Tourism Improvement District Updates

A Tourism Improvement District (TID) is a public-private partnership created for the purpose of providing supplemental funding for new tourism activities by placing a service charge on the sale of a lodging room. Minnesota passed legislation in May 2023 for municipalities to consider forming TIDs with their hotel community. Since June, a task force of Minneapolis hotel general managers has met with Meet Minneapolis staff on a biweekly basis to determine the parameters of a potential district.

The recommendations of the TID task force are contained below in the educational PowerPoint and draft plan:

TID Educational PowerPoint

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Recovery from the COVID-19 pandemic has been uneven, and Minneapolis is not recovering as fast as our competitors.
Yearly hotel occupancy has not recovered to pre-pandemic levels. Business travel has not fully rebounded, and there is a need period in our Minneapolis community around holidays and the winter. In addition, there is currently no way to develop or support experiences, activations, special events, and/or large-scale leisure campaigns in Minneapolis.
- In 2023, overall hotel occupancy in Minneapolis was 51.2%, the lowest among our city’s competitive set.

A TID is a public-private partnership created for the purpose of providing supplemental funding for specific tourism activities.
These districts usually include all hotels in a city or county. They place a charge on all hotels, typically a percentage of room night sales or a fixed dollar amount per night is applied to a guest’s bill at checkout.
The funds generated are used to invest in new tourism-specific activities that benefit hotels.
A TID’s operations are determined by the businesses funding the TID, in this case, our Minneapolis hotels.

According to Civitas Advisors, the first tourism improvement district was formed in California in the summer of 1989.
Currently, there are 211 TIDs in 21 states.

The funds generated by a TID are typically used for additional investment in tourism marketing, sales, promotions, website and digital presence, and group sales.

The TID is managed by a governance committee made up of leaders from lodging businesses that charge the assessment.
The governance committee makes decisions about the use of the funds and has full authority to manage matters related to the TID.

All the activities of the TID must be invested in new strategies to attract business and increase overnight visitation to businesses that pay the assessment (in this case, Minneapolis hotels). Cities that have established a TID have seen an increase in visitation compared to cities that have not.

The Minneapolis TID (MTID) will be managed by a nine-member governance committee made up of leaders from lodging businesses that charge the assessment. The committee makes decisions about the use of the funds.
The TID governance committee will work with Meet Minneapolis to execute the plan of work. The annual plan of work will also need to be approved by the Minneapolis City Council every year.
Regular management meetings of the governance committee will take place, allowing for flexibility and providing of resources when market conditions change quickly.
After successful formation of the MTID, the MTID may be modified pursuant to Section 428B.04 of the TID Law. Upon written request for the modification from the TID Governance Committee, the City Council may conduct a public hearing on the proposed modifications and adopt an ordinance modifying the MTID.

Submit petitions totaling more than 51% of hotels to the City of Minneapolis – meaning 24 of 47 hotels in the city (with 50 hotel rooms or more) must vote YES for approval.
Once the city receives the petition, they can begin their approval process. This takes approximately two months for council review and passage. The Minneapolis City council works on two-week cycles, and approval will take three cycles if all goes well.
There is also a 45-day appeal period that is required by state law. The ordinance will go into effect after the appeal period.
The TID could start collections in summer 2025.

The current lodging tax rate of 15.025% ranks near the bottom of Minneapolis’ competitive set.
With a TID, Minneapolis would rank in the middle of its competitive set (17.03%).
In Minneapolis, current lodging taxes are used to fund transportation, housing, Target Field and other downtown assets such as the Minneapolis Convention Center.

All hotels in the city with 50 or more rooms will be part of the Minneapolis Tourism Improvement District.

The hotel task force group has determined that the assessment should be 2% of gross room rental revenue only.
A 2% assessment fee is the industry average for a TID assessment across the country.

Sales - 35%
- Support site selection and attendee room night production. The sales program may be used for trade show attendance and create signature events in key markets to promote the destination.
Marketing/PR - 30%
- Promote the destination for overnight visits. The program will have the goal of increasing demand for overnight visitation and room night sales at assessed businesses.

Special Projects, Activation - 25%
- Sponsor and/or create special events or activations within the district to drive leisure room nights to the destination during need periods.

Administration, Collections - 5%
- Administrative staffing costs, office costs, and other general administrative costs such as insurance, legal, and accounting fees.

Contingency, Reserve - 5%
- If there are contingency funds collected, they may be held in a reserve fund or utilized for other programs, administration, or renewal costs at the discretion of the TID Committee
- Policies relating to contributions to the reserve fund, the target amount of the reserve fund, and expenditure of monies from the reserve fund shall be set by the MTID Committee

The Minneapolis TID will be formed for a five-year period.
After five years, the Minneapolis TID may be renewed and/or modified if lodging business owners support continuing the district.