For any U.S. hospitality market, the 2024 Democratic National Convention is a major event.
But because it's happening in Chicago, a recovering market that has an existing supply of more than 124,000 rooms, reaching compression levels are that much more of a challenge for hoteliers.
Forward STAR data from CoStar as of Aug. 12 shows Chicago's central business district's business on the books ranges from 60% to 68% for Monday through Thursday. From a week-to-week basis, there was negative pickup for the days of the DNC ranging from 0.4% to 1.8%.
For the comparable week in 2023, business on the books ranged from 42% to 45% while the actualized occupancy was 63% to 75%. The actualized occupancy in 2019 was 83% to 96%.
Part of the drop in pick-up from one week to the next can likely be attributed to the conference organizer releasing their room block, said Jan Freitag, national director for hospitality market analytics at CoStar.
"It is normal for conference coordinators to have a date close to the event date at which point they can release their hold on the unsold rooms without penalty and these rooms are now available for the hotel to sell," he said.
In Chicago’s hotel market, there are two forces in tension, Freitag said. On the positive side, Vice President Kamala Harris becoming the Democratic presidential candidate, paired with her pick of Minnesota Gov. Tim Walz as her running mate, created a lot of excitement and momentum.
“That probably will translate into continued increases in room demand and occupancy, especially in the downtown hotels,” he said.
A national convention, for both the Democratic and Republican parties, is always a huge draw for a market, he said. The question is just how big the market is and whether there will be compression outside of the downtown core. Milwaukee is a smaller city with fewer hotels than Chicago, so it will be interesting to see after both conventions how hotel demand plays out, he added.
He said he expects occupancy to increase up to the last night of the convention.
Naturally, hotels that are closer to the DNC’s main areas will have more pricing power than those farther away, he said.
The headwind for the hotel market is that other people may stay away, Freitag said. Meeting planners looking at possible dates will know the city is not going to be particularly open for business for their groups.
“Everything will revolve around the Democratic National Convention, and my meeting might get lost,” he said. “The restaurants I want to go to may not be open. Police presence is pretty heavy. We may not be able to get around the city as much as we want to, so why don't we just wait this out and go the week before or the week after or two weeks later?”
That’s likely true for both the group and corporate transient sides, he said.
“Those two forces sort of play with each other,” he said. “I would suggest that the occupancies continue to be high, especially for that last night, but there are certainly people who avoid going to a market that is hosting a large political convention.”
Chicago Hotelier's Perspective
Chicago-based hotel management and investment company First Hospitality has 10 hotels in the city's central business district and a handful in the suburbs, said Jenna Fishel, senior vice president of commercial strategies. When the DNC announced it would hold the 2024 convention in Chicago, the company quickly began to strategize and determine rates.
One thing that was important when setting expectations was to put it in perspective, she said.
"It's a new event, but with the major supply in Chicago, it takes a lot to produce extreme demand in the city," she said. "We tried to set realistic expectations a year or so ago."
Between then and now, bookings have been quiet until the market reached the booking window, Fishel said. First Hospitality's hotels in the DNC's housing bureau blocks are fairly full as anticipated, but some of its sister hotels picked up less than projected.
Looking at it from a transient guest perspective, she said they had hoped excitement from the change in nominee from President Joe Biden to Harris would have led to more bookings. While it did, it just wasn't as much as expected.
Overall, First Hospitality's hotels in the Chicago area are going to be fairly full, but they won't meet the average daily rate expectations set a year ago, she said.
As of late Friday, Fishel said the amount of demand hasn't been enough to create compression in the market.
"We're not in a position where we'll be yielding, but we will fill," she said.
Other groups that had considered Chicago as a location chose other weeks around the DNC to hold their meetings and conferences, spreading out demand over the month of August, she said. The same appears true for transient business travel.
Even so, August has been shaping up to be a good month, and it should be a good quarter for Chicago as well, she said.
In reviewing First Hospitality's Chicago CBD properties, Fishel said the hotels have exceeded budget every quarter this year. Retail has led the way, setting it apart from other markets. Group has slightly exceeded expectations as well.
There was a flip during the year in which occupancy was the performance driver during the first half, but the third quarter is showing rate is up significantly year over year, she said.
"So we've seen that flip, which is really encouraging for the city, but overall, a good year for Chicago," she said.