Duluth rakes in record $12.4M in tourism revenue

DULUTH – Once again, Duluth posted a record-breaking year for its tourism industry, which forged ahead in its decadeslong quest to brand the locale as a quintessential Minnesota destination.

In 2019, the city brought in $12.4 million in tourism tax revenue, a 2% increase from 2018 and an all-time high that outstripped budget projections for the year.

Duluth has seen continued growth in tourism tax dollars since 2014, though the rate of that increase has slowed in recent years. That's cause for celebration, not concern, for Mayor Emily Larson.

"Really large numbers in rates of growth, especially in an area that's such a big part of our economy, is something I would be wary of," she said. "I wouldn't build a lot of budget changes around substantial growth. I wanted to make sure that we have staying power."

The city collects a 2.25% food and beverage tax and a 3% lodging tax, with an additional 2.5% tax for hotels and motels that have more than 30 rooms. It then funnels the money back into the local tourism industry.

Some tourism tax dollars are allocated to specific events and amenities, like the Duluth Entertainment Convention Center and Spirit Mountain ski hill, under longstanding agreements. Local organizations can also apply for a portion of the tax money each year by making a case for how their program or attraction will benefit the tourism industry.

The city's numbers do not reflect inflation, changes in hotel room inventory or rising restaurant prices, meaning the revenue increases may not necessarily mean a larger number of visitors are coming to Duluth each year.

Kim Chick, the Duluth-based regional sales director of ZMC Hotels, said a statewide report showed that Duluth and St. Cloud were the only two major markets in Minnesota that saw a slight decrease in total rooms sold in 2019. This was offset by a small hike in local rates, she said.

Similarly, Tom Hanson, who owns a handful of popular Duluth restaurants, said though business was great in 2019, he had to raise some of the prices on his menus to keep employee wages up to his standards.

"What we rely on from Twin Cities traffic now is significant to our overall year-round sales," Hanson said.

For decades, Duluth has marketed itself as a getaway for families from all over the region. Chick calls it "the perfect destination," given its outdoor amenities, proximity to Lake Superior and "small-town feel."

Former Duluth Mayor Don Ness, who worked to further grow tourism during his tenure from 2008 to 2016, pointed to the revitalization of Canal Park and the building of the Lakewalk in the 1980s as early drivers of the industry. He dubs the city's progress since then a success but says there's a constant need to keep introducing new reasons for visitors to come back year after year — for the more tourism has grown, the more the industry has come to shape the lives of locals.

"The amenities that are offered to Duluthians would not be possible if we weren't bringing a few million visitors into our community," he said. "It means attractions that a community of 86,000 couldn't otherwise offer. That translates into a higher quality of life for the people that live here year round."