Zoning changes could make room for bigger variety of hotels in Minneapolis

With few exceptions, visitors who want to book a hotel in Minneapolis have to look to just one spot: downtown.

The city's zoning rules don't allow hotels to be built in most neighborhoods, other than a few areas zoned for industry and heavy commercial uses. They block all but the smallest bed-and-breakfast operations and prohibit small, boutique hotels, the type that are often tucked above shops or restaurants in other cities.

But with more hoteliers and visitors showing interest in other parts of Minneapolis — neighborhoods like northeast, the North Loop and Uptown, among others — the city is poised to overhaul its rules. This week, two City Council committees unanimously approved a package of updates that would open up more potential locations for hotels of all sizes.

Council Member Jacob Frey, who introduced the idea this winter, said he initially wanted to start a discussion about allowing small "European-style" hotels that were linked to other businesses, like a coffee shop or bakery. He'd heard about someone in the Marcy-Holmes neighborhood with that exact plan: chef Alex Roberts, who hoped to open a boutique hotel attached to his other longtime business, Restaurant Alma.

As he began asking questions about the city's zoning rules, Frey said it was clear there was more to tackle than a single type of hotel in a single neighborhood.

"When we opened the code it became pretty apparent that other segments were outdated, so we decided to clean it all up at once," he said.

Currently, about 30 of the city's 39 licensed hotels are in and around downtown. Hoteliers that want to build outside of downtown have limited options and have to build big; hotels in other areas must have at least 50 rooms. Meanwhile, bed-and-breakfasts are limited to three rooms. Only two are now licensed in the city.

The changes that will go to the full council early in July are far-reaching. They would drop the minimum room requirement from 50 to five rooms, expand the number of zoning districts in which both large and small hotels are allowed and up the number of rooms allowed in a bed-and-breakfast to five. They'll also add extended-stay hotels, where guests can remain for more than 30 days, to the lineup of lodging facilities regulated as hotels.

The city also will add more rules aimed at ensuring additional businesses won't mean trouble for neighborhoods. Hoteliers will have to meet specific qualifications and provide services like round-the-clock staffing.

Dan McElroy, president and CEO of Hospitality Minnesota, said his group worked with the city as it drew up the changes. He said his members are supportive, even though it likely means more businesses competing for visitors.

"There will be more options for more guests to find the kinds of experiences they want in Minneapolis or the Twin Cities," he said. "We didn't have a single member call and say: 'We don't want more competition.' "

Peter Remes, the CEO of Minneapolis real estate firm First & First, which is behind developments in several historic buildings, said he's pleased to see the city poised to make changes. His group looked into turning the North Loop building that became the event venue Aria into an Ace Hotel — a brand that has spots in cities like Portland, Ore., Seattle and Palm Springs, Calif.

Frey said he expects the changes will win support from the council — and that the area of the city he represents could soon become a popular spot for a different kind of hotel.

"Both northeast and southeast want to be recognized as a cool, eclectic, creative-class part of town," he said. "And the creative class doesn't necessarily benefit by throwing in a Holiday Inn Express."