While La Quinta’s fate is decided in MIllbrae, owners wait

The Desai family has owned the hotel since 1977 and want to sell to the county based on a lack of profitability — but their eight-month wait for a decision to be made will continue.

“Of course, it does affect our day-to-day life … we have to continue running this as-is. We can’t make any decision that it’s going to sell or it’s not going to sell,” Anita Desai, whose father Arvind owns the family-run La Quinta, said. “We’re just going to be in limbo.” 

In September 2023, the San Mateo County Board of Supervisors voted to purchase the hotel as housing for homeless families and seniors for $33 million — a decision that was decried by residents and opposed by a majority of Millbrae councilmembers, who cited public safety concerns and significant loss of revenue. 

The hotel's $33 million sale price is $3 million over its appraised value, the city said previously. 

The Desai family said, however, the city is misconstruing the hotel’s future revenue capacity, which the city estimated at a yearly loss of $751,234 in hotel tax and other service impacts for Millbrae should La Quinta close.

A staff report from a May 14 Millbrae City Council meeting said hotel tax numbers from 2018, 2019 and 2023 — excluding years when the COVID-19 pandemic impacted hotel stays — were used to predict a yearly loss of $579,061 in La Quinta hotel tax for the city. Combined with an estimate of $172,173 for additional losses of property tax and restaurant and sales tax from hotel guests spending money, the total loss estimate came to $751,234. 

Anita Desai was surprised by the estimations, which were higher than La Quinta’s own figures by tens of thousands of dollars, she said, and didn’t think it was appropriate for the city to share specific revenue information about the business. 

“If we are making that much money, we would not be closing,” she said. 

City Manager Tom Williams said revenue numbers from years before 2023 were boosted from a 12% hotel tax rate to the 14% hotel tax rate that was implemented in 2022 to create an accurate predictor of what revenue costs would look like going forward — information that was not disclosed in the report. 

Additionally, according to city calculations based on hotel tax and a review of room rates, La Quinta’s occupancy rates are around 80% to 83%. Anita Desai says, however, that occupancy rates from 2022 to today range from 60% to 64%. 

Pre-pandemic revenue valuations might not be generally accurate predictors of the hotel market — which is still struggling, said Sajeet Desai, no relation, vice president of the company who owns nearby Millbrae Fairfield Inn & Suites.

“None of the pre-pandemic valuations make any sense in today’s market,” he said.  

“Talk to any hotel owner up and down the SFO market, the rates are a fraction of what they used to be.” 

Anita Desai expressed a similar sentiment, saying revenue is lower than last year and that she didn’t believe the economy would come back for another five to six years.

Millbrae’s own predictions of its hotel tax paints a rosier picture than hotel owners’ estimations of their profitability, predicting a nearly full return to pre-pandemic revenue by 2024. The city is outpacing other regions in San Mateo County in terms of its hotel revenue regrowth post-pandemic, staff have said. Anita Desai said, if the sale is halted, they plan to look to other developers for interest in a sale.

Lawsuit

The city of Millbrae initially filed litigation against the purchase in November 2023, alleging purchase of the property is for low-income housing and should be voted on by residents under Article 34 of the state Constitution. 

And the issue is causing the city significant political turmoil; residents will vote in July on whether to recall two councilmembers that didn’t support a letter opposing the purchase. 

Additionally, the city has yet to obtain Project Homekey funding for the proposed housing project, both a contingency for the purchase to go through and a possible necessity for the lawsuit to continue — unless Millbrae appeals the judge’s decision. 

The city of Millbrae has the legal right to refile the case when it is ripe, the judge ruled. Sam Singer, public relations representative for the litigation, said the city is still reviewing the decision to determine if it allows the county to buy La Quinta and turn it into housing without Article 34 compliance. 

“Our preliminary review of the judge’s decision gives us concern that the … decision never considers or answers the key voting rights question that the city of Millbrae brought before the court,” he said. 

The county acknowledged a decision of the Article 34 element of the lawsuit had not yet been reached, but County Attorney John Nibbelin said they were pleased.

“While the court did not reach the merits of the parties’ Article 34 arguments, we are nevertheless pleased that the court agreed that the case should be dismissed because it is not ripe and that judgment will be entered in the county’s favor,” Nibbelin said.   

Struggles at La Quinta 

Turmoil around the hotel purchase has put significant stress on the Desai family, who say it’s been challenging to remain without answers as they continue to manage the hotel and mitigate a still-struggling hotel market. 

Community members protesting outside the hotel without warning and even threatening the staff regarding the possible sale is another source of tension, she said — and although Anita Desai supports the public’s right to their own opinion, the situation creates challenges.

Millbrae isn’t opposed to the Desai family selling the La Quinta, said Williams, the city manager, but believes the county’s purchase to be illegal without a resident vote. 

“We’re not in opposition to the sale of the property,” he said. “We’re opposed to the process the county implemented to incentivize the sale and not adhering to current requirements of state Constitution.”

Note to readers: This story has been updated to include the hotel's appraised value, according to the city.