The $500 million expansion of San Francisco's Moscone Center, to commence in April and last through 2018, will shut down large portions of the facility during the work and has the city's hotels revising their strategies to attract other business in the interim.
Over the last several years, the San Francisco hotel market has been enjoying surging rates and high occupancies. According to STR, the hotel data giant, the city's occupancy has grown steadily from 2011, when the average for the year was 65.8 percent, to 2015's 84.4 percent and 2016's 84.3 percent. But much of that room demand has come from the Moscone Center, the city's main convention facility, which hosts some 70 events a year, including regular citywides such as Dreamforce, the huge software conference organized by Salesforce.
The current expansion project has so far resulted in the cancellation of 11 conventions at the center. Events that have relocated include the annual fall meeting of the American Geophysical Union, which will go to New Orleans this year and D.C. in 2018, returning to San Francisco in 2019. San Francisco Travel, the city's destination marketing organization, estimates the work will cause the loss of up to 490,000 room nights over that period.
While SF Travel predicts a loss of 290,000 visitors in 2017 due to closures at the center, it still forecasts that the city will attract 25.9 million visitors in 2017, a 2.8 percent increase over 2016, which posted record-breaking numbers. The bureau has been working closely with hotels near Moscone on booking smaller groups to offset the cancellations. "It is challenging. We're focused on building different types of group business," said Joe D'Alessandro, CEO of SF Travel. "Will we be able to make up all of it? Probably not."
"We still expect to run a very high occupancy, but with a different type of customer," said Frank Manchen, area director of sales and marketing for the 1,919-room Hilton Union Square and the 1,024-room Parc 55. He has begun partnering with the nearby 532-room Hotel Nikko to attract groups that will spread out across the three hotels, which have a combined meeting space of close to 200,000 square feet. "The next two years is a great opportunity for certain segments who have never gotten availability," he added. "It's a top-tier destination that drives attention, so they should definitely give it a second look."
As a headquarters hotel, the 1,500-room Marriott Marquis, which has 121,000 square feet of event space, has always tied its group business to bookings at Moscone Center. But with the loss of the big citywides, general manager Chuck Pacioni said a new selling strategy was put in place in 2013 to prepare them for the gaps they would have to fill. "A lot of demand and rates are associated with Moscone, and when that is gone, of course it will be challenging," he said. "When something like this happens, though, it actually creates new options for group business. We have deployed our sales force towards selling more self-contained business that can stay within our meeting space."
As for the convention center, the current expansion will increase exhibit space from 625,600 square feet to 888,3000 square feet and add a new 50,000-square-foot ballroom and at least 80 meeting rooms. SF Travel's D'Alessandro added that pre-booking for Moscone for 2019, when the expansion is completed, "has already reached record levels." Read more about the expansion here.