The Demand Solutions Blog

NMHC OPTECH 2019: We Need To Talk About Pricing

Posted by Dom Beveridge on Nov 4, 2019 2:54:14 PM

Can it really be time for NMHC OPTECH already? It appears so, and I’m looking forward to joining industry leaders and technology luminaries next week for what is usually one of the highlights of the fall, as we make our way to Dallas to learn about what’s new and what’s working in multifamily technology.

There are many reasons to be excited. It looks like there will be a record crowd for this year’s show, and it’s probably the proliferation of exciting new proptech that’s drawing the audience. But alongside the new and shiny, we will be taking some time to celebrate 18 years of multifamily Pricing and Revenue Management (PRM). This year I’m delighted to be leading the first PRM panel that’s taken place at OPTECH for years.

The fact that PRM has been strangely neglected for a few years at this leading technology show is at the heart of what this panel is all about. February of this year marked the 18th anniversary of the first-ever system implementation. However, the last ten of those years have coincided with unprecedented industry growth. There is good reason to think that it may be time to re-sharpen our focus on this critical capability and the technology that supports it.

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Topics: Pricing, pricing and revenue management, Multifamily Trends, Short-Term Rentals

CoStar Shoots for the STRs - Big News for Multifamily?

Posted by Dom Beveridge on Oct 8, 2019 8:20:46 AM

I must admit, last week's acquisition of Smith Travel Research (STR) by the CoStar group took me by surprise. And it wasn't just me - few observers of either the hospitality or multifamily industries expected it. As the dust settles after a seismic move, let's take a moment to think about some of the possible implications of this acquisition.

First, this is a big acquisition. Although not quite at the same dizzying heights of the 2014 Apartments.com takeover, $450m for a data company (i.e., not a product like an ILS that drives prospects to its customers) is extraordinary. But STR is no ordinary data company. It is not an exaggeration to say that STR is the foundation upon which property analytics are built in the global lodging industry. For decades, STR has been the gold standard for property performance and property underwriting. Nobody plays in this critical niche at the same level in multifamily.

For CoStar, who now have the habit of entering new markets with a strategy of going very big, the strategy makes perfect sense. Overnight they have become the uncontested, dominant force in hotel analytics. The merger on this scale creates many exciting opportunities, including a couple of potentially important ones for multifamily.

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Topics: Pricing, multi-family housing, Short-Term Rentals

Ten Questions Asset Managers Should Ask About Pricing

Posted by Dom Beveridge on Sep 10, 2019 8:26:00 AM

Recently we have written extensively on the skills that are needed to run an effective pricing and revenue management (PRM) organization.  We normally take the perspective of an organization looking to bolster its PRM capabilities - something that we feel companies should focus on after a decade of growth in multifamily.  But there is one important stakeholder group whose perspective we have not addressed as directly as the others: asset management.  

Through our industry connections and our growing roster of institutional ownership clients, we have come to pay more attention to the asset management perspective over the last year or so.  With regard to revenue management, asset managers have the often unenviable task of overseeing the revenue management decision-making of third parties, usually either management companies or software vendors.

In either case, an asset manager has to understand enough about market conditions and strategy to be able to evaluate a property’s pricing tactics.  They must resist getting into the weeds, of which there are many in the case of PRM, but still provide oversight. With this problem in mind, we recommend asking ten questions that will help you understand where your PRM opportunities might be.

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

7 Ways to Tell if Your Revenue Manager is Skinny Dipping

Posted by Donald Davidoff on Jul 24, 2019 8:36:00 AM

One of the challenges with pricing and revenue management (PRM) being more than 18 years old is that most of the pioneers in designing and developing the software are no longer involved. In some cases, companies are on their 3rd or even 4th generation of associate (this holds for both software vendors’ and operators’ teams).

The result is that we often no longer have a healthy skepticism that drives deep knowledge of both the software’s capability and the ways various parts of the demand management ecosystem (all the policies, procedures and other activities that affect demand) affect how we should use the software.

After a decade of growth in the multifamily sector - when it's been relatively easy to deliver upside - senior operators might ask how much of their growth comes from proficiency in PRM, and how much from riding the market.  As Warren Buffett famously said, “Only when the tide goes out do you discover who's been swimming naked.”

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Topics: Pricing, Revenue Management, Demand Management

3 Reasons Multifamily Pricing Needs an Ownership Mentality

Posted by Donald Davidoff on Jul 16, 2019 1:30:33 PM

It’s been more than 18 years since the first property went live on the first automated pricing and revenue management (PRM) system in multifamily housing. What started as a niche product and function (only about a half dozen companies were using PRM software in early 2006 (six years into the “PRM revolution”) is now embraced by owner/operators and fee managers alike. Virtually all of the NMHC top 50 use automated solutions, and we estimate close to 50% of all professionally managed multifamily housing companies use a revenue management system.

