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State’s hotels could gain a new tool for recovery

The past year has been difficult for the hospitality industry, and the consensus among industry professionals is recovery is going to take a while.

What can state government do to help?

One suggestion is allowing the creation of “tourism improvement districts.” These would allow hotels to collaborate with local governments and tourism promotion organizations to jump-start the recovery process by channeling additional lodging service charges into promoting specific new tourism activities that could help the hotels book more business.

These “TIDs” already exist in 200 cities in 18 states, and Minnesota could join them via HF1066. Sponsored by Rep. Jim Davnie (DFL-Mpls), it would allow counties, cities, and towns to establish tourism improvement districts.

The bill, as amended, was laid over Wednesday for possible inclusion in the committee report of the House Property Tax Division. Its companion, SF968, sponsored by Sen. Kari Dziedzic (DFL-Mpls), awaits action by the Senate Taxes Committee.

“The tourism and hospitality industry was the first hit and may be the last to recover,” Davnie said. “The Department of Employment and Economic Development reported in December that accommodations employment had dropped 53% since 2019. ...This is an opportunity to provide local businesses the tools to recover and for Minnesota to put its best face forward for tourism.”

A handout from Meet Minneapolis shows that hotel occupancy rates in downtown Minneapolis plummeted from 68% to 21% during 2020, a drop far more precipitous than the economic downturns of 2001-02 and 2007-09.

“We first looked at this four years ago as a tool to drive business to hotels,” said Melvin Tennant, Meet Minneapolis’ president and chief executive officer. “But now it’s about recovery. Hotel occupancy could take five years to reach pre-COVID levels. … This would add a service fee of $1-$3 per hotel room per night with the service fee collected by the district. … The funds must be used for new tourism initiatives. This is supplemental, not supplanting.”

“These districts are successful in small and mid-size communities around the country that don’t have as large a property tax base,” said Anna Tanski, president/CEO of Visit Duluth. “They can be customized for each community.”

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