As San Francisco’s struggling hotel industry begins to show signs of recovery, the city’s Tourism Improvement District (TID) board has announced a significant increase in its assessment on nightly hotel rates to help boost tourism and prevent the loss of major conventions.
The TID board, which includes key hoteliers and city officials, approved what was described as an “emergency” fee hike—the second such increase this year—citing concerns that “San Francisco is not a competitive destination at this moment,” according to the *San Francisco Business Times*.
Starting November 1, the TID fee will rise to 2.25%, generating an estimated $14.6 million in additional revenue. Most of this will go to SF Travel, the city’s marketing agency responsible for promoting tourism and convention business.
The 11-member TID board, which includes SF Travel’s interim Board Chair John Anderson, City Administrator Carmen Chu, and general managers from several major downtown hotels, emphasized in a public letter dated August 24 that SF Travel urgently needs more funding.
Revenue from the TID fee has dropped significantly since the pandemic. In 2019, a 1% fee brought in nearly $26 million, but many large events canceled their conferences at San Francisco’s Moscone Center after it reopened in 2021.
“Our competitors across the country are generating much more revenue, allowing their destination marketing organizations (DMOs) to be better staffed and run more extensive programs and campaigns,” said Markus Treppenhauer, general manager of the Fairmont San Francisco and chair of the TID board. “As a result, we are regularly losing business that we could have easily secured.”
The additional funding will allow SF Travel, which manages citywide events at Moscone, to offer meeting planners incentives such as transportation for attendees between hotels and the convention center, increased security at the downtown venue, and discounts on venue rental fees.
This latest fee hike follows a 15-year extension and renewal of the TID, which took effect this year and runs through 2038. That renewal already raised the hotel fee from its pre-pandemic levels of 1% or 0.75%—depending on a hotel’s proximity to Moscone—to 1.25% and 1%, respectively.
The news of the fee increase came as Salesforce’s Dreamforce conference returned to Moscone, an event expected to attract at least 45,000 attendees and generate an estimated $93 million in economic impact for the city.
While both domestic and international travel to San Francisco is gradually improving, challenges remain. Marcus & Millichap projects that the city’s revenue per available room (RevPAR) will reach $169 by the end of the year, with occupancy climbing to 70%, still 12% below 2019 levels.
The depth of the city’s hotel sector’s struggles is highlighted by a recent report from Trepp, which revealed that the delinquency rate for commercial mortgage-backed securities (CMBS) loans tied to San Francisco hotels had surged to nearly 42% in June, up from just 5.7% a year earlier. This marks the largest annual increase among the 25 largest metro markets in the U.S.
Source: globest.com