Economic caution, confidence battle in bellwether hospitality industry

For more than 90 years, Grand View Lodge has been offering high-end accommodations in a rustic setting near Nisswa. But this year could go down as one of the most notable in its history.

"We're expecting the busiest summer we've ever had up here," said Christine Ianelli, who manages some of the eateries at Grand View. "The most guests we've ever had."

On a recent afternoon, Ianelli looked on as chefs dashed around the kitchen of a new restaurant called Cru, trying out recipes in advance of its official opening.

The new restaurant is one sign of growing confidence at Grand View. Ianelli is another. She's one of several managers recently hired by Grand View, in key positions that pay $50,000 or more a year.

The resort also is hiring a slew of summer workers — restaurant servers, maintenance workers and front desk employees.

Grand View is part of the rebound in the Minnesota's leisure and hospitality sector. Since June of last year, hotels, restaurants and entertainment venues have added more than 5,000 jobs. That's about a third of the positions lost in the industry since the start of the recession.

The leisure and hospitality sector is not the biggest part of Minnesota's economy, and its wages are modest but state economist Tom Stinson said it's still important. It reveals a lot about the mood of the consumer.

"It's one of those canary-in-the-coal-mine type sectors," Stinson said. "So it's an interesting sector to watch, especially the food service and accommodations part."

Patronage of restaurants and hotels rises and falls along with consumer confidence. That's important because consumer spending accounts for more than two-thirds of the U.S. economy.

Stinson wants to see a few more months of job growth in the leisure and hospitality sector. That would give him greater assurance that Minnesota consumers are relaxing their grip on their pocketbooks.

Mark Ronnei, the general manager at Grand View Lodge, shares that caution. Even though he's expecting his best year and hiring lots of workers, he's still on guard.

"I'm not yet optimistic, but I can see optimistic from where I am," Ronnei said.

Here's why: Grand View customers once booked trips more than 90 days out. Now the majority of bookings come in with much less notice.

"Our guests are booking so late that it's really hard to get excited far in advance," he said. "People feel like if they just postpone a decision, it's the same as saving money. ... But that doesn't help me sleep at night."

On a recent weekend, the kind of customers that keep Ronnei up at night were close by one day at the shuffleboard court. Dinah Zabot, 30, and Joseph Ambroson, 33, of St. Paul, were visiting Grand View. Zabot said they waited until the last minute to reserve a room.

"We've been thinking about it for a while but we decided to book early this week because we just wanted a little getaway," Zabot said. "We took advantage of a last-minute deal, which I think was also a nice thing that encouraged us to go."

Big-spending corporate and non-profit clients are playing the same game. Although they're coming to the resort more frequently — group bookings are up more than 40 percent over last year — even large corporations are booking trips the same month as their event. Until recently, that seldom happened.

The trend appears to be plaguing the hotel industry as a whole, said Toby Madden, an economist at the Federal Reserve Bank of Minneapolis.

Madden said about 10 percent of leisure travelers once booked on short notice, within a week or 10 days. In the last year, he's seen such short-term bookings have increased to more than 30 percent of the total. That could stem in part from consumers' continued skittishness about making long-range plans in a weak economy, he said.

That kind of behavior might lead Ronnei at Grand View Lodge to complain more bitterly, if he weren't at times guilty of it himself. His own late orders drive contractors crazy.

Ronnei said the lodge just ordered it's beach chairs for the summer — something in past years it would have done in March — because he wanted to see what business looked like during the first half of the year.

"Now, of course, the shoe is on the other foot," he said. "We're demanding great pricing. We're demanding speedy delivery. And we're demanding what we want, when we want it."

One of the people on the receiving end of this behavior is Tom Steiger. He owns a construction and remodeling business, Floor to Ceiling, based in Baxter.

Steiger, who recently installed wood floors and replaced a carpet at Grand View, said a number of resorts in the Brainerd Lakes area unveiled remodeling plans last year, but many only acted on those plans this year, sometimes with little warning. That means he has to be nimble in working with his suppliers.

"Everyone just learns to help each other and be more flexible in what they do every day to get through it," Steiger said.

No matter how short notice the work is, Steiger welcomes it. At the height of the recession, business from resorts and cabin owners stalled, forcing him to lay off a third of his 20 workers recession.

Now, Grand View Lodge alone is doubling its spending on improvements and equipment. For Steiger, that makes a big difference.

"If this keeps up, we will have to add people back," he said. "That's great news,"

Grand View is still keeping a pot of money in reserve for capital expenditures that won't be spent until there is a sustained recovery. But uncertainty abounds. Last week brought disappointing national job growth numbers and lackluster reports on consumer confidence.

Stinson, the state economist, believes it's unlikely the nation will fall back into recession. But he isn't seeing a vibrant rebound.

"We had a weak first quarter and it looks now like we'll have a similarly weak second quarter," he said. "So the big question is will things pick up noticeably in the second half or is 2011 not as good as 2010 was."

Until there's more clarity on that question, the mix of caution and confidence in the economy is likely to keep buffeting the Grand View Lodge and others in the leisure and hospitality industry.

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