Market Saturation and Development in San Francisco Bay Area, California and Downtown St. Louis, Missouri

Introduction

Spanning opposite ends of the U.S. cost spectrum, the San Francisco Bay Area and Downtown St. Louis illustrate how long-term hospitality fundamentals are being rewritten in the wake of the pandemic, shifting labor markets, and evolving public-policy agendas. Investors and operators who want resilient returns must look past short-term occupancy spikes and examine the structural headwinds and tailwinds shaping each locale for the rest of the decade.

In San Francisco, hotel and restaurant owners confront a triple squeeze: some of the nation’s steepest labor and wage pressures, high nightly room-rate expectations, and a maze of city permits that only recently began to loosen under Mayor Lurie’s new “PermitSF” streamlining package. Yet asset values are starting to look attractive as a “robust recovery” in convention and international demand pushes 2025 group-booking pace 50 % above 2024, signalling fresh capital-gain potential if costs can be contained.

Downtown St. Louis tells a different story: lower operating costs and major public investments—a $240 million convention-center expansion and a new state law empowering an entertainment district to hire POST-certified peace officers—are improving demand visibility and safety perceptions, even after a 2024 leisure-travel dip. Still, the market’s future hinges on sustained workforce depth and successful execution of these civic initiatives.

Together, these contrasting markets offer a clear lesson: long-term performance will depend less on raw visitation counts than on how effectively each city aligns cost structures, regulatory climates, and security measures with shifting traveler expectations.

• San Francisco Bay Area: New hotel and venue construction has largely halted. Nationwide, California saw only 35 hotel openings in 2024 (versus 88 in 2021), reflecting a “dearth of new hotels” in the Bay Area. Developers cite very high financing and construction costs. The local pipeline is thin – for example, SF’s largest new hotel in 2025 is the Casino-linked Chicken Ranch Inn (197 rooms) opened on tribal land – and aside from a few boutique and conversion projects, most of the 2020s have seen very little new supply. This means existing Bay Area hotels will capture incremental demand from any uptick (as noted in recent forecasts). By contrast, Downtown St. Louis has experienced moderate additions. About 572 new downtown rooms (an 8% increase) opened between 2010–2022, and a “few remaining projects” are still under development or on hold. In short, Bay Area supply growth is effectively paused (limiting overdevelopment), whereas Downtown St. Louis has seen steady but not excessive growth in hotel inventory.

• Restaurants and Venues:  San Francisco’s restaurant market, once dense and highly competitive, saw massive pandemic closures. Today there are pockets of openings (especially in revitalized neighborhoods), but many chefs report that foot traffic downtown is still below pre-COVID levels. The city’s strict “formula retail” rules also limit chain restaurants. In St. Louis, downtown eateries have gained from the recent tourism rebound (described below), but the market is smaller and often tied to local events (Cardinals games, etc.). Neither region faces obvious “overbuilding” of restaurants, but both have many options per capita, meaning fierce competition. (For example, the 2024 Explore St. Louis report notes a 60% surge in hotel bookings, which suggests demand is rising to match supply.)

Real Estate and Operating Costs

• San Francisco: Operating costs are extremely high. Commercial rents and property prices in SF remain among the nation’s highest – office rent in the Financial District exceeds $70–$80/sq ft, and retail rents downtown are similarly elevated, pressuring restaurants and shops. Labor is also very expensive: San Francisco’s minimum wage was ~$17.62 in 2025 (and $18.67 by mid-2024), plus laws like California’s tip-credit rollbacks mean many employers must pay full minimum wages. The result is high staffing costs. Hospitality businesses also face steep insurance, utility, and local taxes (until 2023 SF had planned a 30% hotel tax increase, later partly rolled back to 12%). In sum, fixed costs in SF (rent, wages, insurance) are far above typical U.S. levels, squeezing margins.

• Downtown St. Louis: Costs are much lower. St. Louis City’s minimum wage is effectively the Missouri state rate ($12.00/hour in 2025), and average salaries are well below Bay Area levels. Retail rents and office costs are a fraction of SF’s. Tax rates (sales, property) are moderate by national standards. Insurance costs (e.g. storm or flood risk) are not as volatile as California. However, Downtown St. Louis has had its own challenges: aging historic buildings often need costly renovation, and some financing sources remain cautious after past downtown underperformance (the Millennium Hotel site sat vacant since 2014). On the positive side, recent successful renovations (Four Seasons, Ritz-Carlton) and new developments (e.g. mixed-use Millenium redevelopment) show capital is returning, easing capital cost pressures.

