How To Beat The Multifamily Holiday Blues
by Donald Davidoff | December 19, 2019
As we head into the holidays, I hope everyone has some time planned for family, fun and just winding down a bit. Taking a lesson from Stephen Covey’s “7 Habits,” we at D2 Demand really believe in life-work balance to “sharpen the saw.” This balance was on our minds this week as the growing D2 team followed its end-of-year meeting with our now-annual holiday party with our friends at Linnell-Taylor and Après Creative, this year held at Unser Kart Racing.
Amid the holiday festivities, it’s easy to forget some of the pitfalls of year-end in multifamily. One of the most obvious is the traditionally-sluggish demand for apartments that tends to accompany buoyant demand for socks, items from the Williams-Sonoma catalog and the like.
November and December always carry the risk of panic pricing reactions and concessions, and more broadly of the self-fulfilling prophecy that “we don’t sign leases at this time of year.” With marketing budgets having dried up months ago (like *enter the name of the child’s gift you can’t find anywhere*) year-end can be a leasing funk.
They don’t call them “flexible rentals” for nothing
Readers of this blog will be familiar with our position on short-term, or - as they are more and more commonly being called, flexible rentals. For the last five years, we have advised operators to embrace flexible rentals as an additional demand channel to be managed. Year-end gives us a great example of the potential upside. Short-term leisure travel tends to increase at this time of year, just as demand for long-term leases wanes.
Apartments have some important advantages over hotels, like full kitchens, multiple rooms and extra space, which can play well to the family demographic and holiday celebrations. What if your “Plan A” involved proactive use of short-term rentals to fill those holiday-period demand shoulders?
Sure, there are challenges, but every one of them has a potential solution (besides, what about anything in our business is without challenge?). One of our most popular themes on this subject this past year was comparing the concerns of STRs to exactly those same concerns about pets in the late ‘90s/early ‘00s. If you’re not taking a serious look at flexible rentals, now is the time to start.
At least we have January to look forward to. Seriously.
The holiday period symbolically represents the bottom of the low season, but January and February are still low season months. The remnants of the flat holiday period can bleed into Jan when demand does pick up, sometimes leading to under-leasing. But you can avoid the hangover, as seasonality improves moving into the spring. That gets demand management folks like us thinking about lease expiration management (LEM). There’s still time to manage your Jan-Mar expirations for 2021, so what are you doing about that?
As spring approaches our minds turn to spring training for baseball teams. Mine does, anyway, which is why I’ve always loved the concept of spring training for business—a chance to evaluate our teams’ strengths and challenges and return to practicing the fundamentals. We highly recommend planning a “spring training” event around sales/leasing.
Take the time to ask questions of your team capabilities and make a plan to make some meaningful upgrades. Do you have a contemporary sales model? Have your leasing agents gone through any refresher training since they were onboarded? Do all your new agents get formal training in their first 30-45 days? Now is the time to make sure you can answer all three questions in the affirmative.
The new year is when we start to see monthly columns in our P&L switched from the tag “Budgeted” to “Actual.” While budget season is behind us (isn’t that a great thing!), it’s still fresh in our mind. So now is a good time to have an “after action review” on your budgeting process. What went well and should be repeated last year? What did not go well and should be changed? Are your tools sufficient?
Our experience is that most budgeting processes are only as good (or bad) as the data (business intelligence) platform. So, as you hang those stockings by the chimney with care, take a moment to take stock of your BI platform. If you’re satisfied, great! If not, we’d love to talk to you about it!!
And while we’re on the subject of things that we’d love to talk to you about, 2019 saw a sharp uptick in the number of companies for whom we’ve been doing revenue management system health-checks. Whether or not you use external help, now is a good time to review your parameter settings, check on overall lease pricing compliance and analyze your team’s override behavior. Also, look at whether your unit amenities are consistently in place and review policies and protocols around longstanding vacant units and hold times.
From all of us at D2 Demand to all of you, have a blessed holiday season…whatever specific holiday you may be celebrating!