Local employers, including 16 Fortune 500 companies, as well as the Minneapolis Convention Center and the Mall of America, represent the primary sources of demand for the greater Minneapolis-St. Paul market. Hotels in this market enjoyed stable occupancy levels in the mid-60s prior to 2020. Because of this stability, ADR increased significantly following the Great Recession, largely due to corporate demand from Target, Medtronic, US Bank, Cargill, 3M, Wells Fargo, and Best Buy. Although the Minneapolis-St. Paul market was affected by the recession, the impact was relatively short-lived, with occupancy declining in 2008 and 2009, and ADR falling in 2009 and 2010. Overall, RevPAR declined by nearly $14 from 2007 through 2009. Occupancy registered a historical peak in 2015, driven primarily by the strong levels of demand associated with the Ryder Cup. Record ADR levels caused a surge in new hotel development, particularly in Minneapolis, St. Paul, and Bloomington. Absorption of new supply and induced demand from the Super Bowl in early 2018 led to a reversal of these trends and a record RevPAR level of nearly $83 by year-end 2018. Despite demand from the NCAA Final Four in 2019, occupancy and ADR levels declined because of the correction from the Super Bowl spike and the absorption of new supply, resulting in a $2 decline in RevPAR.

The effects of COVID-19 on the Minneapolis lodging market were severe. The pandemic particularly affected Downtown Minneapolis because of its reliance on the meeting/group segment, and with international travel substantially reduced, hotels near the airport and the Mall of America were notably affected. The death of George Floyd during an arrest in May 2020 drew national attention to Minneapolis, which resulted in the Minneapolis-St. Paul hotel market facing a slower recovery from the $52 loss in RevPAR during 2020. While the Twin Cities hotel market registered a 2022 RevPAR $12 below the 2019 level, strong leisure and meeting/group demand resulted in ADR growth beyond the 2018 peak; the opening of the Four Seasons in Downtown Minneapolis contributed to the ADR growth. Corporate demand has remained muted, as many major employers continue to operate on hybrid work models; moreover, larger companies are downsizing office space and/or leaving the central business districts. The full market recovery will require the earnest return of corporate travel, but an increase in citywide events and major concerts have contributed to strong gains in both occupancy and ADR in the year-to date 2023 period. The long-term outlook is optimistic given the diversity of the employment base and variety of leisure attractions.

* Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent “big picture” data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

ADR, Demand, Occupancy, RevPAR, and Supply Projections:

Change In Value For Market:

Minneapolis - St Paul RevPAR Change

Minneapolis - St Paul RevPAR

For more information, please contact:

Tanya Pierson, MAI Senior Managing Director Valuation, Market & Feasibility Consulting [email protected] +1 303 588-6558 (w)