No. 1. Year to date, San
Francisco’s No. 25,” he said. “The beginning of the year
was very challenging, and you could definitely see the
market’s recovery was impacted at every level.”
The market’s slow return to form can be attributed to a
multitude of factors, chief among those the lack of
international and business travel. And perhaps just as

important as the lack of those two segments is that no
other segment took a step up in the absence, Sandoval
said.
“There’s not one segment that has saved San Francisco at
any point in time,” he said.

International Travel
Cruz said that nearly a third of visitors to Island
Hospitality’s San Francisco hotels were from international
markets in 2019, with more than 50% of those visitors
coming from countries in Asia. In 2022, travel from Asian
countries represented only 29% of 2019 levels. Even travel
from European countries, which Sandoval called “the
most positive” thing of the past year, only reached 62% of
pre-pandemic levels.
Travel from Asian countries was still hindered by strict
COVID-19 policies that barred travel to the United States.
Justin Schlageter, senior appraiser at CBRE Group, said
South Korea and Japan have lifted a lot of restrictions,
which led to some demand in the market this year,
however China is still a massive holdout.
“China was really the largest source of international travel
pre-pandemic, and that’s, for all intents and purposes,

just completely dried up,” he said. “With China lifting
their restrictions, I think that’s one of the caveats there
that San Francisco is really relying on, that reinstatement
of Chinese international travel.”
Sandoval said the impact of international travel goes
beyond filling occupancy at hotels. International travelers
also spend more in the city compared to the average
traveler since they’re trying to make the most of their
experience in the states.
“It’s usually important because [international travelers]
do have longer lengths of stay. They’re also the ones that
are helping the general tourist dollar because they're
looking for experiences, they’re doing the activities,
they’re in the restaurants, they’re truly of the city and
they’re in the space looking for the San Francisco
experience,” he said.

Business Travel
Numbers are down on business travel across the U.S., but
for a big tech city reliant on it like San Francisco, the
implications of missing corporate travel are more
significant.

Cruz said travelers flocked to popular leisure destinations
such as San Diego and New York as soon as they could
travel again, helping those cities inch closer to pre-
pandemic levels while San Francisco awaited the return of
business.
“We saw a flip of the switch in the leisure destination
market,” she said. “When restrictions started to ease, we
saw a lot of those domestic travelers eager to get out of
their house, just from sheltering in place for so long that
those destinations outperformed and recovered a lot
quicker than a San Francisco market that is dependent on
big tech.”
Office occupancy is in the mid-30% to low 40% range in
the San Francisco market due to more flexible work-from-
home schedules, Schlageter said. If no one is in-person in
the city, then there’s no reason to meet for business there,
either.
The market also remains off pace from 2019 for
convention center bookings. Sandoval said San Francisco
cleared 900,000 rooms booked for conventions in 2019 but
fell short of 400,000 in 2022. That number has already
grown considerably for 2023, with 650,000 rooms on the
books.

“You’re talking about a 300,000-room-night lift from
where things are actualizing in 2022. Still not the 900,000
plus that were here in ’19, but that is better recovery,” he
said.

Future of the Market
Although 2023 levels aren’t projected to return to 2019
levels, San Francisco is on pace for continued, but slow,
growth.
“[There are] reasons to be optimistic — maybe not bullish,
but optimistic,” Sandoval said. “Comparatively, you’re not
recovered to ’19 levels, but just much more substantial
performance [on the books in 2023] than you had in ’22.”
Schlageter said he projects stabilization will come in the
market in either 2024 or 2025, when hopefully
international travel and convention center activity pick
up.
An often-used term coming out of the pandemic was:
“This is the new normal.” Cruz said she’s over that saying
and adjusted it to be more forward-looking.
“In terms of the Bay Area … I just stopped saying that. I
said, ‘It’s going to be the next normal. Whatever comes,

that’ll be the new norm. Whatever the next factor is, then
that’s going to be the next norm.’ It’s being able to adapt
and adjust to what we’re able to do,” she said.