Maximize Preview - A Deep Dive into the Math Behind PRM

I started planning for my session with Annie Laurie McCulloh at Maximize, October 1-3 in San Diego. This will be the third year in the past four that she and I have been given the opportunity to provide a deep dive into the math behind pricing and revenue management (PRM) and related functions.

To my knowledge, this is the only session at any industry conference where we dig into equations, show real work in spreadsheets and talk about the real complexities behind the discipline rather than speak in generalities and platitudes.  We leave analysts with specific tools and equations they can use at work the next day, and we leave executives with a slew of questions they know they should ask their analysts when they return to the office.

For those of you who will be at the conference, I encourage you to attend this session. If you have any asset managers, PRM associates or analysts going, I hope you urge them to attend as well. For those of you who can’t, I thought I’d leave you with an overview of what we’ll cover. I won’t cover details here, but please feel free to reach out to discuss one or more of these if you want a deeper understanding.

• Seasonality. We frequently use terms like “high season” and “low” season, but do we know how to calculate seasonality? There are simple approximations as well as complex ways that more precisely model seasonality. We’ll give examples for how to calculate both.
• Demand forecasting. How often do you hear your team talk about “strong” or “weak” demand? Did they calculate demand or just “feel it” to drive (or justify) pricing (and even investment) decisions. We’ll show how to calculate demand and how to interpret those calculations.
• Likelihood to renew and renewal statistics. I’ve often commented how we typically spend many hours on new leasing for each hour spent on renewals—in training, pricing support and sales execution—despite the fact that renewals usually are a majority of the leases on a rent roll. Annie Laurie and I will discuss present ways to calculate key statistics in understanding likelihood to renew and use them to drive smarter (more precisely, wiser) renewal decisions. Clients of ours using these statistics have seen at least a 1% increase in renewal rents!
• Lease-to-guest card ratios. The market continuously gives feedback on whether pricing is too high or too low. If we measure this statistic, it can give us great insight…the challenge is that leasing volume is low enough that just looking at the past day (or even week) may not give us enough data. We’ll talk about ways to look at past performance that balance getting enough data to be meaningful while not looking so far back as to make the stat unresponsive to recent change.
• Diagnosing an underperforming property. It’s the age old question when a property is underperforming: Is it pricing? Marketing? Sales? Or what? We’ll put our combined 31 years of PRM experience in multi-family housing to work to show the audience how to do this difficult diagnosis.

If you’re coming to San Diego, please find me and say “Hi!” If not, I hope some of these topics have you thinking about how you can be more systematic and more disciplined in managing your company’s demand!!