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ighgate, a New York-based hospitality firm, has abandoned its 686-room Hyatt Regency hotel in San Francisco after failing to pay off a $250 million loan. The company returned the keys to its lender, Blackstone Mortgage Trust, and handed over a deed-in-lieu of foreclosure for forgiveness of $290 million in unpaid debt and associated costs.

    Highgate had purchased the Park Central Hotel in 2018 for $315 million and invested $70 million in renovations before rebranding it as the Hyatt Regency. However, with higher interest rates and fewer hotel bookings since the pandemic, Highgate's exit from the city's sixth-largest hotel comes after a nearly $400 million investment.

    This move follows similar decisions by other hospitality companies in San Francisco. Park Hotels & Resorts walked away from the 3,000-room Hilton Union Square complex last year due to a bearish convention outlook and office vacancies. Westbrook Partners has also abandoned a Four Seasons hotel and is trying to sell another in South of Market.

    Hotel occupancy rates have declined in San Francisco this year, with a 20% year-over-year drop in revenue per room last month. While some analysts predict a stronger convention calendar next year, short-term profitability gains will be undermined by higher operational costs from the upcoming collective bargaining agreement with a local hotel labor union.