Rhode Island is small, coastal, scenic and perfectly positioned between Boston and New York, which makes it uniquely appealing for short-term rental investors who want high weekend demand, strong summer seasons and proximity to big feeder markets. The state’s visitor economy has been surging in recent years — the tourism office reports record visitor volume and billions in traveler spending — and that tailwind is the single most important macro reason to consider a short-term rental (STR) anywhere in the state: more travelers means more nights to book and more premium weekends to capture, and Rhode Island’s compact geography compresses demand into a handful of towns with strong brand recognition. The state announced record visitor levels and roughly $6.0 billion in visitor spending for 2024, showing the scale of the market you’re tapping into.
Yet the upside comes with growing municipal attention. Almost every market that looks attractive from the revenue spreadsheets has also seen towns adopt or tighten STR regulations in the last two years. Narragansett required rental registration and a permitting regime in 2024 and 2025; New Shoreham (Block Island) adopted a formal short-term rental ordinance in July 2024; Jamestown instituted registration and permitting rules earlier as well. That means underwriting must assume permitting costs, registration fees, and the possibility of day caps or residency clauses — a conservative model is no longer optional. If you ignore local ordinances you risk expensive fines or forced delisting. Before you sign on a property, the first financial line in your model should be compliance. Narragansett RI+2newshorehamri.gov+2
When looking at which towns are the best bets, a handful repeatedly rise to the top: Newport, Narragansett, Block Island (New Shoreham), Westerly/Watch Hill, Bristol, Jamestown, and the Kingston/Wickford/South Kingstown area. Each market has a distinct profile. Newport is the headline market: high average daily rates (ADRs), robust summer weeks and an events calendar that fills up inventory. Market analytics platforms put Newport ADRs and occupancy solidly above many smaller towns — typical occupancy near 59 percent and ADRs that support sizable annual per-listing revenues, though properties and acquisition costs are correspondingly higher. This is a market for premium weekly bookings in June–August and well-executed shoulder-season marketing for shorter stays. Airbtics | Airbnb Analytics+1
Narragansett is more of a surf-and-family market with very high peak occupancy and a strong shoulder season for fall surf and college weekends. The town implemented a rental registration permit that became effective in late 2024 and required property owners to register by early 2025; that clarity is useful for buyers because regulated markets reduce surprise illegal competition and make permit-aware underwriting feasible. Narragansett shows high occupancy metrics in market reports — often among the highest in the state — which makes it attractive if your model relies on nights booked rather than just peak ADR. For operators who can stage weeklong summer stays and also capture fall surf escapes and spring weekends, Narragansett’s revenue profile can be dependable. Narragansett RI+1
Block Island (the Town of New Shoreham) is a classic example of scarcity driving pricing. The island’s limited housing stock, strong summer draw, and higher per-night willingness to pay produce headline ADRs that blow past many mainland towns, although the season is compressed and logistics—ferries, weather, contractor access—add operating cost. New Shoreham passed a dedicated short-term rental ordinance in July 2024 and requires registration; the town also has a local housing board tax on gross rental receipts designed to fund local affordable housing. If you can manage the operational complexity, Block Island can deliver outsized per-listing revenue, but you must plan for the heavy concentration of revenue into the short summer window and for higher maintenance and transport costs. newshorehamri.gov+1
Westerly and its Watch Hill neighborhood are perhaps Rhode Island’s most upscale coastal niche. Supply is small, prices are high and discerning clients expect white-glove service — which can justify very high ADRs for luxury homes. Market snapshots show elevated ADRs and respectable occupancy for the broader Westerly market; Watch Hill itself has fewer listings but commands a premium. The challenge here is twofold: acquisition costs are steep and local communities are sensitive to preserving neighborhood character, which often translates into strict enforcement and a preference for owner-occupied or carefully managed operations. For capitalized investors who can deliver a differentiated luxury product and offer seamless service, Watch Hill properties can be a premium play; for smaller operators they often price out of the market.
