The Endangered Species of Hospitality: Bed and Breakfast Properties

In Lansing, MI, the city council and planning board are revisiting ordinances for short-term rentals. This work often runs into questions about bed and breakfast accommodations and what defines a bed and breakfast. In small communities, ordinances are frequently outdated or inadequate for future growth or preservation. Lansing is not the only community facing this in the state; cities such as Grand Rapids, Ann Arbor, and Park Township are also facing this. As the state of Michigan has deferred short-term rental (STR) laws to cities and towns, there are no cohesive rulings across the board—something this country is facing as a whole.

STRs have been banned or limited in many municipalities across the United States. In Lansing, as community leaders question STR rulings and enforcements, B&Bs are now in danger, which could potentially change historical properties that have been the fabric of communities for years.

Airbnb and VRBO have rapidly impacted neighborhoods across the country, and this has forced lawmakers to consider STR ordinances; STRs are looking to mitigate the impact. Jamie Lane, AirDNA's Chief Economist and SVP of Analytics spoke at the 2024 Skift Short-Term Rental Summit in New York on June 5, 2024. His presentation was titled "Current Landscape and Future Outlook". During his speech, Lane noted coastal, lake, mountain, small-town, and rural vacation rental markets are doing well compared to 2019, while occupancy rates in cities and suburban areas are still struggling.

The Best and Worst Outlooks in STRS

In Michigan, coastal towns, fresh lakes, and majestic scenery allure travelers year-round, and the state saw an influx of pandemic-spurred rural and coastal short-term rentals. But, while Michigan has all the elements, it has found itself on a list of Worst Short-Term Rental Growth in the Next Five Years. Creating a problem for owners. “As a result, short-term rentals pose big questions for small towns in Michigan. Without a legislative road map, communities are patching together rules and navigating lingering legal questions,” Lindsay Moore reported for MLIVE.com.

STR Growth, as a whole, forecasted by AirDNA, supports growth in the luxury sector, long-term rentals (think a month or longer), and cities where people moved during the pandemic. The population migration of 2020-2023 has created new Top Metro areas and where the suggested STR growth will be. Houston, Dallas, Phoenix, Tampa, Austin, Atlanta, Orlando, Charlotte, San Antonio, and Jacksonville top the list for forecasted STR growth.

The STR Conversation is Emotional For Both Sides.

On one hand, an STR could be owned by someone looking to support themselves or their family with supplemental income; on the other hand, it could be owned by an investment company vested in the true hospitality experience. STRs popped up everywhere, in a Wild West sort of way, and now we are all asking what is right. Did Airbnb contribute to changing the landscape of real estate across the country and changing the housing market price increase? The rapid rise of STRs created a need for zoning commissioners to look at ordinances, as in many destination areas, these rentals have priced many individuals out of home ownership.

Vacation homes have existed for a long time. And as a country faced a pandemic, rentals became a preferred accommodation option. But that is changing slightly. As hotels and inns found their footing after closures and impact, data shows vacationers are looking for more hospitality where they are staying. Travelers are looking for better service, trustworthiness, consistency, cleanliness, more amenities, and even breakfast. The Skift Research U.S. Vacation Rental Survey (data as of April 2024 in the U.S.) shows that 76% of vacation rental guests checked whether a professional manager or an individual host manages the property.

STR guests are also thrown into the emotional ring. As more STRs are available, guests are demanding more and have the expectations they do of a hotel. As the STR market has slowed, STR owners are in a dog-eat-dog world to crack the Airbnb algorithms, even enticing their guests to provide five-star reviews, such as this “STAR RATINGS” sticker. (This photo was taken by Mandy Murry in February 2024 in the Charlotte, NC, metropolitan area. A real estate investment firm owns this particular Airbnb.)

STAR RATINGS

“When rating us after your stay, please consider that AirBnB’s ratings are totally different than the classic hotel star rating system: You should know that AirBnB can close down any listing that drops below an average of 4.3 stars. The system is rather confusing. To give you a better understanding, we designed the following (cheeky) guide to the rating system:

Please be aware of the judgment the stars may bear:

⭐⭐⭐⭐⭐ Perfection does not exist, but we are happy here.

⭐⭐⭐⭐ Several issues need to be improved.

⭐⭐⭐ Major problems that should be improved.

⭐⭐Close it down at once.

⭐Put these hosts in jail.

We always strive to give our guests a 5-star experience. Please let us know of any problem you may have during your stay and we will do everything within our power to solve it.”

The Challenges STRs Face

The first challenge for communities is zoning. In a legal battle in Park Township, both short-term rental owners and the township can agree that the 1974 zoning ordinance doesn’t address short-term rentals. Both sides believe that this helps their case. The Michigan Municipal League’s stance is that banning short-term rentals would be an “exclusionary zoning” violation because there is a legitimate use and demand for rentals.

Where is the happy medium? As STRs ask for ordinance changes, some STRs say, "Fine, we won’t throw in the towel; we will become a bed and breakfast.” This approach now challenges laws surrounding long-standing rulings on bed and breakfast properties in Michigan and could become a nationwide conversation. Is a Bed and Breakfast an STR and is an STR a Bed and Breakfast- It Depends… It comes back to how the hospitality is delivered.

