Park Hotels Gives Up on San Francisco’s Doggedly Weak Demand

Daily Lodging Report

Skift’s Daily Lodging Report is a subscription-required, email-only newsletter read by anyone and everyone in the hotel investor, owner, and operator space, including CEOs of some of the industry’s top brands. It covers North America and Asia Pacific with two separate regional editions.

Here are some excerpts from Daily Lodging Report from the past week. If you’re not a subscriber, you should be. Get news on hotel deals, development, stocks, and career moves. Sign up here, now.

“Park Hotels & Resorts, the operator of two of the most prominent hotels in San Francisco, is handing in the keys on the properties — and, in essence, giving up on a city that has fallen on hard times,” reported The New York Times on June 6. Park Hotel halted payments on a $725 million loan linked to the Hilton Union Square and Parc 55. The two hotels make up 9 percent of the city’s hotel rooms, reported The Real Deal.

“We believe San Francisco’s path to recovery remains clouded and elongated by major challenges,” said Thomas J. Baltimore Jr., the CEO of Park Hotels & Resorts, said on behalf of the real estate investment trust. Remote work by tech companies — who are also laying off staff — has undercut tax revenue, knee-capping the city’s ability to tame a homelessness crisis and (perceived or real) lawlessness.

Here are nine other headlines in hotel deals and development that caught our eye this week, but you need to subscribe to Daily Lodging Report to get the daily downloads that are much more detailed.

Marriott’s Newest Brand

Marriott International will expand more in the affordable midscale lodging segment, following its recent entry into the segment with City Express by Marriott in Latin America. Marriott’s new brand, now more formally announced, has not been named.

The affordable midscale extended stay brand is intended to deliver reasonably priced modern comfort for guests seeking to stay 15 or more nights in the U.S. & Canada and will typically be priced at about $80 a night. The prototype model targets a build cost of $13-$14 million, with 124 studios as a typical plan. Hospitality, in collaboration with Whitman Peterson, expects to break ground on three this year. (More, via Skift.)

Industry Optimism at Conferences

Truist, the research arm of the investment bank, described the tone of the NY Lodging Conference as Less Caution, More Optimism. The various segments along with side meetings and analyst conferences seemed more like optimism about the business, a whole lot of caution on development due to financing. As Truist put it, the news on Park giving back two San Francisco hotels to lenders could influence other public hotel owners to consider divesting some of their assets. Besides lending concerns, the other chorus we have seen is the long-awaited distressed sale bonanza may finally be near.

Meanwhile, the Morgan Stanley Travel & Leisure Conference contained much of the same from hotel executives including confirmation that business remains good with financing being the big question mark. The expectations of a future boom of Chinese travelers continues to fuel the optimism from hotel companies, particularly the larger international operators. While the leisure and resort business could be facing headwinds, particularly as we get deeper into the summer, Group/Urban/China is still outperforming and executives believe margins can hold up.

Owners Are Cautious About Pricing, Loans, and Labor

The NYU School of Professional Studies Jonathan M. Tisch Center of Hospitality and Boston Consulting Group collaborated on a survey of hotel owners, management companies, and other industry stakeholders to gauge their sentiment and prospects for the hospitality industry. The survey found new construction is down to 2015 levels. Hoteliers polled said they expect room rates to rise by 8.3% to 8.8% over the next 18 months. Yet high-interest rates are spooking investors in hotels as in other commercial property sectors. 89% of hoteliers consider rates above 8% unacceptable for taking out a loan.

Prolonged staffing shortages are adding to investors’ concerns; 70% of hotel owners view the hotel industry as less attractive if labor problems persist. 60% of respondents reported that they are somewhat or severely short-staffed, which NYU SPS/BCG estimate costs hoteliers about 7 percentage points of revenue and two points of operating margin.

Sonesta’s Newest Brands

Sonesta International Hotel Corporation announced the debut of two soft brands within its expanding portfolio, Classico, A Sonesta Collection and MOD, A Sonesta Collection. Marketed by Sonesta’s Luxury and Lifestyle Lodging Development Team, each Classico property will have a distinct identity and offer signature local cuisine, traditional high-touch service and refined interiors. The first Sonesta Classico brand property is the 40-room Z Ocean Hotel in Miami, Florida’s South Beach neighborhood, which opened on May 1, 2023. The first MOD property will launch as Hotel 11 in Calgary, Alberta, Canada. 

Texas’s Newest Luxury Hotel

Ryman Hospitality Properties and Blackstone Real Estate Income Trust, Inc. have a deal where Ryman will buy the JW Marriott San Antonio Hill Country Resort & Spa in San Antonio, Texas for $800 million. With 640 acres in the Texas Hill country, the resort offers 1,002 rooms plus space for meetings and events.

Boston’s Newest Luxury Hotel

Raffles Boston is set to open later this summer and is now accepting reservations for stays beginning September 1, 2023. The property marks the first mixed-use development in North America for the Raffles Hotels & Resorts brand. The $400 million, 35-story building will offer 147 guestrooms and 16 distinct gathering spaces, a “sky lobby,” and multiple food and beverage venues, gym, plus a spa and an indoor pool.

Melbourne Properties for Sale

“Sam Arnaout is hoping the exit the Melbourne-area hotel market, putting a portfolio of three ibis hotels up for sale,” reported the Australian Financial Review. Arnaout’s hawking the 250-room ibis Melbourne Hotel & Apartments, the 103-room ibis Budget Fawkner, and the 71 room ibis Budget Dandenong for at least $87 million ($130 million Australian) together.

Singapore’s New Wyndham

Wyndham Hotels and Resorts is “soft opening” a 591-key hotel, the Peninsula Excelsior Singapore, a Wyndham Hotel, located in the Civil District. Following a multi-million dollar refurbishment, the grand opening will be in 2024.  The hotel has two swimming pools, a gym and sauna, and an executive lounge for club floor guests and four multi-functional rooms.  The hotel boasts a view of both the Marina Bay and Singapore River. 

MCR Acquires Three Hotels

MCR has acquired three hotels in Florida, totaling 384 rooms, The portfolio includes The Hyatt Place Orlando/Lake Buena Vista, which boasts 169 rooms. The Hampton Inn Dayton Shores features 111 rooms and suites and the Courtyard DeLand Historic Downtown features 104 rooms and suites and two event rooms totaling 1,309 square feet of meeting space. MCR now has 13 hotels in Florida. (Context: Full Video: MCR CEO Tyler Morse at Skift Future of Lodging Forum 2023.”