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Tourism dollars add up in Detroit Lakes

Visitors head to Detroit Lakes, especially in the summer, increasing tourism revenue. DL NEWSPAPERS/Brian Basham

It’s no secret that Becker County’s population swells during the summer months.

Whether it’s visitors on vacation or more semi-permanent people with second lake homes, anyone can see an increase in traffic, and businesses certainly see an increase in sales.

According to a study done in 2013 through Explore Minnesota, with assistance from the Minnesota Department of Revenue and the Minnesota Department of Employment and Economic Development, Becker County is the fourth highest in gross tourism sales for the northwest region. The county brings in nearly $72 million in gross sales and $4.5 million in sales tax.

Cass County is the highest, with $101 million in gross sales, and Beltrami County with $84 million and Clay County with $79 million round out the top three.

Fun facts: The highest grossing county in the state is Hennepin County, with $4.4 billion. The least grossing county in the state is Traverse County, with $1.8 million a year.

With events like Festival of Birds, WE Fest, Northwest Water Carnival and several area powwows, it’s not hard to see people pouring into Becker County.

A 2007 University of Minnesota Tourism Center survey showed that 85 percent of tourists are repeat visitors. The primary reason they come to this area is for pleasure or recreation (43 percent). Other reasons included combined business and pleasure (10 percent) and festivals or special events and visiting friends or relatives (8 percent each).

Detroit Lakes was the primary destination (83 percent), with Frazee accounting for 13 percent, Mahnomen accounting for 7 percent, White Earth accounting for 4 percent, and 15 percent listing other destinations.

Of those visitors, 72 percent said they would definitely be back within the next year, and 16 percent said they probably would be. It’s no wonder tourism continues to grow in Becker County.

Impact on Minnesota as a whole

These increases aren’t just in Becker County, however. Minnesota is known for its tourism — it is the land of 10,000 lakes, after all.

According to Explore Minnesota, Minnesota generates about $13 billion in tourism sales each year, which translates to about $35 million a day.

With the increase in visitors, that means an increase in jobs as well. Each year about 250,000 full and part-time jobs are added for the season. Nearly $4.5 billion is spent in those extra wages each year.

Just over 5 percent of all jobs in Minnesota – one of every 19.7 jobs – are supported by traveler spending. Travel is an employment intensive industry, directly supporting 29,106 lodging jobs in 2013, along with nearly 44,000 jobs in the food and beverage industry and more than 25,700 jobs in recreation and entertainment.

Secondary benefits are seen across the entire economy, through the supply chain and incomes as they are spent though.

Tourism brings in about $840 million in state sales tax, which is about 17 percent of the state’s sales tax revenue.

If there was no tourism in Minnesota, to make up for that lost revenue, each household in Minnesota would need to be taxed an additional $543 a year.

While these numbers prove that tourism is alive and well in Minnesota, they have grown substantially over time. Leisure and hospitality businesses grew 49 percent from 2003 to 2013. In 2003, the leisure and hospitality gross sales were $8.7 billion, and in 2013, that number grew to $13 billion.

Compared to other states, Minnesota ranks 22nd on traveler spending, 18th on travel-generated employment, 14th on travel-generated payroll and 10th on travel-generated tax receipts.

Obviously summer is the most popular season in Minnesota, bringing in 37 percent of the travel expenditures, but fall and winter follow closely behind at 25 percent and 24 percent, respectively. Spring makes up the remaining 14 percent of the travel expenditures pie.

Another interesting aspect of tourism in Minnesota is where the money is spent. The estimated 69 million visitors to the state — both day trips and overnight — spend the most on food, 23.5 percent. The rest breaks down to 21 percent on lodging, 17 percent on retail, 16.5 percent on transportation, 16 percent on recreation and 6 percent on second homes.

So who are these people coming to Minnesota?

Well, 98 percent of the visitors are domestic, meaning they are coming from somewhere else in the United States, and 87 percent of them came for leisure.

