minnesota tourism statistics

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New report shows Minnesota’s tourism industry continues to rebound

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The art and the photo opportunities draw people to the Minneapolis Sculpture Garden. As one of the most well-known landmarks in Minneapolis, it attracts travelers from across the country.

“We came for the State Fair and now we’re just sight-seeing,” said Peter Hay, while visiting the site.

He was raised in Minnesota but now lives in Santa Barbara. Hay brought California-native Nancy Saltamachio with him to the Twin Cities.

“It seems like a really exciting and happening area,” said Saltamachio. “I’ve kind of had a pleasant surprise.”

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Minnesota’s tourism industry has seen growth this summer. A survey conducted in mid-August of 324 hospitality and tourism businesses statewide showed 81% reported they’re in a growing or stable but positive financial position.

The survey was conducted by Explore Minnesota, Hospitality Minnesota and the Federal Reserve Bank of Minneapolis.

A view of the Minneapolis skyline from the Minneapolis Sculpture Garden (KSTP).

“We’re seeing, year over year, businesses are bouncing back a little better,” said Lauren Bennett McGinty, the executive director of Explore Minnesota. “There are definitely improvements.”

The survey showed the highest level of growth occurred in the Twin Cities metro during the summer of 2022. Sixty-four percent of metro businesses surveyed reported an increase in revenue compared to the summer of 2021, while 42% reported higher revenue than in the summer of 2019.

“The growth is really coming from the return of festivals and events this year,” said Bennett McGinty. “And just getting back out, being with friends and family and seeing some of the things that haven’t been around for the last two years.”

Businesses in the Northwest and Central regions of the state also reported more revenue increases than decreases. In the Central region, 48% of businesses surveyed saw more traffic in the summer of 2022 than 2021. In the Northwest region, 38% of businesses surveyed reported better business this summer compared to last summer. Roughly a third of the businesses in both regions reported no change.

More than half of the businesses who responded to the survey in the Northeast region reported lower revenue this summer compared to the summer of 2021.

“Places like Northeast, Northwest, Central Minnesota had really great years last year when people were wanting to get out more, they were looking for cabins, they were looking for some outdoor recreation,” said Bennett McGinty. “They actually fared very, very well in the last few years.”

She added, “We know that those numbers are a little bit smaller and maybe not as robust as last year because they’ve already seen some of that growth come back, which is really exciting and I think it means that a lot of our other areas that didn’t have that growth last year are now starting to reap some of those benefits.”

The Saint Paul Hotel has noticed an increase in overnight stays.

“We definitely have been seeing an uptick with travelers coming back now that concerts are happening at Xcel Center,” said Gerry Goldfarb, the Saint Paul Hotel general manager. “Obviously the State Fair brought a lot of people in town too who hadn’t been to the State Fair for a while so it’s overall exciting.”

He told 5 EYEWITNESS NEWS that visitors seem to be traveling from within a 250 to 500 mile radius.

“More for the staycations, they’re on a budget and they want to drive up from Iowa or come down from Duluth,” said Goldfarb. “With Viking [River] Cruises downtown this last weekend, we’re starting to see more international travel and more farther out states traveling to Minnesota.”

Last weekend, the hotel also hosted seven different wedding groups.

Plus, Goldfarb explained, “Conventions are slowly starting to come back, we’re excited about that and next year is projected to look pretty good.”

The Minneapolis-Saint Paul International Airport reports higher travel volumes this summer. In June of 2021, there were 2.4 million passengers screened. That number rose to 2.8 million passengers in June of 2022.

July MSP data showed a 100,000 passenger year-over-year increase.

“We’re on the right track,” said Bennett McGinty. “I think what we’re doing is we’re looking at this and figuring out how we can sustain this growth and continue to push people here and enjoy all of the great things we have to offer.”

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A fine summer for most minnesota hospitality and tourism businesses, but challenges remain.

September 27, 2023

Article Highlights

• Majority of respondents say their financial health is the same or better than a year ago
• Many face higher vendor prices, and their customers, facing higher living costs, are spending less
• Labor market remains tight, driving up wages, respondents say

Minnesota’s hospitality and tourism sector had a decent summer: Nearly three-quarters of businesses reported positive financial health, according to a recent survey conducted by the Minneapolis Fed in partnership with Explore Minnesota Tourism and Hospitality Minnesota.

But the number of financially healthy businesses was less than the previous two summers and has been trending downward since a year ago (Figure 1).

Many businesses blame inflation, a tight labor market that has pushed wages upward, and declining customer demand.

