Lakefront Is Not Enough
This is a tale of two resorts, both with storied histories, occupying unique spaces in the region’s hospitality universe—places you or perhaps your parents relied on to fill summer family weeks or contemplative romantic weekends, to celebrate milestones or decompress from exhausting periods of hard work. And while both are going strong, they are in the throes of generational change, as the lodging industry bends to accommodate the expectations of millennials.
One is a luxury leader, first among equals, now defining its future around smaller and cheaper (though no less exacting), but still quiet and organic. The other evokes the essence of local tourism—hardwoods, lakefront, peace and quiet—but now is retooling for a more active, structured, demanding urban guest.
They are on different trajectories, but with similar goals—staying with or ahead of the market, lest they end up like hundreds of their brethren: tired, irrelevant, destined to be scraped by bulldozers and sold off to second-home developers.
Have cabin, won’t travel
A generation or two ago, tourism in Minnesota’s northern lake country was a mom-and-pop resort of a dozen cabins, maybe a supper club, open 120 days a year, booked in one- to two-week blocks, with a high percentage of repeat customers who returned for the same week year after year. Expectations were modest: a wool comforter, a roof that didn’t leak, the call of the loon.
When was the last time you went to a cabin for a week or two? “Vacation patterns have changed. It’s harder to schedule one to two weeks off now,” says Steve Sherf, president of Twin Cities–based Hospitality Consulting Group. “Now it’s three or four days. [More guest turnover] raised operating costs and occupancy drops.” That depresses revenue.
As those changes were buffeting small lakeside resorts, the land they sat on was skyrocketing in value. As Mom and Pop faced retirement, their kids had to decide if they could justify the investment in upgrading a business with such intense seasonality. “It pushed many [owners] to sell out rather than upgrade,” Sherf says. “Roughly half the region’s resorts have closed, replaced with condos or luxury time-share cabins.”
Also, the family cabin is in decline. “People are too busy and [the rusticity] is not as attractive as it once was,” Sherf says. These folks are opting to vacation up north, but they are looking for an experience far beyond what their parents’ cabin once offered.
A living room in the Fairway Pines golf community
The North Park indoor pool
A Fairview Pines bedroom
Grand View Lodge
325 keys (as of July 1)
Up to 1,500 guests
250 year-round staff, 800 summer
Largest resort in Minnesota
Grand View Lodge in Nisswa opened in 1916. It is among Minnesota’s oldest continually operating resorts and in its fourth generation of family ownership. (The Cote family is active on its board, but not in management.)
Grand View has always existed in an exceptionally competitive marketplace. Cote Family Destinations CEO Tom Juliano believes there are 100 30- to 40-cabin lakefront resorts within 50 miles, competing not just for guests but labor. It is the largest resort in Minnesota but is straining, along with its brethren, to adapt to fundamental changes in the marketplace.
“Families won’t sit in a cabin for a week. The thought of sitting on a porch watching a lake is inconceivable,” Sherf says. “Everyone wants structure.”
It’s hard to overstate the impact of this trend. Up north vacations were once the epitome of self-sufficiency. Folks did their own fishing, built their log fires, made their s’mores, and created their own entertainment—often just a blissful sort of boredom. Not anymore.
“People don’t want their kids or grandkids to be bored,” says Mark Ronnei, Grand View’s longtime general manager. “We did 18,000 banana boat rides last year. Tons more lessons and wine tastings than the previous year. [Guests] want a curated experience. It’s not enough to have s’mores, they need someone to make them and someone alongside with a guitar singing songs.”
“We’ve gone from 20 [self-use] fishing boats to two,” Ronnei says. “People want guides.” Did you know tennis is in decline? “We had 11 tennis courts at one time, we were one of the top tennis resorts in the country. Now we have two [courts].”
Even that up north veneer is passÃ©. Nobody wants to vacation in a space that looks like the basement of a house from the 1970s. “We’re getting rid of knotty pine and [shifting to] whitewashing,” Ronnei adds. “It contributes to the perception of luxury. It’s clean, coastal.” Juliano describes it as “Ralph Lauren meets Calvin Klein in the woods.”
Not that coastal visitors make up a substantial percentage of Grand View’s customer base. But its guests perhaps aspire to a coastal vacation at an up north price. The Brainerd Lakes area draws primarily from the Twin Cities market. It’s a sophisticated customer base with high expectations based on how they live the other 51 weeks of the year.
Those customers are fond of Brainerd because “it contains amenities and activities for rainy days,” Sherf says. But that doesn’t get guests back a second time if the experience isn’t there. “Our biggest challenge,”
Ronnei says, “is meeting expectations and delivering continuity year to year with so much seasonal staff.” That means appealing to younger generations “because they drive travel choices.”
