Chicago’s Bold Tax Moves: Are New Hotel And Short-term Rental Taxes The End Of Affordable Travel In The Us?

Thursday, July 17, 2025

Chicago’s hospitality taxation strategy will beryllium implemented, impacting some short-term rental hosts and accepted edifice operators. The state’s Hotel Operators’ Occupation Tax (HOOT), which has agelong applied to hotels, will now besides use to short-term rentals specified arsenic those listed connected Airbnb and VRBO. This move follows nan inclination of Chicago’s expanding taxation model to accommodate a increasing and divers lodging market.

Short-term rental hosts will beryllium required to salary a 6% taxation connected 94% of their gross rental income, which will beryllium added to existing authorities and section lodging taxes. This taxation argumentation hold is portion of a larger effort to standardize and modulate short-term rental properties successful nan metropolis while ensuring that they lend to nan city’s gross successful nan aforesaid measurement arsenic accepted edifice operators.

Meanwhile, nan city’s tourism board, Choose Chicago, is pushing guardant pinch a projected Tourism Improvement District (TID) that intends to summation nan edifice taxation for ample downtown hotels. This proposal, if enacted, would raise nan edifice taxation to 18.9%, positioning Chicago among nan highest taxation rates for lodging successful nan United States.

Expanding nan Hotel Operators’ Occupation Tax to Short-Term Rentals

As of July 1, 2025, Illinois rule will widen nan Hotel Operators’ Occupation Tax, antecedently applied only to accepted hotels, to each short-term rental properties. This alteration is expected to effect short-term rental hosts significantly, arsenic they will now beryllium required to remit a 6% taxation connected 94% of their gross income. Hosts will beryllium responsible for remitting nan taxation straight to nan state, though they will person nan action of passing nan costs on to their guests.

The caller argumentation comes arsenic portion of an ongoing effort to guarantee short-term rentals lend arsenic to nan city’s tourism-related taxes. Prior to this change, short-term rentals operated extracurricular of nan accepted edifice taxation structure, which near them mostly exempt from definite authorities and municipal taxes. With nan caller taxation extension, hosts will now find themselves taxable to nan aforesaid financial requirements arsenic hotels.

In summation to nan caller authorities tax, short-term rentals will proceed to beryllium taxable to respective existing taxes that are imposed connected lodging businesses successful Chicago. These see nan city’s 4.5% edifice taxation and a 6% surcharge, arsenic good arsenic nan Metropolitan Pier & Exposition Authority taxation and nan Illinois Sports Facilities Authority levy. When combined, these taxes will importantly summation nan costs load for short-term rental hosts and whitethorn lead to higher prices for guests.

The Tourism Improvement District: A Proposed Increase successful Hotel Taxes for Downtown Chicago

In a related move, nan city’s tourism board, Choose Chicago, has introduced a connection for a Tourism Improvement District (TID) that targets hotels pinch 100 aliases much rooms located wrong circumstantial downtown zip codes. If approved, nan TID would enforce an further 1.5 percent points onto nan existent edifice taxation complaint of 17.4%, bringing nan taxation complaint for ample hotels successful nan downtown area to 18.9%. This projected summation is aimed astatine generating further gross for nan metropolis to support its tourism-related initiatives.

The costs collected done this taxation summation would beryllium utilized to support a scope of activities designed to heighten Chicago’s competitory separator successful nan tourism market. These activities see backing world media campaigns, normal bidding incentives, and arena promotions. The extremity is to summation Chicago’s visibility arsenic a premier destination for visitors and normal attendees, competing pinch different awesome cities for illustration Las Vegas and New York that use from overmuch larger tourism trading budgets.

Supporters of nan TID reason that nan further revenue, estimated to make complete $50 cardinal annually, could thief Chicago’s tourism assemblage scope nan backing levels of cities for illustration Las Vegas, which are known for their dense investments successful tourism promotion. By bolstering trading efforts and supporting normal attractions, they judge that nan accrued taxation will yet lead to a greater return connected finance for nan city, creating a affirmative effect connected nan section economy.

Potential Challenges for Hotel Operators and Meeting Planners

Despite nan imaginable benefits of nan TID, location are concerns among immoderate edifice operators and gathering planners. Some fearfulness that nan accrued taxation rate, erstwhile mixed pinch different rising costs, could discourage business and trim Chicago’s competitiveness successful nan highly competitory edifice and normal markets. Hotel operators whitethorn find it difficult to sorb nan higher taxes without passing them on to customers successful nan shape of higher room rates.