“Customers have cut back on multiple stays at the campground to one to two stays per year versus three to four last year,” said a survey respondent from a southern Minnesota campground. Guests just have less disposable income because of higher costs of living, she said.

More than 270 respondents participated in the survey, which was conducted in late August at the tail end of the peak summer travel season.

Inflation affecting finances, customer demand

Demand for hospitality and tourism services was reported to be relatively healthy for most respondents. Overall, 62 percent said traffic was the same or better than a year ago and 66 percent said revenue was the same or better. Financially unhealthy businesses were less likely to report same or better traffic and revenue.

Outside of customer demand, inflation was noted as the most significant challenge for the industry, with nearly 60 percent of respondents identifying it among the top two challenges their businesses face.

Inflation has been higher than the 2-percent year-over-year level considered healthy by many economists since early 2021, peaking in 2022 at close to 9 percent. By summer 2023, inflation averaged just 4 percent. Businesses, however, are still playing catch-up with pricing.

Retail businesses are often reluctant to pass on to their customers the full price increases they receive from their vendors for fear of losing business. In summer 2023, 56 percent of respondents said their vendors had raised prices higher than 5 percent, but only 33 percent said they raised prices for customers by the same amount. That 23-percentage-point gap, while wide, was not as wide as the 34-percentage-point gap a year ago (Figure 2).

“We have raised prices and reached a peak,” a respondent from a Twin Cities restaurant said. “Unfortunately, we are unable to raise prices high enough to recover the wholesale price increases and the cost of labor increases. We have higher sales and a lower company [profit].”

At the same time, inflation may be dampening customer demand either by causing customers to spend less or not visit at all, as several respondents suggested.

Labor market still tight

Aside from inflation, the other top challenge identified by respondents is labor availability for open positions, with 36 percent naming it one of their two top challenges.

“Candidates do not reply when we reach back out to them. No-show rate is about 50 percent for in-person interviews. And candidates often string along offers and wind up taking another position,” said a respondent from a Twin Cities hotel.

Despite a decrease in job openings statewide, the labor shortage remains in force. As of June, there were roughly two job openings for every unemployed person in the state, according to the Bureau of Labor Statistics. Among survey respondents who were hiring, 45 percent considered the labor market to be very tight.

But that’s actually a significant change from a year ago, when there were 2.5 job openings per unemployed person and 70 percent of respondents said the labor market was very tight. Employers said they still need to work hard to attract workers, especially those with experience.

“I have built my staff by being overaccommodating and picking up the slack when workers don't show up to reduce any burden on the rest of my team,” said a respondent from a northeast Minnesota hotel.

The most popular way to attract and retain workers, respondents noted, is increasing wages, which 75 percent said they had implemented. But with most employers increasing wages, standing out becomes a challenge.

Higher wages have “helped in retaining some employees but since the entire market is increasing wages as well to compete for staff, I don't know if it's truly making an impact in attracting staff,” said another respondent at a northeast Minnesota hotel. “It makes us competitive and on an even playing field at least.”

Other popular labor-attraction strategies include making schedules more flexible (implemented by 49 percent), improving the hiring process (28 percent), lowering experience requirements (26 percent), and offering more on-site perks, such as free food (25 percent).

Into the fall

Looking ahead to fall, when activities tend to slow down for some hospitality and tourism businesses, 45 percent of respondents said they feel optimistic and another 31 percent feel neutral. Most expect customer traffic and revenue to be about the same as or better than a year ago.

But they continue to fret about inflation and hiring difficulties. Sixty-four percent said inflation seems like it’s getting worse, and 40 percent said the same of labor availability. Higher interest rates have made it difficult for some respondents to invest in their facilities.

“One property needs a roof and we cannot afford it,” said a respondent from a northeast Minnesota resort. “This will slowly ruin the building, but that is a measure of risk we have to take now.”

Many respondents, however, are looking past the challenges to the opportunities.

“Although there are economic challenges, we are fortunate enough to be in a location that continues to see sales growth/customer growth,” said a respondent from a northeast Minnesota grocery store. The respondent reported worsening inflation and wage pressure but also added that their “assumptions are that there are no immediate or major limitations to projected growth.”

• Regional Economy

Tu-Uyen Tran is the senior writer in the Minneapolis Fed’s Public Affairs department. He specializes in deeply reported, data-driven articles. Before joining the Bank in 2018, Tu-Uyen was an editor and reporter in Fargo, Grand Forks, and Seattle.

