Supply is charted for substantial growth in 2017; in fact Chicago is expected to see a 20 percent room supply increase by 2019. Mayor Emanuel projects a goal of reaching 55 million visitors annually by 2020. Chicago is home to a variety of demand drivers, including headquarters for Fortune 500 companies, a central location with a solid public transportation infrastructure, and a renowned sports and arts scene that attracts both tourists and local communities. For instance, Kraft Heinz moved one of its headquarters from suburban Northfield to downtown Chicago last year.
Currently, Chicago has 754 hotels with over 114,000 rooms, with a substantial pipeline of almost 10,000 more rooms (a third of which is already under construction).
The Chicago Opportunity
Revitalized neighborhoods are driving demand and business. For instance, the West Loop is transforming into a technology hub with Google and Twitter both relocating to the area. Major corporations are relocating their businesses from outer suburbs to downtown, including McDonald’s, which is set to move in 2018. In 2016, Chicago contributed $15 billion in direct tourism spending (a 2.6 percent gain) with a record of 54.1 million people visiting. The visiting population is expected to grow to 55 million by 2020.
The development opportunity is certainly there, but what does this mean for current hotel owners? How will you drive revenue with less occupancy?
Some key projects:
- The 1,205-room Marriott Marquis Chicago is set to open this fall, connected to McCormick Place
- A 159-room Ace Hotel will open in the city’s Fulton Market District this fall
- A new hotel across from Wrigley Field by the owners of the Chicago Cubs will open in 2018, the 175-room Hotel Zachary
- A 100-room Nobu hotel from Robert De Niro is slated to open in late 2017
Past numbers and transactions that speak to the current opportunity include:
- Occupancy is down 1.1 percent YTD but average daily rate is up 1.6 percent to $146.50
- RevPAR is up 0.5 percent to $103.66, and overall revenue is up 2.3 percent
- In 2015, the highest total price paid for a hotel in the central business district of Chicago was $315 million for the London House, a Curio Hotel
- While valuation is expected to decline 2 percent this year, it is projected to grow 13 percent over the next four years
Because, you will be armed with ideas, solutions and actionable insights that will make an immediate impact on your property. Whether you focus on infrastructure investment opportunities or strategies that force you to “think and act locally” in targeting specific growth sectors, you can take steps that positively influence your ROI.
"Chicago's hospitality industry is looking at growth of 13 percent over the next four years. The city's pipeline is solid, its transportation infrastructure is among the best in the country, and its annual tourism is expected to reach 55 million in just two years." - Bhavesh Patel, AAHOA Chairman