HOLLAND, Mich. — Short-term rentals have sparked a protracted legal battle in a small town on Lake Michigan, and as the case continues, a new report seeks to assess the economic impact of vacation rentals.
A rental advocacy group in Park Township, a small lakeside town bordering Holland, commissioned a study to better determine the value of rentals in the town’s economic ecosystem.
Survey questions were sent out this spring to business owners in West Michigan and rental property owners in Park Township. Hope College’s Frost Center for Social Science Research administered the survey and analyzed the results.
Related: Lake Michigan town bans short-term rentals, but lawsuit blocks enforcement
Vacation homes have existed in some form in Park Township for decades, but the rise of Airbnb and VRBO has left many municipalities scrambling to come up with new definitions, caps and prohibitions on rentals.
According to the rental group Park Township Neighbors, Holland State Park attracts 2 million beachgoers each year, and tourism revenue is the main source of revenue for the maintenance and taxes on beach houses.
The town argues that short-term rentals violate residential zoning ordinances because they are more like hotels than homes.
The town currently bans short-term rentals, but a lawsuit by rental owners has blocked the ban from being enforced this summer. Both sides are due back in Ottawa County Circuit Court on Nov. 21.
The Frost Center compiled responses from 84 Park Township rental homeowners and 38 businesses in the Holland and Saugatuck areas.
Frost Center director Darryl Van Tongeren acknowledges that the sample size is small and specific to the region because of the town’s small size, and the center purposefully kept the survey closed to the public because it didn’t want political opinions to skew the economic picture.
Below are five insights from the Park Township report.
How much do short-term guests spend in your community?
The Frost Center report estimates that the average short-term rental in Park Township generates $14,112 in tourism revenue for the nearby area and $35,280 for the entire region over a 12-week season.
Multiplying these figures by the number of properties in Park Township, roughly 248, it is estimated that short-term rentals generate $8.7 million, with $3.5 million of that being spent around the properties.
The Frost Center was unable to send survey questions to Park Township guests due to privacy and sample size concerns.
To determine how much the average guest spends during their stay in Park Township, the Frost Center used a 2023 national Airbnb survey, which reported that guests spend an average of $210 per day.
According to a survey by Airbnb, 40% of vacation spending is concentrated in the area surrounding the accommodation.
The report makes clear that these national figures do not accurately reflect vacationers in West Michigan, and given how popular Lake Michigan beaches have become as tourist destinations, short-term rentals may not be the sole or direct driver of this tourism spending.
What is the impact on local businesses?
The companies that responded to the survey were primarily in the retail, food and beverage, and service industries.
Survey respondents represented a wide range of locations, years in business, and employee numbers.
When asked about their highest revenues, business owners most frequently reported $1 million to $5 million in top-line revenue from 2019 to 2023. However, businesses in this revenue range have increased over time.
From 2022 to 2023, the number of companies reporting revenue moving from the $750,000 to $1 million range to the $1 million to $5 million range increased by 43%.
The majority estimate that less than 30% of their average annual revenue comes from tourism. The most commonly chosen answer was that less than 10% of revenue comes from tourists (41%).
Results varied by industry: Retail and restaurant owners said more than 50% of their sales came from tourists.
The service industries that make the least amount of revenue from tourists are cleaning, air conditioning, lawn care, and other industries.
However, the majority of short-term rental owners said they employ three or more companies to support their properties, and the majority of owners said they would cut nearly all of these services if a ban on short-term rentals were to go into effect.
How much money are short-term rental owners making from listing their properties?
The majority of survey respondents (58%) said their average annual net income from their property is between $10,000 and $50,000.
A quarter of short-term rental owners said they earn more than $50,000 in net income per year from short-term rentals.
Owners are divided on how much of their total income comes from short-term rentals: 44% said that rental income makes up less than 10% of their total annual income.
The majority of property owners (56%) say rental income makes up more than 10% of their income, with the majority falling within the 10%-29% range.
Will property owners hold on to their vacation homes if the short-term rental ban goes into effect?
For 41% of respondents, these rental properties are investment properties. Another 41% said it is a second home. Other answers included a primary residence, an inherited property, or a vacation home shared with the family.
The majority of owners (64%) said they would not plan to further invest in property in the area if the short-term rental ban were to be implemented.
If the Park Township ban were to go into effect, 30% of respondents said they would invest in a nearby area in West Michigan outside of Holland, while 17% said they would still invest in the Holland area.
Twenty percent of owners said the ban would cause them to stop investing in West Michigan, and 4% said they would leave the area permanently.
How will a ban on short-term rentals affect the housing market?
The Frost Center estimates there are 248 short-term rentals in Park Township, which are self-reported by Park Township neighbors.
The report said opposition to short-term rentals stems from concerns that noise, traffic and increased crime from overnight guests could affect property values in nearby areas.
Van Tongeren said that while these “neighborhood inconveniences” may be perceived as a negative, the data doesn’t show that they are holding down home prices. These “income assets” are more likely to drive prices up, he said.
The report said short-term rentals currently have a “relatively moderate impact” on property values and rental prices.
The report predicts that if all short-term rentals were abolished, rental prices would fall by 0.8% and house prices would fall by 0.6%.
Park Township has a homeowner occupancy rate of about 75 percent, slightly higher than the U.S. average, so eliminating short-term rentals may not have as big an impact on the housing market as it would in more densely populated ZIP codes, Van Tongeren said.
