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Hotels nearly empty as the new coronavirus 'recession' hits Palo Alto

Business leaders prepare for long recovery as economic activity grinds to a halt

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Stephanie Wansek, the general manager at the Cardinal Hotel, walks around the lobby on Oct. 3, 2019. She has shut down the historical hotel due to the coronavirus pandemic. Photo by Magali Gauthier.

Hours after Bay Area public health officials ordered residents to stay at home for three weeks, Stephanie Wansek made the difficult decision to shut down the historic Cardinal Hotel in downtown Palo Alto.

The hotel was struggling even before the March 16 announcement, with just a handful of rooms being occupied, said Wansek, the hotel's general manager. The big blow came when Stanford University called off its in-person classes and told students not to return to campus for the spring quarter. What followed was a cascade of cancellations by people who were planning to attend conferences and other events at the university.

"You can see the business was going and there was no understanding of when the new business will come," Wansek told the Weekly. "There's nobody coming to the county right now."

The Cardinal is hardly alone. Like other Bay Area cities, Palo Alto has seen its hotel industry screech to a halt earlier this month, a development that is particularly ominous for a city that has tethered the funding of its infrastructure plan to hotel-tax revenues. Some local hotels, like the Cardinal and the Garden Court and Nobu Hotel (formerly known as The Epiphany), have shut down entirely. Others remain open but have seen their levels of occupancy plummet because of the sudden economic freeze.

John Hutar, CEO of the San Mateo County/Silicon Valley Convention and Visitors Bureau, said the impact of the pandemic has been profound for hotels throughout the region. Normally at this time of the year they have occupancy rates of 80% to 85%. In the past few days, the highest number he has heard was 30% and the most common rate was about 20%.

"I know hotels in the teens and I know some in single digits," Hutar told the Weekly. "I know owners who may have a few hotels that are consolidating. They're saying, 'Why have three staffs working if you can put whatever business you have in one hotel.'"

Hutar said the visitor's bureau has been rapidly changing its message to adapt to shifting directives and new restrictions. With businesses closing down, it shifted its marketing to the region’s parks and open spaces. Once outdoor areas began to see restrictions, the bureau shifted its focus to displaying attractions that the region offers without necessarily encouraging people to visit at this time.

Judy Kleinberg, president of the Palo Alto Chamber of Commerce, said that for those hotels that remain open, occupancy is generally in the single digits. Guests are typically either travelers who can't get home because of new restrictions, people who are getting their homes renovated or relatives of people staying at local hospitals.

Large companies began to cancel conferences earlier this month, launching the downturn of hotel business. Chamber CEO Charlie Weidanz pointed to Google's decision earlier this month to cancel its annual developer conference, which was slated to bring about 5,000 people to the area.

"That was just devastating to many of the hotels," Weidanz said.

Even open hotels have had to reduce staffing. He said he has recently made contact with a hotel that is keeping its operations going with just management staff, he said.

Every hotel has had to adjust its operations in response to the coronavirus crisis. Jim Rebosio, general manager of the Sheraton Hotel in Palo Alto, said the hotel has closed its bar and restaurant and is only doing take-out and room services, consistent with the order from public health officials. The hotel is also working with the city to assist with some emergency services, as well as the hospital, he said.

The Hyatt Centric Hotel in Mountain View is also operating as a place for people in need of shelter and offering grab-and-go options from its restaurant. The hotel has also been offering rooms as temporary workspaces for $49 per day and providing discounted rooms for stranded travelers, students and first responders (the rates for these visitors are now $99 per night).

The long road ahead

The hotel industry is hardly the only business segment feeling the pinch. The shutdown has left local retail and restaurant industries reeling, prompting many stores and restaurants in Palo Alto's primary commercial districts to shut down. Some, including Zareen's, Subway, Mediterranean Wraps and Izzy's Brooklyn Bagels, remained open on California Avenue as of late last week but limited their operations to to-go orders, consistent with the March 16 directive from public health officials.

