Economic boom, visitor demand drive SF hotel room prices to highest-ever

There's room at the inn in San Francisco, but it will cost you more than ever before.

The average price of a hotel room in The City has risen by almost 40 percent in the past five years, according to figures published by the City Controller's Office.

Travelers can now expect to shell out an average of $200 a night for a room in The City — the highest average nightly rate in city history — up from $123 five years ago, according to the controller.

Following the Great Recession, The City's hotel industry has experienced four consecutive years of steady double-digit growth in cost per room, a boom fueled by a strong economy, surging demand for San Francisco as a destination for conventions and international travel — and, of course, a limited supply of vacant hotel rooms, experts and officials say.

Sound familiar?

San Francisco is one of the few cities in America to experience such remarkable growth, said Joe D'Alessandro, president and CEO of the San Francisco Travel Association.

“We're pretty unique — it's us, New York and maybe Boston,” he said Friday. “And it's not going to change anytime soon.

Conventions drive much of The City's hotel and visitor traffic — and the tech boom has much to do with that. San Francisco recently hosted Google's developer conference, and Oracle OpenWorld and's Dreamforce are major events circled on every hotelier's calendar. But medical groups are also steadily streaming to San Francisco for their events, D'Alessandro said. Medical groups alone will take up almost 20 percent of the 1 million hotel rooms to be occupied by convention-goers over a year, according to the Travel Association.

And busy hotels mean flush municipal coffers. Revenue from The City's hotel tax is also at an all-time high. The 14 percent tariff on hotel rooms netted San Francisco over $270 million in the fiscal year that's coming to an end, representing four consecutive years of double-digit growth.

This all begs the question: When will the good times end? Revenues from a booming tourism industry and a healthy hotel industry are cyclical, officials admit — but for the moment, city budget planners are expecting even more.

The tax windfall is expected to swell to $336 million a year by 2015, nearly double what the hotel tax brought in during the peak of the first dot-com boom, according to the mayor's Budget Office.

In other words, there appears to be no end to the good times in sight yet.

“Unless there's some kind of event, some economic collapse, the next couple years will continue to be strong,” D'Alessandro said.

There are about 33,800 hotel rooms in The City, a figure that is likely to remain steady even as demand grows.

Building a hotel is even more difficult than building housing in The City, with the timetable from the planning stage to opening night about five years at a minimum, D'Alessandro said.

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