Meeting planners, who often book ample edifice spaces for conferences and events, whitethorn beryllium peculiarly delicate to immoderate summation successful lodging costs. Higher room rates could effect nan attractiveness of Chicago arsenic a venue for conferences and conventions, particularly erstwhile competing pinch different cities that connection little wide costs. These concerns bespeak broader anxieties wrong nan hospitality manufacture astir nan semipermanent effects of continually expanding taxes connected nan sector.

However, proponents of nan TID, including representatives from Choose Chicago, reason that nan further gross generated by nan taxation summation will thief support and heighten nan city’s opinionated arsenic a world leader successful tourism and normal hosting. They judge that nan trading and arena promotion supported by nan TID will thief Chicago pull caller business, offsetting immoderate antagonistic effects that higher edifice taxes mightiness person connected room rates and bookings.

Comparing Chicago to Other Convention Cities

Currently, Chicago has 1 of nan highest edifice taxation rates among U.S. cities that are focused connected normal tourism, pinch nan existent complaint opinionated astatine 17.4%. This complaint already positions Chicago arsenic a leader successful nan industry, but pinch nan projected summation done nan TID, nan metropolis would surpass moreover nan highest taxation rates seen successful different awesome normal cities.

For example, Las Vegas and New York some person little edifice taxation rates compared to nan projected 18.9% taxation complaint successful Chicago. However, these cities often allocate larger budgets for tourism trading and events, which has allowed them to support their entreaty arsenic apical normal destinations. In this context, nan summation successful Chicago’s edifice taxation could thief nan metropolis level nan playing field, peculiarly by ensuring that nan metropolis has nan resources needed to compete connected a world scale.

The tourism assemblage successful Chicago has agelong been 1 of nan city’s astir important economical drivers, pinch thousands of visitors coming each twelvemonth to be conventions, research nan city’s taste attractions, and acquisition its world-class eating and entertainment. With accrued finance successful trading and arena promotion done nan TID, nan dream is that Chicago tin pull moreover much visitors, further solidifying its position arsenic a cardinal subordinate successful nan world tourism market.

Looking Ahead: Balancing Taxation and Competitiveness

As nan connection for nan Tourism Improvement District moves forward, location will beryllium an ongoing statement complete nan equilibrium betwixt raising gross for tourism initiatives and maintaining nan city’s competitiveness successful nan hospitality sector. The situation for metropolis officials will beryllium ensuring that nan higher taxes do not value retired visitors aliases trim nan number of conventions and events that take Chicago arsenic their destination.

For short-term rental hosts, nan hold of nan Hotel Operators’ Occupation Tax presents a caller group of challenges. While nan taxation connected short-term rentals is expected to raise nan costs for guests, it besides aligns nan assemblage much intimately pinch accepted hotels, ensuring that each lodging options lend arsenic to nan city’s tourism revenue. The dream is that these changes will bring astir a much unified and regulated attack to tourism, benefiting nan metropolis arsenic a whole.

Navigating nan Future of Chicago’s Hospitality Sector

The changes successful taxation policies for some accepted hotels and short-term rentals correspond a caller era for Chicago’s tourism and hospitality sectors. While nan summation successful edifice taxes and nan description of nan Hotel Operators’ Occupation Tax to see short-term rentals whitethorn lead to higher costs for visitors and businesses, nan gross generated by these taxes is intended to money initiatives that will use nan city’s semipermanent growth. The Tourism Improvement District proposal, pinch its attraction connected boosting trading efforts and normal incentives, intends to guarantee that Chicago remains a starring destination for business and leisure travelers alike.

As nan metropolis navigates these changes, it will beryllium basal to support a observant equilibrium betwixt expanding gross for tourism and preserving nan competitiveness of nan hospitality sector. The result of these initiatives will person a lasting effect connected Chicago’s tourism industry, and nan occurrence of these measures will yet dangle connected their expertise to make affirmative returns for some nan metropolis and its visitors. The hospitality industry, government, and section stakeholders must activity together to guarantee that these changes foster a vibrant, sustainable tourism ecosystem that benefits all.