News
Building Tourism

Building Tourism

Minnesota's hospitality industry is leveraging the Super Bowl, new hotel capacity and public investments to expand economic activity.

The pinnacle of the National Football League season will be showcased in U.S. Bank Stadium in February when conference champions battle for a Super Bowl title.

Nobody knows whether Super Bowl LII will offer the come-from-behind drama that the Patriots produced in the last Super Bowl, but it will be a watershed moment for Minnesota’s hospitality industry.

The throngs of people coming to Minnesota for the Super Bowl need to be housed, fed, transported and entertained—all in the heart of winter.

“Being able to pull off a successful event like that allows you to stand out from the pack,” says Brent Foerster, senior vice president of destination sales for Meet Minneapolis, the city’s convention and visitors association.

Foerster and his hospitality peers from around the country don’t risk torn ACLs or broken collarbones in their day jobs, but they are fighting over the same national business.

“This industry is very competitive,” Foerster says. “Meeting and event planners have got a lot of choices. There aren’t a lot of cities staying status quo.”

The Twin Cities metropolitan area is wrapping up another strong year in the hospitality sector, and leaders are forecasting growth in 2018 based on major events that already have been booked.

In addition to the Super Bowl, Minneapolis is set to host the 2018 Summer X Games (36,700 attendees), the National Baptist Convention (20,000 attendees), National Education Association annual meeting (16,000 attendees) and NCAA Women’s Volleyball championship (15,000 attendees). These large events are on the docket for U.S. Bank Stadium, the Target Center and Minneapolis Convention Center.

The city of St. Paul is getting in on the Super Bowl action by hosting an NFL opening night event on January 29 that is expected to attract 10,000 people to Xcel Energy Center. The NCAA Men’s Frozen Four hockey tournament is estimated to draw about 18,000 daily in April. The Minnesota Dental Association is convening at the RiverCentre for a Star of the North convention that’s set for 9,000 people. SuperValu will be using the same venue for a national sales expo for 5,000 people.

Hotel demand rising

There are about 41,600 hotel rooms in the Minneapolis-St. Paul metropolitan area, and the supply of rooms is expected to grow by 2 to 5 percent during 2018, according to a September report by CBRE Hotels’ America Research.

The rate for adding hotel rooms in the Twin Cities area falls within the same forecasted range as Chicago, Houston, Atlanta and Los Angeles.

In the Twin Cities metro, CBRE estimates that revenue per available room will increase 0.3 percent in 2018, reversing the downward trend of 2017.

There has been some discounting of hotel rates in downtown Minneapolis and downtown St. Paul as new hotel rooms have been added.

In downtown Minneapolis and the University of Minnesota area, the count for hotel rooms was 8,551 at the end of September. “We’ve seen a significant supply increase,” Foerster says, noting that the number of hotel rooms has spiked 14.2 percent within a year. Year-to-date through September, the occupancy rate in this area was 70.3 percent, which is down 5.2 points from the prior year, Foerster says

When there is such a dramatic increase in the supply of rooms, the occupancy rate tends to fall as the marketplace adjusts to the new economics. “It generally takes a while for the demand to catch up,” Foerster says. But he’s pleased with what he’s been seeing. “We have generated an 8.2 percent increase in demand,” he says.

Terry Mattson is encouraged by what he’s seeing in the hotel market in St. Paul. “We’ve had a 20 percent increase in lodging inventory in St. Paul,” says Mattson, president and CEO of Visit Saint Paul/RiverCentre.

“It definitely improves the quantity and quality of offerings for St. Paul,” Mattson says. “It also creates some turbulence because of increased capacity and competition.”

The hotel room inventory in downtown St. Paul is now 1,808, up from 1,499 a year earlier. Hyatt Place opened in St. Paul in September 2016 followed by the Hampton Inn in November 2016. An Extended Stay Marriott is under construction and set to open in 2018.

“2016 was a record year for hotel revenues in St. Paul,” Mattson says. And despite the added inventory in St. Paul and the metro area, he notes that room “rates are coming back up.”

The Como Park Conservatory in St. Paul is an attraction for tourists as well as Twin Cities residents.

New facilities drive traffic

About 32.5 million people visited the Minneapolis-St. Paul metro area in 2016, according to research by Virginia-based DK Shifflet. “We have been trending up at a steady pace,” says Foerster, who points to the fact that there has been annual visitor growth since 2010 when the visitor count was 25.3 million.

