Bay Area room rates to rise, report says

Hotel room rates will rise in 2008, spelling higher costs for travelers but more money for hotels and the government, according to a report released Monday.

“In general, we’re quite bullish in where we see the market going,” said Tom Callahan of PKF Consulting, which researches the hospitality industry, at a meeting of the Hospitality Sales and Marketing Association International. “The story really is in pretty strong rate growth.”

Some 25 percent of the rooms in San Francisco were recently upgraded to the tune of $200 million, he said, which could help fuel a rate increase in 2008; the average daily room rate from January through July 2007 was $171.35. He also projected an increase in occupancy from 77.4 percent, the 2007 January-to-July figure, to 78 percent or 79 percent in 2008.

The hotels around the San Francisco International Airport have already increased their rates a dramatic 14 percent in the first seven months of 2006 and 2007, when they stood at $119.91. Callahan predicted the rate will rise another 8 percent to 10 percent in 2008. Meanwhile, occupancy has suffered at the airport hotels, partly due to renovation work, he said.

On the Peninsula and in San Jose, where the technology industry drives occupancy, room rates should grow 7 percent to 8 percent, Callahan said.

The forecast reflects what others have been saying about hospitality — namely, that it looks reasonably rosy in the near future for San Francisco, despite potential fallout from the mortgage crisis. Increased room rates and occupancy also benefit local government: San Mateo County cities average a 10 percent transit occupancy tax, while San Francisco collects 14 percent.

The San Francisco Convention and Visitors Bureau expects a slight increase in visitors, depending on economic conditions, said Executive Vice President Dan Goldes. “Right now, our future business looks very strong and the convention business looks very strong — and that is the [travel segment] least effected by economic conditions.”

Part of the local hospitality forecast depends on foreign visitors, particularly those with six-week-long vacations and strong currency. Because of that, the California Travel and Tourism Commission will increase its international marketing budget from $700,000 to $22 million, commission Chief Deputy Director Susan Wilcox said.

<p>The commission received an additional $50 million to its budget for marketing through a state law passed in 2006.

kwilliamson@examiner.com

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