Bristol offers a different flavor: historic charm, proximity to Providence and Newport, and major local events (notably the town’s celebrated Fourth of July parade) that produce stable demand spikes. ADRs and occupancy look solid but not extreme; Bristol is attractive if you prefer lower acquisition competition than Newport and a quieter demographic of guests. The town’s smaller market size makes it easier to stand out with quality listings, and guests who want a low-key harbor experience with reasonable proximity to bigger attractions will value the tradeoff. AirDNA and other analytics show Bristol’s occupancy and ADRs yield steady per-listing revenue that can be compelling when acquisition prices are moderate.
Jamestown, on Conanicut Island, is one of those “quiet but steady” markets where regulation has already arrived and where the supply is controlled. Jamestown implemented registration and permit requirements earlier and enforces host responsibilities rigorously; that’s good news for compliant owners because it reduces the long tail of rogue listings and party houses that can undercut neighborhoods. For owners who want a boutique portfolio and prefer predictable community relations, Jamestown’s regulatory clarity — even if it imposes costs — is an advantage. But make sure the permit is transferable and understand the local enforcement posture before you buy. Without permit transferability, an attractive property could be worth far less if you inherit compliance headaches.
South Kingstown and Kingston (including Wickford and nearby villages) are underrated but practical. Proximity to the University of Rhode Island brings a baseline of year-round demand for faculty, visiting families and event weekends, and the river-and-village scene of Wickford appeals to couples and cultural tourists. Analytics for Kingston show very healthy occupancy metrics and good ADRs, especially when timed around university events and fall foliage weekends. These towns are less seasonal than Block Island or Newport and often offer a steadier revenue curve across months, which is useful if your financing depends on year-round cashflow.
When underwriting any Rhode Island purchase for STR use, be conservative with seasonality and aggressive with compliance cost estimates. Many market reports overstate early year occupancy by including top-performing professional portfolios that are not representative of an average new listing. In practice most new listings ramp to full occupancy over two to three seasons, and regulatory fees, registration costs and local transient occupancy taxes reduce net revenue immediately. Typical best practice is to model using 60–80 percent of the ADR and occupancy figures reported by major data vendors and to include a compliance/reserve line equal to several percent of gross revenue. That approach protects you from both slow ramp and regulatory surprises. Several data feeds report occupancy in the 50–60 percent range for places like Newport and Westerly and higher in places like Narragansett and Kingston, but those figures are averages across many listing qualities; a neglected property will underperform.
Financing differences matter: lenders treat STRs differently than long-term rentals. You will likely face higher down-payment requirements and different underwriting on loan terms if the lender views the property as an investment STR. Owner-occupied loans are often cheaper if you can live there part of the year, but that may not fit your operating model. Insurance is also a material line item in coastal Rhode Island; flood and coastal exposure push premiums higher, and some insurers limit coverage in high-risk zones. Always get an insurance quote before making an offer; in some coastal neighborhoods the difference between insured and uninsured cost structures can flip the investment math. Market sources and town data show that coastal towns are increasingly factoring climate risk into cost projections and that insurance trends are an evolving risk to model explicitly. Visit Rhode Island+1
Operational excellence is non-negotiable in these markets. For premium ADRs in Newport or Watch Hill you must give guests flawless service: professional photography, fast Wi-Fi, superior linens, local guidebooks, beach gear and strict cleaning and maintenance routines. For Block Island and other seasonal spots, vendor chains and contractor relationships are the key differentiator — you need reliable cleaners, HVAC and plumbing support even at peak season to protect your listing’s ratings. Reviews and repeat bookings drive most of the yield differential; listings with stellar reviews get the premium rates and the calendar visibility that feeds up bookings across shoulder months. Listings with spotty reviews fall off faster than you’d expect. Market professionals who track local data emphasize that the top 10–20 percent of listings capture a disproportionate slice of revenue in each town, which magnifies the payoff from professional management. AirDNA+1
