Growing Pains: Traverse City Tourism CEO Talks New Motels, Demand, Labor Shortages, And Growth Opportunities

Yesterday, The Ticker shared updates on the status of eight different hotels that are either under construction or planned for the near future in Traverse City. But perhaps the biggest question about these properties, beyond their construction timelines and estimated opening dates, is whether Traverse City’s tourism economy can even support them. To answer that question, The Ticker touched base with Trevor Tkach, President and CEO of Traverse City Tourism (TCT), to talk local hotel inventory, recent occupancy trends, labor shortages, and new TCT marketing strategies.

Ticker: Eight new hotels are in the works, which would bring a 20 percent increase in the number of hotel rooms in Traverse City. What does that mean for TCT?

Tkach: It’s always exciting for us to see new and fresh products in the market. And there’s definitely demand for it at certain times of the year. But we also know we have to work hard to keep all of our transient options viable throughout the year. That is a challenge, and as we get more of these units in the market, it’s going to become a bigger challenge. Per the law of the land, these new properties all fit the criteria and will become TCT members when they get online. We’ve had interaction with some of those groups already, and we’re excited to get moving on programs that will help keep their rooms full and keep the travel economy strong.

Ticker: You previously told The Ticker that this summer was a little bit slower than the past few years…

Tkach: We haven’t finished out the year just yet, so I don’t have a full report to deliver. But I can say that occupancy has been kind of soft – meaning we haven’t seen real growth in occupancy year-over-year, at least for the summer months. We started off really strong in the first quarter of 2022. We had a really strong ski season, and we started to see some of our conference business come back. But then, in the summer, we saw occupancy that was maybe a little bit below what we saw in 2021. Northern Michigan did pretty well with occupancy during the pandemic, especially in the summer months. A lot of people used northern Michigan as an escape from the pandemic in the bigger cities, so we were the benefactors of that migration of people into more rural spaces. The growth we saw this year was more relative to rate increases, so anything that we were seeing in gains was really just keeping up with inflationary challenges in the marketplace.

Ticker: Obviously, not all these rooms are coming online at once. It’s going to be more of a rolling process over the next 4-5 years. But 800 rooms is a lot, and if we’re not seeing off-the-charts growth in the local tourism economy, how much space is there for all these new hotels to come in fill those rooms and be successful?

Tkach: I wish I had a crystal ball that could answer this age-old question of whether northern Michigan can keep growing as a four-season destination. We know that summertime can carry, and that there will be enough demand to keep filling more units as they come online. I think the growth of short-term rentals (STRs) has proven that. We’ve seen significant growth in STRs over the past 5-10 years. In recent years, we’re looking at probably about 20 percent increase in inventory in that segment alone. And in general, we can say that the increase in STR inventory hasn’t reduced demand for traditional hotel lodging. Until this past year, we haven’t seen occupancy numbers stagnate or go backward, except for when we were hit with the pandemic.

If you think about it, those increases in STRs are just increases of more units in the market. So, to say another hotel coming in with 100 units is something that this market can’t absorb? I would argue that we can absorb that – in the summer months, at least – because we’ve watched it happen with STRs.

Where I think we need to be mindful is with the other three seasons. A lot of STRs might be seasonal, where they put that inventory online in the summer months and then pull it back off in the winter. Hotels don’t tend to do that, especially the ones we’re seeing built right now. The Hilton Tru, that’s not going to be a seasonal property. When that one turns on, that’s going to be on 365 days a year. So that’s 90 rooms times 365 days that we need to try to fill to maximize our potential. And that’s what TCT is here to help do. Keeping the travel economy strong throughout the year, keeping small businesses viable, and keeping workers fully employed and making better wages – those are our goals.

Ticker: Speaking of which, TCT is expanding upon the ways in which you attract tourists to the region. You just hired former Traverse City Pit Spitters GM Mickey Graham to focus more on sports, concerts, and events. Can you speak to how those types of new initiatives might help fill some of these rooms?

Tkach: Mickey Graham is a great example of an investment in a person to help develop programming in times of need. We don’t need another major event in the summertime on the weekend. We need midweek events in the spring. We need activities to happen now, in the fall. We’ve proven they can work. And I’m optimistic to see things like the comedy festival coming back online, because any activity in the winter that can bring people in from out of town to spend the night, that’s important to our economy.

The sports piece is a big piece, too. We’ve seen significant interest from our own community to have more sporting events and more recreational facilities available throughout the year. I’m predicting we will see that start to come to fruition over the next five years. There is enough interest and enough demand, and now that we see these new rooms in market, there’s definitely justification to start to build more resources to help bring sports tournaments here, and then to use those events to fill rooms and keep businesses busy year- round.

Something that has been a critical piece of the puzzle for us for many years is conferences and group business. That traditionally happens in our market at a pretty high level between September and May. And we need those events. Fortunately, they’re starting to come back in force, and we’re excited to see that conference calendar fill up for a lot of our full-service properties. We’re hoping to keep that pipeline full of leads and opportunities, because often, we’re planning 3-5 years out for those events, and all of that disappeared during COVID.

Ticker: The other big thing here is that eight new hotels means eight new hotel staffs…

Tkach: I think that’s the thing that is giving us all heart palpitations right now. All these cranes and air and all this stuff being built – and it’s not just hotels – you can’t help but ask, ‘Where are the workers going come from?’

Our industry is looking very closely at ways to help address this challenge. I don’t think it’s going to get solved right away. Hospitality was hit probably harder than any other industry by COVID’s first wave, and It’s hard to bring people back to an industry where more than 25 percent of the people had to be let go or chose to leave during the pandemic. So, we’re already working from behind as an industry, trying to recruit people back and to encourage new workers into this industry.

There are seasonal solutions for some of this stuff. Some of the changes at the federal level related to visa workers being able to come into market and help sustain our economy, that’s going to help. Because there are never going to be enough workers to fill all the positions. There’s a misconception that visa workers are going to take a US citizen’s job, and that’s just not the case. There are simply not enough people in-market year-round to cover all these jobs.

But it’s expensive to [bring visa workers here]. Grand Traverse Resort is making a huge investment to build housing for these folks. And across the board, there are big investments being made to make sure that our hotels can provide the service and keep open all the amenities that visitors have come to expect. At TCT, we’ve tried to find ways to make sure childcare is addressed. We’ve been a partner with the Tri-share program with the state since its inception, trying to help relieve families in the hospitality industry of the burden of childcare expense. And then we’re also looking at housing in general. We’ve invested in Housing North, and we continue to stay engaged on a number of fronts to see what opportunities might pop up where TCT can have an impact on the housing piece.

Ticker: Any other major new investments or growth strategies to get TCT to the point where it can effectively fill an extra 800 rooms?

I think there will be some growing pains over the next five years, meaning that demand probably won’t climb annually as quickly as supply climbs. We’re going to have to work really hard with our members to find solutions to keep all the hotels full, and that’s why we are being innovative, and bringing on new people, and looking at new projects that can potentially beat the seasonality of our market. And that comes down to amenities, mostly indoors. Again, the sports and entertainment component is very important to us. We know that if we can continue to create events that are appealing not just to locals, but also to people outside the market where they’re willing to come and spend a night or two, that has a profound impact in the middle of January, or April, or November. We’ve got some real soft spots in the calendar right now, where occupancy drops to 25 percent or lower. We have to work really hard to come up with any and all opportunities that would bring people here.

And then we’re also working with the airport. If we can get more direct flights here, that helps the economy and helps locals with options for travel. So, I think you’ll see a lot of our attention focused on destination development going forward.