I stayed in an AirBNB there a bit ago, and would again. Traffic got heavy at times though not all times. I noticed one grocery store had a much better selection of stuff than another. It definitely seemed like there was a rowdy tourist element to the place, not sure how new that is. That said, I'd be one of the people renting a 4x4 next time. I really wanted to keep going down a road that turned into a trail there but I was in a minivan.
But overtourism can definitely mess a place up if the swarm of people is too big. When reasonable rental costs are far eclipsed by what weekly renters are willing to pay it will destabilize everything and eventually turn a place like that into a total slave to tourism.
It's really the way to go here, that's why it's so popular I bet. We've stayed in hotels in years' past, it's a totally different experience (and not in a good way). The 4x4's would be fun. We've seen tons of them around town. My wife took her Jeep up Schnelby Hill once but I wouldn't try it in anything other than a 4WD/AWD.
You're totally right. The local government gets addicted to the increased revenue from the Airbnbs but the locals are the ones feeling the squeeze.
Hope you're well. It seems like the weather is finally getting better back home, hope you're enjoying the warmer temps!