Despite national slump, Michigan vacation rentals are going gangbusters
- The number of short-term vacation rentals continues to grow in Michigan’s tourist meccas
- Rental properties shot up 24 percent in one year in Traverse City and Frankfort
- Occupancy rates and per-night prices are holding steady or going up even as they’re sinking in some other U.S. regions
Peter Van Dyke bought a four-bedroom home bordering the vacation hotspot of Frankfort in October 2020 to capitalize on the burgeoning short-term rental market. He put it on Airbnb a month later, and bookings flooded in. “We had rentals all the way through the holidays,” Van Dyke said.
Vacation rentals for the property, a half-mile walk from downtown Frankfort and Lake Michigan and a 15-minute drive to Crystal Mountain ski resort, paid the owner’s expenses and earned a little money.
“It exceeded our expectations,” he said.
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Three years later, Michigan’s short-term rental market is still expanding, with the number of units advertised on sites like Airbnb and VRBO jumping 24 percent in just the past year in Traverse City and Frankfort, according to national short term rental tracking service AirDNA.
Other tourist-heavy spots in northwest Michigan are growing, too. Total listings in the Charlevoix region are up 7 percent in the past year, and Williamsburg, between Elk Lake and Grand Traverse Bay, is up 16 percent.
Yet even as the number of vacation rentals in the northwest region of the Lower Peninsula surpassed 2,700 this year, there are signs that the market may slow in the future. Some owners have more open weeks during prime travel season, and vacationers, with more options, are waiting longer to put down deposits.
Some tourist areas across the U.S. have witnessed a slump in an oversaturated short-term rental market. Cape Cod, Maui and some Florida beach towns have seen a decline in bookings compared to last year. Stays in short-term rental properties are down 29 percent in San Francisco compared to 2019, and revenues have plummeted about 50 percent in Austin and Phoenix, according to AllTheRooms, a short-term rental analytics service.
That’s not happening in Michigan, at least not yet. Much of the decline nationally has occurred in cities, where visitors have plenty of properties (and prices) to choose from between short-term rentals and hotels. Michigan’s short-term rental hub is in comparatively rural, waterfront areas.
“It used to be half of all (short-term rentals in Michigan) were located in counties that border Lake Michigan,” said Whitney Waara, COO of Traverse City Tourism. “Now, it’s about 60 percent.”
The number of rental properties has increased, and demand is up even more. Even with more available rentals, occupancy rates have inched upward in Traverse City (by 3 percentage points, from 65 to 68 percent), Frankfort (8 percentage points) and Williamsburg (9 percentage points) in the past year, according to AirDNA; while occupancy is down 2 percentage points in the Charlevoix area.
“There is no sign of a slump in these markets yet,” said Madeleine Parkin, of AirDNA.
Average rates per night are holding steady or going up. Visitors can expect to pay an average of $400 a night for an Airbnb or VRBO rental in Traverse City or Williamsburg, and $450 a night in Charlevoix. Frankfort is a comparative bargain, with an average of $368 a night.
“We’ve had pretty continuous growth” in short term rentals, Waara said. “I suspect it will begin to soften at some point and become a little more normalized.”
While short-term rentals continue to be a moneymaker for many investors, they have a downside for some Michigan’s tourist destinations, which are facing a housing crunch for year-round residents. In Charlevoix and Boyne City, companies and school districts have struggled to find affordable housing for new employees moving into the region.
Some communities are beginning to implement limits on short-term rentals in an effort to preserve housing for residents.
One change that could indicate the market is peaking: Owners are booking their properties not as far in advance as they once did, Waara said. “More people are booking ahead (just) two to four weeks,” she said, a possible sign that, with so many options, vacationers don’t feel a need to rush to put down a deposit.
Van Dyke, the Frankfort short-term rental owner, said he is seeing warning signs. He’s had to lower the rate of his upscale vacation home from $700 a night to $550, and he still has half of August open.
“It’s still a really strong investment,” he said, “but I hear the market is soft.”
The increased competition will eventually benefit vacationers, Waara said.
“It's still a hot market and revenues are still going up overall,” she said. “But I hear from individual owners that they are concerned about a greater supply.
“There’s going to be more competition, and owners will have to step up.”
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