Oxford Capital Group is expanding its investment in Chicago’s still-struggling hotel industry with its purchase of the Thompson Chicago, a ritzy boutique off the hustle and bustle of Rush Street.
One of the city’s largest hotel owners and operators, Oxford Capital executives said the company chose the 247-room hotel at 21 E. Bellevue Place over a “handful of deals” downtown that have hit the market since the COVID-19 pandemic devastated business and leisure travel worldwide.
“We like this one as a high-profile asset in an excellent location at a very attractive price vs. replacement cost,” said John Rutledge, founder and chief executive of the Chicago-based group and its subsidiary Oxford Hotels & Resorts. Oxford did not disclose the purchase price.
The company’s hotels arm will take over management of Thompson Chicago immediately, adding it to its nine-property Chicago portfolio of 2,160 rooms, including the Godfrey Hotel, LondonHouse, Hotel Julian and Le Meridien Essex Chicago. Oxford also owns and operates other hotels under those names and others, such as Hotel Lexington in New York and Sir Frances Drake in San Francisco, and in other cities including Boston, Tampa and Los Angeles.
Thompson Chicago will continue its affiliation with Hyatt’s luxury lifestyle hotel brand but Oxford Capital has plans to “revamp” the ground floor restaurant Nico Osteria, a popular Italian eatery before the pandemic. Details were not provided.
The purchase comes as the central business district’s hotel industry continues to struggle with high vacancies and low rates. In June, occupancy rates in the city’s central business district were showing slow signs of improvement that were mostly tied to warmer weather, the long 4th of July weekend and summer tourists venturing back into the city.
The rate climbed to 42 percent, still less than half the 88 percent in June 2019, according to STR, the hotel tracking company. Average daily room rates were worse, sitting at $175 compared with $258 in the period in 2019 and well below the record high of $265 in June 2017.
But Sarang Peruri, Oxford Capital’s chief operating officer, said the company isn’t worried about growing crime and a very slow return to office activity and business travel because of its overall belief that Chicago, like other urban metros in which it operates, will bounce back in due time.
“Our more lifestyle-oriented hotels with more experiential room products are outperforming the market” in Chicago, he said. “Thompson absolutely fits in that same bucket. Experiential hotels in prime locations are outperforming because of that unique positioning and the pent-up demand.”
Rutledge is also banking on the number of hotel rooms in Chicago staying steady or even shrinking. “We don’t expect there to be any meaningful new supply over the next several years and as demand grows, the supply denominator won’t grow much or at all,” he said.
The final post-COVID chapters for Chicago’s hotel industry are still being played out as foreclosures, including two Oxford Capital has been involved with, are either worked out or converted into new uses. Oxford Capital did not comment on the foreclosures.