In 2016, those visitors spent about $7.6 billion, and that number is expected to rise in 2017 and 2018.

Foerster reports that multiple tourism categories are experiencing growth—leisure travelers, business travelers and meeting, event and convention attendees.

“The city itself is growing,” he says. “The existing corporations are growing.” He describes Minneapolis as a “robust city,” where there has been substantial investment in sports facilities such as U.S. Bank Stadium, TCF Bank Stadium and the newly renovated Target Center.

He also argues that the local hospitality sector is getting a boost from expansions at the Mall of America and Minneapolis-St. Paul International Airport, investments in light rail and the renovation of Nicollet Mall.

n 2018, Foerster says, “I see the leisure market continuing to grow. Our efforts there are producing results. Business travel both nationally and for the city will also grow.” The business travel market, he says, represents about 40 to 50 percent of the hotel room nights in the city.

While meeting and event planners want gatherings of all sizes to be held in the Twin Cities metro, one event is dwarfing them all for the moment.

“The Super Bowl is our focus right now,” Foerster says. “My sales team is really trying to use it as leverage to get attention for future events.”

He explains: “Our slower period for tourism and national events is in the winter. Being able to produce the Super Bowl in the dead of winter makes people stand up and say, ‘Hold it. If the Super Bowl will go there and they do a successful event, maybe my winter event could rotate through Minneapolis.’ ”

St. Paul’s image makeover

While St. Paul has a smaller downtown commercial district and fewer hotel rooms than Minneapolis, the state’s second-largest city has been increasing its attractions, population and lodging capacity.

“There is definitely a very cool rising vibe about St. Paul,” Mattson says. “CHS Field has been a catalyst to not only direct business in the Lowertown area, but has done a lot to enhance the image and population of St. Paul in general.”

 

CHS Field is the home of the St. Paul Saints minor league baseball team, which has drawn more than 400,000 fans during each of its first three years in the new ballpark.

“It stimulated development in that part of the city, and you have a soccer stadium coming in on the other side of St. Paul,” Mattson says. Bill McGuire, principal owner of a Major League Soccer team, is moving forward with construction of a soccer stadium in the Midway neighborhood of St. Paul, which is off of I-94 and near the Minnesota State Fairgrounds.

Mattson predicts that the soccer stadium’s associated development will include a new hotel.

“For many years, St. Paul was underserved in the quantity of hotel rooms,” Mattson says. But he sees that changing as new hotel rooms come on line and historic buildings are renovated.

In St. Paul, the former U.S. Post Office and Custom House on Kellogg Boulevard was redeveloped into a 149-room Hyatt Place hotel and 202 luxury apartments.

The former Macy’s building in downtown St. Paul is being renovated into a practice rink for the Minnesota Wild, a health care clinic and retail and office space.

Mattson argues that all of this economic activity has a positive effect on the tourism and hospitality industry. “I still see a lot more opportunities in the future,” Mattson says. “Right now we are putting those pieces together that will lead to more success for St. Paul.”

Many convention visitors are using the light rail to travel around Minneapolis.

Proximity to Minneapolis Convention Center

When the 2018 Summer X Games are held in the Twin Cities, the attendees are expected to need a peak of 7,060 hotel rooms. “They are using two venues—U.S. Bank Stadium and the Mall of America,” Foerster says. The athletes, their families, fans and sponsors will be staying in hotel rooms across Minneapolis and the metro area.

“That type of group fits very well with the hotel supply that we’ve added,” he says, noting that the X Games visitors are receptive to taking the light rail between the venues.

In Minneapolis, he notes, “We are walkable. We have great light rail.” But he emphasizes that a lot of the new hotels “are kind of spread out and not near the convention center.”

The Lowry Avenue Bridge in Minneapolis as well as other bridges will be among the sights showcased in Super Bowl television coverage in February.

While some conference and event planners will entertain using multiple hotels for their attendees, Foerster says that is not the case with some associations.

For example, he says, if there is an event at the Minneapolis Convention Center with about 3,000 attendees, they could require 1,500 to 2,000 hotel rooms. In some cases, he says, “They want as many people in as few hotels and as close to the convention center as possible.”

The number of hotel rooms in the downtown Minneapolis area has spiked by 14.2 percent within a year.

Minneapolis hotels that have about 150 rooms and minimal meeting spaces primarily are being used by business and leisure travelers, Foerster says, as opposed to convention attendees.

One national organization that will be convening at the Minneapolis Convention Center in 2018 is the Society of Women Engineers. About 6,000 people are expected to attend the annual conference in October.

