Minnesota’s hotels could get a boost from tourism improvement districts

Christy Loy’s life as a Minnesotan got off to quite a memorable start.

“I moved here to Minnesota in 2020,” she told the House Property Tax Division Friday. “March 2 was my first day of work.”

That work is in a field that’s been described as the one hit hardest by the pandemic that swept into the state within a fortnight of her arrival: the hospitality industry. She’s the manager of Minneapolis’ W Hotel and is now president of the Greater Minneapolis Hotel Association.

Shortly before the pandemic, hotel occupancy was at about 50% of capacity in the state, but that dropped to under 20% in April 2020, and closer to 3% in the city of Minneapolis.

“Out of our 36,000 hotel and restaurant employees [in Minnesota], 50% of those lost employment during COVID-19,” Loy said.

What can be done to give hotels and resorts a boost? Something that’s been tried in 21 other states over the past 25 years is establishing tourism improvement districts. Lodging businesses within a designated geographic area agree to levy a service charge on customers, then direct its proceeds toward tourism activities.

Rep. Frank Hornstein (DFL-Mpls) sponsors HF2172, which, as amended, is designed to make Minnesota the latest state to allow tourism improvement districts. It would establish a procedure for doing so, but also make clear that such districts are intended to be public-private partnerships, and that the service charge is intended to supplement existing funding of convention and visitor bureaus, not supplant it.

The bill was laid over for possible inclusion in the division report to the House Taxes Committee.

According to the bill, over 50% of lodging businesses in a defined geographic area would need to be on board with forming a tourism improvement district. Specific uses for funds raised by the service charge would be outlined and overseen by the area’s convention and visitors bureau.

The district would have a defined term that would need to be renewed by the impacted businesses, and the plan would have to be approved by the local government.

“Within the past two weeks, in Illinois, Gov. Pritzker signed their state’s tourism improvement district legislation into law,” said Melvin Tennant, president and chief executive officer of Meet Minneapolis, the city’s convention and visitors bureau. “That’s important to note, because Chicago is a very close competitor of ours in the tourism market. So they have this tool.”

“In Minneapolis, we would use this money for marketing, to attract conventions to create demand,” Loy said. “And also for workforce development. It’s one of the industries with the fastest path to leadership, and a great entry industry for those who have recently immigrated and don’t have English as a first language. It’s really a spectacular place to work.”