CHICAGO—The Chicago region's hospitality market has had a good run in the past few years. Recently, however, some have voiced concern that, similar to the apartment market, perhaps too much new development was underway. And there certainly has been some pressure on occupancy levels. But according to a new report from Marcus & Millichap, by other metrics, such as growth in the average daily rate, the hospitality industry in Chicago and Midwest still looks healthy, and these trends are likely to continue for the rest of 2017.

“People think there has been a dip in the hospitality industry in general, but it is still strong,” Ebrahim Valliani, investment associate in Marcus & Millichap's Chicago O'Hare office, tells GlobeSt.com. The ADR for the Upper Midwest increased by 2.6% last year, and M&M forecasts that this year it will rise another 2.1%. RevPAR growth was slower, but Chicago hotels did post a nominal gain last year. “People have been asking us, 'what is the outlook for the rest of the year?' And the outlook is positive.”

M&M data show that about 3,000 rooms will come online in Chicago during 2017, and this will put pressure on RevPAR. But Valliani believes “there is still a need for more rooms in the Chicago MSA.” He points out that during many of the big conventions held in the McCormick Place on the lakefront, some attendees end up staying in suburban hotels.

This inconvenience does real harm to the city and its ability to compete for more convention business, he adds. And by adding rooms, Chicago will enable itself to host even bigger conventions, including ones for overseas groups, thereby creating even more demand for hotel rooms. “I think we will see an influx of convention business in 2017.”

Furthermore, more hoteliers are pouring money into property improvements, and this should also bolster the ADR in the Chicago region and the Upper Midwest in general. “All the brands are elevating their standards,” Valliani says, including Hilton, Hyatt, Comfort Inn and others. This will lead others to up their game as well, in order to compete for market share.

“The hospitality industry in the Chicago MSA is going to have an interesting year, and it's going to be interesting in a positive way.”

Instant Insights /

Outlook Positive for Hospitality Industry in 2017

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