The Hotel Boom

A healthy national hotel market has inspired the development of several new properties in downtown Minneapolis. Can this historically ho-hum hotel scene handle a new surge in supply?

September 2006 | by Andrew Bacskai

Ralph Burnet’s Chambers Hotel will be the first of several new hotel projects to open in the Twin Cities.

Photograph by Travis Anderson

And development isn’t restricted to downtown Minneapolis. Last winter, the Sheraton Midtown opened in the new Midtown Exchange project at Lake Street and Chicago Avenue in Minneapolis. Ryan Companies is currently building the Westin Edina Galleria Hotel & Residences for Edina-based developer Warren Beck. The 225-room, 82-condo structure is scheduled to open in mid-2008 next to the upscale Galleria mall in Edina. Developer Jerry Trooien has included a 250-room Westin hotel in his ambitious Bridges of St. Paul project, a proposed “urban village” on the Mississippi River across from downtown St. Paul. Trooien also hopes to develop a 160-room full-service hotel for Sheraton in Woodbury, at Interstate 494 and Tamarack Road. What’s more, there’s been some chatter about a trio of potential hotel projects in Minneapolis’s Uptown district. And last May, Meet Minneapolis, Official Convention & Visitors Association presented a case to the Minneapolis City Council for a new 1,000-plus-room convention headquarters hotel.

Some marketplace players suspect that not all the talk will turn to action. “A lot of people have said they’re going to build something, but the proof is in the pudding,” Burnet says. “When someone actually starts construction, I’ll believe they’re for real.”

Movin’ on Up

Beyond the sheer number of projects and proposals, another interesting component of the recent flurry of hotel activity is the type of properties entering the marketplace.

Traditionally, the Twin Cities have been a steady but unspectacular hotel scene, with modest occupancy and room rates and mostly business-class venues. “Minneapolis has been kind of been a meat-and-potatoes hotel market,” Graves says. “It’s not necessarily a high leisure-travel destination.” Rather, a hefty portion of the hotel nights are generated by the business travelers that local corporations like Target, Best Buy, 3M, Wells Fargo, Medtronic, and others consistently pull into the marketplace. “Those companies negotiate with all the hotels on an annualized basis, and they sign contracts for preferred rates,” Graves notes.