Chicago Hotel Owners Face Looming Tax Increases, Surplus in Downtown Hotels

March 30, 2019

More than 2,000 new hotel rooms are expected to open in downtown Chicago in 2019 as tourism in the city reaches an all-time high. The additional 2,000 rooms increase the total number of hotel rooms downtown to 47,000, adding more competition in an already competitive market. The seven-year uptick in hotel construction has recently led hotel owners left to grapple with the supply boom, in addition to looming property tax increases supported by County Assessor Fritz Kaegi, who seeks to displace tax burdens onto commercial properties, like downtown hotels.

With the potential for hefty property tax increases, and with various new hotels flooding the market, it may be difficult to tell what a hotel’s bottom line will be. Some hotel owners are concerned that new hotels will attempt to undercut the rest of the market by significantly decreasing hotel prices, hoping that they will make up the revenue in increased occupancy. However, this may decrease the ability for all other hotels to increase room rates and may ultimately be detrimental to well-established and new hotels alike.

At this point, experts recommend that hotel owners and contractors keep an eye on changes in the tax law after Mayor Rahm Emanuel leaves office in May. In addition, hotel owners should be cognizant of hotels developing in new areas like River North or Fulton Market, that may take away visitors from more common areas like Michigan Avenue or the Loop.

For consultation on real estate and property tax matters, contact the attorneys at Rock Fusco and Connelly, LLC.