Park Hotels & Resorts, the operator of two of the most prominent hotels in San Francisco, is handing in the keys on the properties — and, in essence, giving up on a city that has fallen on hard times.
Park Hotel stopped making payments on a $725 million loan tied to the Hilton Union Square and Parc 55, the real estate investment trust said on Monday. The hotels, a few blocks from the once-bustling Moscone Center conference hall, have a combined total of nearly 3,000 rooms.
A slowing economy and a remote-work thunderclap have emptied offices across the country, with some warning of a ticking bomb in the commercial real estate market. Slammed by a wave of layoffs in the tech industry and a steep slowdown in Moscone’s conference calendar, downtown San Francisco has been hit hard.
“Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges” that will reduce demand for business and leisure travel, said Thomas J. Baltimore Jr., the chief executive of Park Hotels & Resorts.
The company previously warned investors it was weighing options for the loan and told analysts last month that the properties contributed only a small amount toward its 2023 guidance.
Shares of Park Hotels & Resorts rose nearly 3 percent in afternoon trading on Tuesday. The company’s portfolio of 46 properties includes Hiltons in Chicago, Honolulu, Midtown Manhattan and San Diego.
The abrupt departure of Park Hotels & Resorts is raising fears that others could follow suit. San Francisco is highly dependent on business travel, which has yet to return to prepandemic levels. JPMorgan Chase brought back its annual health care conference this year, but other events have moved out, including VMWare’s tech conference.
Not everyone is giving up. “We’re not writing San Francisco off,” James Risoleo, the chief executive of Host Hotels & Resorts, parent company of the Marriott Marquis San Francisco, told analysts in May.
“I have concern about how the market is performing relative to 2019 and what happened with the layoffs in the world of tech and the like, and return to office in that market is really lagging the rest of the country,” he said. “But it is the center of tech and it’s going to be the center of artificial intelligence as the world returns.”