Short term rental owners in northern Michigan and beyond see drops in revenue
Traverse City is bustling in the summertime.
On this weekday afternoon, people shuffle into restaurants and shops. Some are preparing for a trip to the beach. Others are just back, taking a break from the sun for libations, tasty treats and souvenirs.
And all these people need a place to stay.
“I think people were looking for more private places,” said Rebekah Allen. She and her family own an Airbnb unit. It’s a garden level condo in the Village at Grand Traverse Commons, on the site of a former psychiatric hospital that’s been repurposed into residences, restaurants and shops.
“There was some hesitancy to go to these big resorts and big hotels, so Airbnb seemed like the way to go," Allen said. "You have your private kitchen most of the time, it’s only one entry instead of going through lobbies and things like that.”
They started renting the condo in 2019 and hired a management company a couple years later as life got busier with kids and other jobs.
It took some time to get going, but they had their strongest season during the pandemic shutdown.
“Even with that, there was a chunk of time where we weren’t allowed to rent out anymore," Allen said. "Even with that pause, we still had our best season."
But people who own vacation rentals in northern Michigan — including the Allens — are seeing a change.
“We’re just seeing a big, big drop in revenue,” Allen said.
And that’s being felt across the country. Marketwatch, a financial news outlet, reported on the drop in revenue for Airbnb units. It collected data from a company called “AllTheRooms,” which analyzes the short term rental market.
Places like Sevierville, Tennessee, right outside Dollywood, felt an almost 50 percent drop in revenue.
Nine other destinations in Colorado, Montana, Florida, Texas and had a similar drop, the lowest at 34 percent.
Mark Keely is a managing partner at Golden Swan Management in Traverse City, which manages rental properties.
“Folks who aren’t professionals or working with professionals and they’ve purchased a property in the last two or three years, they’re paying at the top of the market from a real estate standpoint," Keely said.
"But they’re not understanding the realities of what is going to probably be declining revenues year over year."
Keely says there’s a few reasons for that. For one, there are more Airbnbs in northern Michigan than ever before. A quick search online shows more than 1,000 short term rentals in or near Traverse City.
“According to Airbnb, we added about 25 percent more inventory in 2022," he said. "In a single year and we’re anticipating something similar to that in Northwest Michigan again this year.”
Which means short term inventory could double. Keely says demand for short term rentals wasn’t met until last year.
And the folks over at Traverse City Tourism have seen the same thing. With more rentals coming online, as well as hotels, the market could be flattening out a bit, said Whitney Waara, chief operating officer at TC Tourism.
“The fact that we have seen that 20 to 25 percent growth in listings every month throughout the region for the last several years, it may be getting close to a point of saturation or where that competition is going to be tighter,” Waara said.
Travelers are also waiting till the last minute to book a place to stay.
“Last week we didn’t even have a Fourth of July booking," said Allen, the Airbnb owner. "None of July was booked at all.”
She said some of their bookings are happening sooner than seven days, while contending with more options in the region.
If those trends don’t change, it could mean some difficult conversations for airbnb owners.
Keely, at Golden Swan, said people were booking 10 days out from check-in time in 2022. Now people are waiting a week in advance.
“So it’s getting worse in that way. So it’s really hard," he said.
"It’s challenging especially as someone who’s working full time at a job and they have a couple of Airbnb’s as investment properties, to keep up and understand what’s happening. Instead they’re just seeing their revenue plummet and real panic is setting in for some of those folks.”
With an oversupply in the market, Keely said deciding what to do with the rental might be kind of obvious.
“I think you’re going to see people trying to get what they can out of their initial investment by selling,” he said.
Even if owners are struggling to fill their rentals, Waara sees the number of short term rentals as a sign that the region remains a top destination.
“It’s a cool business model and that will continue to be interesting and people will be looking for it for a for a long period to come," she said. "I don’t think it’s going away."
But for Allen and her family, it might go away.
Their garden level condo in The Village is meant to supplement part of their income and helps them cover some of their bills.
They’ll look to the fall to make up for lost revenues from summer. Allen says fall is a popular time for locals to have a little staycation.
But the future is far from clear.
“We’ve kind of had a back and forth about whether or not it’s worth it for us to keep it, if we need to sell it," Allen said. "We’ve also considered doing long term rentals, because yeah at this point we’re not really making any money on it all.”