Related Content

A strong summer for Minnesota hospitality and tourism marred by stressful changes

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"MINNESOTA MUST INVEST IN TOURISM TO STAY COMPETITIVE, ATTRACT MORE OUT-OF-STATE VISITORS AND GROW MINNESOTA'S TOURISM BUSINESS." ~ ANNA TANSKI, MINNESOTA TOURISM GROWTH COALITION PRESIDENT

The Minnesota Tourism Growth Coalition was created to coordinate activities to increase the marketing budget for Explore Minnesota Tourism through an increase in awareness of the importance of the tourism industry in Minnesota.

Explore Minnesota Tourism Budget Approved!

The Minnesota House and Senate have approved the Explore Minnesota Tourism budget as a part of the Jobs/Economic Development/Labor finance bill. The bill awaits the Governor’s signature. The bill provides a $33 million increase in funding to Explore Minnesota through a base budget increase, funding for new initiatives, grants for cultural festivals, and creation of Explore Minnesota for Business. The bill also provides funding for online hospitality training programs, Canadian border counties economic relief program, the ProStart and Hospitality Tourism Management Program.

Explore Minnesota

• This appropriation will provide funding for Tourism Industry Grants and Minnesota Sports and Events
• Taste of Minnesota, $1.847 million (Minneapolis Downtown Council)
• Stairstep Foundation, $1.2 million for African American cultural festivals and events
• Somali Community and Cultural Festivals and Events:
• Ka Joog, $400,000
• Somali Museum of Minnesota, $400,000
• ESHARA, $400,000
• Latino Cultural Festivities and Events, $1.2 million (West Side Boosters)
• Hmong International Freedom Festival event, $1.2 million (United Hmong Family)
• $11 million in fiscal year 2024 for Explore Minnesota Business (one-time appropriation)
• Explore Minnesota’s base budget will increase to $17.023 million per year beginning in fiscal year 2026.

The bill also includes policy language to modify the mission of Explore Minnesota, duties of the Explore Minnesota director, and duties of Explore Minnesota Councils. The bill creates “Explore Minnesota Business: as a division of Explore Minnesota and establishes the Explore Minnesota Business Council.

Other Funding:

• $250,000 grant to ProStart and Hospitality Tourism Management Program
• $400,000 grant to U of MN Tourism Center for creation and operation of an online hospitality training program in partnership with Explore Minnesota Tourism.
• $5 million grant for the Canadian Border Counties Economic Relief Program

Budget Spreadsheet

Bill Language

Survey: Minnesota tourism sees higher revenue this summer, but challenges remain

(FOX 9) - A recent Minnesota tourism and hospitality industry survey found businesses saw increased revenue this summer compared to last year, but still face ongoing hardships, according to Explore Minnesota.

The tourism and hospitality industry was one of the hardest hit during the COVID-19 pandemic amid shutdowns and other restrictions. Tourism Economics reported that the pandemic-related travel downturn has cost Minnesota $10 billion in travel spending losses since January 2020.

However, as restrictions loosened following the rollout of the vaccine in 2021, the industry saw a boost this summer. According to a release from Explore Minnesota, from May to August, three quarters of survey respondents reported higher business revenue, but some fared better than others, and customer traffic was mixed. The survey -- conducted by partnership by Explore Minnesota, Hospitality Minnesota and the Federal Reserve Bank of Minneapolis -- went out to restaurants, attractions, and lodging businesses throughout the state.

Results showed that 71% of businesses reported higher summer revenue versus 2020, and 45% reported higher summer revenue than in 2019. Additionally, 63% of businesses in the food and drink sector reported higher revenue in summer 2021 compared to 2020, and 42% reported higher revenue versus summer 2019.

The survey also found that regionally, southern Minnesota and Twin Cities metro businesses reported the lowest customer traffic.

Overnight lodging accommodations across all Minnesota regions reported somewhat or significantly higher revenue compared to last summer. Revenue was higher for 92% of businesses in the northwest; 90% higher in central; 89% higher in northeast; 81% higher in Twin Cities metro; and 64% higher in southern Minnesota.

As of August 2021, 34% of businesses have met or surpassed pre-pandemic business levels, and another 41% of businesses expect to be at that level by 2022.

Meanwhile, 81% of respondents reported tight labor availability, which has been felt nationwide. According to the U.S. Bureau of Labor Statistics, the U.S. leisure and hospitality industry is the hardest hit sector, still down 1.7 million jobs (10.3%) since Feb. 2020.

However, many businesses are cautiously optimistic that recovery will continue this fall. Sixty percent of businesses expect higher revenue and customer demand this fall versus 2020.