The Portland Business Journal reported this week that hotels in downtown Portland are still struggling years later to recover from the pandemic.
According to the commercial real estate analytics firm CoStar, the occupancy rate for downtown Portland hotels was roughly 62% last year — nearly 10% less than their pre-pandemic occupancy levels in 2019. In another ominous sign of the market’s recovery, the revenue the hotels generated per room was $13 less last year than what they earned in 2019. Recovery for other downtown businesses, including restaurants and commercial real estate, has also been slow.
A recent report from Travel Oregon, meanwhile, showed that spending on hotels and motels by visitors to the Portland region increased by 2% last year from 2024. That might suggest that business travelers and tourists are returning to the area, but choosing to stay overnight and spend their money outside of downtown.
Sara Edwards is a staff reporter at the Portland Business Journal who covers commercial real estate. She joins us to explain the grim outlook facing Portland’s downtown hotels.
Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.
Dave Miller: From the Gert Boyle Studio at OPB, this is Think Out Loud. I’m Dave Miller. Portland hotels are struggling. The occupancy rate for downtown Portland hotels is still down nearly 10 percentage points from pre-pandemic levels – that’s according to data from the analytics firm CoStar, as reported by the Portland Business Journal. Sara Edwards covers commercial real estate as a staff reporter for the Business Journal, and she joins us now with more. It’s great to have you on the show.
Sara Edwards: Yeah, thanks for having me.
Miller: All right, so I just mentioned that number right there. Hotel occupancy in Portland in 2025 was about 10 percentage points below 2019 pre-pandemic levels – it was a little under 62%. What’s considered a healthy occupancy rate?
Edwards: Yeah, so you never want to have a 100% occupancy rate, [which] means that you are completely booked out, no other room. From what I’ve gathered with my research is a really good occupancy rate you want to have is usually between 80% and 90%. And then a generally OK one is going to be around 65% to 70%. So we were just below that.
Miller: Wow, OK. Just below an OK one and nowhere close to a really good one. How many more stays would we need to get there? Or, I guess the other way to think about it is how many rooms do we need to close to get to a healthier occupancy rate?
Edwards: That’s something I talked about with EcoNorthwest, that we are very oversupplied in those hotel rooms, specifically in downtown. We would need to fill around eight full-size hotels, and that’s about 1,400 stays a night.
Miller: How is the Portland hotel market doing compared to peer cities?
Edwards: We’re not doing horribly, but we’re not doing too great. When I was interviewing for this story, one that kept coming up is just the recovery that San Francisco’s hotel industry was seeing. For a great period of time, as the San Francisco Business Times reported, they were seeing hotels just completely go under. They were in distress. Their loans were coming due and lenders were just taking those back like crazy. And then they elected a new mayor, changed around that public perception, and there’s the AI boom that’s really skyrocketed their office presence. That’s brought back business travel. So investors jumped at the opportunity to snag these hotels at a really low price. So that’s an area that’s … they’ve just done so well and we have not seen that same kind of recovery.
Miller: Why not? I mean, what are some of the reasons you’ve heard that occupancy levels in Portland proper have not bounced back?
Edwards: The biggest reason is business travel. You know. Like I mentioned, a lot of our hotel rooms are concentrated in downtown. We had a period where we were building, building, building. We needed to have these hotels for that business travel, and then COVID essentially wiped all that out. We don’t have the same office workers coming back downtown. And that being said, there’s not as many people traveling to come and stay in those hotels. So there’s a lot of that. And a lot of visitors who do come to downtown, they’re not staying downtown. They’re staying, usually, on the outskirts.
Miller: You talked about some of the distressed hotel properties in San Francisco. We’ve seen that in Portland as well. What’s happening with the Hilton Portland Downtown and The Duniway hotel?
Edwards: Those are in the same loan portfolio. Last we checked – this was a couple of years ago – they had been foreclosed on. They were just not performing well, and they even finally made it to a foreclosure sale auction. My predecessor before me went to the auction, hoping to see who was going to buy this portfolio. And no one showed up. So in that instance, the portfolio just went back to the lender, which is tied to an LLC that’s run by Wells Fargo and a couple of other entities, and they’re kind of just holding on to it right now.
Miller: So they’re still operating as hotels, but the ownership structure is a mess and they’re in serious problems.
Edwards: Yeah, and it’s not very common that banks and lenders don’t usually try to hold on to those hotels or buildings. They usually want to offload them, thus an auction or a foreclosure sale. But yeah, no one showed up. No one wanted to buy them.
Miller: If no one wants it, then you’re stuck with it, as a bank.
Edwards: Yeah, pretty much.
Miller: OK, so we’re talking here about downtown Portland, but your reporting found that, at least to some extent, Portland’s loss is the surrounding area’s gain. What’s happening in the suburbs?