Experiential Hospitality & The Bed and Breakfast

Small, independently owned inns and bed and breakfasts have played crucial roles in preserving historic buildings, enhancing local communities, and providing a unique alternative to hotels and large-scale short-term rentals. Popularity has grown in experiential hospitality—almost a micro-boutique lodging vibe is happening with GenZ. Old motor lodges are being redone across the country to create intimate and unique places to stay. Bed and breakfast stays and ownership have become more popular with the GenZ. Large hospitality companies are on the hunt to buy inns and bed and breakfasts as they are in demand- and zoning will always be a consideration with purchases. These properties have something a new property does not- A Story. This lends itself to the demand.

This includes, but is not limited to:

Historic Preservation.
Low Impact on Surroundings.
Owner-Operator Presence: Hospitality.
Compliance Standards.

Can an STR Become a Bed and Breakfast?

In Lansing, an STR did apply for a bed and breakfast license, proposing a rezoning at 730 Grove Street. The planning commission was asked to rezone from R-2 (medium-density single-family residential) to RM-32 (city center multiple-family residential district). After a couple of rejections, there is now a fight to amend Chapter 50 of the City Code, the East Lansing Zoning Ordinance, to add a new definition of “bed and breakfast,” perhaps limiting the operation of a bed and breakfast to under seven rooms. Michigan legislation states that under code 125.1504b- a Bed and Breakfast has 10 or fewer sleeping rooms, including sleeping rooms occupied by the innkeeper, 1 or more of which are available for rent to transient tenants. And serves meals at no extra cost to its transient tenants. The Michigan Bed and Breakfast Association’s membership includes bed and breakfasts, inns, lodges, and boutique hotels- each required to uphold a quality assurance standard.

The question is: can a four-bedroom house rental be a bed and breakfast? If the ruling is yes, then the STR must adhere to all the laws, taxes, hospitality services, etc., that a bed and breakfast or inn has to comply with. This could put more money into the community. While a bed and breakfast is not treated the same as a hotel, the rise of experiential hospitality- both in the STR and historic property world, legislation could endanger long-standing bed and breakfast owners.

Marriott has been growing their vacation rental business tremendously. The STR world under hotel operator management is in demand- due to the level of hospitality and standards involved. As mentioned, the luxury segment is growing. Part of the STR debacle is the pandemic housing bubble. Individuals and companies bought up real estate looking to rent, and now that the market is softening, STRs are being creative in running the side hustle or investment business.

There is no perfect answer. Everyone is looking for a solution. In the process of finding solutions in Michigan, the bed and breakfast market is now in danger. Lansing's proposal to limit the number of rooms within a bed and breakfast directly attacks historic preservation and financial impact.

STR PACE & STANDARD

Regulation of short-term rentals nationwide is necessary so that their growth doesn’t outpace the ability to maintain them. The market for branded, professional short-term rentals is growing because there is a standard, which is why Associations such as the Michigan Bed and Breakfast Association and Select Registry exist in the B&B, Inn, and Boutique space. There is a level of quality and professionalism. Ultimately, there is a standard, and the properties are part of the makeup of the communities.

As zoning committees across the nation propose STR changes and standards, bed and breakfast properties will be scrutinized. Ordinances will be evaluated at every level, and residential neighborhoods have come under attack.

STRs have also been notorious for junk fees. California Senate Bill No. 478 includes the Unfair Competition Law, which made "various unfair competition practices unlawful," including any deceptive or misleading advertising. This includes full disclosure of mandatory hotel fees in the booking process. While STRs must disclose the fees, Skift reported that guests want short-term rentals to clean up their junk fees—another standard. To take it to another level, junk fees in one-off or less than ten corporate-owned properties can also be double- with cleaning fees being charged often at double the rate of a standard local rate.

Do Bed and Breakfasts Have a Dog in the Fight?

Bed and breakfasts have long been contributing to the cultural fabric of our communities. They restore and preserve some of the most historic buildings and invite the public in for the experience. They blend seamlessly into residential neighborhoods, adding to the charm of destinations. They provide dedicated hospitality and are family-run businesses that create a personalized approach. Bed and breakfasts are experiential hospitality in their unique way.

As experiential hospitality companies such as Onera bloom in Texas and blend the ideals of a bed and breakfast with the hospitality of a boutique inn, there starts to become a gray area regarding what's in the name. Whether labeled B&B, inn, boutique hotel, motor lodge, experiential, or farm hospitality, it is all one in the same. Zoning control must be considered across the country to protect hospitality of all kinds.

Marriott and Inspirato- get the hospitality factor in their STR portfolios. The demand for excellence all-around in short-term rentals, bed and breakfast properties, inns, and hotels is setting the pace for legislation and maintaining our unique communities around the world.

Airbnb is finding itself in many lawsuits, town council arguments are being heard weekly over STRs and accommodations, and financial implications are emotional for all involved. How do we protect history, support our future, and embrace experiential hospitality?