Park Hotels & Resorts, the operator of two of San Francisco’s best-known hotels, is handing over the keys to the properties — essentially abandoning a city that’s falling on hard times.
Park Hotel has halted payments on a $725 million loan related to the Hilton Union Square and Parc 55, the Real Estate Investment Trust said Monday. The hotels, just blocks from the Moscone Center’s once-busy conference hall, have nearly 3,000 rooms in total.
A slowing economy and a thunderclap of remote work have emptied offices across the country, and there are warnings of a ticking bomb in the commercial real estate market. Downtown San Francisco has been hit hard by a wave of tech layoffs and a sharp decline in Moscone’s conference schedule.
“We believe more than ever that San Francisco’s path to recovery will be marred and lengthened by major challenges” that will reduce demand for business and leisure travel, said Thomas J. Baltimore Jr., general manager of Park Hotels & Resorts.
The company previously warned investors not to weigh options for the loan, telling analysts last month that the properties made a small contribution to its 2023 guidance.
Park Hotels & Resorts shares rose more than 2 percent on Tuesday. The company’s portfolio includes 46 hotels, including Hiltons in Chicago, Honolulu, Midtown Manhattan and San Diego.
The sudden departure of Park Hotels & Resorts raises concerns others may follow suit. San Francisco relies heavily on business travel, which has not yet returned to pre-pandemic levels. JPMorgan Chase brought back its annual healthcare conference this year, but other events have been postponed, including VMWare’s technology conference.
Not everyone gives up. “We’re not writing San Francisco off,” James Risoleo, chief executive officer of Host Hotels & Resorts, parent company of the Marriott Marquis San Francisco, told analysts in May.
“I worry about how the market is doing compared to 2019 and what’s happened with the layoffs in the tech world and things like that and the return to office in that market is really lagging behind the rest of the country,” he said . “But it’s the center of technology and will be the center of artificial intelligence when the world returns.”
