Core Areas of Focus for the Revenue Management Industry in 2015

Year-end reviews are sort of a rite of passage from one year to the other. And they are in abundance at the end of each year.  So I thought it might be interesting to reflect back on 2014 and look forward to the rest of 2015 now that we’ve had a few weeks of 2015 pass by. So here’s a quick tour of the key areas of business D2 Demand Solutions is involved in, as well as my predictions for areas of focus in the industry:

• Pricing and revenue management. The data I’ve seen indicates there are about ten million professionally managed apartments in the United States. A basic rule of thumb is that a good 20-30% of any industry will never adopt PRM automation due to their small size, transition, comfort with their Excel sheets or they’re just plain Luddites. I have no inside data, but I’m pretty sure that both LRO and Yieldstar have in excess of  1.5 million units each (probably more); add a few tens of thousands of units for Rent Maximizer and Pricing Portal, and the  result is at least 3.5 million units on automated pricing systems. I.e. we’re past the half point in the race for market share. That leaves about 2-3 years for the systems to battle over the remaining undecided prospects and means more investment in refinements and advancements in application and usability, and more effort now to “steal” market share through conversions.

• Sales Systems. Since 1999, this industry has radically changed how it does credit scoring, pricing, property management and marketing. Yet one thing is modeled, coached and trained the same as it was 15-20 years ago—leasing aka sales! Do people shop and buy the same as they did in 1995? Do you? Of course not. So why are we stuck in ‘old school’ models of sales that no longer apply? A really good question, and one that D2DS will continue to focus on  in 2015

• Business Intelligence. I’ve always been worried that this industry has “champagne tastes on a beer budget” when it comes to BI. But I’m starting to see indications that my worries may be unfounded. Several companies have, or are, stepping up to significant BI efforts. I still believe there’s too much focus on “What tool should I use” instead of focusing first on “What are my critical success factors (CSFs) and the actionable metrics that tell me how I’m performing?” so that’s where we’re focusing our efforts.

• Marketing. This continues to get the least amount of attention from the C-suite. It’s not that they don’t talk about it; it’s just that investments lack matching the talk. With so much of a prospect’s decision process occurring online and without interaction with a leasing associate, I think this might be the most under-invested part of the front office operation. With cap rates in the 5-6% range, each incremental dollar of revenue is worth $16-20 of enterprise value. Think about the implications of that!

• Technology “go to market.” I expect the trend towards more and more mobile engagement will continue (how’s that for a ridiculously easy prediction?). What’s interesting to me is not the growth of mobile solutions for prospects and residents (that’s just a “have to do”) but rather some insight suggesting vendors are developing more and more mobile solutions for operational associates. Our regionals and VPs are almost always on the road, so tablet and smart phone functionality will make them much more productive. Expect an explosion of that in 2015.

• Technology integration. Chatter is moving to action in this space. I don’t think 2015 is the year this gets solved, but there’s a lot of pressure on PMS vendors to improve in this space, and there are a number vendors getting creative (e.g. in many cases, a start up doesn’t need direct integration if it can screen capture data off a standard report). So several years from now, we might look back on 2015 as the inflection point where viable solutions began to emerge.

That’s my take on these dimensions of our business. What’s yours?