Hotels And Retailers Hit Hard By California Housing Crisis' Ripple Effect

San Francisco’s hotels are facing a serious problem. The city’s idyllic image of the Golden Gate bridge and grandiose views of the bay are being replaced by concerns about needles and feces littering the streets, homeless citizens sleeping on sidewalks or in Bay Area Rapid Transit stations and aggression toward visitors by people with untreated mental illness. Visitors are noticing and rethinking booking events and vacations at hotels around the city.

San Francisco’s homeless population was down by 0.5% in 2017 compared to 2015, but is about 17% higher compared to 2013, according to SFist. While homelessness is nothing new for the city, hoteliers and local business say street conditions have worsened.

Within 153 blocks in downtown, there were over 300 piles of feces, 100 drug needles and trash on every block, a recent report by NBCBayArea revealed. Complaints of poor street conditions to 311 have skyrocketed in recent years. In 2016, 311, a city agency where visitors and residents can report issues or seek information about the city, received 44,000 complaints of encampments, human waste and needles, up from 6,300 complaints in 2011, according to the San Francisco Chronicle.

“[Visitors] are noticing it and hearing about it and saying, ‘well, why would I bring my conference here?’” Hotel Council of San Francisco Executive Director Kevin Carroll said.

Visitors often have rave reviews for the local restaurants and hotel service, but say they will not come back or will not bring their families here, he said.

San Francisco is not the only major West Coast city dealing with issues of homelessness and street conditions impacting tourism and hospitality. Anaheim, home to Disneyland with its spotless, litter-free Main Street, U.S.A., has the stark contrast of homeless people who live just outside the park. The city has been looking into ways to help its homeless population, such as providing emergency shelter and employment opportunities. Honolulu also took action in recent years on cleaning up the streets, including around its popular Waikiki area.

Street conditions have a ripple effect on a lot of local and small businesses, Carroll said. When guests visit a hotel, they spend money at restaurants and attractions. Tourists spend about $9B in San Francisco each year, according to data from SF Travel.

“When hotels are off … everybody is off,” Carroll said. 

San Francisco Travel Vice President, Public Policy and Executive Programs Cassandra Costello said tourism is one of the city’s largest industries and brings in over $700M in tax revenue each year. That money goes toward the general fund, which is provided for a variety of services, such as supporting police offices, improving street conditions and fighting homelessness.

“Without tourism, our city looks a lot different,” she said.

The number of visitors increased 1.4% in 2017 to 25.5 million compared to 2016, which is below San Francisco Travel’s prediction of 25.6 million, according to Curbed San Francisco. It is much slower growth than the 2.3% increase in 2016 from the previous year.

While a dip in tourism was expected due to the closures and construction at the Moscone Center, the convention center’s expansion is nearing completion, and people are already scouting San Francisco for the 2019 and 2020 convention seasons.

All the upgrades and additional space may not be enough to get people to keep coming back, Carroll said. The expansion only addressed a capacity issue to make San Francisco a more competitive conference market, but the street conditions will impact whether or not a conference comes to the city or returns, he said. 

Worsening Street Conditions

Not all of the problems associated with streets relate to homelessness, Carroll said. Visitors are impacted by aggressive behavior from someone who may have a mental health issue, but has a home.

“Our hotels are feeling even more of it happening now,” Carroll said. “The point now seems to be more of the street aggressiveness than before.”

He said increased drug use combined with aggressive street behavior and homelessness are all creating a perception that the streets are not safe. Employees living and working in San Francisco are feeling it too. The street conditions are scaring away potential retailers, according to NBCBayArea.

Chancellor Hotel General Manager Wes Tyler told the San Francisco Chronicle that during a three-week time span, three mentally ill people entered the hotel and pulled the fire alarm, threatened staff or got into an altercation with a bellman. Handlery Union Square Hotel President Jon Handlery told the Chronicle hotel revenue has not taken a big hit, but he is losing regional customers, many of whom would come into the city from other parts of the Bay Area for a weekend getaway. Hotel garage revenue is down, he said.

The Hotel Council, city officials and San Francisco Travel are working on ways to educate the public that San Francisco is a very safe city despite the street conditions. The agencies also are providing information on who visitors can call if they see someone struggling on the street so that person can receive help, Costello said. 

