While Twin Cities hotels are struggling, rooms fill on North Shore

The light-filled, timber-framed rental cabin Simone and Andrew Strand helped build themselves on the North Shore of Lake Superior has been a boon to the family budget over the past couple years.

When COVID-19 struck this spring they shut down for two months, but now they're back. And so are the road-trippers. "People are just trying to get away from the cities," said Simone Strand. "As I'm sitting here looking at Lake Superior and a ton of land around me, I can't blame them."

With summer sports canceled and flying vacations on hold, Minnesotans are taking to the road this summer, boosting demand for resorts, vacation rentals and campgrounds in places where social distancing happens naturally.

For Twin Cities hotel operators, it's another story. Downtown hotels have become vertical ghost towns, and general managers and staff are scrambling to lure guests by implementing rigid cleaning protocols and installing high-tech equipment that eliminates the need to touch surfaces outside guest rooms.

April was the worst ever for Twin Cities hotels, where the occupancy rate fell to 4%. While bookings are increasing, demand isn't expected to rebound for three to five years, the operators and trade groups said.

"All hotels are losing money right now," said Rick Bertram, general manager of the Marriott Hotel City Center in downtown Minneapolis.

This comes after a 10-year construction boom fueled by the new U.S. Bank Stadium, the expansion of the Minneapolis Convention Center and a string of major sports events that added thousands of hotel rooms. Bertram said all but three downtown hotels, including the Marriott, are now open after two-thirds of them shut down during April. Midweek occupancy rates are now 13 to 14% in the city, he said.

"In downtown, there are not a lot of demand generators that are open yet," said Bertram. "There's no baseball, concerts or anything else to draw people to downtown in the summer."

The Marriott is set to reopen Aug. 1 after a complete renovation that includes adding COVID-safe technology such as touchless door locks and check-in procedures. Bertram said he expects the hotel to operate at about 10% occupancy compared with 80% during a typical summer.

"It's going to be a long road to recovery," said Tanya Pierson, managing director of HVS, an international hotel consulting and valuation firm.

The average occupancy rate in the Twin Cities, she said, peaked in 2019 at about 70%. It's too soon to say, she said, how many hotels will permanently go out of business, but there are no shortage of speculators waiting to buy those distressed assets. "There are a lot of all-cash buyers waiting in the wings for the opportunity to buy at well-below replacement cost and look for returns down the road a few years," she said.

In the meantime, many lenders and investors are working with hotel owners to avoid defaults, Bertram said. Bankers aren't the only ones who are worried. Tourism drives the economy in small towns and big cities alike. The American Hotel & Lodging Association said recently that the glut of empty hotel rooms in Minnesota is expected to cost the state and local governments more than $170 million in tax revenue this year. New data released this week showed healthy gains in hotel occupancy rates that are being fueled by leisure travelers even as COVID-19 cases increase in some communities, including the Twin Ports of Lake Superior, and governments reconsider their business reopening strategies.

Meanwhile, property searches on Airbnb, especially for woodsy recreation areas and lakeside getaways in Minnesota, have increased significantly, said spokesman Sam Randall. He said Grand Marais, where the Strands' rental cabin is perched on a wooded hillside with sweeping views of Lake Superior, was recently one of the most popular search destinations in the country on Airbnb.

"People are cooped up, and they're looking for rural destinations," Randall said. "People want to experience a new type of space outside their apartments, condos and houses."

After being shuttered for several weeks, Edgewater Hotel and Water Park and Lake Superior Hotel at Canal Park in Duluth are reopened at limited capacity and are busy again, said Howard Anderson, vice president of operations in the Lakes Region for ZMC Hotels in Duluth.

"The families that were under travel restrictions are out and about," he said. "Families normally traveling for weekend soccer tournaments don't have those tournaments, so they're looking for things to do with the family rather than with the team."

He said the company — which operates 37 hotels across the country including in Arizona, Florida, Michigan and Wisconsin — is busy implementing preparedness plans that vary by state and community. ZMC is working with industrial cleaning companies including Ecolab to implement strict cleaning protocols.

In at least eight of their hotels the company requires guests to wear masks, but in the others guests are asked to wear masks to protect staff and others. While ZMC has not yet had to permanently close any of its properties, Anderson said there have been a handful of closures in midsize communities including Hibbing, which lost one of two hotels in town.

"If I'm a hotelier, I'm terrified," Tamara Lowney, CEO of the Itasca Economic Development Corp. "You're going to see a lot of hotels close and not open again."

Lutsen-based Cascade Vacation Rentals, a collection of 175 North Shore cabins that were all fully booked over the holiday weekend, has instituted a three-night minimum stay with a 24-hour waiting period after each checkout. Guests are asked to bring their own linens, and any face-to-face interactions with maintenance staff come with masks, gloves and social distancing.

"It's about patience, and 90% of guests have been very understanding about the linen protocol," said marketing manager Jaye White. "We're taking care of people, and for the most part people are accommodating."

She said travelers are coming with more knowledge than they used to as they navigate vacationing during a pandemic, even in places where case counts remain low. (Cook County had just one confirmed case, discovered more than two weeks ago, heading into the weekend.)

"Hopefully this [pandemic] is only for a short period of time, but maybe we can adapt a little and be more patient with each other," she said.

To cope with so much uncertainty, Airbnb activated a search function that enables travelers to search for rental hosts that have adopted the online search firm's new Enhanced Cleaning Protocol, which was developed with the help of a former U.S. surgeon general.

The Strands, who operate the Agua Norte vacation rental on the North Shore, opted into the program that includes providing more disinfectants, and washing towels and bed linens in extra hot water with a touch of bleach. They've also developed a more remote check-in system that is aimed at reducing their contact with guests.

Simone Strand said the rental is nearly booked through fall, and most of the inquiries are coming from people on driving trips from big cities. That includes a couple from Chicago who booked a stay after canceling their honeymoon to Thailand.

"The town is so busy right now it just feels like any other day in the summertime," she said. "But we're playing it by ear for now, and we are definitely prepared to shut it down [again] if we have to if things get bad again."

Staff writer Brooks Johnson contributed to this report.