Booming tourism keeps Chicago-area hotel occupancy steady, report says

The region’s hotel occupancy rate ticked up this year, despite thousands of new rooms coming online

Oct.October 01, 2018 04:30 PM

The Langham Hotel in Chicago

Chicago-area hotels are staying busy, even with a multiplying field of competitors.

The region’s occupancy rate nudged up by 10 basis points to 68.9 percent during the 12-month period ending in June, according to Marcus & Millichap’s regional hospitality research report. The uptick reverses a two-year slide in hotel occupancy, following 70-percent occupancy between June 2014 and June 2015.

Paired with feverish hotel construction — more than 4,500 rooms were underway in June 2017, the report notes — the numbers point to healthy demand for short stays in the city and suburbs, according to Peter Nichols, the national director of Marcus & Millichap’s hospitality group.

“GDP growth and the strong dollar are all contributing to very strong hotel performance, and we’re seeing it pretty consistently across all the major markets,” Nichols said. “Those 10 basis points [in Chicago] may not seem like much, but you have to factor in all the total number of rooms that have become available.”

Almost 3,200 hotel rooms were being built in the region as of this June, according to the report.

The local hospitality industry’s hot streak is also registering in the sums investors are willing to pay to acquire hotel buildings, Nichols said.

The price per room in Chicago-area hotel sales averaged nearly $153,000 between June 2017 and June 2018, a more than 37-percent spike over the average from the previous year, according to data from Marcus & Millichap and CoStar. Between June 2014 and June 2015, hotel sales reaped an average below $87,000 per room.

“You have so many demand generators in Chicago that make it stand apart from 99 percent of other markets in the country,” Nichols said. “You have universities, hospitals with medical conferences, sports franchises … all of them are bringing tourism.”

The city of Chicago has been consistently breaking its own record for tourism each year, drawing more than 55 million visitors in 2017, according to Choose Chicago.

The average daily rate for a hotel is also on the rise, both around the city and across Illinois, according to the report. The Chicago-area average surpassed $142 this June, compared to $137.35 in 2015. The state’s average daily room price grew from $122.29 in 2015 to $127.80 this year.

Between the 165-key hotel proposed as part of Related Midwest’s 52-story tower at 725 West Randolph and Sterling Bay’s 200-room Hyatt House hotel under construction at 105 North May Street, the West Loop is experiencing a mini-boom in new hospitalty space.

Massive Downtown developments like the 101-story Vista Tower, the soon-to-open South Loop Hilton Homewood Suites and Riverside Investment & Development’s proposed redevelopment of Union Station are all expected to add hotel capacity over the next several years.

Related Articles

Alderman Anthony Beale (9th), Jeff Bezos and the 150,000-square-foot warehouse in Pullman (Credit: Google Maps, Getty Images, Ward09)

Amazon plans another giant warehouse in Chicago

The Hoxton hotel at 200 N. Green St. (Credit: iStock)

Hotels turn to day rates amid increasing competition

Marc Jacobs store at 11 E. Walton St., Marc Jacobs (Credit: Getty Images and Google Maps)

Another one bites the dust: Marc Jacobs closes Gold Coast location

Ald. Walter Burnett Jr. (27th) and Steven Fifield, with a rendering of the project

‘Cap the Kennedy’ plan may be revived thanks to real estate money

Trammell Crow CEO Matt Khourie and a rendering of Fulton Labs (Credit: iStock)

Life sciences development may be Fulton Market’s next new thing

181 W. Madison St. and HNA Group Founder Chen Feng (Credit: Google Maps)

Embattled Chinese firm HNA Group refinances Loop skyscraper

Chariot Logistics Center and Jeff Bezos (Credit: Getty Images, Cushman & Wakefield, and iStock)

Amazon inks massive lease at Melrose Park distribution center

Tishman Speyer’s Rob Speyer & 320 North Sangamon rendering (Credit: Tishman Speyer)

Tishman Speyer lands $81M loan for Fulton Market spec office project