A summary table is below. (Examples are illustrative; costs vary by location within each region.)

Challenge	San Francisco Bay Area	Downtown St. Louis
Supply growth	Minimal new construction – few new hotels (35 in CA, 2024); one large casino-resort on tribal land opened. Pipeline largely “dormant”.	Moderate additions – about +8% hotel rooms since 2010; a few downtown hotel projects in the queue. Mixed-use projects (e.g. Millennium site) planned.
Real estate costs	Extremely high – Rents and home prices among highest in U.S. drive up operator costs. High hotel taxes and fees (partially alleviated by a 2024 tax cut).	Low/moderate – Lower rents and property costs. Modest tax rates. Some older buildings need renovation, but land is cheaper.
Labor costs	Very high – SF min wage ~$17–19; full-time hospitality pay (including tips) often $30/hr+. Unionization and benefits add costs.	Lower – Missouri min wage $12. Regional wages modest. Restaurants/hotels typically pay less than half of SF wages.
Insurance & utilities	High – California has expensive liability and property insurance (earthquake/fire coverage). Utilities (water/sewer) are also costly.	Lower – Standard Midwestern insurance (no major natural disaster premiums); utilities relatively cheap.

Regulatory Environment

• Zoning and Permitting:  San Francisco’s regulatory climate is notoriously complex. Restaurants and small businesses often face lengthy permitting and costly requirements (e.g. outdoor seating needed expensive site plans until 2024). San Francisco also enforces “formula retail” (chain store) limits in many districts, which can restrict even restaurant chains. Recently the city passed PermitSF reforms to cut red tape (easing outdoor seating and signage rules), but overall bureaucracy remains a barrier. In contrast, St. Louis (both city and state) has relatively straightforward zoning and health regulations, with fewer layers of approval. The Missouri legislature in 2025 created a new Downtown St. Louis Entertainment District that explicitly allows private security (“peace officers”) and event guarantees. This law (effective Aug 2025) is intended to simplify creating a secure, event-friendly downtown core. Aside from that, local rules in St. Louis tend to be business-friendly (no local minimum wage above state, no mandated paid sick leave as in some CA cities, etc.).

• Labor Laws:  California labor laws are generally much more stringent than Missouri’s. SF employers must comply with robust worker protections (e.g. AB5 employee classification, strict overtime/meal-break rules, high unemployment insurance costs, and expanding paid leave mandates). These raise operating costs and liability risk. In Missouri (and St. Louis), labor law is less burdensome: the state wage and hour laws are easier, and right-to-work status (no union checkoffs required) tends to lower labor costs. On the flip side, both regions must adhere to federal rules: for example, joint-employer liability rules (NLRB) and corporate transparency (FinCEN) now affect hospitality chains nationally, adding compliance costs.

• Health and Safety Regulations:  Both markets require food safety compliance and, post-pandemic, stricter sanitation. SF’s public health requirements (e.g. earlier COVID-era vaccine mandates) were often tighter than elsewhere, though most pandemic rules have since rolled back. St. Louis has similar restaurant health codes but generally looser emergency orders (Missouri frequently sued over mask/vaccine mandates). In practice, routine health inspections are comparable, but pandemic-era burdens fell heavier on SF businesses.

Shifts in Consumer Demand

• Tourism and Conventions:  San Francisco’s tourism recovery has been the slowest in the nation. By 2023 its hotel RevPAR was only ~70% of 2019 levels. Crucial convention bookings have lagged: SF Travel projected ~673,000 room nights for Moscone Center events in 2023 but actually logged only ~618,000. Recent forecasts expect SF tourism might not reach pre-2020 levels until 2027. Key challenges include a 20% drop in high-spending Chinese visitors (Asia travel down), and a weak return of business travel. Tech companies (SF’s main corporate clients) send far fewer travelers now due to layoffs and remote work. The SF hotels and restaurants that rely on conferences, international tourists, and tech crowds are feeling this deeply.

  By contrast, Downtown St. Louis has enjoyed a resurgence in demand. Visitor spending hit a record $5.8 billion in FY2024 with hotel room bookings up 60% over 2023. A flood of conventions (e.g. national union meetings, religious congresses) underpinned this growth. In 2024 Explore St. Louis booked ~460,000 room-nights for FY2025, a major jump. Major entertainment events (concerts by Beyoncé, Metallica) at the Dome also drove hotel stays. The city is even expanding its convention center (72,000 ft² new hall completed in 2024) to meet demand. In short, leisure and meetings tourism are growing strongly in St. Louis, whereas San Francisco’s visitor levels remain below pre-pandemic, especially for business travel.

