LANSING, Mich. (Michigan News Source) — Michigan’s northern and western coasts, renowned for their natural beauty and vacation appeal, have recently been ranked among the worst nationally for projected short-term rental (STR) growth. According to AirDNA, a leading software company that analyzes Airbnb data, the primary cause for this ranking is the decline in population in major “feeder cities” like Detroit. 

AirDNA’s comprehensive analysis includes data from 10 million listings across 120,000 markets worldwide. The company’s method involves examining Airbnb reviews and forecasts from Oxford Economics to predict future demand. A key aspect of this analysis is understanding “feeder cities”—the metropolitan areas from which guests typically originate. By tracking the economic and demographic growth of these feeder cities, AirDNA can project the potential demand for vacation rentals in various regions.

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Detroit, historically a source of tourists for Michigan’s coastal areas, is experiencing population decline. 

According to AirDNA, Detroit is projected to lose approximately 60,000 residents by 2028, placing it just behind Los Angeles Los Angeles in terms of population decline. This trend is anticipated to affect Michigan’s west and north coastal STR markets, as 6% and 17% of their vacationers, respectively, originate from Detroit. The loss of such a vital source of visitors will likely have a considerable impact on the demand for vacation rentals in these areas.

While population growth in feeder cities is a primary factor in predicting STR demand, it is not the only one. Income growth is equally important. Simply having more residents in a feeder city does not necessarily increase STR demand if these new residents lack the disposable income to afford vacations, as highlighted by AirDNA.

For instance, while Broken Bow, Oklahoma ranks high for population growth in its feeder cities, it does not fare as well in terms of income growth. As a result, any increase in demand may be directed towards budget-friendly accommodations. For Michigan, this means that attracting tourists from cities with high population growth but low income growth might not be as beneficial as focusing on cities with higher income growth.

On the other hand, Texas cities like Lubbock, San Antonio, McAllen, and Killeen, which do not rank highly for population growth, excel in income growth.Visitors from these cities are likely to have higher disposable incomes and thus spend more on average when they travel, benefiting the STR markets in those areas. 

Michigan’s west and north coastal STR markets are doubly challenged. They rank low not only in population growth but also in income growth. This combination reinforces the negative outlook for these areas. The Midwest, including Wisconsin and Michigan, consistently appears at the bottom of STR market rankings, joined by a few Appalachian destinations.

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Examining successful markets, such as those in Texas, provides valuable insight. For instance, cities like Fredericksburg and Corpus Christi have thrived by capitalizing on their feeder cities’ growth. These markets have attracted tourists by leveraging strong population and income growth in feeder cities like Houston and Austin, as reported by AirDNA.