A Spanish firm has paid $28 million for a Chicago site near the Magnificent Mile shopping strip in a rare case of planned hotel construction during the pandemic.

RIU Hotels & Resorts bought the land last month at 148-158 E. Ontario St., where it plans a 390-room hotel just east of North Michigan Avenue, Cook County property records show. Construction is expected to begin on the $150 million project in March, Prime Group Chairman and CEO Michael Reschke told CoStar News. RIU hired his company to develop the hotel.

The move comes as hotels in the nation’s third-largest city, normally a tourist destination, have struggled in the pandemic with fewer convention and other visitors. A sign of anticipated hotel demand is also a rarity nationally as the industry's occupancy across the country was at 53% for the week ended Nov. 27, while hotels in the previous week — one that wasn't as disrupted by the holiday — were 59.7% full, below 2019 levels, according to CoStar hospitality analytics firm STR.

The decision shows the firm’s belief that the health crisis will subside and the travel industry will bounce back during the two-year construction project, Reschke said.

The site in the Streeterville neighborhood was sold by Oak Brook, Illinois-based Intercontinental Real Estate for just over $28 million. Buying the 12,801-square-foot parcel is a key step toward kicking off the 29-story plan unveiled earlier this year, during a slumping hotel market brought on by the pandemic. Zoning was approved by Chicago’s City Council in July.

The hotel at 150 E. Ontario, called the RIU Grand Plaza Chicago, is expected to open in March 2024, Reschke said. The hotel group, named for Spain’s Riu family, will pay cash for the project and does not plan to seek a construction loan, he said.

“RIU loves Chicago and they want to have a hotel in Chicago for their client base” of international travelers, Reschke said. “They’re highly confident and they take a long-term view.”

RIU is less dependent on conventions and business travel, he said, because the hotel group owns a travel agency that sets up U.S. trips for international travelers. With hotels in New York, Miami and San Francisco, RIU books many guests for stays in multiple cities as they travel the country.

“The beauty for Chicago is they will bring international tourism to Chicago that otherwise probably wouldn’t have come here,” Reschke said. “International tourists stay longer and spend more money, so it’s a great asset for Chicago.”

Chicago-area hotel occupancy fell to just 35.5% in 2020 and revenue per available room plunged to $33, a 68% drop from pre-pandemic 2019, according to data from STR. This year is expected to end with 49.7% occupancy and $59 RevPAR.

Among the downtown hotels feeling the pain are Chicago’s second-largest, the 1,641-room Palmer House Hilton, which was hit with a $338 million foreclosure suit last year. That lawsuit is ongoing.

Downtown Chicago’s hotel market isn’t likely to return to pre-pandemic health until 2024, said Anne Purcell, a director of hospitality analytics at CoStar.

“Chicago really needs groups and conventions to return to full capacity before the hotel market can make a full recovery, and business travel is also still very slow,” Purcell said.

Four downtown Chicago hotels, all of which were in the works before the pandemic, have opened this year, with a combined 721 rooms.

There are relatively few ongoing hotel projects.

A 191-room hotel is under construction within the completed, 101-story St. Regis Chicago at 363 E. Wacker Drive, as is the 234-room LaSalle Hotel project within the historic building at 208 S. LaSalle St. that already houses a JW Marriott. Reschke’s firm is the developer of both hotels in the LaSalle Street building.

The LaSalle Hotel, part of Marriott’s Autograph Collection, will open April 1 on the building’s top five floors, Reschke said.

In a project that began in the early months of the pandemic, Sterling Bay and Magellan Development Group recently topped out construction of a 47-story apartment and hotel tower at 300 N. Michigan Ave. It will include a 280-room citizenM hotel, which the Dutch hotel company plans to buy from the developers when construction is completed.

“The development pipeline is slowing down in Chicago and other cities, so perhaps they’re betting on less competition,” Purcell said of RIU. “They’ll be opening at a time when there’s less new supply to contend with.”

The RIU Grand Plaza Chicago is designed by Lucien LaGrange Studio. The general contractor is W.E. O’Neil Construction.