Hotel’s Trek to Hipness Trips on the Economy

Hip hotelier Ian Schrager called it his “most grown-up project”--transforming the venerable Clift Hotel, longtime bastion of old money and rep ties, into the coolest luxury hotel in town.

Now, just keeping it open is turning out to be the greater feat, as the signature hotel of the new, avant-garde San Francisco struggles with the rest of the city through the dot-com bust and unanticipated economic downturn.

The born-again Clift opened last August to generally rave reviews. “Reflective of tomorrow, but respective of yesterday,” waxed San Francisco’s stylish Mayor Willie Brown. “It’s going to be one of the hot spots for San Francisco for a very long time.”

What Schrager’s ultra-chic Mondrian Hotel became for Los Angeles, the radically revamped Clift was supposed to be for San Francisco--only more so.

But a year later, the Clift is caught up in what the local hotel business is calling its worst crisis since the end of World War II, when the city emptied of sailors and soldiers. The 367-room Clift is seldom more than half full; its expensive restaurant is hemorrhaging money and, according to industry sources, the Clift has scrambled to make timely payments on its principal loan.

Beyond the collapse of the critical dot-com sector, the general post-Sept. 11 tourism doldrums and the recession, some say there was a cultural miscalculation by Schrager, whose chain of super-hip boutique hotels remains the rage in New York, Miami and Los Angeles.

“San Francisco is still a small city. What works in other cities does not necessarily work here,” said travel book author Erika Lenkert, who headed a drive to save the Clift’s famous Redwood Room bar from a radical makeover by Schrager’s designers.

“The question is how many hip people can you cram into one hotel at one time?” said hotel real estate specialist Bob Eaton.

In the case of the Clift, it may not be enough.

Restaurant Losses

Hotel consultant Rick Swig, who represents GMAC Corp., the loan service agent for the Clift’s lenders, said Schrager has satisfied the lenders for the time being. “They bought themselves a year,” said Swig, scion of a famous San Francisco hotel family whose grandfather owned the Fairmont Hotel on Nob Hill.

Reached by telephone in New York, Schrager dismissed any notion that the Clift was in danger of closing. “We are servicing our debt. We have a lot of equity invested in the hotel. We are not in risk of default. We are just waiting for the market to get better to make the kind of money we had planned,” he said.

Schrager confirmed reports that the restaurant is losing $3 million in its first year, but said he is in negotiations to try to keep it open. “Hopefully, we will be able to work something out,” he said.

The Clift, like other San Francisco hotels, got caught in what Schrager described as a “perfect storm” of conditions that made its problems more severe than those of hotels in other cities.

A recent report by Smith Travel Research, the main hotel industry performance index, said hotel occupancy rates in San Francisco and neighboring San Mateo had dropped 59% in the first six months of this year, the steepest decline in the nation.

To attract guests, most San Francisco hotels, including the Clift, have drastically lowered rates. When it opened last year, the Clift listed room rates at $325 to $530, with suites going for as high as $2,025. But rooms are now available on the Internet for less than $200.

“I would have wished that the Clift opened up in a stronger market,” Schrager said. “But I believe in the fundamental soundness of the San Francisco area.”

When Schrager bought the Clift in 1998, it created an instant sensation in San Francisco, where the squat, 17-story, brick hotel on Geary Street near Union Square had been a landmark of blueblood San Francisco society since it opened in 1913.

By the time he took over the Clift, Schrager had built a reputation as one of America’s trendiest hoteliers, starting with his stylish renovation of New York City’s old Hudson Hotel in 1984. Since then, the Schrager chain has expanded to eight hotels in New York, Miami, Los Angeles, San Francisco and London. Still under construction is Schrager’s remake of the landmark Miramar Hotel in Montecito, the elite enclave just outside Santa Barbara.

When Schrager arrived in San Francisco, rival hoteliers held their breath.

