Hotels in Fargo-Moorhead, North Dakota hit hard as pandemic losses lead to closings

FARGO — The hotel industry has been hard-hit by the COVID-19 pandemic, and Fargo-Moorhead and North Dakota have not been spared.

At least seven hotels in the metro area are closed at this time, most of them victims of bottom lines that went into the red as people started hunkering down a year ago.

Room reservations dried up as malls and non-essential stores closed for weeks, concerts and conventions were cancelled, and businesses turned to “Zoom” calls rather than face-to-face meetings.

Plenty of rooms that would have been filled by vacationing Canadians have also remained empty. The border with Canada has been closed more than a year, and will be another two weeks, all part of the effort to stall the spread of the coronavirus that has killed at least 550,000 people in the U.S. alone in the last year.

Across North Dakota, about 30 hotels and motels have closed since mid-2019, many of them due to the economic disruptions of the pandemic, a tourism official said Tuesday, April 6.

Hotel owners are toughing it out, hoping things get better.

Pinak Patel is the manager and co-owner of West Fargo’s Rodeway Inn. The budget hotel at 731 Main Ave. remains open, even as the nearby Howard Johnson by Wyndham West Fargo is shuttered due to the pandemic.

“We managed to keep it open. Survived, I guess,” Patel said April 6.

Patel said he took part in the Paycheck Protection Program and has taken out disaster loans, which he’ll have to pay back.

A water tank had to be repaired, and the hotel is undergoing renovations even as it serves its guests.

Business has been slow, but it is picking up a bit as spring arrives, he said.

“Very much a hard time,” Patel said.

Other hotels in the metro area are in the same straits, some with parking lots so empty that if you didn’t try the door, you couldn’t be sure if they were open.

At least seven of the 60-plus hotels in the metro area were at least temporarily closed as of April 5-6, several of which had signs saying that COVID was the cause:

• Quality Suites, 1415 35th St. S., Fargo

• Kelly Inn, 4207 13th Ave. S., Fargo

• Econo Lodge East, 1401 35th St. S., Fargo

• Econo Lodge West, 3825 9th Ave. S., Fargo

• Scandia Hotel, 717 4th St. N., Fargo

• Red River Inn and Suites 901 38th St. S., Fargo

• Howard Johnson, 525 Main Ave., West Fargo

Of course, the closings are a moving target, as some hotels closed at some point during the pandemic, to reopen later. And hotels closed now could reopen quickly if their owners decide the time is right.

Certainly not all of the hotels that closed were shuttered due to pandemic losses alone. Some may have already been showing poor returns and the pandemic was the last straw; other hotels may simply have been on land that proved more valuable for other businesses than lodging. That latter seems to be the case for the Kelly Inn, which Fargo city documents indicate may be replaced by a car wash .

Other strategies came into play, too. Hotels shut down whole floors, while others temporarily closed and funneled guests to hotels owned by the same corporation.

“The hotel market has been depressed” through the pandemic, said Charley Johnson, president and CEO of the Fargo-Moorhead Convention and Visitors Bureau. “The whole hospitality sector has been devastated by this.”

In the fourth week of March 2020, the occupancy rate of F-M metro hotels stood at an anemic 17.2%. This year for the week ending March 27, occupancy had bounded back to 54.2%.

“That’s good. That’s good,” Johnson said. “So now, we look like we’re really great.”

In February of this year, local hotel occupancy was 48.6% (and about 35.3% statewide for North Dakota). In February of 2020, just before COVID-19 took hold of the nation, the occupancy rates were higher at 55.5% (47% statewide), he said.

“That was the last real good month of business last year,” Johnson said.

Hotel revenues have been significantly down through the pandemic, Johnson said.

The revenue for calendar year 2020 was 39.5% below what it was for 2019, he said. Revenue from this February was 25.6% less than it was in 2020, but that was “actually a big improvement,” Johnson said, as revenues between the 2020 Christmas season and January were 30% below what they had been for 2019.

Johnson expects revenues will continue to bounce back as tourism and sporting events return, vaccinations drive down COVID-19 infection numbers, and the economy in general improves.

“Now, for the rest of the year …. We’ll look like gangbusters. That's good. It’s kind of nice,” Johnson said.

The area will also have another note of positivity this spring, with the opening of the 125-room luxury Jasper Hotel in the RDO Building in downtown Fargo, he said.

Sara Otte Coleman, longtime director of the Tourism Division in North Dakota’s Department of Commerce, said changes in the hotel occupancy trend lines over the last year were sharp through the first and second waves of the coronavirus pandemic.

Statewide room occupancy rates that approached 50% in February 2020 had bottomed out below 20% by April. Occupancy had topped 50% in August 2020, but was still well below the 2019 summer occupancy rates that approached 70%, Otte Coleman said. Occupancy rates then slid through October, November and December, she said.

Since mid-2019, she said the state saw about 30 hotels close, accounting for nearly 600 rooms.

But things are bouncing back, she said.

“I think we’re seeing good growth. Last week was slightly up again in Fargo, 54.2%,” she said.

Overall, the pandemic hasn’t been kind to the state’s travel industry, which supports 42,363 jobs.

North Dakota saw 18.7 million visitors in 2020, down 21% from 2019. Those 2020 visitors spent $2.1 billion, down 31.8% from 2019. While those 2020 visitors paid $218.9 million in state and local taxes, that was also down 27.1% from 2019, the Tourism Division said in its 2020 annual report.

Other 2020 statistics include:

• North Dakota saw a 30.4% decrease in hotel room nights sold.

• Airport arrivals dropped 51.3%.

• Canadian border crossings were down 77.1%.

“We worked really hard during this pandemic to put support out there for the hospitality industry,” she said. “Some of those businesses lost 90 to 100% of their income over a year.”

The state distributed $23.7 million in Hospitality Economic Resiliency Grants, the 2020 report said. Another $8.4 million was awarded by the Hospitality ERG Plus program.

Otte Coleman said the state’s wide open spaces will offer visitors a lot of worry-free options for vacationing as the pandemic loosens. In fact, despite the pandemic, state and national park visits were up fractionally - by 0.32% - in 2020.

“I’m feeling really good that we’re going to see a good rebound this summer,” Otte Coleman said.

Reopening the border with Canada, when that happens, will help even if border crossings are restricted to the neighboring provinces of Manitoba and Saskatchewan.

“We’ve lost over 500,000 visitor trips in the last year from Canada,” she said. “We’re ready to start welcoming them back.”

Nonetheless, it will take a couple of years before leisure travel bounces back. Business travel numbers might not bounce back until 2025, Otte Coleman said.