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Minnesota’s Travel industry Cautiously Optimistic

June 3, 2011 by   - () Leave a Comment

Minnesota’s $11 billion travel and leisure industry continues to crawl out of the depths of the Great Recession, but experts say there could be bumps ahead, the St. Cloud Times reported.

Memorial Day weekend opened the state’s busiest travel season strong, according to Dan McElroy. He is the president of Hospitality Minnesota, an umbrella trade group for the state’s resort and campground, lodging and restaurant associations.

“What I’m hearing from members is that Memorial Day weekend was better than the last three years,” McElroy said. “Some of members are telling me that they are starting to hire, so that’s promising.”

That’s a welcome development to the former state finance commissioner and the former leader of the state Department of Employment and Economic Development. The industry, while not booming, is gaining ground after suffering through its dark days as an expendable part of tightening household budgets.

The tourism industry is a key component of the Minnesota economy, accounting for $699 million in state sales tax revenues in 2009, the latest data available. It’s the state’s fifth-largest employment sector, accounting for an average of 238,257 jobs in 2009 with a payroll of $3.9 billion.

“There is slightly more optimism in the economy,” McElroy said, citing the consumer confidence index that has bounced back to the 70s after plunging from the 100s in the prerecession era to the mid-20s early in 2009.

The resurgence is tentative, however, with risks to travel’s recovery coming from all corners: shaky hiring numbers, unstable gas prices, unpredictable weather — even a potential shutdown of state government.

Summer forecast

If all goes according to plan, the state’s tourism office is forecasting growth this summer. And summer matters, accounting for about 37% of total leisure and hospitality spending in Minnesota.

“I think we’re going to see a continued, gradual recovery. We’re not back to where we were three years ago, but we’re definitely on the right track,” said John Edman, director of Explore Minnesota Tourism.

Modest recovery in the travel industry should continue in line with the recovery of the economy as a whole, said Pat Simmons, a research analyst with Explore Minnesota Tourism.

Hospitality Minnesota members offered evidence to support that cautious optimism.

“For June, July and August, virtually everybody said their advance reservations are ahead of last year,” McElroy said. “August is a little ahead of last year. It’s too early to project a trend (in bookings) through fall.”

Hotel stays in Minnesota through the first quarter of the year showed a 5.7% gain over the first quarter of 2009. In Central Minnesota, occupancy tracked the statewide number with a 5.2% year-over-year gain.

But consumers remain cost-sensitive.

“We’re seeing our restaurant members telling us that the numbers of guests is increasing but the average check is not increasing,” McElroy said. “The customers continue to be value conscious. They might be coming in for the early-bird special, looking for bargains. But at least they’re back, and that’s good news.”

Late start

Like farming, making money from tourism is a weather-dependent enterprise.

“The industry was kind of concerned about the cold, rainy start,” Edman said. “Now that the weather is starting to improve, the industry is very optimistic because of inquiries and because of bookings.”

State parks also suffered through a dreary spring, he said. Department of Natural Resources data showed a 13% decline in occupancy at state parks during this year’s wet Memorial Day weekend as compared with 2009.

“Participation in state parks is kind of like snowmobiling and skiing — they have to see the snow. It’s the same with camping and outdoor activities,” Edman said. Interest is rising with the arrival of more summerlike weather, he said.

The state should also benefit from the disincentives for “long-haul” travel of rising airfares and gas prices, Edman said.

McElroy agreed. “People are saying they planned to go to Yellowstone but decided to stay in Minnesota. And we’re fine with that,” he said.

Regions showing particular strength this year include Fargo-Moorhead, the Twin Cities and Rochester and its neighboring communities that have popular recreational trails, such as Lanesboro, McElroy said.

Deadlock

But there might be dark clouds ahead in the form of a government work stoppage unless the governor and legislators resolve a budget impasse by the end of the month.

Out of Minnesota’s 2.6 million jobs, about 75,000-80,000 are at risk from a shutdown, McElroy said.

“We’re worried,” he said.

The impact on tourism would vary by region, McElroy said, “but we’re concerned, particularly along the North Shore where those six state parks along (U.S.) Highway 61 are a big part of the draw.”

If those premier parks — Split Rock, Gooseberry Falls, Tettegouche, George Crosby Manitou, Temperance River and Cascade River, along with Judge C.R. Magney and Grand Portage farther north — were to close, businesses that cater to those park users would suffer.

“Some of my members are very worried about that,” McElroy said.

While commercial campgrounds could pick up bookings if state parks close, the impulse to travel could be dampened by other impacts as mundane as closed rest areas, he said. And “certainly, state employees not having the means to travel is a concern.”

While the state is expecting modest tourism growth, “the only caveat I have is that people might have some concerns about a possible government shutdown,” Edman said. “Certainly I have some concerns about what impact that would have.”

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