San Francisco's Hospitality Industry Faces Labor Shortage, Subdued Travel As It Pushes Toward Recovery

As 2022 comes to a close, San Francisco’s hotel industry is recovering from the pandemic, albeit slowly, according to comments from industry experts at Bisnow's Bay Area Hospitality and Tourism event.

Held at the JW Marriott in San Francisco, panelists spoke on the struggles the city’s hospitality and tourism industry has experienced since the peak of the pandemic. Panelists expressed optimism about the asset class's future in the Bay Area, despite the myriad of challenges that still exist, with labor and international travel proving to be key pain points. 

"I would say it's … obviously it's been a bumpy road. And initially, the name of the game was just preserving cash and survival. When occupancy is basically one to zero overnight. And then over time, I think it's been nice to see the extent of the recovery in most markets," said Sar Peruri, Oxford Capital Group chief operating officer and partner. 

"San Francisco has been a little bit slower. But even here, we're dramatically outperforming what we thought was going to happen and how long it was going to take to sort of come back to some normalcy. I would say labor has also been sort of a double-edged sword," Peruri said. 

As far as trends that the local industry can expect, Pankow Builders Senior Project Manager Ashley Shawlee is looking for renovations to be a consistent throughline over the next couple of years, with an uptick in projects expected now that pandemic-related grace periods for construction projects are ending.

"So, I think what we're seeing are a lot of renovations right? Those will stay fairly consistent throughout the next couple of years," Shawlee said. 

"If the owner had renovation or updates on the books, they do have a grace period, right, and they're starting to say, 'Alright, you've had your grace period, it's time to get those projects back online. Let's make those updates, keep the brand standards, you know, where they need to be.'"

Chartres Lodging Group President and co-founder Maki Bara echoed comments about labor being a continued struggle for the industry. 

"Labor is a huge issue still, and you know, during the pandemic, I think the customer accepted, 'OK, this restaurant is closed now, we only have room service, or we don’t have turndown service or housekeeping. It's the pandemic,'" Bara said. 

"Well, you know, that has still continued, and I think the customer is starting to get confused. You know, 'Why? Why are your hours still curtailed or why, you know, is this restaurant still closed? Why can't I get this?' And it's just labor shortage."

Hotel Council of San Francisco President and CEO Alex Bastian said that one of the city’s biggest challenges is that of perception, and that the city and the industry need to reclaim the narrative surrounding San Francisco if the tourism industry is to rebound. 

"Well, first of all, we can't catch a break because we had a national story, National Geographic, talking about how San Francisco is the best place to come to, and two hours later, the attack at the Pelosi home happened, which was bad luck. But that being said, I do think that it starts with all of us. It starts with each and every one of you. And I think all of us are also guilty of feeding into this narrative as well," he said. 

"We just talked about how it's so hard finding a hotel room for less than $500 during the holidays in December. December isn't always the best time for the hospitality industry," Bastian said. "And lo and behold, we're doing actually OK, so it really does start internally as much as it starts externally. So, if we ourselves are better informed and situated and being able to be the messengers, that helps a lot."