Park Hotels & Resorts, the owner of two of San Francisco’s biggest hotels — Hilton San Francisco Union Square and Parc 55 — has stopped mortgage payments and plans to give up the two properties, in another sign of disinvestment in hard-hit downtown.
Park Hotels & Resorts said Monday that it stopped making payments on a $725 million loan due in November and expects the “ultimate removal of these hotels” from its portfolio. The company said it would “work in good faith with the loan’s servicers to determine the most effective path forward.”
The 1,921-room Hilton is the city’s largest hotel and the 1,024-room Parc 55 is the fourth-largest, and together they account for around 9% of the city’s hotel stock. The hotels could potentially be taken over by lenders or sold to a new group as part of the foreclosure process.
“After much thought and consideration, we believe it is in the best interest for Park’s stockholders to materially reduce our current exposure to the San Francisco market. Now more than ever, we believe San Francisco’s path to recovery remains clouded and elongated by major challenges — both old and new,” said Thomas Baltimore Jr., CEO of Park Hotels, in a statement.
Those challenges include a record high office vacancy of around 30%, concerns over street conditions, a lower rate of return to office compared to other cities and “a weaker than expected citywide convention calendar through 2027 that will negatively impact business and leisure demand,” he said.
Park Hotels said San Francisco's convention-driven demand is expected to be 40% lower between 2023 and 2027 compared to the pre-pandemic average.
San Francisco Travel, the city’s convention bureau, expects Moscone Center conventions to account for over 670,000 hotel room nights this year, higher than 2018’s 660,868 room nights but far below 2019’s record-high 967,956. And weaker convention attendance is projected for each following year through 2030.
Tourism spending more than doubled in 2022 to $7.4 billion compared to the previous year. A full recovery isn’t expected until 2024 or 2025.
The company expects to save over $200 million in capital expenditures over the next five years after giving up the hotels, and to issue a special dividend to shareholders of $150 million to $175 million. The company's exposure will shift away from San Francisco towards the higher-growth Hawaii market.
Parc 55 is a block from Westfield San Francisco Centre, the mall where Nordstrom is departing, and the block where Banko Brown, an alleged shoplifter, was killed in a shooting outside a Walgreens in April. Nearby blocks are also full of empty storefronts, as tourist and local foot traffic hasn’t fully recovered.
Other hotels have faced financial distress. Atop Nob Hill, the historic Huntington Hotel was sold earlier this year after a mortgage default.

Rhodium Group researchers estimate that under the RCP 8.5 scenario, between 2040 and 2060 extreme temperatures will become commonplace in the South and Southwest, with some counties in Arizona experiencing temperatures above 95 degrees for half the year.
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By midcentury, ... some areas we don't usually think of as humid, like southwestern Arizona, will see soaring wet bulb temperatures because of factors like sun angle, wind speed and cloud cover reacting to high temperatures ...

The top three markets in the country — California, Washington and Missouri — highlight how unprepared the nation is.

• Despite experiencing 90% of the country’s earthquakes, only 10% of California’s residents have earthquake insurance.
  
• Only 11.3% of Washington’s residents were covered in 2017 despite having the second-largest market in the seismic space.
  
• Missouri’s New Madrid area is a lesson in what skyrocketing premiums can do to the insurance market. In 2000, 60% of its residents had coverage. As of 2021, that number has declined to 11.4%.