Regulation remains the single biggest idiosyncratic risk. Rhode Island towns are not shy about imposing registration fees, permit requirements or even limited annual rental days. Narragansett’s registration system came into effect with clear penalties for noncompliance; New Shoreham’s ordinance is explicit; Jamestown’s permit regime is enforced. Given that pattern, you should expect additional towns to refine rules — possibly including owner-occupancy rules, local agent obligations, or day caps. Some municipalities even consider residency or minimum-stay clauses in reaction to neighbor complaints. Conservative underwriting should stress-test for a scenario of 120–150 rentable nights per year (versus 200+ in unconstrained markets) and still produce an acceptable return. If your model only works with 250–300 nights at peak ADR, you’re taking a risk that a regulatory change could destroy. Recent local reporting and town ordinance pages confirm these advance regulatory moves across several towns. Narragansett RI+2newshorehamri.gov+2
Which towns are best for particular strategies? If your goal is to extract top ADR and you can accept seasonality and higher acquisition cost, Newport and Block Island are the headline winners — Newport for its events and town brand and Block Island for extreme scarcity pricing. Newport’s market dashboards and industry reports show ADRs and occupancy that support healthy per-listing revenue, and Block Island’s island constraints create pricing power for premium weeks. If you want a market with strong nights-booked and less extreme purchase prices relative to revenue, Narragansett and South Kingstown/Kinston are more balanced: high summer demand, good shoulder months and an audience that includes both families and surf-oriented travelers. For quiet, neighborhood-friendly boutique operations with predictable enforcement and lower competition, Jamestown and Bristol make sense. Westerly/Watch Hill is the luxury niche: if you can access a property here and run a premium, low-volume model, the yields can be excellent, but the entry price is high. These town-level recommendations align with multiple data dashboards and municipal ordinance pages showing both revenue potential and regulatory posture.
A pragmatic acquisition checklist is essential. First, read the town’s STR ordinance and confirm permit and registration requirements, fees and enforcement posture by contacting the town clerk; many towns publish registration portals and Q&A documents that explain application windows and fines (Narragansett and New Shoreham have public registration pages and clear deadlines). Second, pull 24 months of ADR and occupancy data from market analytics providers (AirDNA, Airbtics, AirROI or Rabbu) and use 60–80 percent of reported metrics for conservative modeling. Third, obtain coastal and flood insurance quotes and confirm the availability of local vendors for maintenance, cleaning and rapid guest support — on islands that can double in cost. Fourth, confirm permit transferability and any residency clauses that could affect your exit strategy. Fifth, model multiple stress scenarios including regulatory day caps of 120–150 nights and a 20–30 percent drop in ADR; if the model still returns acceptable metrics you have a resilient deal. These steps are consistent with professional advice and the specific municipal guidance published by Rhode Island towns. Narragansett RI+1
Tax and revenue considerations are part of the calculus. Rhode Island and local towns levy transient occupancy and bed taxes; some towns also add local housing taxes or housing board levies (Block Island has a small local tax on gross rental receipts for housing funds). Factor in platform collection differences and potential new local levies when modeling net revenue. The state’s tourism data showing nearly 30 million visitors in recent years is a helpful top-line for demand, but the tax and compliance drag on net yield is real and increasing as towns professionalize enforcement. Always net local transient taxes and registration fees ahead of headline revenue projections. The Offer Sheet+1
Exit strategy: think beyond short-term upside. In a tightening regulatory environment, the ability to convert a property to a long-term rental or sell to an owner-occupant can protect downside. Properties in desirable villages (Wickford, Bristol, Jamestown) often have long-term buyer interest; properties in high-ADR markets like Block Island and Newport have second-home buyer pools which can also be exit buyers. Make sure zoning and permit conditions do not make conversion impossible, and keep resale comps in your head when you bid. If you structure deals with conservative cashflow stress tests and a plausible long-term exit, you reduce the odds of a forced sale at a loss when regulations shift. The Offer Sheet+1
Rhode Island offers a compelling set of micro-markets for STR investment, but the margin between a good and a bad decision is thinner than it used to be. The biggest misstep is treating reported ADR and occupancy as guarantees; a new listing’s real performance depends on quality, management and legality. Regulatory clarity has improved in several towns — Narragansett, Jamestown, New Shoreham — which actually helps sophisticated investors who play by the rules, because clarity reduces the risk of surprise enforcement and undercutting. That said, expect more towns to refine STR laws as political pressure mounts; the national pattern is toward more professionalization and stricter enforcement, not less. Incorporate that reality into your underwriting and you’ll have a viable blueprint.
