Report suggests dangerous information for San Francisco’s financial restoration
The celebrated June 15 reopening date was intended to mark the return of normal city life: cultural events, social gatherings, and the revitalization of office buildings and tourist attractions.
This rosy forecast has not yet come true. Instead, the advent of the Delta variant has slowed San Francisco’s economic recovery.
Office visits are on the decline, according to the Office of the Comptroller’s latest report, released Aug. 25. People also spend more time at home – 16 percent less time away than in January 2020. That means they spend less time using public transport, spending money in small businesses or investing in art and cultural experiences.
That could mean trouble for the local economy.
Local traders could face another difficult year, an uncertainty echoed in the report. It found that small business owners were expecting a longer recovery time than in July, and found that new business registrations in July had dropped from nearly 800 in June to around 500. Both are below the pre-COVID-19 average of nearly 1,200.
Staying close to home could also disrupt economic recovery on a broader scale. Spending less means reducing San Francisco’s sales tax base, a major source of funding for city government budgets, and threatens to further disrupt the labor and housing markets.
“This report continues to show that we must continue to work hard to support our local business that is the backbone of our economy,” said Daniel Herzstein, director of policy for the San Francisco Chamber of Commerce. “As the pandemic drags on, we need guidelines such as vaccination regulations to ensure the safety of customers and employees and to keep our businesses open.”
Ted Egan, the city’s chief economist, says these trends are likely to be mirrored across the country, but remains confident that indicators should improve again once the surge in delta cases subsides.
The picture is a little less clear for tourism, a foundation of San Francisco’s economy. Before the pandemic, the industry generated more than $ 10 billion in annual sales tax revenue and supported over 86,000 jobs.
While tourism took a hit everywhere when COVID-19 hit, things were particularly slow to recover here in the city. According to the report, local hotel occupancy remains relatively constant at around 50 percent, far from the 80 percent of the days before the pandemic.
Regional comparison cities outperform San Francisco by a considerable margin in terms of hotel-generated revenue. Phoenix makes more money every night than it did the same period in 2019, while San Diego and Los Angeles bring in over 80 percent. San Francisco barely reached 40 percent of its nightly earnings before the pandemic.
Egan attributes this sharp decline to a tourism industry that is particularly dependent on international visitors, who were largely denied access, and the convention business. More than a third of the hotel business and 20 percent of San Francisco’s travel and tourism hub comes from conventions, according to a city report published in October 2020.
The Moscone Center alone would host an average of 40 to 60 conventions a year prior to the pandemic, but there was already growing concern that companies were moving their events to other cities, citing high costs, road conditions and safety concerns. Looking ahead, the number of future bookings at the Moscone Center remains uncertain, the report said.
One ray of hope in the Controllers Office results is the continued on-site job creation, led by growth in the leisure and hospitality industry, which added 5,400 in July and 39,800 since January.
Despite the growth, employment in San Francisco is still about eight percent lower than before the pandemic and, according to Egan, ranks 35th of the 40 largest US metropolises. He noted that this doesn’t include office workers whose jobs are technically still based in San Francisco but who now work from a different location.
Egan warns anyone not to read too much into the recent slowdown. “Growth should resume once we have passed the peak of delta infections,” he said. “I don’t think everything we’ve seen should ruin the recovery.”
cgraf@sfexaminer.com
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