Lightfoot urged to back off proposal to raise hotel tax

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A hotel industry group says an idea floated by Lori Lightfoot to increase the room tax to fund grants to artists would hurt the city’s tourism industry. | Sun-Times photo

Mayor-elect Lori Lightfoot risks killing the golden goose that is Chicago’s 55-million-visitors-strong tourism industry with her proposal to raise the city’s hotel tax to provide more grants for local artists, a trade group warned Thursday.

Michael Jacobson, president of the Illinois Hotel & Lodging Association, noted the total tax on a Chicago hotel room already stands at 17.5 percent. That’s the highest of any of Chicago’s leading competitors for conventions and tourism.

Atlanta and New York City tax hotel rooms at 15 percent. In Orlando, the tax is 12.5 percent. In Las Vegas, it’s 13.35 percent. Hotel rooms in Hollywood, California are taxed at a rate of 15.5 percent.

“When meeting or convention planners are looking at which market to put a major meeting with hundreds of thousands of people, the tax rate matters because it adds up quickly when you stay for several nights and multiply that by thousands of attendees,” Jacobson said.

“Every time you see a raise, that does scare away particularly business travel. … They’ll start second guessing coming to Chicago. Our hotel industry has experienced record growth in recent years. Anything that would be a detriment to that or slow down that progress would be a shame and would really hurt our economy.”

Jacobson said he has communicated his objections to Lightfoot’s staff and they now realize that, “it’s a more complicated issue than it seems.”

“It sounds easy to just throw a tax on the visitors, but visitors … are sensitive to that. We’re not the pot of money that everybody thinks we are,” Jacobson said.

Lighfoot’s press secretary Nadia Perl had no immediate comment.

On Feb. 20, Lightfoot unveiled an ambitious arts and education agenda that included yet another increase in the Chicago hotel tax to boost the $1.7 million now devoted annually for grants supporting Chicago artists. Lightfoot called that amount “pocket change.”

“There should be no reason why artists are leaving Chicago to go to New York or L.A. or some other place that’s more friendly and more livable for them. We need to make sure that we create the environment here where they can thrive and feel like this can be their home,” Lightfoot said on that day.

“I believe that one of the things we should do is have a modest increase in the hotel tax so we can expand the amount of monies that are actually available for grant-making for our artists. … We just want to make sure that we’re doing a lot better than $1.7 million in grants to artists.”

At the time, Lightfoot said she hadn’t settled on a specific percentage. She would only characterize the increase as “modest” and “small” and said she has no intention of “proposing something out of sight.” But it has to be enough to “actually yield dividends,” she said.

“Even a small percentage [increase] — 1 or 2 percent — would go a long way in providing us with a steady stream of income where we could significantly expand our reach in grant making to artists,” she said.

Jacobson acknowledged Thursday that supporting struggling Chicago artists is a “noble cause.”

But, he said, “To put the full burden on the back of our visitors — eventually, there’s going to be a breaking point and we’re afraid that we’re pretty close to that point already as one of the top taxed markets in the nation.”

Jacobson noted that eight new hotels opened in downtown Chicago last year with seven more opening this year.

“When you add a new tax like this, how does that look to investors that want to come in and continue growing the market? Scaring away investors is something this city can’t afford right now,” he said.

Mayor Rahm Emanuel had a laser-like focus on tourism.

He merged the city’s three tourism marketing agencies into Choose Chicago. The mega-agency proceeded to open more offices around the nation and the world, with help from an increased marketing budget — at first locally and then with the help from the state after Illinois’ budget stalemate finally came to an end.

He worked with labor leaders — including now-indicted former Teamsters Union boss John Coli Sr. — to broker two rounds of work-rule changes at McCormick Place that made Chicago more competitive against up-and-coming convention cities like Las Vegas, Orlando and Atlanta.

The full-court press produced impressive results. During Emanuel’s tenure, the number of tourists visiting Chicago grew by 40 percent—from 39 million to 55 million-a-year.

Jacobson said Lightfoot has an opportunity to “continue Rahm’s legacy of being a true champion for tourism” by going on foreign trade missions and using her newfound “celebrity status” to promote Chicago.

But only if she steers clear of the hotel tax.

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