Chicago council considers ‘not a tax’ surcharge on hotels

By Jim Talamonti | The Center Square
The Center Square

(The Center Square) – Chicago’s city council is considering a new assessment on hotel stays that supporters say would raise about $40 million.

The Illinois Hotel & Lodging Association supports the proposal to impose a 1.5% assessment at hotels with 100 or more rooms in a new tourism improvement district.

IHLA president and CEO Michael Jacobson said he normally opposes hotel tax and fee increases.

“The TID is a self-imposed assessment on hotel stays. It’s not a tax. It’s directly entirely by the hotel industry to support tourism sales, marketing and business development,” Jacobson said.

If the full council approves the assessment, taxes and fees for Chicago hotel stays in the central part of the city would rise to nearly 19%, one of the highest rates in the country.

Jacobson told the city council finance committee Wednesday that a majority of hotel owners signed petitions supporting the initiative for an initial term of five years. He said reauthorization of the assessment would be required by the city council and hotel owners for the surcharge to continue.

Alderman David Moore asked why hotels couldn’t charge the fee on their own without involving the city council.

“This is an assessment district that is established by state statute, and that state statute governs those rules,” said Tiffany Gallagher of the consulting firm Civitas.

The Illinois General Assembly passed legislation in 2023 to allow municipalities the option of pursuing the extra charge.

Gallagher said the district would be compulsory.

“All those who will benefit directly must pay in,” Gallagher explained.

Revenue generated would be directed by the hotel industry to support tourism sales, marketing and business development.

Jacobson said revenue from the city’s current hotel tax is diverted to other areas, but dollars generated by the new fee would stay in the industry. He said the 1.5% assessment would apply only to lodging and not to other hotel amenities.

Jacobson said the proposal includes annual audit requirements for both the city council and the state.

Choose Chicago president and CEO Kristen Reynolds said a new TID would be an investment in the city’s future.

“I think it’s no secret that our city and our city’s brand and reputation has been globally tarnished and misrepresented greatly on the global stage,” Reynolds said.

When Alderman Brendan Reilly asked about the city’s marketing efforts, Reynolds said Chicago currently spends about $34 million annually on marketing while Las Vegas spends about $105 million.

Alderman Brian Hopkins said the lodging industry was taking one for the team.

“What you’re doing is supporting the entire hospitality sector and tourism industry. It’s not just about heads in beds, as you say in your industry. It’s about feet on the street,” Hopkins said.

Hopkins said Chicagoans sometimes forget how important tourism is the city’s economy.

A hearing on the fee proposal is scheduled Feb. 27.

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