San Francisco trails other major metro areas in economic recovery

Tourists also appear hesitant to book travel to The City

San Francisco lags behind other major metropolitan areas in economic recovery from the ongoing COVID-19 pandemic, according to the latest report from the Office of the City Controller.

Office workers are returning to their desks in other cities, but it remains unclear how many are actually living, working and spending money in San Francisco.

While Austin, Texas, boasts office attendance as high as 60%, the broader San Francisco metro area remains stuck at roughly 30%, according to the report.

Tourists also appear hesitant to book travel to San Francisco.

Nearly all airports ground to a halt when the coronavirus arrived in 2020. Since then, air travel has slowly ticked up nationwide, but some cities have seen a faster increase than others.

As of October, airports in Phoenix and Denver had nearly returned to pre-pandemic passenger numbers for domestic travel, The City Controller’s office states in its report. Seattle and Los Angeles had reached about 80%. By contrast, San Francisco just crested 60% of pre-pandemic passengers for routes within the United States.

Looking at hotels, the story is similar.

Before the pandemic, San Francisco typically had about 80% of its hotel rooms filled. In December, only about 40% of rooms were occupied. That’s actually down from the pandemic-era peak of 50% at the end of July. At that point, vaccines had been widely rolled out and the threat of delta or other variants had yet to fully emerge.

Travelers get their bags together at the valet parking line at the Palace Hotel on Dec. 30. Hotel occupancy is hovering around 40% for December, down from a pandemic-era peak of 50% at the end of July 2021. (Craig Lee/The Examiner)

Travelers get their bags together at the valet parking line at the Palace Hotel on Dec. 30. Hotel occupancy is hovering around 40% for December, down from a pandemic-era peak of 50% at the end of July 2021. (Craig Lee/The Examiner)

One collateral benefit: The average hotel room cost more than $300 per night in San Francisco before the pandemic, but visitors could snag a booking for about $175 around the Thanksgiving holiday.

The report found other major cities are seeing both their rates and occupancy recover much faster. Phoenix and San Diego are earning about as much per hotel room per night as they were before the pandemic.

All told, these numbers suggest businesses in downtown San Francisco continue to struggle without the guaranteed demand from tourists and commuters.

It’s possible many people who have stayed have just shifted their spending from downtown to their local commercial corridors. While the controller report leaves out neighborhood-by-neighborhood spending patterns, it does suggest San Francisco residents have not returned to the same levels of economic activity as they had before the pandemic within city limits.

One of the best proxies for this concept is the amount of time people spend outside their homes. When people are out in their neighborhoods, they’re spending money at local businesses, riding public transit and generally participating productively in civic life. When they remain inside, much of that economic activity is lost or instead redirected to online merchants, many of whom are not local.

Compared with January 2020, San Francisco residents are still spending 15% less away from home, while that number is closer to 5% statewide. What’s important to note here, though, is that San Franciscans decreased their time away from home by nearly 40% in March 2020, while the state average dropped by closer to 25%. In other words: San Francisco residents were more cautious from the start when it came to sheltering in place.

The average asking monthly rental rate for an apartment in San Francisco was about $2,750 pre-pandemic. It reached its lowest rate of $2,000 in January 2021, but started to steadily grow for the first half of the year. That progress has stalled; the average asking monthly rent for an apartment in November was $2,250, according to the report.

Small business remains in a squeeze. The confidence expressed by local merchants that recovery is inevitable remains lower than the national average, and new business openings remain stagnant.

More than 220 businesses — classified as retail and trade, neighborhood services, or restaurants and bars — — — opened in San Francisco in January 2019. By comparison, that number dropped to about 130 in November 2021.

Looking at speeds on the freeway, the City Controller’s report concludes that more people are driving. Decreases in vehicle speeds suggests there’s more congestion on roads. The latest figures as of Novembershow an average speed that’s below the pre-COVID average.

Traffic backs up along Highway 101 near downtown San Francisco in August. The latest data shows decreases in vehicle speeds along the freeways into and out of The City, with an average speed below pre-covid levels. (Kevin N. Hume/The Examiner)

Traffic backs up along Highway 101 near downtown San Francisco in August. The latest data shows decreases in vehicle speeds along the freeways into and out of The City, with an average speed below pre-covid levels. (Kevin N. Hume/The Examiner)

However, it’s possible that this doesn’t indicate more people are out and about but rather that they’ve shifted their mobility from public transit to private vehicles. The number of people exiting BART trains at the Embarcadero, Montgomery, Powell and Civic Center saw weak growth over the last few months, according to the report, reaching just over 20% of its pre-pandemic ridership numbers.

Most of the data in the report predates the emergence of the omicron variant, inconveniently arriving in the midst of yet another holiday season. Already, the latest surge has led to changes in public health protocols including the temporary return of mask mandates and the urging of many businesses to require patrons to be fully boosted.

Omicron also is impacting major events, including the cancelling of San Francisco’s fireworks celebration, changing public health experts’ advice on attending large events and causing staffing shortages at businesses already struggling to survive.

cgraf@sfexaminer.com

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