The all-star game for the Women’s National Basketball Association will be at Target Center in 2018, and that same venue will be used for the NCAA Women’s Volleyball Championship tournament.

Foerster says Minneapolis event planners aren’t only targeting women’s events. “We have a diversity initiative as a whole,” he says.

Convention hotel in St. Paul?

Minneapolis has had a surge of new hotel construction in the past few years. St. Paul is a smaller marketplace. Yet, Mattson says, “There is really a lot of interest for hoteliers to develop properties. We still have our eye on building a convention hotel connected to the RiverCentre.”

St. Paul community leaders want to replace the RiverCentre parking ramp, and a private developer might build a convention hotel on top of the ramp.

He is hopeful that a hotel will be constructed on top of a new RiverCentre parking ramp. “The city owns the convention center, parking ramp and Xcel Energy Center,” Mattson says. “Visit Saint Paul manages the parking ramp.”

The RiverCentre parking ramp was constructed in 1970. St. Paul city leaders have developed a RiverCentre and Kellogg Boulevard infrastructure project with a price tag of $116 million.

“Reconstruction of a new ramp will need a partnership with the state of Minnesota,” Mattson says. The city is requesting $58 million from the state to cover half the cost of designing, constructing, furnishing and equipping a new RiverCentre parking ramp and adjacent eastbound Kellogg Boulevard bridge.

Under this proposal, the city of St. Paul would split the project cost with the state.

The proposal summary states: “A 2015 engineering study deemed the ramp structurally deficient due to outdated design, condition of the ramp and age. Engineers have deemed a complete rebuild by the year 2020 is necessary for its continued operation.”

In addition, the proposal says, “The most recent [Minnesota Department of Transportation] structural inventory report deems the eastbound Kellogg Bridge as structurally deficient and after 81 years has reached the end of its useful life.”

While St. Paul leaders want to build a replacement ramp with public funds, Mattson says they are strictly looking for private development of a hotel atop the ramp or a combination hotel/retail/residential project.

Common Sense Collaborative, a travel industry consulting firm, conducted a study for Visit Saint Paul and prepared a report called “2017 Saint Paul Convention Center Hotel Analysis.”

The consultants argue that the RiverCentre ramp replacement “presents a unique opportunity to develop an iconic convention center headquarters hotel.”

They wrote: “The meeting planning customers with whom we spoke are favorable to Saint Paul, and would put more business in the city if a room block of 500 plus rooms could consistently be secured and if there was more breakout meeting space at RiverCentre.”

Overall they concluded: “Currently, the downtown Saint Paul occupancy is supported by strong business travel, a large number of special events, the successful Minnesota Wild season and the St. Paul Saints at the new CHS Field. Yet, the current growing occupancy is vulnerable to a proliferation of limited service hotels, a downturn in the economy, reduced business travel, or a weak concert and event season.”

The artist rendering above depicts plans for Super Bowl Live, a 10-day festival planned by the Minnesota Super Bowl Host Committee.

Statewide perspective

Tourism businesses employ about 260,000 people in Minnesota, and the leisure and hospitality sector is a $14.4 billion industry, according to Explore Minnesota, the state’s tourism promotion office.

A lodging survey conducted in late August by Explore Minnesota showed a “modestly positive assessment of business expectations” for the 2017 fall season.

The online survey was emailed to 1,753 lodging properties and campgrounds across Minnesota, and survey results were tabulated from 284 businesses. Responses for summer lodging occupancy were a mixed bag, with about one-third reporting an increase, one-third a decline and one-third the same as the 2016 summer.

Regarding revenue for the summer season, a weighted average 42 percent of businesses indicated that revenue was up, 28 percent said it was the same and 30 percent indicated it was down.

In a statement, Explore Minnesota says, “Demand for hotel rooms has not kept up with Minnesota’s substantial recent growth in room supply, which has been concentrated in the Minneapolis-St. Paul metro region.” It reports, “Each of Minnesota’s other four tourism regions had positive or same level occupancy and revenue results.”

Some other key insights emerged from the Explore Minnesota survey. “Metro region businesses noted in comments that they would not be able to replicate fall 2016 business levels, which received big boosts compliments of the Ryder Cup and the nurses’ strike a year ago,” Explore Minnesota said in a statement.

Finally, the organization indicates, “Respondents cited the continuation of a strong economy and low gas prices as positives for business.”


Liz Fedor is the Trending editor for Twin Cities Business.