News on the InterContinental Hotel/ 888 Howard from the San Francisco Business Times
New financing unlocks plan for S.F. hotel
The developers behind a long-delayed $195 million Intercontinental Hotel adjacent to the Convention Center in San Francisco said they have finally landed the financing to proceed with the project.
Leonard E. Blakesley Jr., executive vice president of Continental Development Corp. of El Segundo, declined to identify his financial backers until all documentation on the deal is final. He said the cost of the four-star property will surpass the original $175 million estimate by about $20 million and that he plans a room rate "substantially in excess" of $225 per night.
Continental launched the project nearly seven years ago as a bid to turn a surface parking lot at Fifth and Howard streets into a 550-room, four-star hotel. With partner Hampshire Properties Inc. of Mill Valley, which co-developed the San Francisco W Hotel, the firm won approval from the Board of Supervisors in November 2003.
Despite those hard-won entitlements, the firm had not secured funding for the project, a tough nut when room rates at the time had fallen to $144 from $146 in 2002 and $170 in 2000, according to PKF Consulting.
Those rates edged up last year, as did occupancy. All told, the revenue per available room rose $9 per night throughout the city in 2004.
Much of the strength in the market has come from convention business, which in 2003 and 2004 produced room night bookings on par with the dot-com era. And that business, in turn, has been goosed by brisk business at Moscone West, a 300,000-square foot convention center addition that can hold smaller events on shorter notice.
The Intercontinental Hotel is slated to go in adjacent to Moscone West, positioning Blakesley said is essential to the property's success.
"Things are doing much better, otherwise we wouldn't be going forward there," Blakesley said. "That whole convention area is where the real life of San Francisco is now."
Blakesley said about one third of his guests should be conventioneers, another one third people in town on business and another third tourists. The biotech development at Mission Bay should help draw the business crowd, while tourists will like the proximity of a smattering of museums, including the Jewish, Mexican and African Diaspora museums, and the Bloomingdale's development two blocks up on Market Street.
Down the street at Mission and Steuart, Joie de Vivre Hospitality is aiming for an initial room rate of $225 to $250 per night for its four-star Hotel Vitale on the waterfront. But the Intercontinental won't open until summer 2007, Blakesley said, a year later than originally planned. By then, prices will likely have changed, and the Vitale's rate may be closer to $275 per night, the long term goal for the property.
Blakesley said he was not worried about competition from the luxury St. Regis Hotel, a 260-room property expected to open this summer on Mission Street. That five-star property is going after a different set of guests, Blakesley said.
Ryan Tate covers hospitality for the San Francisco Business Times.