Are the Duluth and Superior Vacation Rental Markets Saturated?

Duluth and Superior have long been a prime destination for travelers seeking stunning views of Lake Superior, outdoor adventure, and a welcoming small-town feel. However, the vacation rental market in Duluth—like many other areas—has seen shifts in profitability since the pandemic. This has led some to sell their vacation rentals and many to claim that the market is saturated. In this blog, I’ll outline the factors that have affected our current vacation rental market and discuss how to evaluate and manage vacation rentals profitably.

While the number of vacation rental properties has increased, the Duluth and Superior area continues to be very popular for vacationers.

Supply and Demand of Vacation Rentals

During the height of the pandemic, demand for vacation rentals surged. Travelers sought private, socially distanced accommodations, and nightly rates soared. While demand from travelers has continued to increase since the pandemic, the supply of Airbnbs has increased at a faster rate in our area. As this supply increased, profitability leveled off. Increased competition, and inflationary pressures on maintenance and management costs have made it more challenging for vacation rental owners to see the same high returns, and increases in home values have made more difficult for investors to find properties that pencil out as vacation rentals.

Despite these shifts, Airbnbs in Duluth and Superior can still be a smart investment—if you follow a few essential rules. Be sure to check your local regulations first. You cannot simply open a vacation rental in all markets, so you’ll want to understand the regulations before evaluating any properties. Once you have a handle on the local regulations, you’re ready to start thinking about profitability. Below are my top three tips for being profitable in our Duluth and Superior vacation rental market.

Special amenities like saunas can help set your property apart and increase bookings.

Keys to Success in the Duluth and Superior Vacation Rental Market

1. Know Your Numbers!

Before making a purchase or turning an existing property into a vacation rental, you need to have a handle on your expected revenue and all your costs. There are free tools that can help with this, but their accuracy can be poor. You will need knowledge of the local market, so if you don’t have this knowledge yourself, you’ll want to contact someone who does. You can simply fill in your property’s information in our rental estimator form and we’ll get back to you with an accurate local estimate.

2. It Helps to be Special

With the increased supply of Airbnbs and VRBOs in our market, your property may need to stand out from the competition if it is going to do well. It needs to be special in some way and there are a variety of ways that it can be special. Location has always been the most important factor in real estate and that is no different with vacation rentals. Canal Park in Duluth, waterfront, and the North Shore are all special locations that come to mind. These places are frequented by our vacation rental guests, and many will pay extra to stay right on location. Amenities are also important. If your property has a pool, hot tub, or sauna, these amenities set it apart from most properties that do not offer these experiences. Speaking of experiences, many guests, want more than just a place a stay. They want a memorable experience and themed properties can provide this. Create a themed property and there may be nothing else like it in the area. But there are simpler ways to make your property special. Even allowing pets in your property helps to set you apart. While this won’t make your property completely unique, allowing pets will put you in a category of roughly 25% of properties, and a lot of travelers are not willing to leave their four-legged friends at home when traveling. Basically, you want to offer what travelers are seeking but few properties are providing.

Good revenue management, which includes dynamic pricing, is critical to maximizing returns on your vacation rental.

3. Good Management

As vacation rental supply and competition have increased, we have seen a widening gap in revenue between poorly-managed and well-managed properties. I believe that revenue management, or pricing strategy is the biggest factor here. Using effective dynamic pricing ensures that the nightly rate for each day matches demand. Full revenue management also includes orphan day, minimum stay, early bird, last minute, and other booking and pricing strategies. Collectively, this can generate over $25,000 a year versus poor revenue management for some properties. Great furnishings, décor and amenities, professional photos, cleanliness and listing optimization are also key aspects of vacation rental management. Together, all of these factors affect your Airbnb and VRBO page ranking, which has a huge impact on how often travelers see your listing, and ultimately, how often travelers are booking your listing. To be clear, there are many properties in our area that have consistently happy guests and very high Airbnb guest ratings, but revenues that are much lower than they could be. Often these properties simply need listing optimization and dynamic pricing to reach their revenue potential. If doing these things are not your forte, consider hiring us to help you. The cost is minimal and the increase in revenue can be substantial. Effective management is crucial in today’s competitive market. Whether you choose to self-manage or outsource some or all of your property management, strong management is essential for maximizing profitability.

The Bottom Line

While the vacation rental market in Duluth is no longer seeing the extreme profitability of the early pandemic days, it remains a solid investment for those who approach it wisely. By knowing your numbers, creating amazing guest experiences, and effectively managing all aspects of your vacation rental, you can still generate strong returns in the Duluth and Superior area.