Minnesota hospitality businesses are wary about the summer season

Minnesota hospitality and tourism businesses reported continued challenges with rising costs and declining customer demand heading into summer in a survey conducted by the Federal Reserve Bank of Minneapolis and Hospitality Minnesota.

The survey received 119 responses from across the state in May 2026; most respondents were owners of overnight accommodation or food and drink businesses. Over half reported lower revenue and profits compared with last spring, with many pointing to increasingly price-sensitive customers.

To gear up for the season, businesses were hiring mainly to replace turnover or fill seasonal needs. Many faced increased difficulty hiring, and additional challenges finding staff coverage for absences. Firms also seemed nervous about the upcoming summer season, which is typically the most important revenue period of the year. Their outlook for the next six months was more negative than positive.

Customers reconsider summer spending

Over half of respondents reported that customer traffic and revenue had declined in the first quarter of 2026 compared with the first quarter of 2025. Profits took an even more substantial hit, with 63 percent indicating that profits fell over the year (see Figure 1).

“Consumers (guests) seem to be holding their discretionary spending ‘close to their chests’ in light of inflationary pressures and alarming concerns about the future,” wrote the owner of a central Minnesota resort.

Predictions for the upcoming season were mostly negative as well. Half of businesses expected their profits to be lower than last summer, and only about 15 percent expected growth. The rest predicted that profits would remain flat over the year.

“Discretionary family spending seems to be down,” a St. Paul entertainment business owner wrote, “so our attraction-based organization is seeing lower attendance.”

New costs pile up

The decline in revenue and profitability had multiple sources, but cost increases were one of the most cited factors.

Nearly 60 percent of respondents reported that their wholesale prices had increased 5 percent or more since the same time last year (see Figure 2). Only a third increased their retail prices by the same amount, reflecting business owners’ fears of driving customers away if they fully passed these costs on.

“Everything is more expensive—food, health care, rent, paper, ink/toner, etc., but we can only raise our hourly rates so much and then customers will complain or go elsewhere,” wrote the owner of an allied business in the Twin Cities.

Some businesses pointed to tariffs as the driver behind some of their wholesale price increases. Over 60 percent reported that tariffs had a negative effect on their business in the last six months.

Another significant challenge was Minnesota’s new paid leave policy that was implemented in January of this year. Over 60 percent of respondents said that their administrative time and operating costs had increased as a result. Roughly 40 percent saw employee absences increase.

“There is not an abundance of employees to fill in when there are large gaps in time off from certain employees,” commented a Twin Cities restaurant owner. “It is very timely, and costly to train a new hire.”

Not all of the comments about the policy were negative. “This has strengthened my relationships with my employees because they know I care about their wellbeing if they are ever in a situation where they need to take leave,” said the owner of a coffee shop also in the Twin Cities.

Amid these changes, wage growth moderated since last May. Twenty-one percent of respondents increased wages by 5 percent or more over the year, compared with 36 percent that did so last year.

Sixty-six percent of respondents were still hiring in some way, with the majority looking to replace turnover and/or fill seasonal positions. Most respondents found it increasingly difficult to find labor for open positions, especially for more senior roles.

“It is easy to hire non-skilled labor, but any skilled positions are difficult to fill,” commented a campground owner in northwest Minnesota.

Expectations sour for summer

As businesses grappled with both new and old challenges, their outlook for the next six months was considerably negative. Exactly half were pessimistic compared with a quarter who were optimistic. The remainder were neutral (see Figure 3).

The multiple shocks businesses have gone through in the last five years have left respondents feeling uncertain; some feared getting kicked while still down with another unexpected shock.

“Between the price of gas/diesel and the cold shoulder Canadians are giving us, I'm not very optimistic on this season’s potential,” wrote an accommodation owner in northeast Minnesota. “Add in the threat of persistent, prolonged wildfire smoke and we could really suffer.”

The Minnesota Tourism & Hospitality Survey was conducted from May 6 to May 27, 2026. The online survey received 119 complete responses from a convenience sample of hospitality and tourism industry business contacts in Minnesota. Sixty percent of respondents were from the Minneapolis–St. Paul metro area. The survey was distributed in partnership with Hospitality Minnesota. Results come from an unweighted convenience sample.