Translated: “Technology is a necessity,” Juliano says. “Cutting-edge smart TVs, high-speed internet, an app for reserving [activities] and housekeeping. Guests are pushing us. They don’t want to sacrifice connectivity on vacation.”
(Not all vacation regions face these expectations. Sherf says northwestern and north central Minnesota is now almost exclusively hunting and fishing tourism, while more modest, older resorts still thrive in western Minnesota, where they cater to guests from the Dakotas and Iowa.)
Talk to any restaurateur or hotelier in the Twin Cities, and management will tell you that labor shortages and turnover keeps them up nights. The problem is a standard deviation worse in Minnesota’s thinly populated vacationland.
The impact falls directly on the bottom line, or absence of one. “Lack of labor has shortened the season,” Sherf says. “Schools now return before Labor Day.”
In a region with few homegrown fine restaurants or world-class spas, it is difficult to staff seasonal restaurants and treatment rooms. Grand View is maintaining a higher staff-to-guest ratio than in previous eras, but deploying them differently, Ronnei says (see banana boats and s’mores).
Grand View brings in hospitality industry students on J1 visas from Europe in summer, Chile in winter. But service remains an inflection point. “Forty years ago we were content with a 17-year-old student who smiled and brought the food when it was ready,” Ronnei says. “Now [guests] are measuring us against Manny’s.”
A Fairview Pines kitchen
Grand View’s chapel is the resort’s new home for destination weddings
New rooms, new models
Grand View’s business model has long been one unique to resort areas of the U.S. Most of its lodgings are multi-bedroom lock-off homes with the capacity to customize the space for the number of guests. Half are owned by the resort, while half are privately owned but are dedicated to the resort’s rental program for at least half of the high season. Furnishings and maintenance are dictated by Grand View, which handles booking and housekeeping, while revenue is split with the owners.
Another 42 such homes are under construction. Grand View sold the land to individual buyers at a propitious window. “We hit the real estate market at the right time,” Juliano says. “There are a lot of buyers looking for a multi-generational retreat.”
But for the first time Grand View is betting on a different customer as well. In July, it will open a 60-room “boutique hotel” of individual rooms. The $10 million investment will triple the number of traditional hotel rooms to 90 while providing meeting rooms and other space for corporate groups, which in the past could not be accommodated in summer. Juliano expects the hotel to maintain more consistent year-round occupancy because corporate groups don’t typically want multibedroom lodging.
He says Grand View manages 85 percent weekend occupancy in winter, but its core product is in low demand during the workweek. The hotel will fill that gap, and Grand View’s restaurants. (He declined to share information about Grand View’s revenue base.)
He acknowledges that Grand View feels its place in the market has to be at the top. “We want to be the product and service leader” in regional resort tourism, Juliano says. Given its size, implicit in that is the revenue leader as well.
Tiny House Escape’s ONE series
A Park model including sleeping porch
A bedroom in a Traveler XL house
A Park model living space
700 units sold to date
Will build 300 in 2019
Canoe Bay’s New Aesthetic
When Dan and Lisa Dobrowolski opened Canoe Bay outside Rice Lake, Wis., in 1993, it was something of an oddity. Built on the site of a church camp, it was dedicated to the harmony found in nature and architecture that evokes nature’s organic essence. The principles are the classic ideas of Frank Lloyd Wright and the Midwestern Prairie School.
Canoe Bay was and remains small, quiet, excluding children and pets. It serves guests breakfast and lunch in a beautiful basket left at their door. During a stay, it is startling to encounter another person at all, other than in its dining room at dinner. Canoe Bay’s prices, not to mention membership in the global Relais & Chateaux collection of hotels and restaurants, signified an ambition and standard nonexistent in “up north” tourism. Often guests from the Upper Midwest didn’t really “get” the place, having grown up at more populist lodgings like Grand View.
But Canoe Bay held fast to its ethos and gradually evolved into what Dan Dobrowolski describes as a “seven-figure” business. It was not a gimme.
“At their level, the constant is you are competing with a world market, a customer who can travel anywhere in the globe,” Sherf says, the industry consultant. “It’s challenging because a lot of what drives regional tourism is price sensitivity” to the higher costs of distant travel. Lacking that, lodgings, he says, have to justify cost exclusively on excellence and originality.
“Canoe Bay was so far ahead of its time that the audience has been catching up,” Dobrowolski says. “With our emphasis on organic farm-to-table food, organic architecture, light environmental footprint, nature and quiet, plus respect for the land—we’re more in step with [cultural values] than we were in 1993.”
And organic growth has been very much on his mind in recent years. (“We are not ones to sit on our hands,” he notes.) He toyed with approaches that felt congruent but would grow Canoe Bay’s limited market. “We were going to build out Canoe Bay,” Dobrowolski says; then he caught wind of the “tiny house” phenomena and thought, “I know what we’re going to do.”
