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Chicago Tribune
Chicago Tribune
Business
Brian J. Rogal

Hotels in Chicago are getting close to pre-pandemic business levels, and more convention travelers in 2023 could close the gap

The events calendar for McCormick Place, Chicago's massive convention complex, is filling up, with interest mounting among potential attendees and exhibitors, and that means 2023 could be the year convention travelers return in big numbers to downtown Chicago, providing a much-needed boost to hotels still suffering from the ongoing pandemic.

More than 2.5 million people are expected to attend 2023 events at McCormick Place, up from the nearly 1.5 million who showed up last year, according to Cynthia McCafferty, a spokesperson for the Metropolitan Pier and Exposition Authority, the corporation that owns McCormick Place and Navy Pier.

Most attendees will pack downtown hotels, which have already enjoyed a strong revival of tourism.

“There is no doubt the continued post-COVID snapback in travel is absolutely happening,” said John Rutledge, CEO of Oxford Capital Group, which developed a portfolio of luxury downtown hotels including LondonHouse Chicago and The Godfrey Chicago.

But a convention revival in 2023 may not be enough to bring the downtown market all the way back from the brink. Many smaller, boutique hotels catering to tourists are doing well, but business travel remains below average, and some major establishments dependent on both those visitors and conventions are still weighed down by debt, a hangover from the 2020 onset of COVID-19, which led to empty rooms and plummeting revenues.

“The big supertanker assets like the Palmer House Hilton were broken during COVID and have a long way to go before getting back to normal,” Rutledge said.

Last summer, Wells Fargo Bank took control of the 610-room JW Marriott Chicago hotel with a winning bid of nearly $251 million during a foreclosure auction. And a county judge ruled Palmer House Hilton Chicago owner Thor Equities defaulted on its $333 million mortgage for the 1,641-room hotel at 17 E. Monroe St.

Other hotels are ramping up operations. The 182-room Park Hyatt Chicago at 800 N. Michigan Ave. reopened in July after a $50 million renovation, and General Manager Rike Erdbrink said tourists and groups traveling to weddings and other social events are already booking rooms at a healthy pace.

“The luxury hotel segment in particular is seeing a bounce back in leisure travel,” she said. “And from what we’re seeing, and the trends we follow, 2023 will definitely be stronger than 2022.”

Chicago hotels are getting close to the occupancy levels hit in 2019. In the third quarter of this year, downtown’s occupancy rate was 74.8%, down from 83.6% over the same period three years ago, according to data analytics firm STR.

The number of visitors to the McCormick complex currently forecast for this year by the Metropolitan Pier and Exposition Authority will still be fewer than in 2019 when between 2.8 million and 2.9 million people attended about 270 events, including conventions at McCormick Place, college basketball games at the complex’s Wintrust Arena, shows at Arie Crown Theater and conferences at neighboring hotels. Just 146 events are officially on the 2023 schedule, but McCafferty said she expects that number to grow, with 12 new events scheduled in just the past month.

Officials from the International Housewares Association said it’s difficult to predict how many people will check out its annual four-day Inspired Home Show, which opens March 4, because most attendees don’t register until February. But organizers consider it a good sign that more exhibitors are eager to share the latest kitchen gadgets and household products with conventiongoers.

Around 1,500 exhibitors plan to display their merchandise, up from less than 1,000 in 2022, when about 20,000 people attended, said Leana Salamah, the association’s vice president of marketing. Last year was the first time the convention was held since getting called off in 2020 due to COVID-19, the first major show in the U.S. to cancel. The convention has been in Chicago for more than 80 years, and pre-COVID, more than 2,000 exhibitors would typically show up.

“It’s not all the way back to pre-COVID numbers, but we didn’t expect to reach that goal this year, and the dam is starting to break,” Salamah said.

Another worry for the hotel industry is how the use of Zoom and other online tools will affect conventions. Many shows at McCormick Place now offer online options, where participants pay to view information sessions or talks while enjoying the comforts of home, avoiding worries about COVID-19 as well as the hassle of traveling to Chicago and paying for a hotel.

A spokesperson for the American Society of Clinical Oncology said the organization offered an online option for its June 2022 annual meeting, and although the event attracted 42,350 total participants, tying the record-setting 2019, 30% were online. The organization decided to make the online option permanent but expects its conventiongoers will return in bigger numbers going forward, especially if there are no severe COVID-19 flare-ups.

“We were thrilled to see record attendance for the 2022 Annual Meeting despite the remaining effects of the pandemic, and pleasantly surprised by the number of attendees in person,” the spokesperson said in an email. “We believe that the in-person experience remains the premiere experience as education takes place not only in the session rooms but in hallway conversations which are hard to replicate online.”

The Metropolitan Pier and Exposition Authority does not track online participation, McCafferty said, but agrees it will have less impact in the future, especially for conventions such as the Inspired Home Show or the 10-day Chicago Auto Show, which opens Feb. 11, where visitors primarily want to check out the latest products.

“You can’t re-create a showroom floor online,” she said.

Rutledge said the ability to hold business meetings over Zoom will also permanently cut business travel, but by last summer 60% of business travel had already returned to Oxford’s downtown Chicago properties such as the 452-room LondonHouse, and he expects by 2024 that will climb to between 75% and 90%. And with business travelers increasingly extending stays into long weekends, what hotel owners call “bleisure,” the gap between present and pre-COVID-19 revenues is narrowing for many hotels.

“All of this bodes well for 2023, even though the conventions calendar is not quite as robust,” Rutledge said, “and overall, by 2024 travel demand should be at or near pre-COVID levels, but with a different mix.”

Downtown hotels have also been able to hike rates over the past three years, further narrowing the gap, said Brian Arevalo, senior vice president of HVS, an industry consultant. The average daily rate for rooms rose from $214.89 in 2022 to $251.84 in last year’s third quarter, STR found, so any significant bumps in occupancy, whether from returning business travelers, international visitors or conventiongoers, could get Chicago hotels back to normal.

“We’re seeing a lot of suburban markets where occupancy and demand are fully recovered to pre-pandemic levels, and even though the downtown is lagging, it’s nothing to be alarmed about.”

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