• Local Consumer Trends:  In San Francisco, a rise in remote work has reduced weekday foot traffic downtown, suppressing lunch and quick-service venues. Leisure demand in SF remains driven by local attractions (museums, Golden Gate Park) and events (APEC, upcoming World Cup and sports in 2026). Meanwhile, visitor safety concerns (discussed below) have kept some visitors away. In St. Louis, downtown dining and nightlife has benefited from the tourism rebound. Post-pandemic, St. Louis locals have also flocked back downtown for games and festivals, improving weekday business for restaurants and venues. Demographically, San Francisco saw many young professionals leave for cheaper cities during the last decade, whereas the broader St. Louis region has recently added population and workers – an uptick that may boost local consumer demand.

Economic Cycles and Industry Shocks

• Tech Boom/Bust:  The SF Bay Area economy is highly correlated with the tech sector. The 2022–25 tech “boom” and subsequent layoffs have had a ripple effect: early reports noted 3,400 Bay Area jobs lost in July 2024, and SF itself lost jobs for eight straight months into late 2024. Tech layoffs (Salesforce, Google, etc.) and relocations (exodus to Austin, etc.) mean fewer high-paying business travelers and conference groups. By contrast, St. Louis is less exposed to tech cycles. Its economy is more diversified (healthcare, manufacturing, finance). In fact, St. Louis’s employment growth recently hit the top 10 nationally (2.16% growth in 2024). Aerospace and construction projects near St. Louis (Boeing expansion, Gateway South development) also drive local business travel, insulating the market somewhat.

• Pandemic Aftermath:  Both markets were devastated by COVID-19 in 2020. SF’s rebound has been slow; RevPAR and occupancy only began rising in 2022–23, and the market is not expected to fully recover until 2027–28. In contrast, St. Louis saw a “full rebound” in ADR by 2021 and healthy RevPAR growth through 2023 (though 2024 was a “correction” year due to convention center construction). Natural disasters have also played a role: an April 2023 EF3 tornado hit parts of St. Louis but, reassuringly, Explore St. Louis reported that major attractions, events and hotels remained open, showing resilience. San Francisco has faced its own events: a series of protests, and notably a 2023 deadline for the city to address homelessness in Times Square, but no natural disaster events of that scale. One local positive is that SF has won marquee events (e.g. NBA All-Star 2025, FIFA World Cup 2026 matches) which should temporarily boost travel, whereas St. Louis’s calendar is already rich with regional conferences and sports.

Competitive Pressures and Consolidation

• National Brands vs. Independents:  San Francisco is dominated by large chains and luxury brands. High operating costs have led to some big deals: for example, in late 2024 and early 2025 investors scooped up SF landmarks (W hotel, Ritz-Carlton) at discounts. Citywide, dozens of hotels risked defaulting in 2024, and CEOs have cited crime as a reason some groups won’t come. This environment favors well-capitalized chains, while smaller independents struggle or get acquired. In Downtown St. Louis, the hotel market is smaller and slightly more fragmented. Union Station, Four Seasons, and a few chains account for much of the upscale market, but there are also many mid-range and boutique properties. There has been some consolidation: e.g., a local ownership group revived Union Station through redevelopment. Overall, the downtown St. Louis hotel market “remains resilient” and healthy enough that receivership of two hotels in 2023 was seen as anomalies rather than a systemic problem. (That St. Louis Business Journal piece noted experts viewed the market as healthier than those foreclosures suggested.)

• New Competitors:  Both regions face the rise of non-traditional lodging. San Francisco has a huge Airbnb presence (ranks in top U.S. markets), cutting into short-stay hotel demand. SF and State laws have begun capping short-term rentals, but competition remains fierce. In St. Louis, Airbnb/VRBO is smaller but growing, especially for event weekends. Restaurants in SF compete with abundant fast-casual and delivery, whereas in St. Louis the mix is more traditional sit-down dining (though chains like fast-casual burger and taco spots proliferate). These shifts reinforce that hospitality businesses must constantly rebrand and differentiate to survive.

Workforce Availability and Wage Pressures

• San Francisco:  A severe labor crunch has gripped SF hospitality. After the pandemic, the city’s employment in leisure & hospitality (42,000 jobs lost 2019–21) fell to record lows, and it lost nearly 10,000 workers from 2019 to June 2022. Contributing factors were high housing costs driving residents out, and federal immigration cuts drastically slowing new arrivals. By mid-2022 SF unemployment was down to ~2.2%, but with far fewer people in the labor force. Restaurants report weeks without qualified applicants; many owners are cutting hours or recruiting relatives to avoid closure. As a result, wages in Bay Area hospitality have been rising. (For context, one 2022 SF article noted a local cafe manager paying about $30/hour including tips.) High turnover and quit rates in leisure jobs remain a headwind. The minimum wage rise (to $17–19 in 2024–25) only adds to pressure.

