Minnesota’s summer tourism season struggled, new Fed survey shows
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Minnesota’s tourism and hospitality industry had a rough summer, according to a new survey by the Minneapolis Fed, Hospitality Minnesota and Explore Minnesota Tourism. Many resorts and businesses across the state reported fewer customers, lower revenue and growing expenses.
About half of the 266 businesses surveyed said customer traffic dropped from June through August, Minnesota’s peak travel season, compared to a year ago, with nearly half reporting a decline in revenue. Only about a quarter of businesses said their revenues grew.
“Growth is stalled in the sector. I think we have to be straight up on that,” said Ron Wirtz, regional outreach director for the Minneapolis Fed.
The survey results show the continuation of a trend over the past couple years, after tourism surged during the summer of 2021, when people vacationed outdoors in droves during the pandemic. Numbers dropped a bit the following two years. These new results show further decline.
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“It seems pretty clear that the pandemic boom has really worn off and that we’re seeing some adjustments throughout the sector,” Wirtz said.
Though inflation has slowed compared to a year ago, businesses still cited the rising costs of goods and services as their biggest challenge, followed by rising wages.
Weather also a factor
About half of businesses attributed part of their decline to severe weather, including major flooding across southern Minnesota.
A fishing outfitter who was surveyed said their business was forced to cancel four weeks of guided fishing trips because of the flooding, with an average loss of $400 per trip.
One bright spot in the survey was the availability of labor. Last year about a third of businesses reported difficulty finding employees. This year only about a quarter said they had a labor shortage.
“I think a lot of businesses have managed to staff up over the last couple of years,” Wirtz said. He suspects much of the hiring now is aimed at maintaining current staffing levels.
Businesses in the state’s northeast and in the Twin Cities were hardest hit. Among different types of businesses, restaurants and bars fared worse, with hotels and other lodging businesses reporting more modest declines, boosted by growth in the average room rate.
But other metrics used to measure the health of the tourism sector paint a rosier picture, said Gretchen Nussbaum, senior research analyst with Explore Minnesota Tourism.
She said hotel occupancy was up nearly 3 percent statewide in August, and nearly 7 percent in the metro area.
State data also showed a two percent increase in employment in the leisure and hospitality sector compared to last summer. And airport traffic at MSP was up more than 8 percent compared to last summer.
“So we take this sentiment survey seriously, but we look at it in conjunction with the other data pieces,” Nussbaum said.
But business owners remain largely pessimistic, said Angie Whitcomb, president of Hospitality Minnesota.
“They’re not feeling that this is the best of times,” she said. “We’re still trying to find where we’re going to land post-pandemic.”
She said businesses are facing increased costs to retain employees by raising wages and offering increased flexibility. Many are also struggling to find enough seasonal workers.
Moving into the fall shoulder season, businesses in the hospitality and tourism industry have a mixed outlook. A third of respondents were pessimistic about the next six months, a third were neutral and a third were optimistic.
State tourism officials are planning several national niche campaigns focused on specific activities, Nussbaum said, with plans to target hikers and mountain bikers in the fall, and a focus on performing arts and outdoor recreation in the winter.
Whitcomb, with Hospitality Minnesota, said if the cost of doing business continues to rise, customer traffic continues to decline, and businesses have to raise prices, it will be interesting to see how travelers respond.
“I hate to be the ‘Debbie Downer,’” Whitcomb said, “but at some point, families are just not going to be able to travel or go out to a restaurant and be comfortable paying $25 for a hamburger.”