July 12, 2021

This time last year, fewer than one in three Sioux Falls-area hotel rooms was booked on a good day.

Now, occupancy rates are hitting 60 percent on weekdays and are going as high as 94 percent on weekends, said Teri Schmidt, executive director of Experience Sioux Falls.

That’s one piece of good news for the city’s hospitality industry, but hotel managers aren’t exactly able to celebrate.

While the demand for rooms and the hotel revenue are coming back to pre-pandemic levels, what hasn’t returned to normal is the staff.

“I feel like this has been more stressful now than it was a year ago,” said Paul Hegg, president and CEO of Hegg Cos., which has four hotel properties in Sioux Falls.

Hegg has weekly calls with his staff to brainstorm ideas to find employees and has tried incentives, including referral bonuses for workers who bring friends to the company.

Meanwhile, Sioux Falls’ occupancy rates year to date put it ahead of 10 other comparative regional communities, including Fargo, Omaha, Des Moines and St. Paul, Schmidt said.

That boost in demand also is illustrated in the city’s sales tax report, which shows lodging tax surging in May. Year over year, it was a fivefold increase in lodging tax revenue, according to the latest city finance report.

Tourism demand is back statewide too. South Dakota tied with Florida for top in the nation when it comes to travel and tourism, according to the latest Economic Impact Report from the U.S. Travel Association.

It’s keeping up with demand that’s the challenge.

“I’m not sure we’ll see 100 percent of where we were pre-pandemic anywhere anytime soon,” said Tom Biegler, president and CEO of Regency Hotel Management. “I can’t envision a scenario where we have an available employee base to even allow us to get back to that number.”

Last spring, Biegler saw mass furloughs throughout the company, to the point where he got down to about one-sixth of normal.

“When we went to try to hire people back, there weren’t as many people to hire back,” he said.

For Matt Brunick, general manager at the Holiday Inn Express & Suites near The Empire Mall, staffing is such an issue that he has had to institute a two-night minimum because there aren’t enough employees to clean the rooms for people who stay just one night.

“It discourages some people from booking, which is unfortunate,” Brunick said. “But we just don’t have much of a choice.”

The hotel is running at 60 percent to 65 percent occupancy, he said, which is closer to normal, but until he can hire more employees, there really is no “back to normal.”

“We’re having to put rooms out of order on Sundays and play catch-up all week in hopes to have all the rooms available to sell on the weekend,” Brunick said.

The shortages also are taking a toll on the employees because they’re asked to do more with less, Biegler said.

“We’ve got a lot of people that just, they’re tired,” he said, adding that it’s hard to know how to help when there’s no sign of a return to normal employment levels anytime soon.

One of the factors adding to the hiring issues was how quickly the demand for rooms came back as people returned to traveling.

“There was very little warning that this ramp-up would be such a V-shaped return to normal revenue levels,” Biegler said.

Leisure travel is driving that surge in demand for hotel rooms.

Typically, hotels would see a mix of business travel, people traveling to conventions and leisure travel, but the vast majority of folks booking rooms this summer are on vacation.

“They are coming from not just this region, but they’re coming from all over the United States,” Schmidt said. “People are traveling, and they’re coming here.”