Half of American hotel markets are in a recession or depression. And California is expected to lose more than 150,000 hotel jobs from 2020 through 2021, with bankruptcy hitting large establishments like the Fairmont San Jose and San Mateo’s Holiday Inn & Suites. Who would open a hotel in this dismal climate?
Berkeley, it turns out.
This October, a 16-story Residence Inn will open its doors at 2121 Center St., becoming the city’s third-tallest building behind two other high-rises on the same downtown corner. Managed by Pyramid Hotel Group, the Marriott-branded hotel will include 331 extended-stay suites, 15,000 square feet of meeting space, and a rooftop bar and restaurant. The structure, which is LEED Gold certified, will be wrapped in colored glass that mimics the fetching skies over the San Francisco Bay.
It’s only about two-dozen years in the making.
“We’ve been trying since 1997 to get that spot taken,” says Barbara Hillman, president of Visit Berkeley, the organization that markets the city to the world. “I worked with the Office of Economic Development to designate that particular area as a hotel-and-conference center and we had several bites, but it seemed as one bite progressed there was a downturn in the economy. This is the most recent bite coming to fruition, and I’m excited because it’s something Berkeley has needed for a long, long time.”
The hotel goes some of the distance toward completing Berkeley’s 2012 Downtown Plan, which set forth design guidelines to make the district denser and more attractive for visitors and locals. The plan envisioned bringing in taller-than-usual buildings, especially hotels if they deliver “significant additional public benefits.” The Residence Inn is one of these high buildings; an 18-story housing development that’s been going under the name of Shattuck Terrace Green Apartments is another. The developer for that project has changed since it was conceived and no construction has begun; it’s still just a Walgreens. There was also supposed to be an 18-story housing project on Harold Way, but that was canceled last year due to financing problems.
At 168 feet, the Residence Inn will sit slightly in the shadow of the Wells Fargo Building, at 176 feet, and the SkyDeck building, the city’s tallest, at 186 feet. Rates aren’t yet available. But a one-bedroom studio with a king bed and kitchen in the Residence Inn closest to Berkeley, in Walnut Creek, goes for about $270 a night in October, according to its website (or about $200 a night if you rent by the week).
Hillman hopes the hotel will help stanch the bleeding-out of visitors and convention attendees in Berkeley. “We have the No. 1 public university in the world. People come and want to hold meetings there but we just didn’t have the space to accommodate them, so they would go over to San Francisco and Oakland to hold their conferences. We turned a lot of business away.”
The hotel owes its existence partly to Jim Didion, a former real-estate adviser to UC Berkeley and the late brother of writer Joan Didion. “Jim was the first individual who saw the site, saw the opportunity, contacted us as architects and said let’s put a plan together,” says Edward McFarlan, principal of JRDV Urban International in Oakland.
The site was previously a Bank of America in a low-rise building with a distinctly suburban-looking front lawn.
“It used to be 15 tellers lined up and everyone would have to come in and do their personal business,” says McFarlan. “Well, that went away because a lot of people do online banking. It was empty all the time. It was this giant, wood frame, 1970s – you know, some people could call it ugly, some people could just call it a very unnoticeable building on the most prominent corner of downtown Berkeley. The bank realized that, too. That’s why they said, ‘Yeah, let’s sell it.’”
Boston-based Pyramid Hotel Group started to pursue the project in 2014, but told the city a couple years later that due to a regional building boom and rising costs, it might have to cancel the project. The city council granted the developer about $13 million in tax abatement in 2018, and construction started that year. The city says there have been no changes to that tax agreement. The developer wouldn’t comment on the final costs of building the almost-finished hotel, which in 2018 were estimated at $125 million.
The Residence Inn is expected to employ about 110 people by next year and, along with Berkeley’s other hotels and motels, will eventually chip in transient-occupancy taxes to the general fund. In 2018, the city estimated it would bring in $4 million a year, a figure that hasn’t been recalculated since the pandemic.
Berkeley has dozens of hotels and motels that funnel in not just occupancy taxes but sales and property taxes. (They occasionally provide other civic benefits; last year, Alameda County leased two Berkeley hotels through Project Roomkey to provide lodging for unhoused people.) In a good year, these taxes would amount to several million dollars. With COVID-19, the city expects to collect only about $2.2 million for the 2022 general fund, according to preliminary budget figures. Still, the Residence Inn will likely become a large tax contributor in decades to come, given its size and the brand’s reputation for high occupancy rates that industry experts put in the 75%-80% range.
The hotel arrives among other recent enhancements to the downtown area, including a renovated BART plaza and a reconfiguration of Shattuck that brought in new sidewalks and traffic calming.