During the normally bustling lunch hour, only a few people could be seen strolling on California Avenue, with most employees now staying at home and working remotely.

Given the economic shutdown and the climate of uncertainty about its duration, business leaders are bracing for the worst. Kleinberg said she expects the recovery to take longer than a year and to be more difficult than the last recession in 2008.

The fact that the current crisis presents a "physical danger," in addition to the financial danger, completely changes the dynamics in the business community and makes the situation very different from how it was 12 years ago, Kleinberg said.

"This is an economic crisis. It is a recession and it may turn into a Great Recession," Kleinberg said.

She predicted that even after the shelter-at-home order is lifted, business will not go back to normal for a while. Some businesses simply won’t reopen, she said.

"I just heard today of a business on University Avenue whose corporate office is suggesting that they won’t reopen. Some of the smaller businesses will probably not reopen," Kleinberg said. "They won't be able to survive, either because they are in shutdown or because staff goes away and they don’t have enough staff to reopen. And because rents are so high in Palo Alto, they may reopen but just not in Palo Alto."

But while major hotels are more likely than mom-and-pop shops to open again, the plunge in occupancy rates can have a far bigger impact on the city's bottom line. Before the virus hit, the city was projecting to see $27.2 million in transient-occupancy taxes in fiscal year 2020 (which ends on June 30), 6% higher than the prior year. Those numbers, however, were based on expected occupancy rates of about 80% and an average room rate of about $280 per day, among the highest in the region.

The prosperity of local hotels is also critical to Palo Alto's infrastructure plans. In both 2014 and 2018, voters approved increases to the local hotel-tax rate, with the understanding that the money would be used to fund infrastructure projects such as new garages and fire stations, a bike bridge over U.S. Highway 101, and a new public-safety building. Because of those votes, Palo Alto now has the highest hotel-tax rate in the region, at 15.5%, as well as a heavy reliance on hotel-tax revenues to pay for long-awaited projects. Some of these, including the bike bridge and the police building, were set to enter the construction phase in the next year.

While Palo Alto officials are still trying to gauge the impact of the pandemic on the city's revenues and its infrastructure plans, City Manager Ed Shikada pointed to information about hotel occupancy and acknowledged that revenue declines "will be severe." To prepare, the city has already implemented a hiring freeze.

The city's ongoing expenses, he told the council on March 16, will need to be "monitored very closely and in all likelihood cut back in recognition of the severe economic impact of this event."

How has your business been impacted by the coronavirus pandemic? Tell us by sending an email to editor@paweekly.com.

Find comprehensive coverage on the Midpeninsula's response to the new coronavirus by Palo Alto Online, the Mountain View Voice and the Almanac here.

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Comments

21 people like this
Posted by resident
a resident of Downtown North
on Mar 24, 2020 at 9:50 am

When COVID-19 testing ever starts going mainstream, we're going to need space to quarantine and care for the sick people. Start converting those unused hotel rooms now, before hospitals get overrun. News reports say San Francisco is already doing this.


28 people like this
Posted by Trump fired the national pandemic team
a resident of Greenmeadow
on Mar 24, 2020 at 10:31 am

[Portion removed.]

Feds need to backstop cities and states ASAP, as well as get a monthly stipend to every American family to prevent this recession sliding into a depression worse than the First Republican Great Depression of 1929.

Federal money to hospitality industries is reasonable. Trump has the experience - having been funneling tax dollars to his properties for the last three years (all the golf trips, fundraisers at the covid petri dish - Mar a Lago, etc..).

Do it. Then the hotels can support the local paper with advertising.


16 people like this
Posted by Stop already
a resident of Mountain View
on Mar 24, 2020 at 10:42 am

[Post removed.]


34 people like this
Posted by Stop already uses drugs
a resident of Barron Park
on Mar 24, 2020 at 10:58 am

For someone to write a comment that we should not look analytically and critically at the person responsible for perhaps the poorest response of any elected official is the height of putting head in the sand. [Portion removed.]


