Pandemic pain is finally starting to fade for downtown Chicago hotel owners.
Occupancy at hotels in the central business district last month averaged 68% and room rates averaged more than $239 per night, the highest marks for both metrics since late 2019, according to preliminary May data from hospitality data and analytics firm STR.
The occupancy rate jumped from 59% in April and compares to 38% in May 2021, STR data shows, while room rates have now topped their comparable 2019 levels in five of the past six months.
The numbers signal a quickening pace of recovery for the city’s COVID-battered hotel sector, which has labored to reclaim business since the depths of the crisis. Chicago’s comeback has trailed the national average, with the city more reliant than most on business and convention-related travel that has recovered more slowly than leisure demand. Stricter public health rules and more prevalent crime in the heart of the city have also caused issues among prospective visitors.
But hoteliers say demand has surged since the end of Illinois’ mask mandate at the end of February. A strong start to the city’s leisure travel season, and with weather improving, has lifted hotels’ bottom lines, but so has the return of larger conventions and pent-up demand for social gatherings such as weddings that were delayed from earlier in the pandemic.
“Things are much better than where we’ve been over the last two years. The level of optimism rises every single day when I talk to hoteliers across the city,” said Michael Jacobson, president and CEO of the Illinois Hotels & Lodging Association. “We’re not fully recovered, but we are well on our way to reaching that point.”
Hotels have been improving nationwide in recent months. Average occupancy among hotels in the 25 largest markets tracked by STR was nearly 70% in May, preliminary data shows, which was 8% lower than the average in May 2019. Chicago’s May occupancy was still 19% below the same period in 2019.
But a recent uptick in attendance at conventions and trade shows—which typically account for about 20% of hotel rooms booked in downtown Chicago each year—has provided a local boost. The National Restaurant Show said it drew more than 51,000 people on its busiest day to the event at McCormick Place last month, blowing by the 40,000 it projected.
Group bookings at large hotels in the city have also picked up throughout the second quarter, according to Park Hotels & Resorts, a Tysons, Va.-based real estate investment trust that owns the Hilton Chicago on Michigan Avenue and the W hotels in the Loop and along Lake Shore Drive. The REIT’s executives told analysts on a May 2 conference call that average occupancy across its hotels in five major urban markets—including Chicago—jumped from 20% in January to 47% in March and was projected to average 68% for the second quarter.
“Chicago has been one that really has picked up,” Park Hotels Chief Financial Officer Sean Dell’Orto said during the call, according to a transcript.
Chicago hotel developer Bob Habeeb said leisure demand “has come back with a roar” but that the uptick in group bookings has been an especially promising sign of people eager to get out and live with COVID.
“The groups that are coming now booked a long time ago, but people are showing up for groups. That’s the really good news in these numbers,” said Habeeb, CEO of Chicago-based Maverick Hotels & Restaurants.
There are still challenges ahead of the city on the path to recovering to 2019 performance levels. Even if rising COVID cases do little to hamper travel demand, the perception—and reality—of violent crime downtown must be addressed to make more visitors comfortable staying in the city, hotel owners and managers say.
Soaring gas prices and the threat of a recession could also keep tourists away and companies from sending employees back out on the road.
The next moment of truth for Chicago will come in late September and October when leisure demand starts to dry up and the city depends more on corporate and group business, Habeeb said.
“We could see some significant headwinds, but we just don’t know,” he said. “This is going to really be a wait-and-see.”
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