“Our very first reaction was fear and curiosity,” said Rob Delamater, vice president of the Joie de Vivre hotel chain. “Schrager was the superstar in our industry. The fear was that the Clift would blow us out of the water.”

The key element of the Schrager formula is a sense of velvet-rope exclusivity borrowed from his days as co-owner of the famous Studio 54 nightclub in the 1970s. You do not choose a Schrager hotel, said Steve Pinetti, marketing director of the San Francisco-based Kimpton hotel chain; it chooses you. Being accepted there is a confirmation of your stylishness.

The Clift Hotel, for example, carries no sign over its door or in its lobby. The message is that if you do not know where you are, you are not cool enough to be there.

The lobby, decorated by French designer Philippe Starck with a hugely oversized Louis XV chair as its centerpiece, is as imposing as it is inviting.

“The Schrager environment is not about fun,” said Pinetti, who regularly stays at the Mondrian when he is in Los Angeles. “There is a lot of pressure when you walk into a Schrager hotel. You better be looking right and feeling fit.”

In its previous incarnation, the Clift Hotel was famous for a different kind of exclusivity founded on the very conservative standards of old San Francisco, one of the last cities in America where women wearing dress gloves and hats are not an uncommon sight.

San Francisco restaurateur Gianni Fassio recalls being ejected from the Clift in the early 1970s because his hair was considered too long. Actor Michael Douglas, then performing in a play at a nearby theater, got the same treatment. Coat and tie were de rigueur in the Clift’s stately French Room restaurant.

For a time under the same ownership as the elegant Santa Barbara Biltmore, the Clift was the place where uniformed bellhops walked the guests’ dogs and where a guest could be confident that if he dropped his reading glasses, an attendant’s gloved hand would be there to catch them.

The social center of the hotel was the magnificent Redwood Room bar, named for the rich, solid wood panels that lined its walls. The Redwood was where San Francisco society gathered for martinis before and after the theater. Anniversaries were celebrated there. Famed San Francisco columnist Herb Caen was a regular.

So when the Schrager takeover was announced, it provoked a panic among San Francisco traditionalists, convinced that the Redwood Room was endangered when Schrager’s designers signaled a total remake.

A committee, San Franciscans for Saving the Redwood Room, was hastily created by travel writer Lenkert, and it quickly generated a swell of nostalgic support.

“They almost rode me out of town on a rail over the Redwood Room,” Schrager said.

In the end, he was able to appease most of his critics. The essential Art Deco style of the room was maintained, although the old 75-foot redwood burl and Italian marble bar, flanked by two brass elephant heads, was replaced with a cut-glass countertop. The Gustav Klimt prints were supplanted by digital panels that project an array of images, including the old Klimts.

But the clientele had completely changed. Occasionally, formally attired older couples would wander into the bar, looking lost in the swirl of modish 20-year-olds. Customers in suits and ties risked being turned away in favor of the more casually dressed.

These days, the Clift can’t afford to be picky. Many of the high-rolling dot-com crowd that the hotel beckoned have either left town or been traumatized by the events of the last year. The question for Schrager is whether his hotel can be a port in the storm that is buffeting his clientele.

“A kind of post-Sept. 11, post-hip mentality has emerged,” said Delamater, creative director of the Joie de Vivre chain.

“Schrager is at the pinnacle of the ethereal, uber-hip at a time when people are wanting to be more grounded. The era of the post-hip hotel is about to begin,” Delamater said.

Comeback Predicted

For his part, Schrager insists that is all nonsense and that he still has the right formula to flourish here.

Although harder hit than other cities, San Francisco will make a comeback sometime in the next five years, Schrager predicted. He plans to be there when it does.

“San Francisco is a city of contradictions,” Schrager said. “It still has that liberal element and also has a very conservative element. It still has an incredible amount of young people and a big gay population. It’s a big bouillabaisse, full of contradictions. But these same contradictions produce energy, and that is exactly why I am attracted to them.”