For Minnesota hotel industry, normal could be a year or more away

Jim Alderman was set to fly from North Carolina to Minnetonka a year ago to start his new role as chief executive of Radisson Hotel Group Americas when the phone rang.

"I got a call March 10 saying the governor was shutting the state because of COVID," Alderman recalled. "So on my very first day as CEO, we closed the [headquarters] office and told everyone to come and take what they needed home."

As COVID infections spread nationwide, Radisson's guest bookings plummeted. "By mid-March we took a real punch in the mouth. Business was down 80% overnight," Alderman said. "Devastating isn't enough of a word. ... God. It's been terrible."

Radisson, with 39 hotels in Minnesota and 613 in the Americas, wasn't alone in being pummeled by COVID-19. Hotel owners nationwide are wishing hard for a recovery, but few expect it will be swift even as vaccinations rise and state-imposed gathering restrictions loosen.

"The hospitality industry was hit extremely hard by this," said St. Paul-based Hospitality Minnesota board Chairman Howard Anderson. "We are hopeful we will get back to normal in 2022 or 2023."

One billion hotel rooms went unsold, helping "2020 set a record for the worst performance by U.S. hotels," according to a new report by hotel analytics firm STR. COVID-19's damage even surpassed the Great Recession, which left 786 million hotel room nights unsold.

Last year, U.S. hotel revenue plunged 49% as guests filled only 39% of all available rooms.

Guest visits were so weak, STR said, Minneapolis and St. Paul hotels recorded "the lowest occupancy among the Top 25 markets" in 2020.

The hotel slowdown is expected to cost Minnesota about $173 million in lost state and local tax revenue for the year, according to the American Hotel & Lodging Association and Oxford Economics. Few are surprised.

"We saw the cancellation of over 400 events" in Minneapolis last year, including the 2020 NCAA Division I wrestling championship that was supposed to bring 40,000 fans to U.S. Bank Stadium in downtown, said Melvin Tennant, chief executive of the city tourism bureau Meet Minneapolis. "For 2020 we saw devastation."

Twelve of 47 Minneapolis hotels temporarily closed. While a majority have reopened, it's unclear when the Crowne Plaza Northstar, Delta Hotel Minneapolis Northeast, Le Meridien Chambers and Sheraton Minneapolis Midtown might reopen their doors, Tennant said.

Now, as vaccination efforts begin to ramp up, the area's open hotels still face an uphill climb.

Marriott and Hilton hotels both recently reported losing hundreds of millions of dollars to the pandemic.

Worker layoffs and furloughs flourish. Last year more than 116,429 Minnesota leisure and hospitality workers lost their jobs to COVID, including the 41,100 shed in December, the Minnesota Department of Employment and Economic Development (DEED) reported.

Still, industry watchers said there are small signs of progress.

Hotels near Lake Superior and the North Shore report doing well. The half-built Courtyard by Marriott hotel that was burned by arsonists last year in downtown St. Paul is being rebuilt and will open this year.

Next year, United Properties still expects to open Minneapolis' first five-star hotel — the Four Seasons — at Washington and Hennepin avenues in downtown.

Business in December proved a dud, but "it's getting better. We've gotten creative," said Rand co-owner Nick Peterson.

To pull in guests, the 26-story Rand now offers private, six-course dinners for up to six people, with contactless "knock and drop" service.

It is catering intimate birthday parties for COVID-weary families and hosting themed whiskey-tasting nights.

The extra pamperings have helped, nudging bookings above 25% some days. "We are just plugging away," Peterson said, noting that he and his partners are prepared to ride out COVID's storm.

The Radisson Hotel Group temporarily shut 20% of its North American hotels last year "because the occupancy was so low," said CEO Alderman. All but 10 reopened, but business is still off.

Even so, "my crystal ball is so bright," Alderman said. "We're seeing some really good green shoots across our portfolio especially with last-minute bookings."

He's thrilled the Radisson Blu Mall of America was 94% full Valentine's Day weekend. Destination places such as Duluth and the North Shore benefited as city dwellers dashed to rural areas and outdoor adventures.

Bookings in Duluth and at Radisson's rural Country Inn & Suites properties did much better its urban hotels, he said.

"We are looking at very possibly the best six to seven months of travel starting from late May or June," Alderman said. "There are some people who will get out and will travel, saying, 'I can't take it anymore.' There's a lot of pent-up demand."

Radisson Hotel Group is betting big he is right. It will soon open new hotels in Florida, the Dominican Republic and Aruba.

He expects lodging won't return to normal levels until late 2022 or 2023 — after most people are vaccinated and families feel safer venturing out.

Business is down 50% at the five hotels ZMC owns in Hibbing, Duluth and Superior, Wis.

The draw of Lake Superior as a COVID fatigue reliever is credited for preventing a steeper decline.

But full recovery will require more than a lake. It needs the return of Duluth's adored concerts, festivals, sporting events and firework displays, Anderson said.

Tennant at Meet Minneapolis is also yearning for his city's "demand drivers." Events at U.S. Bank Stadium, Target Field, TCF Stadium, Orchestra Hall and Hennepin Avenue and other venues typically draw 30 million-plus visitors a year. They will return, he said.

Dee DePass • 612-673-7725