Minnesota short-term rental hosts, travelers drawing back from oversaturated market

Joan and Mark Robertson seemed poised for short-term rental success when the Bloomington couple bought a townhouse minutes from Disney World two years ago and spent about $15,000 on upgrades.

For the first six months or so, business was steady. Then bookings flatlined, and the Robertsons are now selling the property and forfeiting the short-term rental game.

“When we first got it, things looked really good,” Joan Robertson said. “But as time went on, it just got worse.”

Around the world, short-term rental hosts who lease properties through websites such as Airbnb and VRBO are reporting booking declines even as traveler demand stays strong. Part of that is a correction from the post-quarantine travel surge and a glut of new short-term rental properties hitting the market, said Jamie Lane, chief economist at analytics firm AirDNA. With more rentals than guests to fill them, hosts are struggling to stand out among thousands of listings.

Meanwhile, cities are implementing new restrictions or moving to oust short-term rentals altogether as they grapple with housing shortages and skyrocketing rents. In Barcelona, where fed-up locals have taken to spraying tourists with water guns, city officials announced in June they intend to ban short-term rentals by 2029. About a month ago, the Otter Tail County Board of Commissioners passed an ordinance to restrict noise and occupancy as a way to crack down on rowdy short-term renters in Minnesota’s lake country.

Some travelers are losing patience, too, with chore lists, cleaning fees and the uncertainty that comes with relying on a host they might never encounter in person.

Through the past 12 months, Minneapolis experienced a 16% increase in short-term rental demand but an 18.5% increase in supply, according to AirDNA. Year-over-year occupancies for the average listing are down 2.5% and average daily rates, or what hosts are able to charge, are down about 2%. All told, the average host is earning about 4.5% less than they did the prior year.

“If you’re talking with hosts, and they’re calling out weakness in performance, that’s a lot of what it is, is more of a normalization of occupancy levels,” Lane said.

In a statement, an Airbnb spokesman pointed to strong demand for listings in Minnesota and a 10% overall increase in host earnings in Minneapolis and St. Paul last year. The company, which posted more than $2 billion in revenue in 2023, reported contributing $465 million to Minnesota’s economy last year.

“Airbnb continues to be a sought-after part of the accommodation landscape in Minnesota and Minneapolis, providing travelers with amenities that can drive additional value and comfort: bedrooms for everyone, a kitchen to prepare a meal, a space to work, a backyard to socialize and play with pets and much more, unlike most traditional accommodations,” the statement said.

VRBO did not respond to a request for comment.

Ryan Glanzer said he’s largely sworn off short-term rentals. The Austin, Texas, resident who summers in the Twin Cities said he encountered multiple maintenance issues at an Austin rental he booked as a refuge from home renovations. After reporting the problems to the New York-based host, he said the host ended up charging him for the fix.

“I’ve stayed at quite a few Airbnbs — I think my profile shows 25 or 30 bookings over the years — and I think the last four or five, there’s been some issue,” Glanzer said. “If it’s just me or it’s just me and my immediate family, wife and kids, I’m going to be opting for a hotel. It’s not worth it. It’s too much of a hassle now.”

After an inquiry from the Star Tribune, Airbnb gave Glanzer a refund and vouchers, he said.

Minneapolis resident Alex Lapp said while he’s never had a bad short-term rental experience, hotels have become more appealing as he’s graduated from his post-college, shoestring travel budget.

“I’m getting to a point where now, maybe my priorities have shifted where I do actually want a good bed,” he said, “or I do want to have that peace of mind of the reputation that some of these chains have versus reading reviews on Airbnb and crossing my fingers that the amenities and the inside are going to be actually what they’re saying they are, and there’s not going to be any major issues with it.”

Downtown Minneapolis hotel revenue reached an all-time high in June, thanks in part to Pride festivities — also a top driver for Airbnb bookings — the U.S. Olympic gymnastics trials and the Taste of Minnesota. In an April consumer survey on behalf of the American Hotel and Lodging Association, respondents’ top lodging choice was hotels, followed by staying with family or friends.

“What is clear is that we know travelers, Minnesotans included, appreciate a warm welcome and full-service hospitality,” said Jill Sims, Hospitality Minnesota’s director of government relations, in a statement noting rising occupancy rates. “Across Minnesota, our hotels provide reliability, consistency, dedicated guest services and amenities which provides a clear advantage over short-term rental stays.”

Just outside Two Harbors, Minn., the “ReTreet House” Shari and David Hendren built and started renting in April 2019 boasts a near-perfect rating on Airbnb and ranks among the company’s “guest favorites.” Located on the couple’s 30-acre property, the two-story house is elevated among white cedars and uses a nearby outhouse, so it tends to draw more adventurous, outdoorsy travelers, Shari Hendren said.

Though there’s plenty to make the ReTreet House catch the eye, she said it isn’t booking as far in advance this year. Cancellations are also up, and slots don’t refill as quickly, if at all.

Hendren suspects a proliferation of vacation rentals in Two Harbors in recent years is contributing to the decline by adding more options for travelers. The town of about 3,600 had 230 average monthly short-term rental listings for the past 12 months through June, according to AirDNA.

“It doesn’t seem like the traffic or the tourism coming up the North Shore has gone down any,” Hendren said. “It’s still extremely busy in the summer.”

At the same time, the dynamic between host and guests has become more impersonal, Hendren said. Early on, travelers booking a stay would write a note about what drew them to the property, and the Hendrens would add a perk if they learned their guests were visiting for a special occasion, like a birthday. These days, those interactions are limited.

“When people come, and they’re really excited, and they’re taking advantage of all the outdoor things and of what up here has to offer, that makes me and my husband feel really good about people coming to stay,” Hendren said. “Those are the people that I get excited about doing this for, and it’s hard to gauge that when you don’t have the communication.”

Thomas Keller bought a property in Ely, Minn., in 2019 with a business partner and started renting it out in December as the Atomic Lodge, a “luxury mid-century sanctuary” that sleeps 12. He said he’s heard hosts talking about guest shortages and watched their attempts to draw travelers in, from adding new amenities to posting discounted rates. Some are leaving the market altogether and are turning their properties into regular long-term rentals, he said.

In an oversaturated market, Keller said, branding, marketing and an exceptional product have become essential. He believes that is what has insulated his property from the stressors other hosts are facing.

“You need to differentiate yourself. Otherwise, people just won’t even find your listing,” he said. “The average ‘we’re a log cabin’ is just not really enough anymore.”