The Coming Year Could Still Be 'A Roller Coaster Ride' For Chicago Hotels

The decision last week by state and city officials to allow the four-day Chicago Auto Show to go forward at McCormick Place Convention Center starting July 15 has given the hospitality industry another sign that normal life will eventually return.

The city’s downtown depends heavily on the conventions that can draw tens of thousands of visitors, and coronavirus-related shutdowns left its hotels empty and dark for more than a year.

It isn't the only hopeful sign. The spread of vaccinations, the subsequent drop in infection and hospitalization rates, and the loosening of other public health restrictions have also led to the return of some leisure travel, along with more small-group gatherings at downtown hotels.

But a full recovery will likely take some time.

“Everybody is seeing a rebound, but I don’t think it’s going to be a steady rebound,” said Maverick Hotels and Restaurants CEO Bob Habeeb, whose 223-room Sable at Navy Pier hotel on Chicago’s Navy Pier opened on March 18 after a postponement last year due to the coronavirus pandemic.

Habeeb said he expects downtown hotels to have a relatively active summer, at least compared to the past year, but when fall arrives and that leisure travel dries up, occupancy and room rates could stagnate or decline. The chief problem is that many companies still restrict business travel, and even though those restrictions will also loosen in the coming months, it may take time for many people to once again get accustomed to attending conventions, the true lifeblood of Chicago’s hotel industry.

“It’s going to continue to be a roller coaster ride,” Habeeb said.  

Industry leaders are keeping a close eye on vaccination rates for the city and state. In early February, roughly 2% of Chicago residents were fully vaccinated, according to the Illinois Department of Public Health. That has risen to about 35%, equal to the statewide average, and about 20,000 additional people get shots each day. The seven-day average of new Covid-19 cases statewide declined from more than 3,000 per day in mid-April to less than 2,000 this week. On May 11, the state reported 1,528 new cases.

These improvements led both Illinois Gov. J.B. Pritzker and Chicago Mayor Lori Lightfoot to put forward ambitious reopening plans. Last week, Pritzker said the state would further loosen restrictions on gatherings and business operations by May 14, and meetings, conferences and conventions will then be able to fill spaces up to 60% of capacity, as long as that is fewer than 1,000 people.

If coronavirus statistics continue to improve during this bridge phase, the state may fully reopen by June 11, Pritzker said. Lightfoot set a goal of fully reopening Chicago by the Fourth of July. Navy Pier reopened on April 30, and that gave Habeeb’s hotel a needed boost.

“We’re selling out on weekends,” he said. “That’s pretty remarkable for this time of year, never mind the pandemic and never mind that we’re new.”

There have been a few good surprises since opening the Navy Pier hotel, Habeeb added. Before March, he said he expected about 70% of the customers to be tourists and roughly 30% to be locals. But so far, it has been the other way around, with about 70% of the business coming from locals attending small meetings, weddings, bar mitzvahs and other social gatherings.

“We’ve been very busy and attracting a lot of staycations from locals,” Habeeb said. “One of the things I heard in the lobby shortly after opening was, ‘It’s mom’s birthday and I just bought her a night out at the Pier,’ and we’re seeing a lot of that.”

Many other downtown hotels are also doing well on the weekends, according to HVS Managing Director Stacey Nadolny. But the market is a long way from being healthy.

“With the nicer weather, people are out and about and the downtown is showing signs of recovery, but for hotels, it’s still kind of flat in terms of overall occupancy,” she said.

In a typical May, the downtown hotels would be around 78% to 80% occupied, but the rate last week was 29%, Nadolny said. That is a big improvement over 2020, when the rate at times fell below 10%, but it isn't enough to make hotels profitable. And the return of the Auto Show, along with several other conventions in the late summer and fall, may also not be enough.

“There won’t be a big convention at McCormick Place this year, at least one that would sell out the market,” she said.

Many employers are still cautiously watching infection rates and considering the possibility that new outbreaks could occur this year, she said. In addition, many potential attendees for the foreseeable future will still be uncomfortable with the idea of roaming around indoors at McCormick Place with thousands of others and ask their firms if they can attend events virtually.

“For the next six months, planners and employers are going to have to plan for that and hold hybrid events,” Nadolny said. “It’s going to be a mixed bag as people learn how to live life again.” 

Any meeting places that can make outdoor space available should do well, she added.

The Chicago Auto Show, which usually takes place in February, will expand to the outdoors and also give attendees chances to take new vehicles out for test drives, according to show officials.

"While we believe February is the right time for the Chicago Auto Show to have its biggest impact on the industry and the area economy, we're thrilled to be able to experiment with the July dates," Chicago Auto Show General Manager Dave Sloan said in a press release last week. "The timing has allowed us to get creative and try new things and the automakers have really embraced it."

There are 43 events set to take place at McCormick Place between July 1 and the end of the year, according to Cynthia McCafferty, a spokesperson for the Metropolitan Pier and Exposition Authority, which owns McCormick Place and Navy Pier. The schedule still includes major events such as the three-day Black Women’s Expo starting Aug. 20, which in a typical year draws about 30,000 people.

MPEA officials estimate that the 223 McCormick events canceled since March 2020 would have drawn more than 3 million visitors and added more than $3B to the local economy, McCafferty said.

The governor’s move to open the state, along with the improving public health situation, has led some groups, including the National Apartment Association, to simply reschedule.

“We initially postponed our Apartmentalize conference date from June 16-18 to August 31-September 2, to allow time for more of our members to be vaccinated,” NAA President and CEO Bob Pinnegar told Bisnow in a written statement.

Almost two-thirds of the events canceled since March 2020 will return sometime in the next three years, McCafferty said.

It could take several years for Chicago conferences to fully ramp up again, Nadolny said. And considering the key role played by McCormick Place in the market, that means Chicago’s downtown hotels will take longer to recover than those in more tourist-heavy regions such as New York, Los Angeles and San Francisco.

“We’ve got the longest recovery ahead, that’s for sure,” she said.

Habeeb indicated agreement with the sentiment but added that with Chicago’s path to recovery at least visible, new development deals are possible again. His firm, which also opened the 148-room SpringHill Suites by Marriott in Chicago’s Chinatown neighborhood on March 17, will soon announce a couple of new Chicago hotel projects.

“Our development projects are starting to move again,” he said.