Duluth tourism revenue rebounds to pre-pandemic levels – Duluth News Tribune

Duluth tourism revenue rebounds to pre-pandemic levels – Duluth News Tribune

DULUTH — Local tourism tax collection figures released this week show visitors are back in force and spending even more than before the COVID-19 pandemic hit. But while the numbers paint an encouraging picture, they shouldn’t be misinterpreted as evidence that Duluth’s tourism industry has fully recovered. Far from it.

“These numbers are fantastic to see,” said Brian Doherty, president of Grandma’s Restaurant Co. “Demand for Duluth is strong. It’s a great gift and blessing, and not all markets are nearly as strong as we are.”

“So those numbers are good, really good, and I don’t want to sound ungrateful. But there are a few asterisks,” he said.

tourist tax 6-2022.jpg

Gary Meader / Duluth News Tribune

The first asterisk Doherty pointed out was the shortage of workers and the higher wages businesses had to offer just to keep staff. He said total labor costs have increased by more than 20% since the pandemic.

Second, food costs have also jumped by more than 10%.

And the third asterisk includes the rising prices of other input costs, such as water, gas, electricity and sanitation, Dougherty said, calling restaurants “utility machines.”

Brandon Porter, general manager of Duluth’s Holiday Inn & Suites, described similar challenges, with wages for many employees, such as housekeepers, rising nearly 50 percent since the pandemic hit.

But Porter also sees reason for optimism.

People in Canal Park.

People gather at Canal Park as others take a Vista Star cruise on Wednesday.

Steve Kucera / Duluth News Tribune

“Our occupancy figures show that people are coming back to travel,” he said, noting that Holiday Inn business is up more than 22 percent year-to-date.

Lodging revenue is supported by a strong local market, according to Jen Carlson, the city’s finance director.

“I think a big part of what’s driving the number of hotel/motel accommodations up is the cost of the rooms. And the price of the rooms is determined by the demand. So, we’ve added new accommodation capacity in Duluth and yet demand remains strong. I’ve heard that it’s often very difficult to get a hotel room in the city of Duluth on the weekend,” she said.

Porter sees even more reason for optimism as conventions and other major events begin to return to the Duluth Entertainment Convention Center.

DECC Executive Director Dan Hartman noted that “We’re not 100% yet. But we’re coming back.”

The number of convention bookings for the fall and winter is actually ahead of what DECC hosted during those same seasons in 2019, Hartman said. However, attendance at some of these events has been weaker since the pandemic and the evolving coronavirus continues to surprise.

“If there’s only one lesson we’ve learned over the last few years, it’s that you can’t guarantee anything,” he said.

Porter said conventions are especially helpful in maintaining room occupancy levels during off-peak months outside the tourist season.

Tricia Hobbs, senior economic planner for the city, noted that Duluth had a hotel/motel occupancy rate of 74 percent in June, compared to 73 percent in the same month of 2019, according to Smith Travel Research Inc.

Duluth’s lodging tourism tax collections for the first half of this year totaled nearly $2.9 million — up 15.6 percent from the same six-month period in 2019.

Enter the door.

A sign on the door of Caribou Coffee in Canal Park lists out-of-stock ingredients. Businesses are dealing with shortages and higher prices.

Steve Kucera / Duluth News Tribune

“We’re seeing good numbers in terms of people coming and booking stays in Duluth. So, this hit count continues to look really great. But the cost of doing business is also increasing, and many business owners are adjusting accordingly,” Hobbs said.

Local businesses, such as chain Grandma’s, however, often haven’t been able to fully pass on the increased costs to customers without risking adverse sticker shock, and Doherty said profit margins have been severely eroded as a result.

While Carlson sees the recently improved tourism tax collections as a positive sign, she said people shouldn’t assume they serve as evidence of the tourism industry’s overall health.

“They’re two very different things: earnings versus collection,” she said.

Hobbs said recent tourism statistics are encouraging, while “knowing and understanding that as summer approaches, gas prices are absolutely a factor.”

So far, it looks like people are still traveling to Duluth based on the number of seats available. But Hobbs admits they may be cutting back on spending where they can, perhaps packing a lunch instead of going out to eat.

Carlson said Duluth remains an attractive destination for people on tight budgets.

“There are a lot of things you can do in Duluth that don’t cost money. So I think it’s a place where people come when maybe they don’t have a lot of money to take a vacation because a lot of what we offer is free,” she said.

Food and beverage sales saw more modest growth than the accommodation sector. Tax revenues from restaurants and bars increased by nearly 13% compared to the first half of last year. But that’s only about $1,200 more than what the city took in from food and beverage sales in the first six months of 2019 — about the same at about $2.8 million.

Closed sign on a restaurant window.

The Taste of Saigon restaurant in Canal Park is closed on Wednesdays. Many businesses have been forced to reduce working hours due to staff shortages.

Steve Kucera / Duluth News Tribune

“Food and beverage sales are pretty much dead where they were in 2019,” Carlson said.

In an inflationary environment, this means that businesses in the food and beverage sector are losing ground as a group.

Many local restaurants have been forced to operate on a reduced schedule due to their inability to hire enough staff to maintain a full schedule

Porter said the Lyric Kitchen bar, which operates as part of the Holiday Inn, used to serve breakfast, lunch and dinner, but now serves only the latter meal because of “the limited return to business we’ve seen downtown.”

Doherty said he also operates limited hours due to staffing constraints.

“If I could stay open longer, I would,” he said. “Would there be room to increase our sales if we had more manpower? yes But we cannot cover all sales at the moment due to the shortage we are facing.’

Leave a Comment

Your email address will not be published.