Hotel owners in downtown Chicago are alarmed over property-tax valuations and their long-term impact on the city’s recovering hospitality industry.
The latest assessments by Cook County Assessor Fritz Kaegi show surging valuations for major hotel owners in Chicago’s Loop, Crain’s reported.
Assessed values for the InterContinental Chicago, the Fairmont Chicago and the JW Marriott Chicago leapt by over 150 percent compared to 2021. While some increase was anticipated after pandemic-induced reductions, the Illinois Hotel & Lodging Association contends these figures exceed realistic valuations.
“These outrageous assessments by the Cook County Assessor are not commensurate with the reality facing most hotel owners,” IHLA president and CEO Michael Jacobson said. “While we have seen many improvements and certainly had boosts to visitation from large-scale events this year, we are nowhere near pre-pandemic levels when it comes to profitability or occupancy.”
Revenue per available room, a measure of hotel profitability, averaged $162.70 through September, reflecting an increase of 9 percent compared to 2019. However, inflation-adjusted figures show revenues trailing pre-pandemic levels.
Labor costs have further squeezed margins, with hospitality-sector wages in Chicago rising 30 percent over five years, according to the U.S. Bureau of Labor Statistics.
The spike in valuations poses a direct threat, said Gene Kornota of Rebel Hospitality, which operates the Acme Hotel Chicago.
“Even under the best circumstances, nobody can adjust to an assessment increase of this size overnight. These reassessments threaten our livelihood and, more importantly, our employees’ livelihood,” Kornota said.
Kaegi’s approach to valuations has drawn sharp criticism from commercial property owners since his election in 2018. However, his office has defended the valuations, arguing that downtown hotels rebounded faster than expected, with many implementing cost-saving measures while maintaining strong room rates.
But rising assessments also discourage investment in Chicago’s hotel market, Jacobson said.
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“The impact on investor sentiment is severely underestimated,” he said.
Final assessments for the 2024 cycle are expected early next year, leaving owners scrambling to file appeals. The deadlines for appeals fall on Nov. 27 for North Chicago Township properties and Dec. 12 for South Chicago Township.
—Andrew Terrell