Chicago OKs Hotel Surcharge to Fund Tourism Push

Chicago is turning to hotel guests to bankroll its tourism comeback.

City Council on Wednesday approved a new Tourism Improvement District covering downtown hotels, adding a 1.5 percent surcharge to room rates starting May 1. The fee is expected to generate more than $40 million annually — more than doubling the budget of the city’s tourism arm, Choose Chicago, Crain’s reported.

The move caps a yearslong push by hotel owners and tourism officials to adopt a funding model widely used in other major U.S. markets. The surcharge will stack on top of Chicago’s existing 17.5 percent hotel tax, bringing the total levy on downtown stays to 19 percent — the highest in the nation, according to the publication.

Backers argue the industry-backed assessment is critical as Chicago works to regain ground lost during the pandemic, particularly in the lucrative convention and meetings business.

Choose Chicago currently operates on about $33 million in annual public funding, well below peer cities. The added revenue is expected to fuel more aggressive marketing and, crucially, offer financial incentives to land conventions — a strategy competitors like Indianapolis, Nashville and New Orleans have used to chip away at Chicago’s dominance, according to the outlet.

Attendance at large events has yet to fully rebound, with fewer and smaller conventions at McCormick Place and other venues. That shift has intensified competition from mid-sized cities offering subsidies to attract trade shows and corporate gatherings.

Under the new structure, funds generated by the surcharge will be controlled by Choose Chicago and an 11-member board made up of hotel industry representatives. The district will run for an initial five-year term before requiring renewal.

Tourism leaders say the money will help rebuild Chicago’s global profile, expand outreach to international travelers and increase domestic leisure marketing — all while sweetening deals for major events.

The stakes are high. Chicago drew about 55.3 million visitors in 2024, a 6.5 percent increase, year-over-year, but still below its pre-pandemic peak of 61.6 million in 2019.

— Eric Weilbacher