Mild winter melts profits at N Minn. tourism businesses

For many small business owners in northeast Minnesota, winter typically brings the sound of money.

It means the roar of snowmobiles as they approach the Dixie Bar & Grill, five miles north of Two Harbors. Along the North Shore, catering to snowmobilers who stop for a drink or food after a long ride is an important part of the economy.

But Phil Carlson and his wife Diane, who rode a popular state trail from Hermantown for lunch at the Dixie Bar, nearly gave up on snowmobiling this winter.

"It's been a crazy season, that's for sure," Phil Carlson said. "We thought maybe we wouldn't even get a chance to ride this year."

It's been an unusually mild winter across much of Minnesota, and a lack of snow has dealt a severe blow to some businesses that depend on winter tourism in northern Minnesota.

After the Carlsons hit the trail, the Dixie Bar was pretty quiet, with only a couple tables full. Owner Scott Larson said January is typically one of his best months because of snowmobile traffic.

"This year was our worst by far," he said. "We were down around 39 percent."

In February, the bar's business was down nearly 30 percent.

That pain is being felt in the tourism industry across the north-central United States, according to the Federal Reserve Bank of Minneapolis. Businesses are reporting double-digit drops in revenue from last year, regional economist Toby Madden said.

"We got a wide range of estimates from business owners, from down 10 percent, down to 70-80 percent," Madden said.

That can translate to fewer jobs. Employment in the tourism sector for the three county-Duluth region is the lowest in 18 years.

"I have five employees that haven't worked for six weeks," said Vickie Louks, general manager of the Country Inn in Two Harbors, just north of Duluth. "Because I have to keep my main employees at least in enough hours that they will stay with me."

Louks said she tries to find odd jobs for the people out of work.

"But if I'm not making money, I can't out of the kindness of my heart have them come here just to clean something that nobody's used," she said.

City officials in Two Harbors say overall lodging tax revenue was down by nearly one third in January compared to last year.

Farther up the shore, in Cook County, there's been more snow and more tourists. But even there, January's lodging tax receipts were off about 7 percent.

Dan Baumann, who owns the Golden Eagle Lodge and Nordic Ski Center on the Gunflint Trail, said it's tough to convince potential customers to ski if they see brown grass out their kitchen windows.

"Even though we have snow ... they don't believe us," he said. "We put a web cam up, that takes a picture every hour, and that shows you exactly what's there. There's no beating around the bush."

But pictures may not provide enough proof for people who feel the psychological effects of a mild winter. Jim Vick, marketing director at the Lutsen Mountains resort said customers want to experience winter — as long as the weather is not overwhelming.

That can cut both ways.

"Last year at this time I was dealing with snow fatigue in the market," Vick said. "It got to be March and it had worn on folks. And it was like the last thing they wanted was snow."

Elsewhere, some businesses have succeeded by thinking beyond snow.

Jody Hepola who owns Hugo's Bar in Brimson, Minn., on the state snowmobile trail, said snowmobilers typically are her bread and butter. Not this year. Instead of snowmobile suits, this year a visitor would find snowshoe making and antler basket classes, cribbage tournaments and even a hot dish cook-off at Hugo's.

"We've just been creative and come up with lots of parties and classes to keep things going," Hepola said. "It's actually been a really good winter."

Still, even Hepola is hoping that the warm weather holds off long enough to allow at least a couple more weekends of good snowmobiling — and the reliable business it brings.

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