We have investigated electronic and catalytic modifications of the p-type semiconducting selective oxidation catalyst vanadyl pyrophosphate (VPP) for propane oxidation in the presence and absence of steam. Steam changes propane conversion only slightly, but increases the selectivity toward oxygenates (acrylic acid, acetic acid) and the olefin propylene resulting in reduced selectivity of the undesired total oxidation products CO and CO2. Contact-free in operando microwave conductivity measurements at 0.1 MPa revealed that the modified catalytic performance is accompanied by a reduced electrical conductivity. Surface sensitive near-ambient-pressure X-ray photoelectron spectroscopy (NAP-XPS) and X-ray absorption spectroscopy (XAS) measurements at 25 Pa showed that steam depletes the topmost surface of VPP in phosphorus and enhances the average vanadium oxidation state slightly. These findings are accompanied by a decreased work function, but no detectable shift of the valence band edge is observed. Thus, the chemical surface modification changes the surface dipole but leaves the barrier height of the surface induced space charge layer basically unaffected. Hence, we conclude that steam does not affect the electron hole concentration (majority charge carriers) and hence the oxygen vacancy concentration. Therefore, the reduced conductivity can be understood in terms of charge carrier mobility changes, which may affect the selectivity of VPP toward oxygenates with steam. In addition, the modification of local properties, such as the concentration of acid sites as well as the nature and number of adsorption sites may have an impact on the catalytic properties.