Minnesota’s Lodging Continues Recovery thru First Half, Approaching Pre-Recession Levels

Release Date: Aug 05, 2011

This article and graphs are provided under permission granted by STR (Smith Travel Research, Inc.), the source of the data.

Minnesota’s lodging industry continued its positive growth through the first half of 2011, including growth in all six reported lodging metrics. Two sets of graphs illustrate this. The first set of graphs shows lodging metric changes for the first half of 2011 compared with the first half of 2010 among various geographic areas, including Minnesota. Minnesota’s growth was slightly more positive than growth of the U.S. for four of the six metrics, and virtually the same for the remaining two. Minnesota year-over-year first half growth included: occupancy (5.7%, compared with 5.0% for the U.S.), room rates (3.3%/3.3% U.S.), revenue per available room (i.e., RevPAR; 9.2%/8.5% U.S.), room revenue (10.0%/9.4% U.S.), room supply (0.7%/0.8% U.S.) and room demand (6.4%/5.8% U.S.). Minnesota also surpassed the 7-state West North Central region in growth for all metrics except room supply. The Minneapolis-St Paul Metro market experienced stronger growth than Greater Minnesota overall, but there was substantial variation among the five Metro areas and the five Greater Minnesota areas. However, one area of commonality was change in demand (i.e., rooms sold) for Greater Minnesota areas, with four of the five areas experiencing demand growth around 4.5%.

The second set of graphs shows Minnesota’s monthly year-over-year change in lodging performance for each of the most recent 12 months, along with change for the first half of 2011 compared with the first half of 2010. One of the six graphs in this set is shown below, illustrating a 12-month time line of consistent growth in Minnesota’s lodging RevPAR (again, revenue per available room) – a single measure that takes into account the effects of demand, supply and room rates. The only negative changes among Minnesota statewide lodging metrics over the 12-month period were for room rates, which continued to show year-over-year monthly declines through August of 2010 but have increased every month since then. This is consistent with previous post-recession patterns, where properties do not start to raise room rates until increases in demand and occupancy are well established.

A quick comparison of first half 2011 RevPAR with first half 2008 RevPAR shows that, even without adjusting for inflation, most markets have not fully recovered from the impacts of the Great Recession. (See graph below.) This comparison spans the period from just before the lodging industry experienced the full force of the recession through the most recent post-recession half year for which data is available. RevPAR is a good measure for this comparison, as it takes into account the combined impacts of demand, supply and room rates. This comparison shows that Minnesota has regained more RevPAR ground than has the U.S., but less than the West North Central region. Within Minnesota, recent strong RevPAR gains in the Metro region have not yet offset the relatively deeper losses experienced in the region during the recession. On the other hand, three of the five Greater Minnesota areas (Duluth, Rochester and the Minnesota North area) have all exceeded their pre-recession RevPAR levels.