“Everybody is very concerned,” Costello said. “We want to make sure people struggling on the street get help and housing, and visitors feel the same way.”

Working Toward Solutions

Addressing homelessness is a careful balance of providing compassionate services while also cleaning up the streets so businesses and hotels are less impacted. 

Honolulu dealt with similar issues in Waikiki several years ago when homeless people used to sleep on the streets and create issues for local hotels. Visitors too would say they would not come back to the city because of homelessness, according to the New York Times.

“Homelessness in Waikiki had become a glaring problem at that time and was a shock to many visitors who did not expect to see homeless camping out on the sidewalks of Waikiki,” Honolulu Tourism Authority Director of Communications Charlene Chan said.

In 2014, Honolulu passed strict sit-lie laws aimed at getting people off the streets. The Hawaii Lodging and Tourism Association partnered with the Institute of Human Services to launch a Waikiki Homeless Outreach Program, which has the objective of moving homeless people off the street and into shelters to receive help, Chan said. The $2M program included donations from hotels and private donors and also helped fly mainland transplants back home, according to The Guardian.

By 2017, the homeless population dropped 83% in Waikiki and 60% of the homeless people in Waikiki received help from social workers, according to The Guardian. Over 200 people who had verified plans to reconnect with family members were flown back to the mainland.

Hawaii's homelessness does not have any measurable impact on travel demand today, Chan said. She said hotels have been supporters of various initiatives to address homelessness and have donated funds and living supplies.

At the time, Honolulu's aggressive approach received criticism and many felt the policies criminalized homelessness and resulted in ongoing displacement. To avoid citations, homeless people moved into neighborhoods where sit-lie policies are not as strict.

Other cities have received pushback on plans to move people out, including New York in 2009 when it paid to relocate homeless people and reconnect them with families. Busing and relocating homeless has come under scrutiny in recent years for not addressing the underlying issues of homelessness.

Anaheim Chief Communications Officer Mike Lyster said homelessness is an issue visitors have accepted when they come to Disneyland or attend a convention. Disneyland remains such a huge attraction, that homelessness has yet to have a significant impact on hotel revenue.

He said Disneyland is struggling with capacity issues and recently raised rates to help control demand. Hoteliers do have issues with people coming into lobbies and causing disruptions, but the city has yet to have tourists decide against visiting because of the street conditions, Lyster said.

The city did have to remove several bus benches outside of Disneyland after many people ended up taking over and hanging out at these benches 24 hours a day, Lyster said. People would sit around either drunk or smoking and provide issues for regular bus riders, many of whom worked at the local hotels. 

Anaheim is working on ways to help homeless people get shelter and find jobs, but it takes time and persistence, he said. During weekly outreach, city officials connect with homeless individuals to find ways to provide immediate shelter and long-term housing. He said sometimes it takes multiple visits to get a homeless person to agree to move into a shelter and accept services. The city also provides a drug-free program allowing anyone in Anaheim to approach city staff to get help for drug addiction issues.

Under its Better Way Anaheim program, Anaheim has provided volunteer work to homeless to help clean up local parks and provide additional work experience that may help them get a job. The city will start a new phase of its Better Way Anaheim program through a partnership with Chrysalis, a nonprofit organization that provides employment opportunities to homeless and low-income individuals, to place people who are homeless and may have recently had a job into a position.

Lyster said that could mean finding employment in various fields including construction or hotels. He said the city may even consider becoming an employer and using Chrysalis to employ people to help set up and clean the convention center.

“Ultimately our goal is to make our city better,” he said. “Homelessness is growing.”

While San Francisco has long been dealing with homelessness, the city is increasingly focusing on cleaning its streets and devotes over $300M of its budget toward homelessness services. The city created a central command center with various city agencies working together to address complaints and connect people with health and housing resources.

One of the most difficult issues is telling guests or prospective conference hosts that the city is working to improve conditions while that person witnesses something inhumane on the street, Carroll said.

“The hardest part of the hotels is explaining to guests why this is happening,” Carroll said. “More has to be done.”

Find out more issues impacting West Coast hotels and tourism at Bisnow's Lodging & Innovation Series West April 26 in Los Angeles.