After years of steady growth, there are some early indications that Duluth’s hospitality industry may finally be close to topping off, at least momentarily.
Anna Tanski, executive director of Visit Duluth, said business appears to have reached a bit of what she called “a plateau.”
The latest tourism tax receipts released by the city of Duluth show collections for the first six months of this year running just 1.2% ahead of the first half of last year, despite a relatively strong June, where tourism taxes jumped 5% compared to June of 2018.
Tourism taxes are collected on local lodging, restaurant and drinking establishments. The tax collections reflect overall spending in these hospitality industries, but Tanski said they don’t tell the whole story.
She noted that as additional hotels continue to sprout up, room vacancy rates have been creeping up as well.
“We’ve seen the continued growth in lodging inventory, and that is definitely being felt,” Tanski said.
Even heading into this most recent weekend — when the Bayfront Blues Festival and the Festival of Sail drew throngs of visitors to town — a portion of local hotel rooms continued to sit empty, she said.
In order to draw attention to the availability of rooms in town, Visit Duluth now lists local hotel and motel vacancies for special events on its website. Tanski explained that some would-be visitors have given up in the past after calling a few local hotels only to learn that they are fully booked. Even though other establishments have rooms available, people sometimes give up, assuming there’s no place left to stay.
But Tanski agreed 2019 got off to a soft start for the local hospitality industry.
“The polar vortex in the first quarter of the year had a significant impact on our winter attractions, such as Spirit Mountain and just outdoor recreation in general. So, it was a pretty brutal start to the year. We’ve slowly but surely gained some ground to get back to a plateau, really. But business is what we would consider flat,” she said.
Tanski said the seasonal variations of Duluth’s tourism scene present unique difficulties.
“That’s part of the challenge, when you’re already six months into the year before you really have the opportunity to gain any significant ground,” she said.
Although the city has yet to tabulate tourism tax receipts for July, Tanski characterized it as “a solid month” and noted that “We have another signature month of events in August to kind of carry us through into our busy fall season, as well.”
Through June, the city of Duluth collected nearly $5.24 million in tourism taxes. By state statute, that money must be invested to support and strengthen Duluth’s position as a tourist destination.
Faced with limited and relatively stagnant financial resources, Tanski acknowledged that Visit Duluth has been somewhat challenged to grow the city’s visitor base. But she said the organization has demonstrated some creative ideas that appear to be yielding at least modest results.
Tanski said Visit Duluth has been reaching out to new markets, such as Rochester, Minn.; Madison; North Dakota; South Dakota; Thunder Bay and Winnipeg.
Nevertheless, Tanski’s expectations for the year remain conservative.
“We remain optimistic but also realistic, and I would say we will probably see a year, at year end, where we have performed at-par with 2018, which was a record-breaking year. We may edge it out a little bit, but the reality is, when you don’t have a solid 12 months of performance, we’re probably looking at a flat year,” she said.
Last year, Duluth collected $12.2 million in hospitality taxes — 4.7% more than in 2018.