Despite a wave of tech-job layoffs over the last year, San Francisco -- aka Silicon Valley -- remained pretty hot for the hotel industry in the first quarter.
"San Francisco is just crazy -- you can't afford to build a hotel because of the residential price increases that have occurred," says Choice Hotels International(CHH) - Get Report President and CEO Steve Joyce in an interview with TheStreet. Adds Joyce, "San Francisco's [economy] is still really, really strong -- we are trying to build new products there, but it's really hard to get a deal done."
Choice has about 21 hotels in and around Silicon Valley, mostly weighted toward its Comfort Inn and Quality brands. With more than 5,400 U.S. hotels, strength at Choice' Silicon Valley locations likely did a small part in driving the company's bottom line to start the year.
Choice Hotels reported domestic revenue per available room in the first quarter rose 1.2%. Earnings before interest, taxes, depreciation and amortization, or EBITDA, rose slightly to $50.3 million compared to $49.0 million a year ago.
Joyce's comments on the state of San Francisco echoed those made by several of his industry peers.
"San Francisco has been a remarkably strong market; the city itself has been remarkably strong and I would say the whole region's been very strong," said Hyatt(H) - Get Report President and CEO Mark Hoplamazian to analysts on a May 3 call. While Hyatt's first quarter benefited from the Super Bowl being held in San Francisco, Hoplamazian rejected the notion that underlying trends in the area have softened.
"I would say it's been actually nothing but good news out of San Francisco. For the last probably six to eight quarters, it has been on a steady, positive progression -- so that's my overall assessment of what's going on in the market," he said.
Hyatt operates 13 of its namesake hotels in and around the San Francisco area. Marriott(MAR) - Get Report , which has 84 locations under brands such as Courtyard and Residence in and around San Francisco, also hasn't seen a letup in demand.
"Our group [bookings] pace for this coming year, that is 2017, is quite strong and demand for 2017 bookings continues to increase -- so I don't really have any particular concerns about either San Francisco in particular, or other things that I'm seeing that cause me anxiety at this point," said Marriott President and CEO Arne Sorenson to analysts this week.
Whether the hotel industry could keep defying conventional wisdom -- as tech giants such as Intel(INTC) - Get Report , Dell and Microsoft(MSFT) - Get Report slash jobs and once promising startups go bust -- is up for debate.
According to job outplacement company Challenger, Gray & Christmas, the computer industry has announced 72,333 job cuts over the 12-month period ended March 31. About 17,002 job cuts were announced by the computer industry in the first quarter alone, which represents a 148% increase from the prior year.
"We will always need technology, but how we interact with it, as well as where and when we interact with it, is changing rapidly," says John Challenger, CEO of Challenger, Gray & Christmas, adding, "as a result, we will continue to see a lot of job destruction, along with job creation, in the industry over the next several decades."