Investors awash in liquidity are continuing to pour money into the robust San Francisco hotel market. As construction of an InterContinental Hotel tops out on a once-dodgy stretch of Fifth Street, the venerable Sir Francis Drake Hotel is pushing ahead with a $20 million makeover. Meanwhile, other hotels are gearing up for refurbishing.
The new InterContinental, ensconced in a glassy high-rise near Moscone Center, will open in spring, while the Sir Francis Drake, a 1928 landmark on Powell Street, christened a chic new lobby bar with a big party last month. Extensive remodeling of the Sir Francis Drake's guest rooms and installation of a high-end spa are on the agenda in the coming weeks.
The flurry of activity is being driven by a resurgent travel market that has returned to pre-Sept. 11 levels, along with investors looking for a growing industry where they can put their money.
The rise in hotel business is happening locally and nationally. Construction of hotel rooms jumped 64 percent nationwide in 2006 from 2005, according to PricewaterhouseCoopers -- the biggest year-to-year gain since 1993-94. Revenue per room, the standard industry measurement, rose 7.7 percent in 2006, the firm reported.
The growing supply of hotel rooms will slow growth in revenue. But PricewaterhouseCoopers predicts revenue will rise 1.6 percent this year and 2.3 percent in 2008.
Bay Area hotels are outstripping the national growth rate. The hospitality industry research firm PKF Consulting notes that "hotel performance is expected to be strongest in the coastal regions of the country ... Mountain/Pacific regions are forecast to achieve (revenue per room) growth in excess of 6 percent in 2007."
All that helps explain why there's money and interest in sprucing up the 417-room Sir Francis Drake. The hotel, in its Roaring Twenties skyscraper, is managed by Kimpton Hotels and Restaurants, the San Francisco operator of boutique hotels that has gone nationwide in recent years. The property, with a prime location on the cable car line overlooking Union Square, is owned by Oxford Lodging, an investment and asset management firm with a sizable presence in the United States and Japan, where it owns hotels.
Cody Bradshaw, an Oxford Lodging vice president of asset management, said that the landmark status of the Sir Francis Drake means that the company needs to respect the historic design of the facade -- right down to the size and shape of the windows -- but is free to extensively revamp the inside.
In addition to installing a lobby bar where the main reservations desk used to be, Oxford Lodging is pushing ahead with guest room renovations, Bradshaw said. The renovation, which is nearly completed, features new televisions, marble and granite surfaces in the bathrooms, new carpets and drapes and updated plumbing and central air conditioning throughout the building.
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