The rate of hotel cancellations has accelerated this week as the number of coronavirus diagnoses and event cancellations has increased. (Kevin N. Hume/S.F. Examiner)

Controller: Coronavirus will cost SF ‘tens of millions’ in tax revenue

Hotel occupancy rates plummet to 20 percent

Mayor London Breed must submit a budget proposal by June 1, but due to the coronavirus she will have “tens of millions” less in revenue to work with than anticipated, according to City Controller Ben Rosenfield.

Rosenfield presented a grim financial outlook Wednesday to the Board of Supervisors Budget and Appropriations Committee on the initial projections for the financial hit to The City’s coffers for the current fiscal year that ends June 30.

“The loss in the coming quarters will be in the tens of millions,” Rosenfield said. “The question is just how many tens of millions. I hope to have some sense of that for you next week.”

Some of the most dramatic impacts came from a drop in the number of people staying in hotels. The City collects a tax on each hotel room stay, collecting about $500 million annually from the hotel tax.

But hotel occupancy rates have plummeted to rates worse than what San Francisco experienced after 9/11, Rosenfield said.

“Many hotels downtown, if not most hotels downtown this week, are reporting that this week they are now operating at occupancy rates of 20 to 30 percent,” he said. “That’s versus the standard that we’ve grown used to for many years now in the city of 80 to 85 percent. Even this quickly, our hotels are emptying out very quickly.”

He added, “This kind of level of occupancy is actually worse than what we felt immediately after September 11th.”

Rosenfield said that the rates of hotel cancellations are “accelerating” this week.

San Francisco issued health guidelines last week to ban large gatherings and on Tuesday took it a step further by placing a moratorium on events with 1,000 or more attendees.

Rosenfield said that all conventions at The City’s Moscone Center have been cancelled until May 15 and they accounted for 235,000 room nights. “We effectively have a dark convention center that drives a lot of our room rates and hotel occupancy in The City for the next several months,” he said.

The hotel industry employs about 25,000 in San Francisco, he said.

The City is also expected to take a hit in sales tax revenue as San Francisco sees less tourism and visitors from the region, as well as fewer commuters coming into The City. Many companies have told their employees to telecommute.

“There is a broad number of restaurants reporting very significant declines in sales thus far this week,” Rosenfield said, adding that some are reporting losses of 50 percent in this week’s sales. He said the impacts are being felt the most severely in the downtown area, and to a lesser extent in the outer neighborhoods.

The City can look at a number of indicators to observe the economic impacts, including planes landing at San Francisco International Airport, exits from BART stations and occupancy at city-owned parking garages. All of these numbers are significantly down since The City diagnosed its first two cases of COVID-19, the disease caused by the coronavirus, last week. The number of cases has since climbed to 14 as of this afternoon.

Rosenfield reported international flights landing at SFO are down 20 percent and domestic landings of planes down 12 percent this week.

BART exits of passengers in the downtown area were down 24 percent Monday compared to the previous Monday, he said, adding that the data shows “very significant slowdowns in terms of travel on BART.”

City-operated parking garages were showing vacancy rates of about 20 to 40 percent this past weekend compared to the previous weekend.

He said he will provide a range of the dollar amount impact next week to help city leaders plan as they head into the budget season, when the mayor submits her two-year budget and the board reviews and makes changes to it.

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