Chicago hotels may be in for a slow recovery due to the market’s reliance on corporate and group business, according to the latest market spotlight from Kalibri Labs released on July 14. Kalibri Labs analyzed Chicago hotel performance in 2019 and 2020, along with what recovery may look like for the market going forward.
In 2019, guest-paid average daily rate (ADR) for Chicago hotels fell 2.4 percent from the previous year even though occupancy, at 70.23 percent, rose 1.32 percent over 2018. In 2020, based on data from the beginning of the year through July 3, occupancy fell 55.41 percent year-over-year to 29.84 percent, and guest-paid ADR fell 25.33 percent to $109.21. Guest-paid revenue per available room (RevPAR), at $32.59, dropped 66.7 percent so far in 2020 compared to the same time period last year, and booking costs per room night declined 26.35 percent to $8.02.
Kalibri Labs’ Chicago hotel market spotlight noted that revenue declines have been more pronounced across middle- and upper-tier hotels in Chicago; despite upticks in recent weeks, these declines are averaging 70-80 percent year-over-year.
The Chicago market’s dependency on corporate travel and group business will likely prove to be a challenge to recovery, according to the report. In 2019, 40 percent of Chicago’s room revenue came from group and corporate business. Group business, in particular, represented more than 25 percent of Chicago room revenue in 2019 compared to 14 percent nationwide. As restrictions on large gatherings and limits on corporate travel remain in place, recovery for the Chicago market may take longer than in areas that are less reliant on group business and corporate travel. “Early indications are that both of those demand drivers are going to be slow to return until at least early 2021,” Kalibri Labs noted.
Markets with more drive-to local and regional travel and leisure demand are likely to have a quicker recovery. “Unlike East and West Coast markets, which have large population centers within an easy driving distance, Chicago hotels will be more challenged in this area,” the report noted.
Kalibri Labs added that air travel will be another critical factor in Chicago’s recovery—prior to the pandemic, Chicago O’Hare International Airport was among the busiest in the world. At the beginning of June, Kalibri Labs saw a slight increase in net purchased airline tickets; however, that trend has since declined in recent weeks.
Read Kalibri Labs’ Market Spotlight on Chicago here.