The lodging segment of the hospitality industry employs over two million workers and generates revenue of over $200 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 tragic events of September 11, 2001 hit the hospitality industry very hard. In the aftermath of the financial crisis of 2008. the industry suffered record losses and it took five years for key operational and financial metrics to return to their pre-recession levels. Since that recovery, each of the past five years has seen steady but modest improvement in profitabiity. And yet there are still challenges. Consumer confidence and business travel are high, but with a tense global economic situation, this could change quickly. 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 growth, there are now approximately 7,800 hotel rooms in Minneapolis, and over 40,000 rooms in the Twin Cities metropolitan area. Over the past decade or so, a number of new hotels opened near the airport and the Mall of America (about 10 miles from downtown Minneapolis), and more recently a number of innovative and trendy new or renovated hotels have opened in downtown Minneapolis. Moreover, in the downtown area, construction plans are in the works for at least 1,500 additional rooms and the city's first-ever five-star luxury hotel. A full-service convention center in downtown Minneapolis boasts 1.6 million square feet of space. In a typical year, Minneapolis hosts more than 300 conventions with over 400,000 attendees, and it frequently also hosts major sporting events such as Super Bowl LII.
Labor Market Analysis