United States -  Chicago

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HVS In-Depth United States Hotel Valuation Index:   2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007

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. Over the last ten years, over 30 headquarter offices have relocated to Downtown Chicago, infusing the CBD with more activity. 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 opened last year. As such, the area’s well-established, 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. Demand continued to increase in 2017, but it was outpaced by new supply, which led to a decrease in market-wide occupancy. Citywide bookings increased in 2018, bringing a record number of visitors to Chicago and selling more room nights than ever before. While 2019 is expected to be somewhat flat compared to the boom in 2018, the limited number of new hotels rooms should allow occupancy to remain stable.

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. About 12,000 hotel rooms have opened in Downtown Chicago since 2015, including a new 1,205-room Marriott Marquis hotel, which opened in late 2017 adjacent to the McCormick Place Convention Center. In 2018 and 2019, overall supply growth represents a relatively low percentage increase, with most new hotels spread out in neighborhoods throughout Downtown. The pipeline for Chicago over the next three years is one of the smallest by percentage growth in the Midwest. With this expected increase in supply, we anticipate occupancy to decline slightly over the next few years, but remain in the high 60s. Average rate (ADR) will likely fall as the market responds to new supply, although stronger convention years should allow for ADR growth after 2019. The value of Chicagoland hotels will fluctuate in the near term as hoteliers focus on ADR management with the new supply.

The number of hotel transactions increased in 2018, with seven sales occurring between January 2018 and January 2019. At approximately $400,000 per key, both the Westin Michigan Avenue and the Hotel Chicago Autograph Collection sold as part of a portfolio for the highest per-key value. In March 2018, the 40-room Soho House Chicago sold for a record $2,375,000 per key. However, this sale also included the private Soho Club. Several of the transactions were slated for substantial renovations and brand conversions. Given the vibrant economic environment of the city and an influx of foreign investment, the outlook for the lodging market in Chicago remains positive.

* 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.

The widespread impact of the coronavirus (COVID-19) has had an unprecedented impact on hotels and hotel values worldwide. Consequently, the latest HVI analysis may no longer reflect the most current measure of lodging industry strength or the hospitality investment market.

In each of our offices across the globe, we are working tirelessly to analyze the impact of recent events and provide timely insights to help you navigate these uncharted waters. Because it is unclear how long the pandemic will last or how long related restrictions will be in place, we are updating our analyses on a weekly basis using the most current data.

Additionally, examination of value trends in prior cycles can provide useful information. Historical patterns, together with an understanding of the market’s current expectations for the eventual recovery of the industry and its performance, can provide insights on the likely trajectory of decline and recovery for hotel values.

For the Latest Information and Analysis on the Impact of COVID-19Click Here

If you’d like to speak to someone personally to review details of our most current analysis, please don’t hesitate to contact us directly.

For more information, please contact:

Stacey Nadolny, MAI
[email protected]
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