Even as San Francisco basks in the glow of its busiest tourist weekend in years following the Feb. 16 NBA All-Stars Game, one of the largest Bay Area hotels is at risk of foreclosure after its owners failed to make payments on a $100 million loan.
The 500-room Oakland Marriott City Center hotel defaulted on the loan from Invesco CMI Investments, which bought the debt last spring, according to the San Jose Mercury News, which cited Alameda County public records filed earlier this month. CoStar data shows that Hong Kong-based Gaw Capital Advisors bought the hotel, located next door to the Oakland Convention Center, for $143 million in 2017 and refinanced two years later with a $100 million standalone mortgage from Natixis.
The 21-story hotel at 1001 Broadway — the largest hotel in the East Bay — is only the latest Bay Area hotel to shut down or run afoul of lenders, as the Bay Area’s tourism economy has failed to bounce back fully from the aftereffects of the COVID-19 pandemic.
The San Francisco hotel market is still lagging behind other major U.S. markets, according to a recent CoStar analysis.
“Years of negative national press have affected tourism, leading to some convention events relocating,” wrote Senior Director of Hospitality Analytics Michael Stathokostopoulos.
He noted that office vacancy rates in San Francisco are still the highest in the country at around 23%. Bay Area technology companies retained remote work policies long after the end of the COVID-19 pandemic, which has suppressed corporate travel.
Notable establishments to fall into a financial abyss include Oakland’s quirky Waterfront Hotel, a 145-room nautical-themed establishment that had been a fixture of the East Bay waterfront for decades. The sprawling Oakland Hilton Hotel near the Oakland International Airport closed its doors in August, citing declining business and rising crime.
The sector has not looked much brighter across the bridge in San Francisco, where the Hilton San Francisco Financial District hotel, the Hilton San Francisco Union Square, the Parc 55 San Francisco and the Four Seasons Hotel San Francisco at Embarcadero all were unable or unwilling to pay off maturing loans taken out before the pandemic hit in 2020, upending their business.
Lagging behind
Prior to the pandemic, San Francisco hotels were roughly 80% occupied with average daily rates of $250, among the highest metrics in the United States, according to CoStar.
“At the time most of these hotels were financed, the loan-to-value ratio was reasonable and not aggressive,” Stathokostopoulos told CoStar News.
By comparison, hotel room demand in San Francisco was 20% below 2019 levels in 2024. According to CoStar, San Francisco is the least recovered among the top 25 U.S. hotel markets in terms of demand and second to last overall.
Nationally, hotel demand has almost returned to 2019 levels, with half of the markets above and half below their 2019 levels. Factoring in supply increases, albeit overall modest, only three of the top 25 hotel markets have fully recovered in terms of occupancy. San Francisco International Airport passenger data also indicates that international travel to and from the city remains well below pre-pandemic levels.
Many are expecting a turnaround for San Francisco's hospitality sector in 2025, as three major sporting events set to take place in the Bay Area in the next two years are expected to net the region more than $1 billion in economic output, boosting commercial sectors that have struggled to recover from the pandemic.
In addition to the 2025 NBA All-Star Game last weekend, the region will be the location of Super Bowl LX in 2026 in addition to serving as a host for the FIFA World Cup. Even though two of the three events are taking place in Santa Clara, a South Bay city near San Jose, the entire San Francisco Bay Area stands to gain from the expected influx of visitors.
A new day for Oakland?
The FIFA World Cup, the National Football League's Super Bowl and the National Basketball Association's All-Star Game could collectively bring $1.4 billion in spending to San Francisco and surrounding cities, according to a report commissioned by the Bay Area Host Committee. Local officials hope that those events will help spur positive images of the region that take the place of negative headlines about homelessness and crime that have dogged San Francisco in recent years.
Though Oakland hasn't been immune from the effects of those headlines, the area is forecast to record the strongest hotel revenue growth among all California markets, with 2025's revenue per available room projected to increase by approximately 4%, wrote Stathokostopoulos in a January analysis. He noted the city’s relatively affordable lodging options for visitors to nearby San Francisco, Berkeley or even Silicon Valley.
Several large-scale real estate developments in and around Oakland are also expected to stimulate hotel demand in the near and medium term, such as Brooklyn Basin, a $2 billion redevelopment of Oakland’s waterfront into a “vibrant residential and commercial hub featuring 3,700 homes, parks, retail spaces and other amenities.” A similar mixed-use project is the Mandela Station development at the Bay Area Rapid Transit's West Oakland station, a mixed-use project that is ultimately set to include 760 apartments plus office and retail space.
Finally, a local consortium of investors, the African American Sports & Entertainment Group, has floated an ambitious redevelopment plan for the abandoned Oakland Coliseum, the former home of the Oakland Athletics MLB team, which is expected to revitalize the area and boost hotel demand.
Overall, these developments specific to Oakland, combined with California's hosting of significant events, such as the 2026 FIFA World Cup and the 2028 Olympics in Los Angeles, are projected to positively impact hotel performance in 2025 and beyond.