Last week, we talked about how unit amenity pricing is the most common place to uncover hidden NOI in multifamily rental operations, and we covered the various reasons why amenity opportunities present themselves.
Unit amenities are a simple concept, at least in theory. However, experience shows that the practice is a lot more challenging. So, let’s explore a few of the reasons that finding missing amenities is more difficult in practice than in theory.
1. It takes a concerted effort. Finding missing amenities is not like finding trash along the tour path. Associates must make must review and understand the configuration of the PMS and purposefully evaluate that against what they see in the property. It takes a combination of looking at site maps, Google maps and physically visiting buildings and units. It’s rare that one just stumbles upon the obvious.
2. The sheer volume of amenities can be challenging. It’s not unusual for a community to have 20 or more amenity codes, and there are rarely fewer than 10. Since it’s typical for multiple amenities to be associated with individual units (e.g., finishes, flooring, floor, views, location, etc.), associates are managing hundreds, and sometimes thousands, of distinct unit-amenity combinations. That’s a lot to manage without some specific tools to help.
3. Bundling of amenities complicates things. Associates can’t just look at a list of units and total amenity values since each unit represents an almost-unique bundle of amenities. For example, if a balcony amenity is present in units 102 and 302 but missing from 202, we know we need to add that to unit 202. But a total amenity by unit will include amenity values for the floor, flooring, location, finishes, rehab packages, etc. thus making it typically difficult to notice a single missing amenity value from a list of total values by unit.
4. “Zero-dollar” amenities. For communities using pricing and revenue management (PRM) software, it’s a best practice to put as much rent into the base rent in order to let the software manage as much of the rent as possible. Since it’s also a best practice for websites and pricing reports for leasing agents to list amenities. For these reasons, we typically introduce the notion of “zero-dollar” amenities to allow the listing while leaving the value in the base rent for any unit types (UTs) where all of the units have the amenity (e.g. all one-bedroom units have a balcony). This leads two challenges: 1) it’s very hard to notice the difference between a zero-dollar amenity and one that is missing and 2) some unit types may all have an amenity while other UTs don’t. Therefore, some units will aggregate amenity values where that amenity’s contribution is $0 and others where it’s a positive value. That makes it hard to compare and notice something missing.
5. PMSs are not configured to make it easy to identify missing amenities. Property management systems are almost more accurately described as “unit management systems” when it comes to amenities. They give access to view (and change) amenities by unit, and reports on amenities also provide a unit-centric view. They don’t make it easy to see amenities in ways that make patterns obvious. To see those patterns and quickly identify holes (missing amenities) and inconsistencies (things like higher floor units have a lower view premium than a lower floor unit in the same stack), associates need tools that make it easy to view by floor and/or stack.
As I said last week amenity audits are going to be big in 2020 as seasoned revenue managers look for ways to free up NOI - we’d love to talk more about it with you - please click below to schedule a call!