15 people like this
Posted by Stop already uses drugs
a resident of Barron Park
on Mar 24, 2020 at 11:00 am

[Post removed.]


24 people like this
Posted by Anneke
a resident of Professorville
on Mar 24, 2020 at 11:12 am

I agree with Resident (post #1).

If the County needs a steep increase in hospital beds, we could temporarily convert empty hotels into small hospitals. They already have all the amenities, and the government could fund this temporary conversion.




9 people like this
Posted by Trump fired the national pandemic team
a resident of Greenmeadow
on Mar 24, 2020 at 11:27 am

[Post removed.]


23 people like this
Posted by Judith Wasserman
a resident of Leland Manor/Garland Drive
on Mar 24, 2020 at 11:52 am

In SF, 8500 hotel rooms have been donated for the homeless, health care workers and first responders who can't shelter at home, according to this morning's Mercury News. Why not here?


12 people like this
Posted by Gale Johnson
a resident of Adobe-Meadow
on Mar 24, 2020 at 12:18 pm

I was a late Great Depression entry into this world. I was born in January of 1937. I never felt the hard impact of the Great Depression because I went to a one room country school and came home to a loving and caring farm family. We had farm animals and grains to supply most of our food needs: milk, eggs, pork, chicken, flour, beef, and a few garden vegetables. And mom was a prolific canner when things like peaches, pears, and berries of all kinds were in season and in great supply at our local small town grocery store. The fact that we didn't have electricity, gas, phone service, flush toilets, running water coming out of our faucets, refrigerators, or Charmin toilet paper in our outhouse was not a problem. We dealt with it just like our neighboring farm families dealt with it.

I heard, as kind of a home schooling lesson, about the Great Depression, and how my parents handled it and how it changed/shaped their lives, including how they would invest their hard earned money. It stuck. Don't spend what you don't have, until you have it. But sadly, many people were never able to get it, even after all the New Deal programs were implemented and I think we are facing that same situation/dilemma again. I have thought about a worst case scenario but I am reluctant to tell it in detail. It would include things like crime rate increases, suicides, massive increases in our homeless population, etc. Our basic survival instincts might take over and that could do away with centuries of civilized living together and behavior. Please pray for our leaders...they need it, and help anyone you can, if you have the ability to, to get through this crisis.

Be safe, be healthy, and follow the guidelines set by federal, state, and local governments.


8 people like this
Posted by chrisk
a resident of University South
on Mar 24, 2020 at 1:01 pm

Fox is constantly playing its interview with Trump today, where he is telling
everybody to pack the churches on Easter (April 12). Hallelujah! Resurection!
Damnation! All the hotels in the country won't be enough then.


15 people like this
Posted by Trump fired the national pandemic team
a resident of Evergreen Park
on Mar 24, 2020 at 1:02 pm

Gale - lovely thoughts. Thank you.

I think most of us are observing and generally following state and local rules and guidelines per your suggestion.

The White House still think it's okay for groups of ten or less to gather. Web Link

Alas, leadership is being provided at the state and local level. Countries that are doing better than the US have leadership from the top, not leaders who claim it "wasn't my fault."


9 people like this
Posted by Gale Johnson
a resident of Adobe-Meadow
on Mar 24, 2020 at 1:04 pm

Hi,

Of course a lot of CC's previous decisions were made when things were moving along smoothly, and looking rosie for the future ahead, and there was a good revenue stream available to approve many projects. That has all changed. There was no way to predict and plan for this, but now that it's here, what should we do to get through it? Halt all projects that haven't started, including the bike bridge project that would be so little used by so few of our residents. Evaluate and take care of the most crucial infrastructure projects. Although most of the Ross Rd bicycle friendly project didn't work out very well, don't waste money trying to undo it to get it right.

