CHAPTER 1 SUMMARY &CONCLUSIONS1–1 1.1THE SAN FRANCISCO ECONOMYThis report presents the Golden Gate Restaurant Association’s(GGRA) annual study of the Economics of the San Francisco Restaurant Industry. Previous reports, prepared in 2002 and 2003, documented industry conditions after the onset of the recent national recession, the dot.com bust, and the 9/11 terrorist attacks. These events produced the most challenging economic conditions for San Francisco restaurants in half a century. •The number of arriving passengersat San Francisco International Airport fell 25%between 2000 and 2003, reflecting the sharp drop in out-of-town visitors. •Hotel occupancydropped 20%, average daily hotel room ratesfell 16%,and hotel room tax revenueplunged 59%. •The number of transient vehiclesusing City-owned parking garages dropped 13%reflecting the drop in the number of metropolitan area visitors to San Francisco. •The City lost 80,000jobs, nearly 14%of all City-based employment; the resident labor forcecontracted 8%; employmentdropped more than 12%; the unemployment raterose from 3.4%to 7.0%; and the number of unemployed residentsincreased 84%. •The office vacancyrate for Class Aspace soared from 3.8%in the fourth quarter of 2000 to 21%in first quarter of 2003. Vacant office spaceof all types rose from 5.2 millionsq ftto 20 millionsq ft– roughly a 10-year supply at historic absorption rates. •Sales taxrevenues, a good reflection of consumer spending in the City, plunged 46%.•Median incomeof table service restaurantsplunged 40%in 2001 and another 10%in 2002. In the process, San Francisco suffered a net loss of 298restaurants and bars, or 6.4%of all such businesses in the City.Economic conditions in San Francisco have improved substantially from the depths of the recession in 2002 and early 2003. However, many measures of economic activity remain well below their level in 2000 before the onset of the recession and the economy in general is smaller than before the recession. •The number of arriving passengers at San Francisco International Airportin 2004 was up 6%from it low point in 2003, but still 20%below the level in 2000. •Hotel occupancyin 2004 was 4%above its low point in 2002, but still 20%lower than in 2000. Average hotel room rateshave declined in every year since the onset of the recession and were 17%below their 2000 level in 2004. Hotel room taxrevenue was up 36%from its low point in 2002, but 44%below its 2000 level. All three measures were depressed by an as yet unresolved hotel industry labor dispute.