CHICAGO—Seven years ago, the trade in Chicago hotels was booming, with about $1.2 billion worth of transactions in 2006, up from less than $200 million in 2003. This trade crashed along with everything else in 2009, but researchers from Jones Lang LaSalle say the sector's profitability and profile has brought big investors back in a big way and the trade could soon approach those pre-recession levels. Since 2011, 87% of the buyer volume in the sector came from REITs and private equity, and based on deals in the pipeline, the city could see more than $1 billion in transactions between now and the end of 2014, according to JLL.

“The convention business in Chicago has always driven profitability,” says Adam McGaughy, managing director at JLL's Hotels & Hospitality Group. “But what I think has changed recently has been the visitation levels. In 2012, there were 46 million visitors to Chicago, which was up over 18% from 2010 levels. There is a goal to have 50 million visitors within the next five years. And a majority of that growth is coming from the international sector, so it's not just a convention destination, it's more of an international destination as well, which has created a more diverse mix in terms of demand generators.”

Other underlying trends should also bring investors back to Chicago. “The reason why there's so much activity is that occupancy levels are now above peak levels that were achieved in 2008,” McGaughy adds. Furthermore, he estimates, the city's overall ADR can still grow $12 before it hits $193, the peak level of 2008. “So the occupancy is there and the ADR is likely to bump back up again, so NOI is probably going to exceed peak levels at some point next year.”