This story is part of a series on the state of the short-term rental industry in Door County.
As revenue in Door County’s short-term rental industry has soared in recent years – topping $40 million in 2021 and exceeding hotel and motel revenue by 40 percent – fewer short-term rental owners appear to live in Door County, a Knock review of public records has found.
While the share of short-term rental business owners with Wisconsin mailing addresses – now about seven in 10 – has risen among new owners in recent years, the share of new owners with Door County mailing addresses has dropped in each of the past two years. About three in 10 current owners have mailing addresses with Door County ZIP codes.
Short-term rentals – which include homes listed on websites such as Airbnb and Vrbo – have grown dramatically in Door County over the past decade. A Knock analysis in November found that more than 500 new short-term rental businesses have been created in the county since 2018, with the number of new businesses created annually doubling between 2020 and 2021.
In reporting this story, Knock reviewed the room tax permits of 1,083 short-term rental businesses in a category the Door County Tourism Zone Commission labels as cottages, cabins and houses, together with the commission’s annual reports. Knock obtained the permits through a public records request; the data are current as of September of last year.
The data don’t show how much revenue went to each owner, or how much went out of the county or the state. They also don’t show to what extent an owner has ties to the county. Short-term rentals take many forms – from full-time residents renting out extra space to cover costs, to second-home owners, to investors with few ties to the community – and people have many different reasons for getting into the business, including as a way to afford a retirement home or keep a historic vacation home in the family.
Realtors, housing experts and vacation rental managers have offered mixed answers on how many new short-term rental owners are investors, as opposed to second-home owners; some have said the split is about 50-50.
The revenue growth in the short-term rental industry reflects both an increasing number of rental units – the total number in the county has grown by nearly 60 percent over the past decade – and nightly rates charged to guests that have increased faster than those in other parts of the lodging industry.
The revenue growth, together with the shifting ownership dynamics, contribute to questions about how the industry has affected traditional lodging businesses and service industries, whether rate increases for guests have created a peak for the industry, and how to balance stresses that short-term rentals put on community resources with the industry’s economic benefits.
Innkeepers concerned about employee housing
Innkeepers with whom Knock spoke said they’re not concerned about competition for guests from short-term rentals right now, because tourism overall has been so high in recent years.
It’s difficult to tell whether short-term rentals are taking business from traditional lodging businesses, said Sam Nelson, who manages of the Blacksmith Inn on the Shore in Baileys Harbor, as well as a short-term rental across the street. (Disclosure: Nelson also is a donor to Knock.)
“That’s really hard to answer with data, but I think the point is almost moot because we’ve seen such a spike in demand the last couple years in particular,” Nelson said. “Maybe (short-term rentals) have taken a little bit of business away from local hotels, but I’d be hard-pressed to prove that with data. There’s such a fire hose of demand for lodging in the county.”
Meredith Coulson-Kanter, manager of the White Gull Inn in Fish Creek, agreed.
“I do not feel like we are in direct competition,” Coulson-Kanter said. “These last few years, it feels like there’s sort of an infinite well of people who want to come and stay in Door County. Our occupancy numbers have been higher than they’ve ever been before, even though there are so many more units up here.”
“I also think that’s not necessarily a permanent situation,” she added. “The market and the tourism economy could certainly change.”
Nelson said one effect of the rise of short-term rentals has been increases in nightly rates charged to guests. He noted the significant increases in rates across the county’s lodging industry in recent years.
“That’s mostly due to how many more houses there are for rent, which typically have a much higher daily rate than a hotel room,” he said. “We’re seeing a spike in (average daily rate) across the county across the sector. That kind of pulls up rates in traditional lodging, too.”
Innkeepers said they’re not concerned about competition for housekeeping staff from short-term rentals but suspect others in their industry might be. Nelson and Coulson-Kanter said they have small full-time staffs of housekeepers, many of whom have been with them for a long time. They supplement that with seasonal workers, including students on J-1 visas, they said.
“People who have short-term rentals or second homes in Door County try to hire our housekeepers,” Coulson-Kanter said, adding that her staff are busy enough as it is and not able to take on extra work. “They come into the restaurant and ask if we can recommend any of our housekeeping staff to do their houses for them.”
Innkeepers said they have had more difficulty scheduling service with contractors such as electricians, plumbers and HVAC technicians, noting the shortage of workers across service industries in the county.
“Anybody that we used to be able to call with an emergency and they’d be there that afternoon, now we have to wait a week or two weeks,” Coulson-Kanter said. She said it’s difficult to tell how much of that change is due to short-term rentals as opposed to a surge in work on primary residences and second homes, or just a shortage of service workers in general driven by generational turnover.
“With so many more short-term rentals on the market, that just increases competition for that scarce skilled labor,” he said.
Innkeepers said the one area in which they’re most seeing the effects of short-term rentals is a lack of affordable housing for their staff members.
Jewel Peterson Ouradnik, owner and manager of Rowleys Bay Resort, said she’s experienced those effects firsthand.
“I’ve had two managers that were living in rentals – within a few years of each other – they both lost the place they were living in because somebody bought it and turned it into (a short-term rental)” Peterson Ouradnik said. “Thankfully I had somewhere for them to live.”
Peterson Ouradnik said more than half of her staff lives on-site at the resort, including in some former hotel rooms that she turned into employee housing. Those rooms don’t work for all employees, she said, and the resort’s other employee housing is a seasonal, dormitory-style staff house.
“I’ve set a couple of (former hotel rooms) up to be a little studio suite,” she said. “But I can’t put a family in there, and I can’t put dogs.”
Peterson Ouradnik and Coulson-Kanter said short-term rentals have stressed their staffing by limiting the number of affordable homes available for their full-time staff to buy or rent.
