REGIONAL- At the five-year anniversary of the onset of the coronavirus epidemic, Minnesota’s hospitality industry is still struggling to get back to its pre-pandemic levels.
Hospitality Minnesota, the industry’s primary statewide trade association, recently issued its first-ever State of Hospitality Report, and the document reveals that while not all food service and lodging establishments are hurting, the industry as a whole has stalled since 2020, with negative trends seen in numerous metrics in 2024.
Average annual lodging occupancy rates in northern Minnesota dropped 5.6 percent from 2019 to 2024. From a pre-pandemic rate of 55.4 percent in 2019, the sector took its biggest hit in 2020, falling to just 40.4 percent. Lodging bounced back in 2021 and 2022 but declined slightly in 2023 and slightly more in 2024. However, losses in the central and southern parts of the state and in metro areas were even greater. The statewide rate of 52 percent in 2024 is nine percent lower than in 2019. Hospitality Minnesota’s report ranks Minnesota last in the Midwest for hotel occupancy rate recovery since the pandemic.
The food service sector isn’t hurting for restaurants – Minnesota added 485 new establishments between 2019 and 2023, when the total was 8,212. The challenge is finding people to work in them, as the number of restaurant employees dropped by over 4,000 during the same time period. Even though wages have jumped by 32.2 percent, total payroll is up only 23.8 percent, pointing to a significant labor shortage. Specifically in northern Minnesota, establishments are up 3.4 percent while the number of employees has dropped by 2.4 percent.
The same is true of caterers, where establishments are up and employment is down. Employment is down 9.5 percent since 2019, even though the number of caterers has increased by 15 percent.
Across the $392 billion industry, 2024 was a gloomy year for about half of all hospitality businesses, with 49.7 percent reporting lower revenue and 51 percent reporting lower customer traffic. Only 27 percent of businesses expected revenues to increase, and 35.9 percent reported some stage of financial decline. The report described the situation as “a concerning trend of declining revenue, customer traffic, and financial health.”
However, Hospitality Minnesota also touted a bright spot, that being workforce development programs sponsored through its own educational foundation. The flagship ProStart Program focuses on culinary arts and restaurant management, and has seen enrollment grow from 1,617 in 2020 to 12,989 in 2024 at 69 participating schools. The report emphasized the need for continued investment in workforce development to meet workforce needs and ensure accessibility for all students.