While the Chicago hotel market had been somewhat slower to recover than New York City's or Washington, D.C.'s from the industry slump in the early part of this decade, the Windy City lodging market is enjoying resurgence of late, and investors have taken note.

Occupancy and average daily room rate are both trending in positive directions. According to Smith Travel Research, average daily room rate at Chicago hotels is approximately $119 as of September of this year, up from about $107 from the same period a year ago, just over an 11 percent increase. The research firm also reports that occupancy is about 68 percent as of September of this year, up from nearly 65 percent from the same period a year ago, an increase of about five percent.

Two high profile sales have already occurred this month. On Nov. 8, DiamondRock Hospitality purchased the Conrad Chicago hotel (pictured), located on North Michigan Avenue on the Magnificent Mile, for $118 million. Two days later, the 443 Allerton Crowne Plaza was bought by ALT Hotel Partners for $70 million.

The Conrad's per key price of approximately $400,000 per key is on the high side of hotel sales in Chicago, commented Mark Gordon, managing director of Sonnenblick Goldman, who advised the seller in the transaction.

The Chicago market had to digest a significant amount of full-service hotels that entered the market earlier this decade just as hotel demand started to decline, Gordon said. But he is optimistic going forward, saying that the city has now absorbed that supply, and the projected amount of new hotels rooms coming to the market is relatively small.

"The city of big shoulders is getting bigger," said David Pisor, CEO of Elysian Worldwide, which is developing the Elysian , a 188 room "condo hotel," that will also contain 51 private residences on the top floors.

Pisor said Chicago has about 1,200 rooms that he said are at the high end of the market, and believes the city can support more. "Room rates were typically higher for hotel rooms in New York and San Francisco," Pisor said. "But in the last decade, the difference is not as drastic."

The opening of Millennium Park, and the expansion of the exhibition space McCormick Place, are two catalysts that have strengthened Chicago's lodging sector in recent years, said Michael Maurer, senior associate at Lucien LaGrange Architects, the architect of The Elysian. Visitors to the Windy City are showing a greater appetite for luxury hotels, Maurer said.

The architecture firm has found redevelopment opportunities. The firm is presently restoring the Blackstone Hotel, built in 1910. Twelve U.S. presidents have stayed at the property, and the Blackstone houses the original "smoke-filled rooms" of American political lore.

The firm is also converting two old office buildings on LaSalle Street to hotels. Once the backbone of LaSalle Street, some financial firms are moving to more modern office buildings in other areas of Chicago, that feature larger floorplates and under-floor air conditioning. But while some of LaSalle Street's older structures may be outmoded as offices, they can "work perfectly as hotels," Maurer said.