“The only time I really grit my teeth thinking about short-term rentals is when I see a cute little starter house go up for sale and get snatched up for (a short-term rental),” Coulson-Kanter said. “I think, ‘That would be a perfect house for our young manager who just got married.’”
“Having your employees live closer than Sturgeon Bay is a good thing,” she added.
Higher costs, increased professionalization lead to rate increases
While the number of cottage, cabin and house rental units in the county now exceeds the number of hotel and motel rooms for the first time, that difference is slight – about 50 units. Much of the disparity in revenue between the two sectors can be explained by the higher nightly rates that short-term rentals charge.
From 2009 to 2021, the average nightly rate for a cottage, cabin or house rental increased by 86 percent, from $163.20 to $303.46, according to Tourism Zone Commission measurements. Over the same period, the average nightly rate for a hotel or motel room increased by 50 percent, from $94.95 to $142.83, and the average nightly rate for a resort unit increased by 29 percent, from $138.41 to $179.20.
People involved in the industry have said there is no clear-cut or single explanation for why rates in short-term rentals have increased faster. Several factors likely have played a role, they have said, including increased professionalization and higher quality among short-term rental businesses, as well as the labor market for housekeepers and other service industries.
A shortage of housekeepers compared to the demand for that work has contributed to higher rates for cleaning rentals, which often are passed on to the guest, said Kelly Avenson, who manages about 20 short-term rentals through her company, RestAssure, LLC. Avenson is a short-term rental owner and also manages rentals for other owners.
Avenson said housekeepers she works with usually are paid between $35 and $50 per hour, rates that she said are higher than those in other communities. She said she doesn’t disagree with what housekeepers charge, noting that cleaning is difficult physical labor and is usually seasonal work.
“If they’re going to do this job, they know it’s only six months – four pretty heavy, (and the) shoulder months lighter,” she said.
Joanne Metzel, who together with her sister Suzie operated Kangaroo Cleaning before the pandemic started, said increasing demand for cleaning short-term rental units affected her rates.
“Right before the pandemic shut everything down my sister and I had regulars for almost every day in the week, and I'm proud to say the two of us worked out a pretty stable schedule and just couldn't fit any new clients in after a while,” Metzel said in a written message. “Of the people seeking our services, I noticed an increased need for someone to clean (short-term rental) properties, and though it stressed me out me to turn away anyone willing to give me money for honest work, I had to turn away a lot of business.”
Metzel said cleaning a short-term rental unit is more work and more complicated than cleaning a hotel room – each short-term rental unit has to be treated more like a hotel unto itself.
“Running a rental unit remotely honestly requires hiring more help than one might expect,” she said. “So (owners) need cleaners of course, and should have a property manager, ideally a maintenance (worker) as well, pretty much on call if they’re not going to be available themselves.”
Cleaning short-term rental units was difficult, Metzel said, because check-in and check-out dates – as well as the amount of time between guests – weren’t consistent week to week, and in some cases owners weren’t available to help address maintenance issues when they arose. She said she required clients to have at least a day in between guest stays for cleaning and maintenance, with no check-ins on the same day as the previous check-out.
“We made it clear that we preferred a set day a week to dedicate to changeovers, but quite a few times potential clients backed out when we told them that,” Metzel said.
“When a home owner thinks they can turn a cabin into a small business, (it) doesn’t mean that the job is small just (because) the cabin is,” she added. “The clients that we had worked out beautifully when their scheduling worked with the natural weekly flow of tourism in the county.”
Hotels and other traditional lodging businesses can have more economies of scale than short-term rentals, said Rob Esposito, who manages and develops short-term rentals through his companies DoCo Vacations and DoCo Capital.
Traditional lodging businesses are more likely to have housekeepers on staff, Esposito said, and they have the advantage of cleaning all their units in one place, instead of requiring housekeepers to drive between units in different places around the county.
Nelson and Esposito said they’re seeing more professionalization in the short-term rental industry.
“It was a wide-open market when it first started – it was the wild west,” Nelson said. Now, he said, more short-term rentals are owned or managed by larger companies, and budget or non-professionalized short-term rentals are a minority.
Esposito said he’s tried to follow a professionalized model, including by doing cleaning and laundry in-house for the rentals he manages.
“For good and for bad, the people who are doing it well are treating it as a business,” Esposito said.
Nelson and Esposito also pointed to the rise of more sophisticated, automated business practices for setting rates – often referred to as yield management or revenue management – which can take into account occupancy levels, competitors’ rates and other factors and automatically raise rates as a result. Esposito said traditional lodging businesses may have been slower to adopt those practices than short-term rental owners.
At a conference earlier this year, Nelson said, he was blown away by how much more developed yield management software is now than it was in 2017 or 2018. He said the practice has combined with inflation and increased guest demand to drive up rates across the lodging industry.
“Starting about five years ago, the concept of yield management and revenue management – specifically automated – took the hospitality industry by storm,” Nelson said. “It really became accessible and kind of a no brainer for even mom and pop businesses to have automated yield management.”
“You’re basically getting into a game of chicken with the entire industry for who can raise rates fast enough,” he added.
As those practices become more widespread, Nelson said he expects their effects on rates to level off.
Nelson, Avenson and Esposito each said they believe the short-term rental industry is reaching or has reached a peak.
“I don’t see (the short-term rental business) as the cash cow that it has been for the past eight years or so,” Nelson said, noting the effects of municipal regulation, market saturation and rising interest rates.
Josh VanLieshout, the Tourism Zone Commission’s chair and the City of Sturgeon Bay administrator, agreed.
“As far as market absorption for short-term rentals, I’ve got to think at some point, the consumer is going to say that property isn’t worth X number of dollars, and I’m not going to stay there,” he said. “Which should drive that property owner either to make improvements or change their strategy and either put it back into long-term rental or sell it.”