I think most of our council members will make the right decisions on how to mitigate the problem in our community, with the exception of our mayor. He is being so focused on supporting Wiener's great housing plan. That is not what we need in PA now. Certainly not what is described as affordable housing, when that only means housing for work force employees, well above incomes the hundreds of minimum wage workers make in our town. And now most of them are out of a job.

Step up your game, Adrian. You too could follow in Mark Berman's footsteps into a State Assembly position at the next chance of an opening. I never missed him once he left council and I was happy I didn't have to watch him at council meetings, ignoring speakers at the dais while whispering things into Lis's ear. So rude!


17 people like this
Posted by Competence matters
a resident of Another Palo Alto neighborhood
on Mar 24, 2020 at 3:05 pm

Competent leadership matters. We got this one because of a Godlike worship of "business experience" even though it's meant 2 Republicans in a row who bankrupted their own businesses, this one starting with $450 million from daddy and going bankrupt 6 times. No matter how many times Republicans mismanage government, including that they always make debt go through the roof and cut investments, and no matter how many times Democrats have to be the adults and clean things up while Republicans blame everything but the kitchen sink on them (some personal responsibility), still Democrats don't get wise to claiming the mantle of fiscal RESPONSIBILITY as they deserve far more than Republicans.

Our previous build-baby-build Council has made this bed, now the rest of us must lie in it. Notice our mayor is concerned mostly about "businesses" -- not mom and pop, which he and his philosophy are destroying just like residence quality of life, but the big guys he's been trying to hand our city over to for years.

Of course, like Dorothy with her ruby slippers, Democrats have had the power to fix things all along by not being such flakes when it comes to voting, but voting in EVERY election and caring about the balance of power in Congress in the Supreme Court -- Care about the fate of the planet? Get YOUR butt into the voting booth EVERY election, and make sure your friends who care do, too, because if YOU don't reliably vote, no one else does, and we all will keep having to live with Republican mismanagement destroying competent government and the deadly consequences. Stop making excuses that the candidate isn't your exact perfect personal dating match, or that your vote doesn't count. Elections hinge on turnout, and YOU have to take personal responsibility EVERY ELECTION if you want things to get better.

Read Michael Lewis's The Fifth Risk. No, the incompetence was NOT unforseeable! We took our money out of stocks while things were going up and up, started talking about it at the start of this presidency. But then, we saw the 2008 dive coming from miles away, predicted it 8 years earlier (including the timing). Who does 45 have as treasury secretary? How did said person profit from the 2008 crash? Exactly how did the SALT deduction limit affect just the people on the bottom end of the housing markets in just the states where a real estate investor (also advantaged by the tax changes) would stand to make the most money by picking off some bargains, just like in 2008?

Notice how excited said treasury secretary looks, he's practically salivating at all the people who will lose their homes again, notice the utter lack of help in proposals for people who were already made vulnerable by the 2017 tax changes. Someone should force 45 into a corner by asking if he'll include a refund of extra taxes from 2018-2020 for anyone whose taxes went up more than 10% from his supposed tax relief act, and apply a cost-of-living adjustment since his tax INCREASE hit people on the high-cost-of-living coasts hardest (someone here making $150,000 is living the equivalent economic circumstances of someone making $20,000 in many red states), i.e., this refund should be for anyone making like $350,000/yr to help anyone who has been targeted, I mean, accidentally hit by the tax increases on the lowest rungs of homeownerships on the coasts, people who were already put in danger of losing homes before this because of the specific way taxes were increased on them. That's millions of people. (Again, if you are inclined to think accident, look again at the treasury secretary's and potus's histories since 2008).

Again, competent leadership matters. That means planning, and doing boring stuff like caring about science and safety. Competence is usually incompatible with the inclination to put image above substance and lie all the time. Democrats: Republicans are living in a frame of lies that no amount of economic devastation from their policies will wake them up from. Get your butts into the voting booths, before it is too late to ensure that vote is even fair. (I'm pretty sure when the election is "close" it already isn't. Get out in numbers!)