Nearly 1.5 percent is from Canada and just under .5 percent is from overseas.

With that said though, Canadian and overseas travelers spent more money per trip than domestic travelers.

About 56 percent of Minnesota visitors are here on day trips, while the rest stay at least one night.

In a University of Minnesota Tourism Center study done in 2004, specific to Becker County visitors, 27 percent of tourists were from the Minnesota metro area. North Dakota visitors and non-metro Minnesota visitors each made up 23 percent. The remaining visitors reported were from Iowa and other locations in the United States (6 percent each), Nebraska, Illinois and Indiana (3 percent each), Wisconsin and South Dakota (2 percent each) and local and Canada (1 percent each).

Those with summer homes

Not only are tourists big contributors to Minnesota’s economy, those who have second homes in the state are also. And course, Becker County is chock full of people who travel to the lakes on the weekends and spend more money locally.

According to a study by Ryan Pesch and Merritt Bussiere of the University of Minnesota Extension, second homeowners, or seasonal residents, are economic contributors just like tourists.

Besides Becker County, the counties used in the study include Otter Tail, Douglas, Pope, Hubbard, Cass, Crow Wing and Aitkin. About 31 percent of all housing units across all eight counties are vacant at least part of the year, due to seasonal, occasional and recreational use.

Fun facts: Of those responding to the survey, 65 percent have a bachelor’s or graduate degrees, 65 percent of all respondents were in their 50s or 60s, and 59 percent earn $100,000 or more annually.

According to the study, seasonal households spend an average of $120 a month in groceries and liquor, $74 in dining and bars, $74 in gas, $95 in home maintenance, $75 in entertainment and recreation, and $1,066 in construction and remodeling.

Not surprisingly, when looking to buy a second home, the largest component is location — lake location, that is. Seventy-one percent said they looked for property on the lake.

Other key reasons for purchasing their home were peacefulness (63 percent), scenic beauty (57 percent), water quality (48 percent), family ties to area (33 percent), proximity to family (33 percent) and proximity to recreational amenities (32 percent).

The quality they were least looking for when purchasing a second home was rental income, with 1 percent.

About 56 percent of seasonal residents plan to make it their permanent home in the future. About 27 percent are undecided what they’ll do with the home, and 17 percent do not plan to move there permanently.

Closer to home

A few years ago, the City of Detroit Lakes passed a Food and Beverage Tax, trying to raise more money for city projects, but at the same time taxing all of the people who used the amenities, and not just the city’s citizens.

The tax was approved in 2011, and that first year collection was started in April. The city profited $244,000 that year. That number continues to increase, and in 2014, the city collected $364,000.

There is also a 3 percent lodging tax imposed on Detroit Lakes resorts and hotels, which is then used for advertising and other methods to get visitors back to the area.

The income from that tax has continued to grow each year as well. In 2010, lodging tax collected was $164,000. In 2014, that amount swelled to $232,000. And while that number grew, the amount of rooms available didn’t increase substantially. In 2010, there were 379 rooms for rent, and in 2014, there were 383.

The lodging tax, which started in 1990 at 1 percent, was increased to 2 percent in 1992 and has been at 3 percent since 1994.

A city ordinance specifies what the lodging tax funds can be spent on — getting people to come back. The money has to be spent on out-of-area advertising markets.

In 1990, when the lodging tax was still at 1 percent, it generated $23,600. That amount increased — as had the percentage by then — to $164,000 in taxes generated for 2010. In 2011, it was $176,000. In 2012, it was $194,000, and in 2013, it was $213,000.

The county also passed a SMART (Safe, Multi-Modal, Active, Responsible Transportation) tax last year, and that adds on a half percent sales tax to all things sold in Becker County that are already taxed. The money raised from that tax goes back to transportation infrastructure.

Bottom line: Minnesota, Becker County and Detroit Lakes depend on tourism dollars to keep taxes down, employment up and visitors coming back for more.

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