Chicago Hotel Boom Skirts Conventions, NYT Reports

Although new construction there came to a screeching halt during the Great Recession, Chicago is in the midst of a new hotel boom, according to The New York Times, which reported this week that at least a dozen new hotels totaling 2,700 new guest rooms have either recently opened in Chicago or are under construction there.

According to real estate services firm Jones Lang LaSalle, the boom is in large part a reaction to soaring occupancy rates. “The city exceeded its 2007 occupancy peak of 74.4 percent last year and there’s lots of room for average daily rate growth,” Adam McGaughy, managing director of the firm’s Midwest hotel business, tells the Times. “When that happens, new supply starts to become part of the conversation.”

Chicago has always been a popular travel destination. In fact, behind Las Vegas, New York and Orlando, it is the United States’ fourth-largest hotel market, with approximately 37,000 guest rooms downtown. And yet, the city’s latest infusion of hotels is remarkable. The reason, the Times says, is that it’s not driven by business at the city’s convention center, McCormick Place. Instead, it’s driven by an influx of international and leisure travelers, which is attracting a rash of small lifestyle hotels.

“Mayor [Rahm Emanuel] has made tourism a priority,” Donald Welsh, CEO of Choose Chicago, the city’s convention and visitors bureau, tells the Times, pointing out that Chicago over the last 18 months has opened 10 international tourism offices in countries such as China, Japan, Brazil and the United Kingdom, and also is running 30-second TV ads promoting Chicago to tourists throughout the Midwest.

As a result, leisure travel now accounts for approximately 15 percent of Chicago’s downtown hotel market, up 10 percent from the early 2000s, hotel consultancy TR Mandigo & Company says.

Despite the surge of leisure hotels — including, for instance, the upcoming Soho House, opening in 2014 in Chicago’s West Loop neighborhood — Chicago isn’t giving up on conventions, the Times stresses, citing the recent opening of a 316-room Langham hotel on the Chicago River, the recent completion of a 460-room annex to the Hyatt Regency McCormick Place and the forthcoming Loews Chicago Hotel, scheduled to open in 2015 with 400 guest rooms and more than 25,000 square feet of meeting space.

“Chicago continues to be a city that event organizers look to and — since we typically do about 50 percent group business — that should benefit us,” Loews Chairman Jonathan Tisch tells the Times.

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