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Room for a. discount
<br />Price cuts hurt hotels during the last downturn, but as occupancy dips,
<br />some San Francisco hoteliers are once again slashing room rates
<br />BY SARAH DUXBURY
<br />San Francisco Business Times
<br />ever again.
<br />That, in theory, was the lesson hoteliers
<br />learned from the last downturn. With occu-
<br />pancy tumbling after Sept. 11 and the dot-com
<br />bust, hotels cut room rates deeply — so deeply that
<br />local room rates still lag other cities.
<br />But it turns out that memories are short, and that
<br />hotels have only a limited arsenal when it comes to
<br />getting heads .in beds. By November 2008, some San
<br />Francisco hotels anxious about the downturn were
<br />already publishing steep discounts on web sites like
<br />Expedia and Hotels.com. And in as price -sensitive an
<br />industry as hotels, where one leads, all too many will
<br />follow. Some kick and scream, but they follow all the
<br />same.
<br />"Unfortunately, everybody talks restraint, and nobody
<br />does it," said Torn Callahan, CEO of PKF Consulting. "All
<br />BART's Dublin
<br />development
<br />Waits on economy
<br />BY ALBERT C. PACCIORINI
<br />San Francisco Business Times
<br />BART's newest station, West Dublin/
<br />Pleasanton, should begin operating in
<br />September, but the accompanying tran-
<br />MIND THE GAP
<br />Difference between published rates and web discounts.
<br />Published
<br />Hotel
<br />rates'
<br />Expedia.com1
<br />Difference
<br />1 InterContlnenlal
<br />$229
<br /><$143
<br />$©6
<br />Parc 55:
<br />$1 59
<br />$too
<br />459
<br />Westin Market Street:
<br />$179
<br />$99
<br />-$©0
<br />Fairmont:
<br />$299 -�
<br />$1 35�"
<br />-$164
<br />Hyatt Regency �aF `''
<br />:.
<br />$179
<br />I. Basic rates indicated by individual hotels.
<br />2. A sample of the lowest rates available for the weekend of Feb. 27
<br />the ground we lost after 2001, we still haven't made that
<br />up again because you drop rates real last, but increas-
<br />ing them again takes time, even in as strong a market
<br />as we had from 2004 to 2008."
<br />According to PKF, average daily room rates in San
<br />sit -oriented development — offices,
<br />apartments, shopping and a hotel'— has
<br />ground to a halt.
<br />The Bay Area Rapid Transit District's
<br />44th station, on the Blue Line between
<br />the Castro Valley station and Dublin/
<br />Pleasanton, which is the final stop,. is
<br />being built in the Interstate 580 median
<br />between Dublin and Pleasanton. The $80
<br />million station will be connected to devel
<br />opment in each city by pedestrian walk ,.
<br />ways, which are the last major wlik to.
<br />be done, said Jeffrey P. Ordway, BART's
<br />manager of property development. -
<br />.Eric Heffner, vice president for residen=-
<br />Francisco dropped 14 percent between 2000 and 2001,
<br />and occupancy during that same period fell 20 percent.
<br />In this current recession, PKF forecasts that aver
<br />daily rates in 2009 will drop between 4 and 5 per(
<br />and occupancy will drop by another 10 percent. It arav
<br />forecasts revenue per"available room — a factor of
<br />average daily room rates and occupancy — to be down
<br />at least 10 percent in San Francisco. That said, the firm
<br />has already had to adjust downward its numbers more
<br />than once as economic conditions deteriorate rapidly.
<br />A Morgan Stanley report for the first week of
<br />February, the most recent data available, had revenue
<br />per available room plunging 27 percent nationwide for
<br />the first week of February, an ominous figure.
<br />Experts agree.that San Francisco is likely to (are bet-
<br />ter then the nation as a whole. Nevertheless, some San
<br />Francisco hoteliers say they have had to give in to pres-
<br />sure to cut prices.
<br />tial development and a principal with
<br />Windstar Communities LLC, the devel-
<br />oper in both cities, said his company is
<br />ready to go, but "our plans are holding
<br />until the financial environment becomes
<br />more favorable."
<br />Windstar is the residential property
<br />.division of Nexus Properties Inc. of La
<br />Jolla, a developer and manager of com-
<br />mercial, biotech and office properties.
<br />Ori the Pleasanton side, Windstar plans
<br />to develop an open area;next to the new
<br />450-space BART parking garage and
<br />-across from Stoneridge. mall. Plans call
<br />for 350 apartments, including some units
<br />SEE RATES, 28
<br />for low-income tenants, and retail, includ-
<br />ing a small grocery, to serve the apart-
<br />ments.
<br />On the Dublin side, plans call for a 150-
<br />room hotel, offices and 210 apartments
<br />along Golden Gate Drive.
<br />Windstar worked for three years to find
<br />a hotel operator for the Dublin site, but
<br />there's currently no market for hotels,
<br />Heffner said. The property is entitled for
<br />a hotel and retail, he said, and Windstar
<br />is "planning to build as soon as that mar-
<br />ket returns."
<br />apacciorini@biziournals.com / (925) 596-1430 ■
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