“I think people want to stay in hotels where there’s a lot of vibrancy and choice,” says John Caner, CEO of the Downtown Berkeley Association. “If you were a parent or visiting scholar or tourist, wouldn’t you love to stay in downtown Berkeley and be able to BART into San Francisco or Oakland, or rent a car and go up to wine country?”
‘Very conservative … not love and crazy at all’
The original concept for the hotel was a little too risque for downtown planners, according to architect McFarlan. It had a three-dimensional art wall with variously colored apertures and glass that seemed to float over the street.
“You think about it as UC Berkeley and radical and all the leftists activists are there, and that’s one of the things we love about Berkeley. … But over time we realized we weren’t getting support, and it wasn’t clear why,” he says. “I finally realized that actually with Berkeley, the zeitgeist they operate on is very conservative in their view of their city. It’s not love and crazy at all, which is OK. They really love their tradition, as I do – I love downtown Berkeley and the traditional buildings. The only question you ask yourself is, ‘What’s a new building have to be to complement that?’”
McFarlan and his colleagues settled on a more traditional brick-and-stone design with glass and white-metal detailing hinting at a modern playfulness. They included sophisticated solar technology with preheated water, a green roof, a rainwater-harvesting system that feeds the building’s vegetation and a publicly accessible roof deck, which McFarlan’s particularly proud of. “It’s going to be the hangout because it looks out over the UC campus, over the hills, downtown Oakland, and you can see pieces of the Golden Gate Bridge and San Francisco.”
There will be a new street-level restaurant and a second-floor parking garage with spaces designated for Bank of America, which is moving back into its historical home on the first floor. There will be four ATM vestibules in the branch and one in the lobby, plus expanded office space for bankers to meet with clients, according to Bank of America executive Nitu Nanda.
The Berkeley Art Museum and Pacific Film Archive, which sits directly east of the hotel, is pumped about the possible boon to art tourism.
“While BAMPFA has deep roots in our local community, we’re also proud to serve a large audience of arts lovers from outside the Bay Area, who will now have an inviting new accommodation option that’s literally right next door to the museum,” says BAMPFA director Julie Rodrigues Widholm.
Planning for a bounce back
Will a sweet exhibit of Gandharan Buddhist sculpture and a free breakfast buffet be enough to draw in visitors, when new and more gnarly-sounding COVID-19 variants seem to pop up every moon cycle? The hotel industry certainly hopes so.
“I don’t have the numbers back to the Great Depression, but this makes all of our other downturns and recessions pale in comparison to the complete loss of revenue in the hotel business,” says Alan Reay, president of Atlas Hospitality Group, a hotel brokerage-and-research company in Irvine.
Some hotels are seeing a comeback, particularly those in “drive-to” markets like coastal communities and wine country as people look to finally escape the house. “A number of our clients (in those markets) have had the best May on record,” says Reay.
The problem is hotels in downtown areas and business districts are still struggling. “It’s going to take them longer to come back, just because you can’t flip a light switch and expect people to have meetings and conventions.”
Dhruv Patel, president of Ridgemont Hospitality, predicts local hotels will see a gradual rebound through 2023 but won’t be back to normal until an astonishingly late date of 2025. “We’re heavily reliant not only on corporate and group travel but international inbound. And while America is well on its way to controlling the pandemic, we know what’s going on overseas,” says Patel, whose company operates six hotels in the Bay Area.
The fortunate thing is Berkeley’s newest lodging specializes in extended stay, a category that’s done remarkably well during the pandemic. Extended-stay hotels are popular among nurses and first responders, and the inn’s location near the university perhaps will entice students who need a place to live while finding more permanent housing. The suites also include kitchens, an appealing feature for folks who’ve spent an entire year honing their cooking-at-home game.
“We opened an extended-stay hotel in Alameda in October, and that actually outperformed our entire portfolio through the pandemic,” says Patel.
The area certainly could use more visitors; foot traffic is still down by about two-thirds compared to pre-pandemic levels, according to Caner of the Downtown Berkeley Association. “Our poor merchants have been under such financial duress during COVID,” he says. “I’ve been saying to so many people, ‘If we can just hang on until August, students are going to return, people are going to come back to offices, and with the hotel, we are going to bounce back so much faster than I think other downtowns will.’”
Perhaps the true test of downtown’s comeback will be how well UC Berkeley’s football does. In normal years, the games typically draw in huge crowds of spend-happy visitors from Southern California, Oregon and Washington.
So far all signs point to a roaring season, according to Herb Benenson, the university’s associate athletic director for communications. “I do know that nearly 95% of our 2019 football season-ticket holders have renewed their seats for this season, and demand for new season tickets is strong.”