Chicago Bets on Hotel Tax to Stay Competitive

Skift

6 days ago

In a city where hotel taxes are among the highest in the nation, Chicago's tourism leaders say a 1.5% surcharge is the only way to stay in the game.
Kristen Reynolds, just two months into her role as president and CEO of Choose Chicago, is focused on what she calls a critical priority. Establishing a Chicago Tourism Improvement District (CTID) to secure long-term funding.
Brand USA's $80-million funding cut highlights the urgency.
'Sustainable funding is so important. We are one election away from people not understanding what we do, and need diversified and sustainable funding to protect us,' Reynolds said.
The Chicago Tourism Improvement District would add a 1.5% surcharge to room rates at hotels with 100 rooms or more in a defined geographic area. That would bring Chicago's hotel tax — already 17.39% — to 18.89%, the highest among major U.S. convention destinations.
'We are close,' Reynolds said, noting that the Illinois Hotel & Lodging Association (IHLA) has been working on the initiative for two years.
Proposed Hotel Surcharge Would Fund Marketing and Sales
Roughly half of the funds would be used for international and domestic marketing; the remainder would support sales and bidding efforts.
'For nearly a decade, Choose Chicago has been lagging in international presence. Due to a state budget stalemate, international offices had to be closed,' said Michael Jacobson, president of the Illinois Hotel & Lodging Association.
The plan is to re-establish these offices when the TID goes into effect. In addition, there will be a marketing push in the drive market.
Incentives to Meet in Chicago
The fund would also be used to cover bid fees and cash incentives — tools competing cities use to win large-scale events.
'For several years, we have heard from meeting planners who were offered cash incentives to bring citywides to certain destinations. We didn't have a budget for this,' Jacobson said. 'This will re-establish our competitive edge. We are not asking for city money or state money. We are asking the city to authorize us to go and collect assessments ourselves.'
Bid fees alone can be a significant barrier. Entering the competition for the Democratic National Convention, for example, required a $1 million bid just to be considered.
As high as Chicago's hotel tax may be, Jacobson said the key is to stay below 20%.
'We can't hit that number, as that is the danger zone,' said Jacobson.
Support is encouraging, he said. 'A majority of hotel owners signed on in the last two months. We are confident we will see movement in the next couple of months and begin collection in January of next year,' he said.
Chicago had 55.3 million visitors in 2024. A 6.5% increase from the prior year, according to ?Choose Chicago. Preliminary estimates indicate international visitation topped 2 million for the first time since 2019. A year-over-year increase of more than 10%.
Choose Chicago booked 1,891 meetings and conventions in 2024.