9 people like this
Posted by Anon
a resident of Another Palo Alto neighborhood
on Mar 24, 2020 at 3:28 pm

Posted by Judith Wasserman, a resident of Leland Manor/Garland Drive

>> In SF, 8500 hotel rooms have been donated for the homeless, health care workers and first responders who can't shelter at home, according to this morning's Mercury News. Why not here?

Unfortunately, for years, the bean-counters have been forcing the removal of what they consider to unneeded hospital beds, despite warnings that those beds would be needed during, e.g., a bad flu pandemic like 1918-1919. Now, we have not a flu pandemic, but, a corona virus pandemic that requires similar resources. Let's all make a mental note about this-- we need to find a cost-effective way to maintain the facilities and staff at an affordable cost, even though they will not be needed on a daily basis.

I quoted articles that have a bearing on this in several threads:

Web Link

It is true that on a daily basis, all these hospital beds are not needed, although I do have reason to believe that the typical target "3-day" surgery stay is not long enough. But, yes, there are times when a lot more beds, and staff, are needed.

We, as a society, need to find a way to handle a situation like we have today, and provide some kind of "surge" capability in both facilities and staff.


Like this comment
Posted by Anneke
a resident of Professorville
on Mar 25, 2020 at 8:55 am

I am a naturalized American citizen from The Netherlands and grew up in Limburg, the southern part of The Netherlands.

I just read that this specific hotel in Stein-Urmond, Limburg, where my husband and I have stayed many times, has been converted into a temporary COVID hospital. It took ONLY THREE-AND-HALF DAYS to convert the hotel into a medical facility that can handle COVID patients who are "too bad" to stay at home but "too good" to stay in a regular hospital.

Web Link

As you look through the pictures you can see the hotel has everything. I truly hope we can do this in Palo Alto. What a Godsent for doctors, nurses and patients.


6 people like this
Posted by Trump fired the pandemic team
a resident of Greenmeadow
on Mar 25, 2020 at 9:17 am

[Post removed.]


3 people like this
Posted by Hulkamania
a resident of Duveneck/St. Francis
on Mar 25, 2020 at 9:32 am

On the up side, the air hasn't been this clean in years.


10 people like this
Posted by Competence matters
a resident of Another Palo Alto neighborhood
on Mar 25, 2020 at 11:07 am

@ Trump fired
Is that really true, that they’re sending out postcards?

I want us to get this under control by summer not create another round.

One thing for sure, Trump has been the worst manager of the civil service ever in modern history by a lot. He seems mainly interested in manufacturing crises and rancor to cover his misdeeds. His very way of talking is to aggressively blame others for whatever he is guilty of. Small example: being really mean to a reporter while saying the reporter was asking a mean question (which clearly wasn’t a mean question). Bigger example: bringing all of the women Bill Clinton had affairs with him to a debate while he was secretly covering up paying off women including a porn actress to stay silent about his own affairs.

Or relentlessly calling Hillary Clinton corrupt such as spurious accusations against their charity while he himself had a charity so questionable and corrupt, the actual misdeeds fill a book. He does this so much, every time he makes an accusation, we should be asking what he really did (like the brag about shooting s/o on fifth avenue...). And every time he makes a brag about himself, why is it there is no pushback anymore? Why isn’t anyone naming the lies snd the damage of the lies, especially when he lies about being good for the economy? Even before this pandemic, the manufacturing sector here was in recession, largely due to Trump’s import taxes. The last three years of the stock market under Obama were better than the first three years under Trump before the pandemic. Trump raised taxes on tens of millions of middle class Americans on the coasts in such a harsh way before the pandemic, you can see Mnuchin practically drooling over the prospect of all those evictions all over again like how he enriched himself after the last Republican-spawned financial crisis in 2008. Only this time they had figured out how to hit just the coasts.

