The Demand Solutions Blog

Pricing and Longstanding Vacant Units

Posted by Donald Davidoff on Oct 6, 2013 2:36:00 PM

In my last blog, I promised to talk a little more about longstanding vacant, so here we go. I am not an advocate of automatically reducing rents just because a unit has been vacant a while; and as discussed in a prior blog, I don’t recommend putting leasing bonuses on longstanding vacants.

Here’s what I do recommend:

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Topics: apartment, apartment pricing, pricing and revenue management, apartment marketing

Is Your Bonus System Hurting You?

Posted by Donald Davidoff on Sep 26, 2013 5:26:00 PM

Funny thing about bonus systems —you often get exactly what you incent. Now that doesn’t mean you get what you want. It means you get what you incent. So here are a couple of pet peeves of mine that I’'ve seen w.r.t. bonuses in multi-family that at best just waste money but at worst actually hurt our pricing and revenue management efforts:

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Topics: Revenue Management, apartment, property management, apartment operations, apartment pricing, multi-family housing, pricing and revenue management, financial performance

Inverted Leases at Renewal Time: A Big Challenge

Posted by Donald Davidoff on Sep 17, 2013 6:51:00 PM

It’s that time of the year when prices typically start going down. The good news is that with rent growth relatively strong over the past year, in general new rents are above expiring rents come renewal time. However, there are still times when rents are “inverted.”

With transparency of pricing on web sites, this can cause a real challenge. Existing residents see you offer no (or a small) increase and then take a look at the website where they see new pricing below what they’re currently paying. So what do you do?

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Topics: Revenue Management, apartment, property management, apartment pricing, pricing and revenue management

A Gathering of Pricers--Will I See you at ARM?

Posted by Donald Davidoff on Sep 3, 2013 10:43:00 AM

It’s been a while since I last blogged. Lots going on—crazy busy with clients, my younger daughter just started high school and we just sent my older daughter off to Princeton for her freshman year. Both of those milestones got me thinking about how I got to where I am.

Hard work, smarts and a good bit of luck certainly had a lot to do with it. But I think the most important thing for anyone in a “cognitive skill” career path is to be constantly learning. Learning from experience,  but more importantly learning from others—from “experts” we may not know and from colleagues (and competitors) who we do know. Which got me thinking about how important a role conferences have played in my career. I’ve met so many people who become not just business colleagues but also friends; and I’ve learned from many speakers I never would have otherwise encountered—people with ideas that changed how I viewed the world, my job and myself.

So if you’re serious about pricing in the multi-family industry, you simply have to go to the Apartment Revenue Management Conference. There are lots of pricing conferences and lots of multi-family housing conferences, but ARM is the only conference dedicated solely to practicing our art in our vertical. I’ll be there again and hope to see you. For those of you who might care, here’s what I’m expecting to do there:

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Topics: Revenue Management, apartment, property management, apartment pricing, multi-family housing, pricing and revenue management

Budgets are Looming

Posted by Donald Davidoff on Jul 9, 2013 1:27:00 PM

As we enter the “dog days” of summer, it’s time for pricers to look ahead. Things are usually good right now—we have a strong tailwind from seasonality so rents and occupancies are trending upward nicely. And with various summer vacations going on, the pressure isn’t quite as high as it usually is—most operators and executives are happy with the trends, and some of them aren’t even in the office today anyway.

But as anyone who’s been doing multi-family pricing for any length of time knows, beware the coming of the 4th quarter. For though the kingdom seems at peace, we know that ill winds are about to blow. Come September/October, two things will conspire as we face what is often our biggest enemy:  the BUDGET; and it’s almost equally evil sidekick, the operator’s bonus.

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Topics: Revenue Management, property management, apartment operations, apartment pricing, pricing and revenue management, financial performance

Should we offer and price really long lease terms?

