Finance Committee backs hotel tax hike to rev up tourism in Chicago

Choose Chicago, the city's convention and tourism agency, says it needs more money to attract conventions and tourists, and rehabilitate a Chicago image tarnished by Immigration and Customs Enforcement raids and high-profile crimes. The agency is about to get it at the expense of hotel patrons.

The City Council’s Finance Committee agreed Friday to support the creation of a so-called Tourism Improvement District and raise the hotel tax on rooms within that district to 19%, the highest in the nation. The current combined city, county and state tax on hotel rooms is 17.5%.

The voice vote on the measure, which now goes to the full City Council for final approval, was enthusiastic and nearly unanimous.

Ald. Brian Hopkins (2nd) led the charge for what he called an “easy yes vote,” noting that hotels in all or part of fourteen different wards — including downtown, McCormick Place, the Illinois Medical District and Hyde Park — have volunteered to impose the 1.5 percentage point increase for the next five years. After that, the district would need to be renewed by an oversight board of hotel operators and the City Council.

“Anyone who has participated in the budget process for the past couple years can’t help but notice how rare and uncommon it is for any sector of our Chicago economy to raise their hand and say, `Please tax me more.’ I can’t think of another example,” Hopkins said.

Finance Chair Pat Dowell (3rd) said she’s convinced the tourism district and the $40 million in annual revenue it generates will “benefit Chicago greatly.” But her yes vote came with a demand for spending specifics.

“I’m looking for more information on how you’re going to promote, for example, historic preservation tourism in places like Bronzeville or the Prairie District or Chinatown,” Dowell said. “How are you going to interact with the designated state cultural districts all over the city? How you’re going to support things like the Bud Billiken Day parade and other parades?"

South Side Ald. David Moore (17th) cast the only no vote to protest the fact that the 1.5 percentage point increase would also be paid by Chicago residents who can’t afford to leave town and might want to treat themselves to a “staycation" by taking a Chicago hotel room.

“I’m concerned about how this will impact people living in this city and may want to enjoy this city,” Moore said.

The increase would apply to room rates at hotels with 100 or more rooms that opt in — and are within a designated area of the Greater Central Business District.

The tax increase is expected to generate $269 million over the next five years. That would double the existing marketing budget for Choose Chicago.

Revenue would be used to market the city, bankroll incentives and cover bid fees, such as the $1 million required to enter the competition to host the Democratic National Convention. It would level a marketing playing field now tilted in favor of Chicago’s hard-charging convention and tourism competitors.

The Las Vegas Convention and Visitors Authority has an annual operating budget of $457 million, according to a comparison prepared by Choose Chicago. That’s followed by Visit Orlando ($116 million), Discover Los Angeles ($62 million), the San Diego Tourism Authority ($56.9 million) and New York’s NYC & Company ($45 million).

“Our competitors know very well that Chicago is underfunded, and they use it to their advantage not only to attract the same conventions, visitors and events that we’re trying to attract to Chicago, but to lure away our legacy clients that have been coming to Chicago for decades,” Choose Chicago CEO Kristen Reynolds told the Finance Committee. "Our competitors benefit from the negative narratives surrounding our city that we can’t afford to counteract, and they offer lucrative incentives that they know we can’t match.”

More than 200 cities have created tourism entertainment districts since San Diego blazed the trail 25 years ago. Chicago is one of the last major convention cities to embrace the idea and needs to do so after a difficult year that included the federal deportation campaign known as “Operation Midway Blitz.”

“The narrative around our city that was around the globe [showed] tear gas. It scared a lot of people [who] wanted to come to our city,” Reynolds said Friday. “We were writing talking points and talking to every single convention that was worried about their attendees coming, reminding them that this is a safe city, that this is a wonderful city.”