Republics are scheming, corrupt, lying bullies, and they inevitably make us more vulnerable to enemies and crises of all kinds. Their followers have been cultivated like members of a cult who have almost no ability to see outside their cult anymore to analyze facts and truth. (but in true Republican fashion, loudly accuse democrats of exactly that with no evidence of it). Again, read The Fifth Risk.

The book took a look at a few agencies of government that Lewis had no familiarity with, to figure out what they do. He found mostly hardworking civil servants, often acting on a calling (and chronically underpaid for their expertise level), who are mostly engaged in one way or other protecting America and Americans and the world against all kinds of threats. And mostly no one even knows. We saw how Trump abused the civil service foreign service and intelligence community over the past year. This is not a reality game show where it’s possible to treat uniquely qualified people with decades of national security experience like the attention seekers who just want to be on TV.

The Democrats in Congress have to make a really assertive case in the impeachment hearings, and somehow the media pick up and repeat a loud Republican accusation that impeachment managers, who were making a strong, well-supported, iron-clad factual case, were repeating themselves as if they thought it would make a lie the truth, which has been ironically one of the Republican ways of operating for decades, and was one of the reasons things went so badly in the Republican-led war in Iraq—mainly Republican leaders saying lots of made up stuff that was just detached from reality and believing it themselves as if it were true. Yet somehow, Republicans get away with aggressively and falsely charging someone else with what they are guilty of. They are following the leader.

Republicans do not believe in good governance. They do not believe in freedom. They openly admit they want to destroy our government (drown it in a bathtub) which is the power of the people, and thus have made it vulnerable to our enemies like the Russian hackers, they openly admit they think government is the problem and are thus incapable of administering an effective government (look at how well-run FEMA was under Bill Clinton vs the wasteful incompetence under George Bush and Trump). Read Michael Lewis’s book The Fifth Risk and remember we could have avoided this. Then pay attention the next time a Republican says we aren’t a democracy. They have been saying that for 50 years. They don’t even believe in democracy and don’t think we are or should be one. They think there is no such thing as a democratic republic or representative democracy, as this nation was founded to be.

More than that,Republican ideology and its inextricably linked mismanagement and corruption of government, and insulation of politics from the honing forces of actual competition, are why we have a public health system in such disarray, why our people are so economically fragile across the nation (just like in 2008), why we uniquely do not have affordable medical care for all Americans when every other first-world country (and many others less wealthy) do (how many millions of needless American deaths had that caused in the last 50 years?), why our infrastructure is a shell of its former state in the ‘50s. This guy has been scheming to blame homelessness on Democrats in the election without having to take any responsibility for the storms of structural contributors the Republicans have caused. Once again, they make a problems and force Democrats to be the adults to fix it while blaming Democrats and taking undue credit. The POTUS is not the problem, he is the perfect lying, corrupt, bad manager endpoint if Republican ideology.

But don’t blame just him for the death and economic crisis, Republicans and their insular world of lies and self-serving echo chamber are as much to blame as the flaky Democratic majority who let them do this to our nation and people by not each getting to the polls in every election.

We have a little microcosm of the problem here: putting all the eggs in one industry (tech and the steamroller crushing out everything else through their all wanting to crowd in here, the monoculture of hotels on El Camino being one manifestation, the pushing of trickle-down density which pushes out low-income people and people of color while calling it housing advocacy is another) rather than supporting the broad populace for a dynamic and diverse economy, has made us far more vulnerable here to this kind of economic downturn. .


Like this comment
Posted by Trump fired the Pandemic Team
a resident of Greenmeadow
on Mar 25, 2020 at 11:21 am

> Is that really true, that they’re sending out postcards?


Yes, I got my Trump postcard yesterday, telling me social gatherings of 10 were just peachy-keen.

Web Link

I swear, you couldn't make this stuff up.


3 people like this
Posted by Elizabeth
a resident of Downtown North
on Mar 25, 2020 at 11:22 am

I support using these hotels for isolation. Most of the houses and apartments around here are way too small for any sick family member or roommate to effectively self-isolate


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