Chicago’s reputation as a place to do business rather than a tourist destination is holding back the recovery of its hotels.
Downtown hotels ended 2021 with an average occupancy rate of 43 percent, Crain’s reported, up from 27 percent in 2020 and nowhere near the pre-pandemic rate of 74 percent. Nationwide, the average was 58 percent compared with 66 percent in 2019.
Trade shows and conventions, which haven’t yet rebounded, typically account for as much as a fifth of downtown hotel bookings.
“For a lot of people, being in the office is still not a thing. As long as people aren’t back in the office, downtown areas will continue to hurt” without more corporate business travel, Jan Freitag, national director of hospitality analytics for CoStar Group told Crain’s.
The city isn’t alone among large markets. Revenue per available room was down by 33 percent last year compared to 2019 levels among the nation’s 25 biggest markets, while the national average fell 17 percent, Crain’s reported. Hotels in the Chicago area underperformed both, as revenue slipped 40 percent.
Investors still have some reason for optimism. The Chicago Loop Alliance last month reported pedestrian counts, hotels and office occupancy all hit their highest pandemic-era rates at the end of last year compared with the same period of 2019.
While leisure travel picked up in the summer last year as vaccination rates rose, waves of Covid variants shut it down. Travel may revive this year, staving off more hotel distress. Properties that have been transferred to lenders or are in foreclosure include the Hilton Hotel Magnificent Mile. Others have traded hands at prices less than or barely more than the debt owed on them.
[Crain’s] – Sam Lounsberry
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