The lodging segment of the hospitality industry employs nearly two million workers and generates revenue of over $160 billion annually. This segment includes over 50,000 properties ranging from small motels with a handful of rooms to mega-hotels with over 1,000 rooms. Budget hotels provide only rooms while full-service hotels provide rooms, food and beverage service, meeting space, and other services. Resort properties may offer golf and other amenities while extended stay hotels have more apartment-like furnishings.
The lodging industry experiences cyclical, seasonal, weekly, and daily fluctuations. The 2001 recession and the tragic events of September 11, 2001 hit the hospitality industry very hard--harder than most industries because of reduced travel--and the lodging industry lost $16.1 billion in 2001. The industry struggled to restore profitability, a task made more difficult by the growth in internet travel sites that make it easy for travelers to compare hotel rates. The industry returned to profitability in the middle of the 2000s, and then suffered record losses in 2009 in the aftermath of the financial crisis of 2008. It took five years, but the industry has now recovered and key operational and financial metrics have returned to their pre-recession levels. And yet there are still challenges. Low interest rates and increased travel have spurred new construction projects which increases competition. And revenue generation at traditional properties is further challenged by discounted booking sites and the rise of the sharing economy in which sites such as Airbnb allow travelers to rent homes and apartments instead of stay in hotels. Only time will tell what the next few years will bring.
Depending on the hotel's location, different parts of the year may have much higher demand than others. In some years, the occupancy rate in Minneapolis in August is 30 percentage points higher than in January. During any given week, a hotel catering to business travelers may be very busy Monday to Thursday while resort hotels experience the opposite demand pattern. In the course of a single business day, the concentrated periods of check-in and check-out are the busiest. As is easy to imagine, food operations are busiest around meal times.
Within a hotel, the two major revenue centers or operating departments are i) Rooms and ii) Food and Beverage. The major service or cost centers are Administrative (including human resources, accounting, and information systems), Marketing, and Property Operations and Maintenance. These functions generally do not generate any revenue, but support the revenue-producing departments.
After years of steady but not explosive growth, there are now approximately 7,100 hotel rooms in Minneapolis, and over 30,000 rooms in the metropolitan area. Over the past decade or so, much of the growth has occured near the airport and the Mall of America (about 10 miles from downtown Minneapolis). Much of the new hotel construction has also been in the extended stay segment of the market. But developers are again turning their attention to downtown Minneapolis. A new 211-room suite-hotel just opened, and construction plans are in the works for at least 500 additional rooms. A full-service convention center in downtown Minneapolis boasts 1.4 million square feet of space. In a typical year, Minneapolis hosts more than 300 conventions with over 400,000 attendees.