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Hospitality industry on the rebound despite inflation, workforce shortages

There is a lot of good news — mixed with some bad — in the Spring 2022 report led by Hospitality Minnesota.

ST. LOUIS PARK, Minn. — It's the first weekend of June, meaning patio season at The Block Food and Drink has reached full swing.

The change of pace is refreshing, compared to the early days of COVID-19.

"We're expecting really great things for the summer," said human resources director Trish Amatuccio of Craft and Crew Hospitality, which runs The Block and five other Twin Cities restaurants. "So far, sales revenue is up for all restaurant locations. We're seeing record-breaking numbers."

According to a joint survey from Hospitality Minnesota, the Federal Reserve Bank of Minneapolis and Explore Minnesota Tourism, 75 percent of the state's hospitality businesses said they plan to "meet or surpass" pre-pandemic levels this summer, including 70 percent of restaurants and 80 percent of hotels and resorts. 

"New revenue projections for hospitality businesses are the strongest we've seen during the pandemic era as summer approaches. This good news comes almost exactly one year after winning the ability to re-open at full capacity through our work on the Roadmap to Recovery," the Spring 2022 report noted. "Still, significant challenges around workforce shortage and inflation have become more intense, offsetting recovery gains."

For example, about three-quarters of businesses said inflation has driven up costs by at least 5 to 10 percent over the past year, according to the survey. 

At her Craft and Crew Hospitality restaurants, Amatuccio said products like chicken and limes  — for whatever reason  — have skyrocketed in price recently. 

"It is random things that go up significantly in price, and sometimes it's overnight, which is incredibly hard for the bottom line," Amatuccio said. "Unfortunately, for the restaurants, it means we're having to adjust pricing for menu items, which does impact the customer at the end of the day."

Besides inflation, labor shortages also continue to plague restaurant groups like Craft and Crew.

"We hire a lot of seasonal help with our patios. It's been especially difficult this year to become fully staffed," Amatuccio said. "I believe our group is faring pretty well, considering the environment we're in, but we're still hiring. We're always hiring." 

Ben Wogsland, the executive vice president of Hospitality Minnesota, said the industry has lost 25,000 workers statewide since the pandemic started. In the Spring 2022 survey, 88 percent of hospitality businesses described labor availability as "tight," with 64 percent calling it "very tight." 

"You're seeing a lot of employers trying to recruit workers as best they can, trying to get creative," Wogsland said. "Raising wages, workforce flexibility, doing everything they can to attract young workers and get folks to come back and come into this industry."

Meanwhile, many businesses are still working through pandemic-related debt. 

Wogsland said about 70 percent of restaurants in Minnesota took on debt because of COVID, with that debt averaging around $700,000. On top of those struggles, almost half of the hotels and restaurants told Hospitality Minnesota they don't expect to reach "sustained" pre-pandemic revenue levels until 2023 or 2024. 

In the short term, though, the summer 2022 outlook remains strong.

"It is still, I think, a multi-year recovery," Wogsland said. "But certainly happy there's hope on the horizon." 

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