Downtown Chicago Hotel Owners Please Tax US

Downtown Chicago hotel owners won strong backing from City Hall this week for a plan to tax themselves, in an effort to juice tourism spending and give the city a louder marketing megaphone.

Members of the Chicago City Council’s Finance Committee praised a proposal Tuesday to create a new Tourism Improvement District that would add a 1.5 percent surcharge to hotel stays at downtown properties. Crain’s reported that the committee voted to schedule a Feb. 27 public hearing — the final procedural step before the panel and the full City Council take a formal vote on creating the district.

If approved, the surcharge would stack on top of Chicago’s existing 17.5 percent combined city and state hotel tax, pushing the total levy on downtown hotel rooms to about 19 percent — the highest in the nation, according to the outlet. Aldermen framed the move as a rare example of an industry volunteering to shoulder a new tax rather than asking the city to spread the pain elsewhere.

“You’re taking one for the team here,” said Alderman Brian Hopkins. “What you’re doing is supporting the entire hospitality sector and tourism industry.”

The proposal has been championed by Choose Chicago and the Illinois Hotel and Lodging Association, which argue that hotel tax revenue meant to support tourism has increasingly been siphoned off to general city needs. IHLA President and CEO Michael Jacobson told aldermen at the meeting that money generated by hotel taxes has “eroded,” as it’s been diverted to infrastructure, general funds and other priorities.

Under the plan, the new surcharge would generate an estimated $40 million a year, money that would be controlled by downtown hotel owners and Choose Chicago. That would more than double the tourism agency’s current annual budget of roughly $33 million, giving it more firepower to compete for conventions, trade shows and leisure travelers in an increasingly crowded national marketplace, according to the outlet.

“This is simply allowing Chicago to level the playing field, particularly with our major competitive markets,” Jacobson said, noting that more than 200 markets nationwide already use tourism improvement districts.

Chicago welcomed about 55.3 million visitors in 2024, up 6.5 percent from the year before, but still short of the 61.6 million tourists who came in 2019, according to the publication.

The district would initially run for five years before requiring renewal. Several aldermen expressed appreciation — and some surprise — that hotel owners are backing the added cost.

“Not a lot of people come and say, ‘Please tax us for more,’” said Alderman Andre Vasquez.

— Eric Weilbacher