Pandemic's toll on tourism hits Duluth hard

DULUTH – The Callan family finished their Northern Waters Smokehaus sandwiches and strolled along the Lakewalk a few hours after they arrived in town the Friday before Labor Day. The parents and their young girls were heading back to Roseville that night, but they hoped to catch a quick glimpse of a ship before heading north to explore Gooseberry Falls.

"We decided we weren't going to stay up here this year just because we didn't want to be in a lodge or a hotel," Chris Callan said.

Duluth's tourism industry is way down this year, as visitors are opting for day trips and avoiding coronavirus trouble spots like hotels, indoor restaurants and enclosed attractions. Locals are hoping the fall colors can draw some extra business to dampen the devastating impacts of the pandemic.

"This just isn't sustainable," said Anna Tanski, president of Visit Duluth, the city's nonprofit tourism bureau.

The city collected $1 million in tourism taxes for July, down about 25% from what Duluth took in during the same month in 2019.

Duluth spent decades painstakingly cultivating its tourism sector, branding itself as a haven for those who love long hikes or craft brews (preferably both). Now the industry's pandemic-fueled struggles threaten to upset the economic ecosystem that relies on visits from millions of out-of-towners each year.

Though campgrounds and resorts up the North Shore booked up earlier this summer as Minnesotans made vacation plans close to home, Tanski said Duluth hotels have been 60% full on an average weeknight in August. After the cancellations of major events like Grandma's Marathon and the Bayfront Blues Festival, more people are treating Duluth as a road trip stop instead of a final destination.

Last year the city brought in a record $12.4 million in revenue from its tourism taxes on food, beverages and lodging that are funneled back into local attractions.

Mayor Emily Larson said Duluth's latest projections estimate this year's collections will be down by more than one-third. She's already told organizations not to expect additional tax money due to more pressing financial obligations.

That means the Great Lakes Aquarium had to push back major work on two exhibits, including a new 1,200-gallon alligator habitat. The Lake Superior Zoo had to ask for extra time to pay back a line of credit. Visit Duluth will likely have laid off almost all its staff by the end of the month.

"It's a domino effect," Tanski said.

Once home to a scrapyard and port warehouses, Duluth's Canal Park is now filled with touristy stores and restaurants.

The district's transformation was in ways emblematic of the city's economic shift. Though shipping and manufacturing remain major local industries today, jobs and people left the region as big employers like U.S. Steel shut down plants in the 1970s and 1980s. Local leaders began to view tourism as a means of filling the void.

The North Shore had always been a summer destination for Minnesotans, but Duluth slowly started to build reasons for visitors to stay. The earliest tourism taxes helped fund the Duluth Entertainment Convention Center and Spirit Mountain ski area.

Duluth also started to rely on visitors to support regular municipal operations as the only city in Minnesota with a sales tax that feeds its general fund. Larson said this system puts a larger share of the city's tax burden on visitors.

"It provides the rest of us who are living here year-round with opportunities that our millions of short-term guests are really helping to fund and pay for," Larson said.

It also makes Duluth more susceptible to the ebbs and flows of tourism, a relatively stable industry under most circumstances — barring a pandemic. COVID-19 cut an estimated $25 million hole in the city's budget that forced officials to make layoffs and delay projects.

"Who could have predicted this? Our tourism industry was growing and clipping along at a really solid pace," said Arik Forsman, a Duluth city councilor.

Larson said she thinks recovery will take a couple of years. The local hospitality sector is down 5,500 jobs from this time last year, according to state employment data.

Like the mayor, Forsman said he believes tourism provides locals with amenities the city might not otherwise be able to afford. But moving forward, he plans to consider ways Duluth may be able to diversify its economy.

"We absolutely have to capitalize on the natural beauty and characteristics of the city that people want to come visit," he said. "But if you are too overleveraged in that industry, I think it does exacerbate issues you hear about at council meetings — like the need for more affordable housing, more affordable child care and other things that impact the quality of life."

After shutting down in March, many attractions didn't reopen until June. So the tourism industry tried to make the best of it.

Visit Duluth rolled out its new social distancing-inspired tagline: "Lake Superior is big enough for everyone."

The North Shore Scenic Railroad saved money by closing half its track to store 800 freight cars when the shipping business slowed down. When the aquarium couldn't host its usual summer camps, staff designed take-home boxes and virtual sessions for kids. Glensheen Mansion opened a temporary beer garden and ice cream stand on its 12-acre lawn.

Directors at most attractions said they feel confident they can deal with their financial situations but worry that another statewide shutdown could be disastrous.

"If there's a severe lockdown during our Christmas season or a future summer season, I don't know how places like Glensheen survive," said Dan Hartman, director of the historic estate.

At a virtual meeting for members of the city's tourism industry last week, Tony Bronson of the Duluth Local Restaurant Association referenced the recent closings of Surly's taproom and other popular eateries in Minneapolis.

"The reality of it is: This could be coming to a city near us soon," he said.

Locals in the industry are prepping for a tough fall due to the cancellation of dozens of conventions that fill hotels and restaurants. Even if the season's colors draw lots of visitors Up North, Tanski said she is worried.

"People will come back here. It's just a matter of when," Larson said. "The lake, the woods, the trails — they can't stay away."

A bright spot on the horizon? Right now, 2021 is booked to be a record year for events in Duluth.

Katie Galioto • 612-673-4478