Loews Walks Away From Chicago Hotel

Loews Hotels decided to walk away from a $1 land deal in Chicago, saying that it wasn’t financially viable to create its agreed-upon, four-star, 384-room luxury hotel in downtown Chicago. The hotel itself would have cost around $175 million (I guess the total, with the land, would have been $175,000,001.)

“Unfortunately, the lack of construction financing and the severe decline in hotel market dynamics have made it not viable to build a new luxury hotel,” a spokeswoman for Loews told Chicago Business.

Despite the rather sound reasons that Loews gives, many are calling the ill-fated project part of the Block 37 Curse. The curse refers to several retailers and agencies (among them the Apple Computer Inc. and a health club chain) who decided not to locate there or canceled their leases at the property fearing a mass exodus.

Loews isn’t the only hotel canceling plans, three others have also dropped hotel developments in Chicago and none of them are part of the Block 37 Curse. The truth is that financing is difficult, commercial or otherwise, and the amount of risk has risen for lenders. A new hotel in a recession isn’t considered a great risk, especially when hotel occupancy nationwide has dropped 1.4 percent  to just above 50 percent while hotel revenue sank 10 percent. Expect more such “curses” in the next couple of years.