Edwards: We’ve seen a lot of corporate investment especially go into West Portland areas like Beaverton, Tigard, Hillsboro. Actually a Marcus & Millichap market report found that [the] Beaverton area is the most resilient because of that silicone forest. And all of the business travel is heading out that way. A lot of studies I’ve seen exclude short-term rentals. But that’s kind of where people are going, and then they’ll either drive into downtown or they’ll take public transit into downtown. But generally, they see the idea of staying in the suburbs as a safer option.
Miller: What did you hear about what it would take to turn this around, to have more people spending a night or two, or whatever the business travel timing is, actually in downtown Portland?
Edwards: Yeah, I keep hearing that there needs to be a catalyst, like some kind of event or development that brings people back, that gets people wanting to stay. So ones that get thrown around a lot are the potential MLB stadium in South Waterfront. That would have a lot of people coming in from downtown into South Waterfront. And the other one is the James Beard Public Market. A lot of people are excited for that development. It’s in downtown, has the potential to bring a lot of vendors and foot traffic. So some kind of big development or project like that could help just turn the shape and the perception of downtown.
Miller: You know, it’s interesting to think about the market or baseball because earlier you were talking about business. And in terms of the hotel business, are they still super reliant on business travelers as opposed to people just coming for travel and vacations?
Edwards: That’s the difficult part. The downtown’s hotel, for the most part, yes, just because that’s what they were built for. There was a period where people were saying we didn’t have enough convention size hotels. When we have conventions, we need to be able to house everyone close to the convention center. And then, again, COVID hit. We’re not seeing as many. We’re still trying to bring businesses back to downtown and also conventions are trying to come back. So we just have not seen that bounce back or recovery that we’ve seen in other markets.
Miller: We’ve been talking about vacant hotel rooms, but I want to turn to a related issue that you’ve been writing about: A proposal floated by some members of the Portland City Council to impose a tax or a fee on Portland property owners based on the amount of time that their retail or residential spaces are vacant. What’s the idea behind this?
Edwards: This is an idea that’s been floating around for a while, and nothing official really happened to investigate this until last summer. And the idea is, a lot of people have this perception that landlords are holding on to vacant spaces, whether it’s housing or particularly in retail, in hopes that someone who can pay a high rent or will pay a higher rent will come in. So the city councilors essentially wanted to find a tool of, how can we address these vacancies? How could we push people to go into these vacant spaces and reactivate them again? So a vacancy fee and or a tax is one that’s been floated around, not just by Portland, but by a lot of cities across the country.
Miller: You filed a public records request and got a copy of a report that the city commissioned, that we as taxpayers spent $60,000 on. What did it find about the feasibility of such a tax or fee?
Edwards: If we were to implement a tax or a fee, first of all, we’d have to distinguish, would this be a tax or would this be a fee? Both are very different legally. Also, the way that Oregon’s current tax policy was set up, specifically when we passed Measures 5 and 50, also the Uniformity Clause in Oregon’s Constitution, would actually prohibit this kind of tax. So if we were to get to a point where we were seriously considering implementing this at the city level, the city would have to go through a lot of legal issues, policy changes. There’s a lot that would come before this idea could even happen.
Miller: But there’s also other things in this report, as you’ve been digging into it, that are worth talking about. What did the report say about the reasons for these commercial vacant storefronts in particular?
Edwards: The biggest takeaway was there’s just a lack of demand. That was probably the biggest takeaway that the report acknowledged. There is just not the demand that we were hoping for these vacant commercial spaces. So if we had wanted to implement a vacancy tax or fee, it’s not a great solution for an issue that is totally related to the demand side.
Miller: In other words, the theory that it’s greedy property owners who are just waiting for a better deal, that’s not the problem. The problem is nobody wants these vacant storefronts to begin with?
Edwards Correct. So when I talked to a lot of landlords, they’ve talked about how they’re doing deals that they never would have done pre-COVID, and that includes lowering the rent as much as they can, maybe bringing in a tenant that they probably wouldn’t have considered pre-2020. Some other challenges that have also come up are we have a lot of shell spaces, so the space is a completely blank slate for whatever you could want to do with it. But the issue is construction costs, tenant improvement costs, and also just the unpredictability of when your permits are going to get approved contribute and can sink a small business before they even open. And that’s another big barrier this report found, why these spaces are empty.
Miller: That’s why, as you drive around, even away from the downtown core, you’ll see some new buildings with empty and an unbuilt-out retail space on the ground floors.
Edwards: Yeah. So if anyone is going to go into an empty ground floor, say a coffee shop, they’re going to ideally want to find a spot that, already, was retrofitted for a coffee shop. That’s less work, less retrofitting you have to do.
Miller: Well, if the authors of the city commission report didn’t think that a fee or tax would work to reduce those vacancies, to accomplish what it would be intended to accomplish, did they put forward any alternatives?
Edwards: They did. So a lot of it would come from the public side. They suggested tenant improvement grants. They also suggested streamlining the permitting process and making it easier to get permits analyzed, evaluated and approved, which is something actively happening with city council and the Permitting Bureau.
Miller: Sara, thanks very much.
Edwards: Yeah, thank you so much.
Miller: Sara Edwards covers commercial real estate for the Portland Business Journal.
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