United States -  Chicago

The greater Chicago market is experiencing a period of economic strength. Over two dozen Fortune 500 companies are headquartered in the Chicago area, spanning a variety of sectors and industries, including finance and food services. New companies are drawn to the Chicago area for its modern transportation infrastructure, central location, affordable cost of living, and world-class cultural, sports, and entertainment attractions. Several areas of Chicagoland are experiencing growth or revitalization. An example is the West Loop, which has undergone a transformation from a former meatpacking and light-manufacturing district to a new “tech hub” of the city; companies such as Google and Twitter have recently relocated to this area, and the new McDonald's world headquarters is under construction. As such, the area’s well-established and diversified economy represents a top investment market for hotels, including new hotel development.

Improvements in the economy and an increase in public and private investments have led to continued growth in hotel demand, with positive RevPAR growth year-over-year since 2009. Although 2016 was a slow year for meeting and group demand, due to it being an off-year in the convention cycle, increases related to both commercial and leisure travelers helped boost demand levels. However, after a record year in 2015, market-wide occupancy fell slightly in 2016 with the entrance of new supply, coupled with the soft convention year. Citywide bookings are expected to increase in 2018 and 2019, along with continued increases in demand from both commercial and leisure travelers.

After several years of stable room inventories, new supply increased for the first time in 2012, a trend that has only gained momentum in recent years. Eighteen new hotels in the Chicagoland area opened in 2016, adding more than 2,700 new rooms to the market. This level of growth is forecast to continue in the next several years; over 50 hotels and nearly 12,000 rooms are anticipated to enter the broader market area by 2020. Included in this count is the 1,200-room Marriott Marquis hotel, scheduled to open in late 2017 on a site adjacent to the McCormick Place Convention Center. With this expected increase in supply, we anticipate occupancy to fluctuate over the next few years, but remain relatively stable. Average rate will likely fall as the market responds to new supply, although stronger convention years should allow for average rate growth. The value of Chicagoland hotels will fluctuate in the near term as the new supply is absorbed.

Fourteen hotels totaling over $1 billion in transaction volume have sold in the CBD since January 2016, including such significant assets as the LondonHouse – a Curio Collection Hotel (highest total price paid at $315,000,000 and almost $700,000 per key prior to its May 2016 opening) and the Waldorf-Astoria (for a total of $111,900,000, or nearly $600,000 per key). The gap between asking price and perceived buyer value has widened with the soft first-quarter performance in 2017. However, given the vibrant economic environment of the city and an influx of foreign investment, the outlook for the lodging market in Chicago remains positive for the long term.

* Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent “big picture” data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

Change In Value For Market:

Legend
Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

Chicago RevPAR Change

Chicago RevPAR

Year RevPAR
2006 82.67
2007 87.54
2008 83.37
2009 63.87
2010 69.74
2011 75.88
2012 83.55
2013 87.18
2014 93.38
2015 99.93
2016 99.79
2017 (f) 97.80
2018 (f) 98.78
2019 (f) 100.77

For more information, please contact:

Stacey Nadolny, MAI
snadolny@hvs.com
  • +1 419 367-3879 (w)
Dana Waud
dwaud@hvs.com
  • +1 312 505-5913 (w)
Meghan Bean
mbean@hvs.com
  • +1 734 649-7221 (w)