Chicago Bets on Hotel Tax Increase to Stay Competitive in Global Tourism Market: Here’s What Traveler’s Need To Know

Chicago, a vibrant cultural, business, and visitor destination in the U.S., is looking to play a game of catch up among international visitors in the tourism and meetings market. Tourism leaders in the city, led by Kristen Reynolds, president and CEO of Choose Chicago, are pushing for a new hotel surcharge to fund the formation of the Chicago Tourism Improvement District (CTID). The proposed 1.5% surcharge, to be added to room rates at hotels with 100 or more rooms in a defined geographic area, would bring Chicago’s already high hotel tax rate to 18.89%. The hotel tax hike isn’t a controversial addition either despite the already high cost of the hotel tax, but keeping Chicago’s tourism industry in the game with other major American cities—including other U.S. cities that have yet to join overcharging tourists–especially when it comes to international visitors, and continental-sized conventions.

The new surcharge arrives at a time when tourism is playing a much more prominent role in the economy, when the travel and hospitality businesses are grappling with major changes in the behaviour of visitors and the global competition. With a 17.39% hotel tax already in place, the 1.5% surcharge would push the rate just shy of the 20% threshold that industry figures have said is a trip wire that would likely drive away some visitors. But Chicago’s tourism stakeholders are hopeful that the increase will enable the city to keep pace with growing competition from other major U.S. destinations, including Orlando, Las Vegas and New York, which are all vying for big conventions, business events and international travelers.

WHY CHICAGO DESERVES THE TAX HIKE: COMPETITIVE EDGE AND VIABLE FUNDING

Chicago has long been one of the premier leisure and business tourism destinations. The city drew 55.3 million visitors in 2024, which was up 6.5% from the year before. A significant increase of international visitorship was also seen with over 2 million international visitors, exceeding the figures of 2019 for the first time, recording a 10% year-on-year increase. The tourism industry is an economic mainstay in Chicago, pumping billions of dollars into the economy and providing employment to thousands of workers. The city’s recognizable landmarks — Millennium Park, Navy Pier, Art Institute — and its elite food and drink scene, lively nightlife and rich history bring visitors by the millions every year.

Yet even with that strong showing, Chicago has faced growing competition from rival locations, especially for those large conventions and international events. Chicago has struggled for years to have an international profile, particularly after a state budget standoff in recent years led to the shuttering of a number of the city’s overseas tourism offices. This marketing and outreach void in turn has made it more difficult for Chicago to stay competitive as a destination for major global events and conventions that, in turn, have become an increasingly lucrative source of business for the local economy.

The hotel tax increase will provide much needed boost to the ailing tourism industry. Most of the money would go to marketing and sales, including re-opening international offices and funding domestic marketing efforts to rebuild Chicago’s image. Their hope is to breathe new life into Chicago’s image as a global tourist hotspot, draw local destination events that juice up hotel stays (like the Democratic National Convention) which require big bid fees, and make a statement about the Windy City’s humility on the worldwide stage.

Restoration of Chicago’s International Focus: Marketing and Sales Driven

The money raised from the surcharge would be spent to re-open Chicago international tourism offices and supplement sales and bidding of major event activities, said Michael Jacobson, president of the Illinois Hotel & Lodging Association. For almost a decade, Chicago’s international presence has waned because the city has had 0 in funds to market and sell overseas, and this new surcharge would provide the funds needed to address that.

The money would also be used to compete for big events, including conventions, conferences and international sports events. Jacobson points to competing cities that are providing cash to attract those events, saying it is imperative that Chicago have the budget and the flexibility to bid against those other cities. In the case of the DNC, for instance, Chicago had to put down a $1 million offer just to be put into consideration, and should they win the bid, there will inevitably be more costs that follow.

The proposed surcharge will enable Chicago to have some of the resources it needs to compete in this area. The latter is not only meant to bring more conventions and major events to the city; helping the city’s tourism infrastructure — hotels, convention centers and their services — keep pace with the increasing demands of the international market.

Opportunities and Challenges for Tourism: The Post-COVID-19 Era of Economic Rejuvenation

The proposal comes as the tourism industry, in Chicago and beyond, is grappling with the complications of returning after the pandemic. The global tourism sector has been hit hard by COVID-19 and recovery is underway, with a notable shift in the way people travel. A lot of travelers also are being more careful with their money, and some are gravitating toward destinations that offer value, flexible travel policies and a focus on health and safety. For Chicago, the predicament facing the city is not simply how to woo visitors back but also how to bill itself as a safe, enticing and unique destination for everyone from international tourists and business travelers to families and culture hounds.

Some of these issues Chicago has much more successfully handled in recent years. Its push to encourage domestic tourism, displayed in such events as the Taste of Chicago and Chicago Blues Festival, has brought more visitors here. What’s more, newer attractions — including a rejuvenated waterfront and an expanded convention center — are giving travelers reasons to return. It has been a successful undertaking thus far, however, success can only continue and be built-upon with sustainable funding — and that is exactly what the proposed increase in the hotel tax aims to achieve.

On the Street: Finding the Sweet Spot between Tax Hikes and Customer Service

Although the 1.5% surcharge of room rates is expected to bump up Chicago’s hotel tax to the highest among the nation’s top convention destinations, industry leaders point out that maintaining the tax below 20% is essential for preventing it from becoming a deterrent to visitors. It’s crossing that line over the threshold, you might push travelers to a destination that’s cheaper to go to, with less tax, Jacobson said. But as long as Chicago can hold on to an affordable tax rate and be able to provide good services, there are expectations the city can build up its tourism industry from present levels.

If that the tax is passed and the spending campaign is successful, it could greatly impact the city’s ability to bring in more international events and visitors — but it will be important for Chicago to maintain the right equilibrium between the added tax and the quality of experience it can promise to visitors. In doing so, Chicago can continue to be a leading city in both leisure and business travel, and help guide the path forward for post-pandemic travel.

Conclusion: One Small Step for Chicago’s Tourism Future

Chicago’s proposed 1.5% increase in hotel tax may sound like a small increase on the face of it, but it is an essential piece of the city’s plan to stay competitive in the global citysharking game that is tourism. By scaling up marketing and event-bidding investments, Chicago aims to leverage its current strengths for broader global appeal. The city needs to identify new ways to edge past the competition so recovery can follow in the tourism industry left behind by the pandemic. This add-on could be the very thing needed to keep Chicago at the top of the list of places to be for decades to come.