Posted by Donald Davidoff on May 19, 2013 1:18:00 PM

So I’m at the NMHC Market Research Forum in Boston this past week to sit on a panel/workshop on revenue management. Mark Obrinsky, who heads up Market Research at NMHC and has been a good friend and colleague for roughly decade brings up an interesting question:

“(paraphrasing) So what do you think about longer lease terms? And by longer lease terms, I mean 3-, 4- or 5-year leases.” He hypothesizes that there’s a latent, older “renter by choice” demographic that could be tapped, particularly in urban markets. The theory is that these folks would choose to rent but for the fear of unknown and thus uncertain future rent increases.

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Topics: Revenue Management, apartment, apartment pricing, pricing and revenue management, apartment marketing

Pleasure or Pain

Posted by Donald Davidoff on Apr 18, 2013 8:40:00 AM

Those of you who know me well know that my brother is a sales coach. Well, more than that but this blog isn’t really about him, so I’ll leave it as a gross simplification of what he does. He and I used to work together—he ran a sales team and I ran the service team for a membership group of travel agencies back in the 1990s.

One of the first things I remember he taught me about sales and marketing is that people are motivated by only two things—they seek to avoid pain and they seek to gain pleasure. But it’s not symmetrical. We’re actually wired to put more attention to avoiding pain than to seeking pleasure. That’s why it’s easier to sell something to someone solving a crisis than it is to someone who’s doing very well and says they want to do better.

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Topics: property management, apartment operations, apartment pricing, pricing and revenue management, apartment marketing, marketing programs

JC Penney Proves It’s Hard to Change Pricing Psychology

Posted by Donald Davidoff on Apr 9, 2013 10:41:00 AM

Don’t know how many of you follow retail, but JC Penney just pulled the plug on one of the biggest experiments in pricing history—acknowledging it to be a colossal failure. In short, Ron Johnson, the architect of a move from constant couponing to simple “fair” pricing is out. And expect coupons to be back in.

I was skeptical when he was hired and announced his plans less than 2 years ago on two grounds:  1) Walmart kind of owns the “every day low price” model (plus it’s not clear that “everyday fair pricing” has an authentic ring to it anyway) and 2) more often than not, I find people like to feel they’re getting a deal. In other words, discounting sends a psychological signal that is more powerful than “simple” pricing.

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Topics: Pricing, apartment, LRO, apartment pricing, Yieldstar, pricing and revenue management

An easy $120 a year

Posted by Donald Davidoff on Apr 1, 2013 11:00:00 AM

Amenity pricing can be one of the tougher things to get right—but also one of the most lucrative. So here’s the shortest blog I’m likely to ever write.

Do you put an amenity charge on south facing units? Why south facing (many of you may already have figured it out)? Because you have to have a south facing view if you want a satellite TV subscription. As a displaced Marylander who desperately wants to watch his Washington Capitals on DirecTV’s NHL Center Ice package (even this year, when they’re not playing too well), I can personally attest to the willingness to pay a segment of the market has.

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Topics: Revenue Management, apartment, property management, apartment pricing, pricing and revenue management, apartment marketing

Evaluating comps when pricing

Posted by Donald Davidoff on Mar 19, 2013 10:44:00 AM

Understanding your competitive set when pricing is obviously important. If you’re constantly at low exposure, you can push pricing and ignore whatever comps are doing. But if your exposure ever goes up, you’ll want to make sure that you’re not priced out of the market such that you can’t reduce exposure.

In my experience, I’ve seen two “camps” on how to approach this problem. The first tries to build the comparison from the ground up. We audit our community against the comp on a variety of things—age, community amenities, unit size, unit type amenities (balconies, fireplaces, kitchen and bath finishes, etc.), and record these in (usually a large) spread sheet. $15 for a balcony, $3 for crown molding, $10 for a fireplace, ….  A lot of work, and a lot of alleged precision.

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Topics: apartment, apartment operations, apartment pricing, pricing and revenue management, competitor shopping