• Downtown St. Louis:  The labor situation is easier in absolute terms. The St. Louis metro unemployment rate in mid-2024 was ~3.7%. Employers do compete for workers (especially after the national wage inflation of 2022–23, and competition from the expanding healthcare and manufacturing sectors). Yet St. Louis area restaurateurs do not cite anywhere near the desperation reported in SF. Hospitality jobs here grew by ~12,000 in one year, suggesting plenty of openings, and wage growth has been modest. Still, managers complain about turnover – workers often jump between restaurants or leave for higher retail pay – and rising costs of food and benefits do squeeze operators. Overall, however, Downtown St. Louis businesses enjoy a relatively large, affordable labor pool compared to the tight, expensive market in San Francisco.

Infrastructure, Safety, and Public Perception

• San Francisco:  Infrastructure and safety have become major challenges. BART and Caltrain ridership remain below 50% of 2019 levels as fewer people commute, limiting hotel/business demand linked to transit. Union Square and areas around the Moscone Center have struggled with visible homelessness and street disorder, deterring some tourists. Indeed, Bay Area hospitality leaders openly blame “crime and homelessness” for lost convention business. The city and county have responded with new efforts: increased police deployment, mental health outreach, and shelter expansions as part of an anti-homelessness program. The recent PermitSF and business-tax reforms (Mayor Lurie’s agenda) are aimed at improving the business climate. These steps may help perception, but many investors remain cautious until “sanitized” neighborhoods reassure visitors.

• Downtown St. Louis:  Crime and safety are also concerns, but the context differs. St. Louis’s murder rate is high in national rankings, but violent crime is concentrated in certain city neighborhoods, and downtown itself has seen improvements. The 2025 state law (House Bill 199) explicitly targets downtown safety by funding private security and “peace officers” around stadiums and the Arch, acknowledging perceptions of risk. City leaders emphasize that most downtown businesses and attractions (even after a 2023 tornado) operate safely. Public infrastructure projects in St. Louis may enhance attractiveness: the new convention hall addition and planned consolidation of STL airport terminals (a $3B project) will improve visitor experience. By comparison, SF’s transit agencies are still bled out from post-COVID budget cuts and are wary about riders’ safety perceptions.

Demographic and Socioeconomic Trends

• San Francisco Bay Area:  The region has lost population recently. High housing costs and a shift to remote work led to a decade of net out-migration; only in 2023 did SF see a slight reversal. Most domestic migrants left for cheaper suburbs or other states during 2020–22. Many of those who left were younger workers – the same demographic that frequents cafes, casual dining, and mid-market hotels. Meanwhile, foreign immigration (especially from Asia) fell during the pandemic. The combined effect is an older, smaller daytime population downtown. If these trends persist, they could keep local consumer spending (outside tourism) relatively weak. On the positive side, if the rumored “brain drain” reverses and tech firms stabilize, that could restore some customer base. SF’s median income remains among the highest in the U.S., but wealth is very uneven, and income inequality fuels debates on affordable housing – a key factor for future hospitality workers and customers.

• St. Louis:  The St. Louis metro area has been seeing modest growth and diversification. The recent labor report shows a larger and growing workforce, thanks in part to gains in the Metro East and aging workers delaying retirement (the 55+ group is rising toward a quarter of the workforce). The downtown population itself (residents living in the Loop and Downtown) has crept upward as some office buildings have been converted to lofts, but it remains small (on the order of 5,000–8,000 people). Culturally, St. Louis tourism benefits from a broad appeal (history at the Arch, family attractions, sports, and conventions). Demographically, visitors and customers are drawn from across the Midwest and South; recent convention bookings even show significant growth in international and domestic meetings. Socioeconomic factors such as the relatively lower cost of living in St. Louis mean locals have more disposable income for dining and entertainment than counterparts in high-cost Bay Area neighborhoods.

Sources: 

Comprehensive industry reports and news from early 2023 through mid-2025 have been used to assemble this analysis.

These include:

• hospitality market forecasts (HVS, Marcus & Millichap),

• economic research (Bay Area Council, Explore St. Louis),

• local journalism (San Francisco Chronicle, St. Louis Public Radio, Business Journals).

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