For the better part of a century, San Francisco’s luxury
accommodations largely meant Nob Hill icons such as the Fairmont and
InterContinental Mark Hopkins, not to mention the addition of the Ritz-Carlton
a quarter-century ago.
But recent announcements of plans by Waldorf Astoria and Langham suggest that the city’s
luxury epicenter, or at least one hub of activity, is moving about a mile
southeast, to San Francisco’s South of Market district, or SoMa.
Slated for a 2020 debut, the Langham Place San Francisco
will be developed by Pacific Eagle, the U.S. affiliate of Hong Kong-based
Langham parent Great Eagle Holdings. The property will likely have at least 200
rooms and will be designed by renowned architect Renzo Piano.
San Francisco’s first Waldorf Astoria will open in 2021 in
the first 21 stories of a Mission Street tower. The 171-room hotel will include
personal concierges and a Peacock Alley restaurant.
The San Francisco market has long been one of the country’s
most lucrative. Through June, the San Francisco-San Mateo market’s RevPAR rose
10% from a year earlier, marking the second-fastest growth rate after the Los
Angeles-Long Beach market, according to STR.
And with an average of $195 a night, San Francisco’s room
rates have been the second most expensive in the U.S. after New York.
The development of both hotels has been spurred by the $4.5
billion Transbay Transit Center. That project, billed as the “Grand Central
Station of the West,” is expected to serve more than 100,000 passengers a day
and 11 transit systems, including local bus and light-rail lines as well as the
Caltrain commuter line, Amtrak and, ultimately, California’s high-speed rail
service.
The project is receiving local, state and federal funding.
The first phase of the project, which will feature a 5.4-acre park above the
facility, is scheduled to open next year, and it is expected to also spur the
development of 4,500 condominiums and apartments in an area that until a decade
or so ago was better known for warehouses and tool shops.
“This used to be a neighborhood where a 10- to 12-story
building stuck out like a sore thumb,” said San Francisco-based hotel
consultant Rick Swig, whose family owned the city’s Fairmont from 1945 to 1998
and who has kept his office in the neighborhood since 2000. “Now you can’t see
these buildings anymore because they’re dwarfed by 40- to 60-story buildings.”
With notoriously expensive real estate, space-constrained San
Francisco has seen little in the way of new hotel development in the past
decade or so.
That said, there has been a mini-boom of hotel development
about a mile southwest of the Transbay site, where the convergence of the
Tenderloin, Civic Center and SoMa districts has been rechristened Mid-Market.
With older properties being rehabbed into offices for companies such as Twitter
and Uber in recent years, hotel operators such as Yotel and Proper Hotels
(which is headed by Viceroy Hotel Group founder Brad Korzen) are planning
openings there.
But whereas the San Francisco Proper and Yotel are being
rebuilt on the sites of the Renoir Hotel and Grant Building sites,
respectively, the Waldorf and Langham Place will both be newbuilds.
Swig said that the high cost of both development and
operations in union-heavy San Francisco will likely put pressure on the hotels’
operators to generate room rates well above $500 a night while maintaining
80%-plus occupancy rates.
Still, both Swig and Pacific Eagle senior vice president
Hans Galland said that the combination of the Transbay development, newer
commercial development and the Moscone Convention Center nearby will likely
give both hotels a healthy base of higher-end business and leisure travelers.
“While Union Square is more well-known to tourists, and Nob
Hill has the cachet of having high-end residential real estate, SoMa is
becoming known as a center of business, nightlife and contemporary
architecture,” Galland said. “We feel that a luxury hotel of Langham’s caliber
will be right at home there.”