Drive along Petaluma Avenue and you'll pass the fenced dirt lot at 6828 Depot Street, its current tenant a rotating public art installation rather than a hotel. Walk two minutes into The Barlow and you'll pass the old Guayaki Yerba Mate warehouse, still standing, its longtime tenant still waiting to relocate while the hotel project planned for that footprint works out its financing. Both sites have had a hotel planned for them since before most people reading this owned their current home. As of this summer, only one of those two hotels just got a lifeline from the city.
On July 21, the Sebastopol City Council voted to rebate half of the city's 12 percent hotel tax back to the developer of the Barlow Hotel for the project's first ten years of operation. Across town, the other long-promised hotel for Depot Street still doesn't have a construction loan. Understanding why the city just started subsidizing one hotel project, while the other sits fenced and unfunded, tells you something about Sebastopol that the new restaurants and expanded shops at The Barlow don't: the town's downtown momentum right now is coming from small operators willing to bet on themselves, not from the outside capital that was supposed to arrive with a hotel.
Two Sites, One Long Wait
The Barlow Hotel is planned for 6782 Sebastopol Avenue, on the footprint of the aging Guayaki building, which Guayaki has not renewed its lease on and is vacating as part of the deal. Barney Aldridge, who founded The Barlow and still serves as its managing partner, first floated the idea of a hotel there more than a decade ago. The Sebastopol Planning Commission and Design Review Board finally approved a development agreement for an 83-room hotel in March 2025, and the City Council signed off the following month.
Four blocks away, Hotel Sebastopol has been in the pipeline even longer. Piazza Hospitality, the Healdsburg-based developer behind four hotels in that town and two more in San Luis Obispo, got its original approval for a 66-room boutique hotel at that same Depot Street address back in 2017. Wildfires that year pushed back contractor availability. A planned 2020 groundbreaking got shelved by the pandemic. Then interest rates climbed, and Piazza's own vice president of development has told the council that lenders view Sebastopol as an unproven market for high-end lodging, meaning banks want to see a track record the town simply doesn't have yet.
Both were supposed to be part of the same story: Sebastopol finally getting real overnight lodging to match the destination-level shopping and dining The Barlow had already built. Instead, the two projects have spent the past year running into the same wall from opposite directions.
What the City Actually Agreed To
The Barlow Hotel's development director, Ari Wangerin, told the Planning Commission in mid-July that without a tax rebate, the project was likely headed for a hold. Commissioners spent nearly two hours dissecting what "promoting tourism" should actually mean before recommending the rebate to the council, with Vice Chair Jennifer Koelemeijer pressing for assurance that public funds wouldn't just promote tourism inside a district "owned by one individual."
The revenue numbers behind that debate came from two consultants with very different answers. RRC Associates, hired by the developer, projected the hotel would generate $1,548,000 a year in transient occupancy tax once it's operating. EPS, hired by the city for a second opinion, put the number at $891,000, a gap of roughly $657,000 a year, or about 42 percent below the developer's own projection.
The City Council took up the amendment on July 21, with Vice Mayor Sandra Maurer and Councilmembers Phill Carter, Neysa Hinton, and Stephen Zollman voting in favor. Mayor Jill McLewis recused herself from the entire discussion because she owns a small business across the street from the hotel site.
During the council's discussion, Zollman pointed out that even Piazza Hospitality, an experienced developer with four hotels in Healdsburg alone, still hasn't found a way to move Hotel Sebastopol forward. Wangerin agreed with the comparison rather than push back on it:
"That's a proven developer, and they have a dirt lot surrounded by a fence, and they're trying to figure out what to do and they can't."
He added that Aldridge, unlike Piazza, is at least willing to put his own money on the line, and that the Barlow team has been working the financing angle for three years. Wangerin argued Sebastopol needs a revenue source beyond property taxes from houses, telling the council the town "can't survive as a bedroom community."
Why the Proven Developer Still Can't Break Ground
Piazza's own account of Hotel Sebastopol's delays, given to the council in earlier annual updates, traces a chain of bad luck that started with the 2017 wildfires and hasn't really stopped. The pandemic shelved a planned 2020 groundbreaking. Then came a long federal environmental and archeological review tied to a USDA construction loan application, followed by interest rate increases that pushed the project's financing further out of reach. Piazza has floated a redesign that would swap the original two-story, hotel-over-retail layout for a one-story building with storefronts facing Petaluma Avenue, a change the company says could shave roughly $6.5 million off construction costs while keeping all 66 planned rooms, according to reporting on the project's most recent reset.
In the meantime, the empty lot hasn't stayed empty in the way you'd expect. In 2025, Piazza partnered with the Sebastopol Center for the Arts on a temporary installation called The Belonging Project, featuring work from ten artists exploring identity and community. Before that, the same lot hosted a kinetic sculpture by Sebastopol-based artist Ned Kahn. It's a strange kind of holding pattern: a lot approved for construction back in 2017 is still doing double duty as a rotating public art space nearly a decade later.
The Barlow Isn't Waiting on Either Hotel
While both hotel projects have spent this year negotiating financing, the retail and restaurant side of The Barlow has kept expanding without any of it. Rust Boutique more than doubled its footprint on April 1, moving from roughly 500 square feet into a space topping 1,300 square feet. Genero's Delicatessen, run by chef-owner Ian Marks, opened in the food court in late January. Iggy's Organic Burgers is taking over the former Cock Robin space with a family-friendly burger and ice cream concept, and Wild Poppy Cafe is opening a second location on-site that will produce fresh tofu for both restaurants. The Venue, in the space that once hosted Peacetown concerts, drew crowds for a Summer Solstice weekend in June with a BBQ, live DJ, and shopping specials, and the Head West makers market has been returning to McKinley Street on the third Sunday of every month through December, according to reporting on The Barlow's spring growth. Property managers have also filed for a construction permit to add six new retail suites at 100 Morris Street.
None of that growth required a tax rebate or a USDA loan. It's local operators signing leases, expanding storefronts, and betting on foot traffic that's already there. Compare that to the two hotel projects still working through the kind of financing puzzle that doesn't resolve with a ribbon cutting or a good design review.
What to Actually Watch For
If you live here, the two lots are worth tracking for different reasons. The Barlow Hotel now has a ten-year tax incentive behind it, which the developer says he needs to bring in the outside equity that's been missing. Whether that incentive actually unlocks financing, or whether it becomes another line item in next year's annual update, should show up in the city's next development agreement review. Hotel Sebastopol's entitlements run through 2027, and Piazza has been candid with the council that failure is a real possibility if a financing package doesn't materialize before then.
For now, the more reliable measure of how downtown Sebastopol is actually changing isn't either hotel. It's the deli counters, the boutique that doubled in size, and the makers market that keeps showing up on McKinley Street every third Sunday. Those are the businesses actually testing whether Sebastopol can support more visitor spending, months or years ahead of whichever hotel manages to get its financing in order first.
If you're weighing what any of this means for property near downtown or The Barlow, that's exactly the kind of question The Shone Group spends time on with clients who know this market from the ground up. Reach out when you're ready to talk specifics.
