Otter Tail Resorts: Part I

This is the first of a three-part series by Kelly Asche on the Otter Tail Resorts research project. Part I is an overview of the importance of resort guests to local economies.

Since 1985, over 50% of Otter Tail County’s resorts have closed. As tourism is the county’s 2nd largest industry, the importance of the success of these businesses cannot be overstated. And the implications of this decline are exactly what Nick Leonard, the Director of Tourism and Economic Development for Otter Tail County, wanted to find out.

We brought together the tourism expertise of  Ryan Pesch and Dan Erkkila from the U of MN Extension along with the hands-on experience of Nick Leonard (who is a resort-owner himself) to survey and interview resort owners about their future plans and what they saw as the largest barriers to business.

The following information is taken from the full report giving an overview of the economic contributions of resorts in Otter Tail County. You can find the full report at z.umn.edu/ottertailresorts.

Economic Contributions of Resort Visitors

Why focus on resorts? Interestingly, they play a significant cultural and economic role in Minnesota. For many middle-class families, they serve as affordable access points to Minnesota’s lakes. This access provides the region with many short-term benefits, such as money being spent in local businesses, and long-term benefits, such as the opportunity to promote itself to potential future residents.

Our research team looked at the short-term benefits the resort guests have on local businesses in Otter Tail County. Combining data from property records, Explore Minnesota, and our survey, we estimated that there are 114 resorts in operation that serve an estimated 8,550 guests at full capacity. In 2014, these resorts brought in $9,638,388 in gross sales (Explore Minnesota, 2014).

Based on our survey, we conservatively estimated that the 114 resorts host nearly 800,000 people-days (number of people multiplied by the number of days occupying a facility), assuming 93 full days at full capacity. We believe this estimate to be conservative since it does not take into consideration winter and shoulder-season months (early spring and late fall).

Due to Detroit Lakes similar resort culture and proximity to Otter Tail County, data from a previous U of MN Extension study in the Detroit Lakes area was used as a proxy to estimate the spending of resort guests in Otter Tail County. The study intercepted visitors on-site and asked about their spending while on vacation. Using the Detroit Lakes spending data and applying it to the number of resorts and guests in Otter Tail County, our results show that overnight guests spend an average of $77 per person per day in spending categories besides lodging. Annually, these guests spend $61,226,550 on retail and service operators in the county (Table 1).

Category Spending per Person per Day Total Spending
       Restaurants or Bars $21.00 $16,698,150
       Transportation (including gas) $16.00 $12,722,400
       Groceries $8.00 $6,361,200
     Shopping $17.00 $13,517,550
       Recreation or Attractions (including guides or outfitting) $14.00 $11,132,100
       Miscellaneous $1.00 $795,150
Total $77.00 $61,226,550
Table 1: Resort guests spending per day by category

Impact of Seasonal Residents vs. Resort Guests

Recent University of Minnesota Extension research, “Profile of Second Homeowners in Central and West Central Minnesota” (Ryan Pesch, 2014), brought attention to seasonal residents and their local spending where their second home resides.  Since Otter Tail County has many second homes (8,114 with a building value $20,000 or greater, according to 2014 property tax records), it may seem reasonable to assume that the contributions of resorts guests are inconsequential or minimal in comparison.  However, our research finds that resorts guests and overnight visitors spend significantly more per person than seasonal residents (Table 2).  

Taking the categories from the above table and applying them to the categories in the Pesch report, we report that resort guests spend $59 per person per day (assuming Otter Tail resort guests are similar to Detroit Lakes area visitors), whereas a seasonal resident spends $11.06 per person per day (Table 2).   

Even though there are many more seasonal residents in the county, the per day spending of resort guests more than makes up for their smaller numbers.  Research on seasonal residents found that they spend an average of 93 days at their second home and four people on average occupy the residence when in use.   At full capacity for 93 days, resorts are hosting 795,150 people-days, whereas seasonal residences hold 3,018,408 people-days (8,114 homes hosting an average of 4 people occupied for 93 days).  The total spent by seasonal residents is $33,397,224 compared to $46,913.850 spent by resort guests.

Spending Category Seasonal Residents Resort Guests
Per person per day Total for Otter Tail Per person per day Total for Otter Tail
Groceries or Liquor $3.87 $11,684,160 $8.00 $6,361,200
Dining or Bars $2.39 $7,205,232 $21.00 $16,698,150
Transportation (including gas and auto service) $2.39 $7,205,232 $16.00 $12,722,400
Entertainment and Recreation $2.42 $7,302,600 $14.00 $11,132,100
Total $11.06 $33,397,224 $59.00 $46,913,850
Table 2: Comparison of Seasonal Resident and Resort Guests Spending Estimates for Otter Tail County

Another way to view this data is to break down the economic impact based on lakeshore frontage. Figure 1 is a breakdown of the percentage of lakeshore in Otter Tail County by each type of property. Seasonal residents own 43% of the lakeshore in the county. The resort and campground businesses are within the “commercial” category and make up 1.5% of all lakeshore.

piechartOT

Figure 1: % of lakeshore owned by each category

Using the total spending per day from above and applying it to linear feet of lakeshore, it is estimated that seasonal homes spend $32 per linear foot, while resort guests spend $764 per linear foot.

It is important to recognize that these findings do not diminish the impacts of 2nd homeowners, but they do highlight the importance of resorts in our region. Resorts bring a lot of visitors to a region like Otter Tail County, which impacts local businesses in very positive ways, while utilizing a very small percentage of real estate.

3 thoughts on “Otter Tail Resorts: Part I

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