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When Single Industry Towns Work

May 15, 2013 By Agata Miszczyk, Undergraduate Research Fellow

Editor’s note: As Minnesota’s Iron Range and wood products regions have learned over generations, single-industry economic dependence can lead to unpredictable, unstable local job markets. However, there are places like Rochester where sector specialization or clustering creates thriving, sustainable local economies, especially around health care. Former Minnesota 2020 Undergraduate Research Fellow Agata Miszczyk explored this topic for her Macalester College honors thesis. Over the next few weeks, we’ll bring you relevant excerpts from that research as the Mayo Clinic embarks on its plans to become a destination medical center.

Mayo’s Indirect Economic Impacts
In the next decade, Rochester expects to see 1,800 new bio-tech jobs, according to John Wade, President of the Rochester Area Chamber of Commerce. Most, he predicts, will result from smaller, innovative, start-up companies influenced by Mayo. Economist and urban theorist, Richard Florida, also points out Rochester as a place of fast growth, specifically in the creative class sector, a term that refers to many professions, including healthcare.

In Florida’s book The Rise of the Creative Class, he forecasts Rochester’s growth to be much higher than in cities such as Chicago or Los Angeles. Based on Minnesota Department of Employment and Economic Development (DEED) data, such a prediction is realistic. DEED estimates health care practitioner jobs could grow by 4,500 in the Rochester region. This would coincide with a proposed multi-billion dollar construction plan that will add thousands of direct hospital jobs and attract thousands of more patients from outside Minnesota.This will have a ripple effect on the wider Rochester area, creating a need for industries and services, including those in lodging.

Rochester welcomes 2.75 million visitors annually, 763,000 of which are patients and their families. The city has a very high number of hotel rooms for a town with 106,769 people (U.S. Census). As of July 2012, Rochester had 5,362 hotel rooms, according to a Post-Bulletin article, second to only Minneapolis. Such demand puts the average Rochester hotel room price at $95, much higher than other greater Minnesota cities. In June of 2012, Rochester hotels were running a 68% occupancy rate. Rochester houses specialty hotels usually not available in a city its size, including many extended-stay hotels, catering to patients with a long treatment time, and some high-end options.

Bruce Rohde of Facility Project Services at Mayo says that the Mayo Clinic does not partner with any private or corporate business in offering patient services that Mayo does not provide, such as accommodation. However, when Mayo sees a need for something they often bring this up to the City. Recently, patients illustrated a need for more high-end accommodations. The Kahler Grand Hotel in downtown Rochester responded by creating penthouses and suites on the top two floors.

Since Mayo patients spur much of Rochester’s lodging industry, many hotels provide shuttles to and from Mayo Clinic buildings, eliminating the need for some patients to rent cars.

As long as Rochester is predicted to grow, hotel development will continue to try to stay ahead of the demand, says Brad Jones, president of the Rochester Convention and Visitor Bureau.

Aside from industries geared towards patient and employee support, Mayo fuels many spinoff ventures.

“Having the Mayo Clinic, IBM, and now the University of Minnesota all located…[in Rochester] has spawned numerous businesses that want to take advantage of the opportunity to be close to global leaders in healthcare and technology. The Minnesota Partnership for the biotechnology and Medical Genomics is an economic development venture between the Mayo Clinic, University of Minnesota, and the State of Minnesota,” according to Olmsted County’s 2010 Comprehensive Annual Financial Report.

Numerous “spinoff” businesses have been started as consequence of the healthcare industry monopoly in Rochester.

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