Hotel boom sprouts in Bay Area amid lodging sector’s COVID recovery

BERKELEY — A hotel boom has sprouted in the Bay Area, raising hopes that the battered lodging sector has begun to recover from economic woes and business losses unleashed by the coronavirus, a new report shows.

The Bay Area during 2021 added more than twice as many hotel rooms as the nine-county region added during 2020, according to a new report that Irvine-based Atlas Hospitality Group provided to this news organization.

Hotel developers added 2,863 lodging rooms in the Bay Area during 2021, which was an increase of 127% — more than double — the 1,262 rooms they added in the region in 2020, this news organization’s analysis of brand-new and previous reports issued by Atlas Hospitality, which tracks the California lodging market.

The economic uncertainties triggered by the coronavirus chased away travelers and hotel guests and caused business travel to dry up.

“We saw many hotel construction projects slow down and in some cases halted altogether,” the Atlas Hospitality report stated. “Projects that were close to completion delayed opening due to all of the negative impacts of COVID-19.”

Some signs have emerged that the hotel sector in the Bay Area and California overall has begun to rebound from the coronavirus-linked economic battering, according to the report by Atlas Hospitality Group.

In all of California, including Northern California and Southern California, an upswing, measured by new hotel openings, is well underway, the Atlas Hospitality report stated.

California set a new record for the number of new hotel rooms opened during 2021, with 12,027 new lodging rooms. The state also achieved its second-highest total for the number of hotels opened with 88.

“2021 is the year that California hotel development jumped back into high gear,” Atlas Hospitality stated in its report.

The upswing is expected to extend for a considerable period, opined Alan Reay, president of Atlas Hospitality Group.

“We are definitely seeing signs that point to a big and rapid rebound for hotel openings and hotel construction,” Reay said. “That will occur in 2022 and continue into 2023.”

The robust predictions for hotel construction have emerged despite a surge in building expenses that have driven up the cost of an array of commercial real estate and residential projects.

“The interest in building new hotels is amazing when you consider how high construction costs have jumped, maybe 25% to 35% higher than what they were before COVID began,” Reay said. “This says a lot about what lenders think about the California hotel market. Without lenders, these hotels aren’t going to be built.”

Lenders are particularly interested in funding development projects for hotels with one of the Marriott or Hilton brands, according to Reay.

Reay believes the Bay Area is poised to share in the ongoing upswing for new hotel projects.

“The interest in the Bay Area is strong, especially in San Jose and Santa Clara County,” Reay said.

In contrast to the South Bay, the San Francisco hotel market still looks weak.

The most closely watched barometer for, revenue per available room, is rose everywhere in the Bay Area and the rest of California last year — except in San Francisco, where hotel room revenue tumbled during 2021, Reay said.

Santa Clara County added 1,150 hotel rooms in 2021, up 185% from 2020.

Alameda County gained 946 rooms in 2021, up 181% from the year before. Sonoma County suffered a 51% decrease in rooms in 2021 compared with 2020.

Four counties went from no new rooms in 2020 to some rooms in 2021. After adding zero rooms in 2020, San Francisco added 195 rooms, Napa County gained 187 rooms, Solano County added 83 rooms and San Mateo County increased its total by 44 hotel rooms in 2021, Atlas Hospitality determined. Marin County and Contra Costa County each added no hotel rooms in both 2020 and 2021.

The five largest hotels that opened in the Bay Area during 2021 were all well over 100 rooms in size, Atlas Hospitality determined:

— Residence Inn Berkeley, 331 rooms, Berkeley

— The Ameswell Hotel, 255 rooms, Mountain View

— Shashi Hotel, 1625 N. Shoreline Blvd., Mountain View

— citizenM San Francisco Union Square Hotel, 195 rooms, San Francisco

— Moxy Oakland Downtown, 172 rooms, Oakland

“Developers and lenders are looking long term,” Reay said. “They still see the Bay Area as being a very, very vibrant hotel market. We’ll see if they’re right.”