Newbuild hotels shifting San Francisco’s center of luxury

(Source: Internet)

For the better part of a century, San Francisco’s luxury accommodations largely meant Nob Hill icons such as the Fairmont and InterContinental Mark Hopkins, not to mention the addition of the Ritz-Carlton a quarter-century ago.

But recent announcements of plans by Waldorf Astoria and Langham suggest that the city’s luxury epicenter, or at least one hub of activity, is moving about a mile southeast, to San Francisco’s South of Market district, or SoMa.

Slated for a 2020 debut, the Langham Place San Francisco will be developed by Pacific Eagle, the U.S. affiliate of Hong Kong-based Langham parent Great Eagle Holdings. The property will likely have at least 200 rooms and will be designed by renowned architect Renzo Piano.

San Francisco’s first Waldorf Astoria will open in 2021 in the first 21 stories of a Mission Street tower. The 171-room hotel will include personal concierges and a Peacock Alley restaurant.

The San Francisco market has long been one of the country’s most lucrative. Through June, the San Francisco-San Mateo market’s RevPAR rose 10% from a year earlier, marking the second-fastest growth rate after the Los Angeles-Long Beach market, according to STR.

And with an average of $195 a night, San Francisco’s room rates have been the second most expensive in the U.S. after New York.

The development of both hotels has been spurred by the $4.5 billion Transbay Transit Center. That project, billed as the “Grand Central Station of the West,” is expected to serve more than 100,000 passengers a day and 11 transit systems, including local bus and light-rail lines as well as the Caltrain commuter line, Amtrak and, ultimately, California’s high-speed rail service.

The project is receiving local, state and federal funding. The first phase of the project, which will feature a 5.4-acre park above the facility, is scheduled to open next year, and it is expected to also spur the development of 4,500 condominiums and apartments in an area that until a decade or so ago was better known for warehouses and tool shops.

(Source: Internet)

“This used to be a neighborhood where a 10- to 12-story building stuck out like a sore thumb,” said San Francisco-based hotel consultant Rick Swig, whose family owned the city’s Fairmont from 1945 to 1998 and who has kept his office in the neighborhood since 2000. “Now you can’t see these buildings anymore because they’re dwarfed by 40- to 60-story buildings.”

With notoriously expensive real estate, space-constrained San Francisco has seen little in the way of new hotel development in the past decade or so.

That said, there has been a mini-boom of hotel development about a mile southwest of the Transbay site, where the convergence of the Tenderloin, Civic Center and SoMa districts has been rechristened Mid-Market. With older properties being rehabbed into offices for companies such as Twitter and Uber in recent years, hotel operators such as Yotel and Proper Hotels (which is headed by Viceroy Hotel Group founder Brad Korzen) are planning openings there.

But whereas the San Francisco Proper and Yotel are being rebuilt on the sites of the Renoir Hotel and Grant Building sites, respectively, the Waldorf and Langham Place will both be newbuilds.

Swig said that the high cost of both development and operations in union-heavy San Francisco will likely put pressure on the hotels’ operators to generate room rates well above $500 a night while maintaining 80%-plus occupancy rates.

Still, both Swig and Pacific Eagle senior vice president Hans Galland said that the combination of the Transbay development, newer commercial development and the Moscone Convention Center nearby will likely give both hotels a healthy base of higher-end business and leisure travelers.

“While Union Square is more well-known to tourists, and Nob Hill has the cachet of having high-end residential real estate, SoMa is becoming known as a center of business, nightlife and contemporary architecture,” Galland said. “We feel that a luxury hotel of Langham’s caliber will be right at home there.”