Taxes show flood didn’t dampen Duluth tourism

Despite a devastating June flood, Duluth’s hospitality industry chalked up another year of growth in 2012.

Local sales tax collections indicate Duluth’s hotels and motels took in 6.3 percent more revenue than they did in 2011. Meanwhile, food and beverage sales rose 4.4 percent in 2012, compared with the previous year.

As images of floodwaters, collapsed roads and submerged buildings in Duluth spread quickly around the nation, the city’s tourism faced a daunting challenge.

“The way some people reacted, you might have thought Canal Park had dropped into Lake Superior,” said Gene Shaw, director of public relations for Visit Duluth, a group tasked with promoting the city as a tourist destination.

“The fact that our local hospitality industry continued to grow is a testament to the fact that the city, Visit Duluth and its membership were so proactive in getting the word out that we were still open for business,” he said.

If not for a rapidly developed marketing campaign, Duluth’s hospitality industry could easily have seen a significant decline in business, said Karen Pionk, general manager of Duluth’s Sheraton Hotel and president of Visit Duluth’s board of directors.

Instead, Duluth is entering the 2013 tourism season with a full head of steam, she said.

“It seems momentum is going in the right direction,” Pionk observed.

But not all players in the local hospitality industry saw improved sales in 2012. After the June flood waters receded, Grandma’s Restaurant on Miller Hill faced substantial repairs.

“We worked our tails off to get back open before the end of summer,” recalled Brian Daugherty, president of Grandma’s Restaurant Co.

Those concerted efforts helped Grandma’s get back in the game quickly, but Daugherty said that despite the restaurant’s fairly speedy return and the chain’s continued operations at other locations, his books never fully recovered.

“You just can’t make up 6½ weeks of lost business,” he said.

Despite the financial setback, Daugherty said Grandma’s hasn’t soured on Duluth. Far from it.

“Duluth is a shining star, in terms of the steady, continued, incremental growth of its hospitality industry,” Daugherty said.

“This year’s results should convince even the biggest skeptics that Duluth has been able to go against many of the adverse trends in our industry,” he said.

Shaw noted that in 22 of the past 23 years, Duluth’s hospitality businesses have increaased their collective revenues.

When the national economy took a nosedive in 2009, Duluth’s annual hotel-motel revenues fell 3.6 percent, and its food and beverage sales slipped 1.8 percent.

Excluding that rough year, however, Duluth’s annual hotel-motel revenues have grown by an average annual rate of 8.7 percent since 2006. During the same time period, its food and beverage sales have averaged 4.7 percent annual growth.

Those kinds of statistics helped convince Grandma’s to reinvest heavily in its Duluth operations, Daugherty said. In addition to about $300,000 the chain already has poured into its Miller Hill restaurant, Grandma’s is also investing about $1.6 million in its Canal Park properties.

Brian Hansen, treasurer for the city of Duluth, reported that local tourism taxes yielded in excess of $8.4 million last year — 3 percent more than what they generated in 2011. It was another year of growth, even though a half-percent tax expired on both lodging and food/beverage sales in November, reducing the city’s take.

In light of the flood and the declining total tax rate, Hansen considers 2012’s tax figures a positive sign.

“I think really does reflect on the stability of our tourism industry,” he said.

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