Chicago hotels want to tax themselves to supercharge Chicago tourism

ChicagoBusiness.com

By: Justin Laurence

Chicago’s tourism bureau and downtown hotel owners want to tax themselves to create a new fund that could help poach large trade shows and launch new marketing campaigns focused on “putting heads in beds.”

A resolution to begin creating a special tourism district — funded by a 1.5% surcharge on hotel stays — was introduced to the City Council minutes after lawmakers approved the city’s 2026 budget following a bitter standoff with Mayor Brandon Johnson.

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Those pushing the plan argue the $43 million in projected revenue from a new Tourism Improvement District, or TID, will provide a shot in the arm to the city’s marketing efforts and allow Chicago to better compete to land major conventions that drive spending at restaurants, bars and cultural institutions.

Choose Chicago, the city’s tourism arm, has quietly built support with downtown hotel owners for over a year and now have the sign-off of at least 60% of those impacted by the assessment, easily clearing the 50% + 1 threshold required. 

Kristen Reynolds, appointed CEO of Choose Chicago in April, told Crain’s the increased revenue will be a “game changer” in promoting the city as a travel destination to emerging markets across the globe and offering financial incentives to large event operators, where subsidies for renting exhibition space or providing free transportation have become the industry norm.

With Johnson already in support, the backers hope the legislative hurdles can be cleared to create the district by March. 

A 1.5% assessment would be added to guests' bills at hotels with at least 100 rooms within a set geographic boundary that includes the central business district, South Loop, McCormick Place and Illinois Medical District. 

Instead of the money flowing to the city or other public bodies, a new board representing the hotel owners would control how the funds are spent.

Choose Chicago’s current $33 million budget, funded by a mix of city and state dollars, lags peer cities, Reynolds said.

“Orlando's annual budget is over $100 million and Las Vegas has almost a $500 million annual budget, and we're at $33 million," Reynolds said. "It's very, very difficult to offer the same type of incentives and to compete to attract these groups that have a huge economic impact on our destination.”

Choose Chicago would administer the program and submit annual budgets to a new 11-member board representing large and boutique hotels within the district. Chicago’s mayor and organized labor would each get a non-voting member on the board, but the district is meant to allow hotel owners to tax their own industry in an effort to ultimately attract more guests.

The collective tax rate at hotels, after adding the new 1.5% assessment, would reach 19%, the highest in the nation. The additional revenue will be used to lure the same large events that may be wary of the already high rate. 

"Even though it's going to be a 1.5% increase in what guests pay, it's going to have huge positive impacts on our industry in terms of getting new visitors here and remaining competitive, because there's 200 other markets around the U.S. that already do this,” Michael Jacobson, president of the Illinois Hotel & Lodging Association, told Crain’s.  

Pushing the rate to 19% could also make it politically more difficult for the city to later increase its own hotel tax. 

Jacobson's message to the City Council is that workers from every ward work in the downtown hospitality industry and any boost to hotel stays will lead to increased hospitality tax revenue for the city. 

"When a business group comes to your office with a proposal to self-assess their own industry, and at zero cost to the city, to generate new tax revenue to them. . . .It's a win-win,” Jacobson said. 

28th Ward Ald. Jason Ervin introduced the resolution at the tail end of the Dec. 20 City Council meeting. It could be approved as early as January.

If approved by the City Council, there will be a 30-day window to hold a public hearing before a separate ordinance can be introduced to codify the 1.5% assessment and create the district. 

Even if approved early next year, the impact from the increased spending will take at least a year to materialize, due to lag times in when the revenue is collected and distributed, Reynolds said.

Johnson supports the proposal, but he and industry leaders appear to have been hesitant to introduce the legislation earlier this fall, fearing it would be swept up in the combative budget process or that some council members might want to stake claim to any hotel tax increase for the city’s own coffers.

Ald. Bill Conway, 34th, whose ward is in the district’s boundaries, supports the plan and doesn’t expect it to receive much pushback with his colleagues, but said, "I could understand why (Ervin) would not want to introduce that during the budget.”

Reynolds downplayed the timing, saying advocates have worked to get the support of hotel owners first before turning to the City Council.

In a letter sent to alders and shared with Crain’s, Reynolds said the increased funding was needed even after Chicago saw more than 55 million visitors in 2024.

“Our ability to sustain and grow that number begins with our reputation — guarding it, amplifying it and ensuring we remain top-of-mind in a highly competitive tourism landscape. We’re up against other cities that aggressively invest in tourism because they understand the long-term value of the visitor dollar,” she wrote. 

The letter carried the added weight of being endorsed by large local companies, hospitality trade organizations and the Chicago Federation of Labor.

By Justin Laurence

Justin Laurence is a reporter for Crain’s Chicago Business covering politics and policy from City Hall to Springfield. Prior to joining Crain's in 2022 he covered city politics, development and cannabis as a freelance reporter.