Another high-end hotel in San Francisco is struggling financially as the city's hospitality rebound plods along.

Florida developer Westbrook Partners received a notice of default on a $72.5M loan collateralized by the 155-room luxury Four Seasons San Francisco at the Embarcadero, the San Francisco Business Times reported.

Westbrook purchased the hotel in 2019 for $126.6M and is more than $3.15M behind on loan payments, the Business Times reported. The company has not paid its loan since December and has 90 days to cure the default. If Westbrook is unsuccessful, the lender, Waterfall Asset Management, could foreclose on the property.

The property joins a growing list of downtown San Francisco hotels in default. Two of the city's largest hotels, Parc 55 and Hilton San Francisco Union Square, went to their loan servicer last year after their owner, Park Hotels & Resorts, stopped paying its debt on the properties.

“Business travel is certainly deflated in San Francisco,” Green Street Senior Associate Michael Herring said. “Many of the top industries in and around San Francisco are tech-focused. As we know, the tech industry has largely adopted work-from-home policies, which means less travel in many cases.”

And while some major conventions, like Salesforce's Dreamforce, have come back to San Francisco, the city's convention center isn't drawing the crowds it did pre-Covid.

“San Francisco was previously a very strong convention market, and the business travel segment hasn’t recovered to 2019 levels either.”

On the other hand, New York has a strong financial sector presence, while LA has a strong entertainment-industry presence, setting both of these metro areas apart from San Francisco, he said.

“New York hotels are well above pre-covid [revenue per available room] levels at this point,” Herring said. But urban leisure travel in New York has recovered in the past eight to 12 months, which hasn’t been the case in San Francisco.

“The metro’s hospitality sector is enduring a unique set of challenges amid record-high office vacancy, a slow return of international travelers from Asia, concerns over safety in the city, and recent tech industry headwinds,” Marcus & Millichap said in its 2024 San Francisco Hospitality Investment Forecast. “This combination has stunted the post-pandemic momentum that other locations across the country have benefited from recently,” the report says.

Hotel rooms in San Francisco had more ground to make up entering this year in terms of revenue relative to 2019, the brokerage's report states.

“Buyers with long-term perspectives may look beyond negative headlines,” the Marcus & Millichap investment report says. “The elevated cost and tighter availability of capital, softer performance trends, and highly-publicized news regarding urban unrest are stifling investment. Some buyers are taking a wait-and-see approach expecting distress as well, particularly after the 55 and Hilton Union Square hotels entered into receivership last November. Some new opportunities may emerge this year, but distress and major discounting are not expected on a large scale.”