Chicago Hotel Owners Pitch Self-Tax to Boost Tourism

Chicago’s tourism bureau and downtown hotel owners are backing an unusual play to boost demand: taxing themselves.

A resolution to begin creating a Tourism Improvement District, funded by a 1.5 percent surcharge on hotel stays, surfaced at the Chicago City Council just minutes after lawmakers approved the city’s 2026 budget on Saturday, Crain’s reported. The proposal would generate an estimated $43 million a year for marketing campaigns and financial incentives aimed squarely at landing large conventions and trade shows that fill hotel rooms.

The push is being led by Choose Chicago, which has quietly spent more than a year lining up support from hotel owners. Backers say they’ve secured sign-off from at least 60 percent of affected properties, comfortably clearing the state-required threshold to move forward.

The surcharge would apply to hotels with at least 100 rooms within a defined district that includes the central business district, South Loop, McCormick Place and the Illinois Medical District. Unlike traditional hotel taxes, the money would not flow into the city’s general coffers. Instead, it would be controlled by a new board representing hotel owners, with Choose Chicago administering the program.

Kristen Reynolds, who took over as CEO of Choose Chicago in April, told the outlet that the additional funding is critical if the city wants to compete with peers that routinely offer subsidies to lure major events. Choose Chicago’s current $33 million budget trails rivals by a wide margin. Orlando tops $100 million annually, while Las Vegas approaches $500 million.

The plan has the backing of Mayor Brandon Johnson, and supporters hope to clear legislative hurdles by March. Alderman Jason Ervin, who introduced the resolution at the tail end of the council meeting, could tee up a vote as early as January. If approved, a public hearing would follow before a separate ordinance codifies the surcharge.

The proposal isn’t without risk. Adding the 1.5 percent assessment would push Chicago’s combined hotel tax rate to about 19 percent, the highest in the country. Proponents argue the added cost will be offset by stronger demand driven by better marketing and incentives. Michael Jacobson, president of the Illinois Hotel & Lodging Association, told the publication that more than 200 U.S. markets already use similar districts.

There’s also a political angle. By letting the industry self-assess, the plan could make it harder for future administrations to justify raising the city’s own hotel tax. Jacobson framed it as a win for alders citywide, noting hospitality workers from every ward depend on downtown tourism.

Even if approved early next year, the impact won’t be immediate. Revenue collection and distribution lags mean the spending boost could take at least a year to materialize. Still, with Chicago logging more than 55 million visitors last year, boosters say standing still isn’t an option in an increasingly competitive convention landscape.

— Eric Weilbacher