In combination with his design guru, architect Kelly Davis (now retired) of SALA Architects in Minneapolis, whose contributions helped establish the Not So Big House phenomenon, Dobrowolski decided not to go big or go home—he went tiny.
The duo created a prototype in 2013 that showed up in the debut episode of Tiny House Hunters in 2014. “There was a tidal wave response,” Dobrowolski recalls. He realized the tiny house phenomenon portended more than just a market extension for Canoe Bay. It was a standalone business with multiple applications and revenue streams.
Deckside on a Premiere Unit at Canoe Bay. Guests like to sleep on the porch
Small house, big opportunity
In five years, he has built what he calls an “eight-figure business” by innovating around revenue models. Tiny houses can be customized and financed through Escape Homes. It also does joint ventures with buyers who want to rent their houses on Airbnb’s platform. Tiny House “villages” are under construction in New York and Florida, designed for no more than 50 units.
“Some are offices, some are dwellings, some are nightly rentals. Retirees want a second home near their kids,” Dobrowolski says. “The rental program is marketing for sales. Stay in it and see how you like it.”
He has focused on maintaining a low down payment and 15-year financing terms through dedicated lenders. “The monthly nut is $350 to $600,” he says. “I ask people, can you afford a $400-a-month payment? Then you can afford a tiny house.”
Because tiny houses are designated as recreational vehicles, very few Escape homes house full-time residents. “By law, RVs are not designed for that,” Dobrowolski says, “although one city in California allows them as dwelling units because of the cost of housing and land there.”
Though the tiny house phenomenon has fueled his business, he believes many of its acolytes have been sold a bill of goods about the ease of building their own or relocating to one. “The fad has attracted a lot of P.T. Barnums. They [prey on] aging hippies, earthy Portlanders who fall in love with a lifestyle.”
Though Escape’s houses all ride on wheels, the RV category also has the potential to depress the market. “We’re on the edge of the envelope, because RVs depreciate, but houses don’t,” he says. “What we build are houses.”
“I’m a creator,” Dobrowolski says. “I’m interested in the beauty that affects life in a positive way.”
Be that as it may, the business that the tiny house tidal wave spawned, Escape Homes, is housed in a characterless collection of roadside Quonset huts in Rice Lake, with a trailer for the executive offices. Dobrowolski wears a sweatshirt and jeans, with a Cubs toque over his head to ward off an unseasonable spring chill.
“Because we are so aesthetically driven, we could make more money, but we’re too stupid,” he says. “Instead we ask, ‘How can we make it more beautiful?’ ”
This obsession has driven Dobrowolski to offer an amenity known as shou sugi bon siding on his tiny homes. “It’s a very expensive Japanese wood siding treatment” that involves charring cedar planks to achieve a certain visual effect. “Frank Lloyd Wright was influenced by Japanese architecture. But it’s a third the price if we train people to do it.” So he has.
Dobrowolski is not impressed with what constitutes most of the tiny house competition. “Most tiny houses are crap. Build a box and cram everything into it,” he says. “Our houses feel big. I’m a big guy and if I can’t move comfortably, forget it.”
When it came time to consider the evolution of Canoe Bay, the Midwest’s first tiny house village was the option Dobrowolski chose. “Canoe Bay is constantly evolving and changing,” he says. “The [tiny house] village and Escape are driving that forward now. We’re using tiny houses as an extension of Canoe Bay. A younger customer, a less expensive product, but the same principles of design and detail.” Escape Village guests can dine in Canoe Bay’s restaurant, but otherwise enjoy their own adjacent natural setting and amenities.
Dobrowolski says the experience at Canoe Bay informs how every Escape house is built. “What we learned about durability and upkeep at Canoe Bay, we applied to Escape. We build our own towel bars and toilet-paper holders because they have major durability issues in a hotel setting. We expect people to be animals.”
He anticipates a record sales year of 300 units and likely will need to expand his production capacity, possibly outside of what he describes as regulatory-happy Wisconsin. “What this is in five years, we haven’t even scratched the surface.”
So as you pack up the SUV for that summer vacation, look around at the changing face of regional tourism. Grand View Lodge knows you want to go big. Escape Homes is certain of the immutability of small. The common denominator is more: more staff, more amenities, more detail, more choices.
And it’s not inconceivable that the lake home/condo era that has dominated the last few decades has peaked as well, signaling a resurgence of the resort business, in whatever 21st-century form it takes.
“Communities are starting to tax lakefront homes heavily,” Sherf says, as they realize the barely occupied residences are not otherwise priming the local economy. That taxation “is depressing [outstate] home building now.” These two iconic brands of regional tourism are keen to welcome the disaffected with fresh options of their own.
Adam Platt is TCB’s executive editor.