In my time watching PRM mature from an early start-up stage to widespread acceptance, I’ve seen many models of PRM support evolve. Broadly, I put them into two camps: those whose pricing managers behave as if they own the communities and those who serve in a more subordinate role to owners or operators.

In the case of the former, PRM and property management are co-equals and collaborate as such in executing a strategy. Of course, being co-equal has its challenges, the most obvious of which is coming to a decision when both parties authentically disagree; if they’re co-equal, then who casts the metaphorical deciding vote?

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Topics: Pricing, property management, pricing and revenue management

Multifamily Pricing: The Danger of “Doing Fine”

Posted by Dom Beveridge on Jun 25, 2019 3:57:01 PM

A couple of weeks ago, we published a post about the risk to multifamily operators of complacency in their approach to pricing and revenue management (PRM).  Frequent readers of this blog will be familiar with this theme, which was a major finding of our 20 for '20 white paper.  To summarize, PRM seems to have slipped from the senior management agenda, resulting in a pervasive view that "PRM is doing fine."

PRM has been doing fine in multifamily for a number of years - in fact, it's been doing exceptionally well, delivering outsized returns for operators and investors alike.  Looking forward, however, our concern is not so much with the current business practice, but its future evolution. With reduced senior management attention and technical innovation delegated to a highly consolidated vendor community, several of the drivers for big change appear to be missing.  To put it another way, the source of the next big thing in PRM is far from clear.

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Topics: Pricing, Revenue Management, pricing and revenue management

NAA Apartmentalize:  3 Killer Pricing and Marketing Tactics

Posted by Trachelle Spencer on Jun 18, 2019 12:02:00 PM

It's June, the sun is out (mostly) here in Denver, and like all locals involved in the multifamily industry, I'm looking forward to welcoming a few thousand esteemed colleagues to my hometown for next week's NAA Apartmentalize conference.

This year I'm excited not only because the show is in Colorado, but because I'm taking part in what promises to be an excellent panel, discussing one of my favorite topics: the interplay of pricing, lead generation and sales.  I will be joined for this discussion (which takes place at 5 pm on Thursday, June 27) by my friends John Reardon of Beacon Communities and David Dear of Equity Residential.

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Topics: Pricing, NAA Conference

5 Highlights of Donald Davidoff’s Multifamily Matters Interview

Posted by Donald Davidoff on Jul 9, 2018 2:00:00 PM

You probably already know that D2’s CEO, Donald Davidoff, revolutionized the multi-housing industry seventeen years ago when he led the team that built the first automated pricing and revenue system.  But he certainly wasn’t content to rest on his laurels. Donald, an engineer by training, has continued to transform the industry with a holistic viewpoint tied together by a common thread: data.

Multifamily Matters, a national weekly radio show dedicated to interviewing the best in the industry, was eager to have Donald on as a guest so he could share his unique perspective. After all, as host Paul Marks pointed out, not only was Donald prescient about the multifamily industry’s need for analytics, he has continued to be a “legendary thought leader” for Pricing and Revenue Management (PRM).

Here are some highlights from Donald’s hour-long interview, followed by a link to the full conversation with Paul Marks and Donald’s former client, Brian Hilton. Hilton is the current head of PRM at Simpson Housing, which was the second multifamily operator in the industry to implement PRM software. 

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Topics: Pricing, pricing and revenue management, Artificial Intelligence

6 Indicators that it's Time for a Pricing Health Checkup

Posted by Jessica Mills on Sep 26, 2017 3:00:00 PM

Modern pricing strategies and revenue management systems have had a tremendous impact on the performance of multifamily owners and operators. While systems like LRO and Yieldstar are quite robust and continuously improved, they are not infallible on their own. In fact, the flexibility they give operators to implement a range of strategies means that users need to review and modify settings as market conditions and strategies change.

Forward-thinking and high-performing property management companies realize that, as with any system, a routine assessment or checkup is a powerful tool. Inevitably when you look at your pricing and revenue management system in depth, you find areas of meaningful improvement.

Here are six indicators that the time has come for a pricing health checkup:

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Topics: Pricing

Lessons Learned: Conducting a Pricing Review

Posted by Jessica Mills on Jul 21, 2017 3:00:00 PM

Weekly or bi-weekly pricing review calls are a great forum to learn more information on why a property is or isn’t leasing. But sometimes when helping teams the answer isn’t as simple as just “the price”. You may be surprised what may arise as part of these regular communications. Here are three lessons learned from leading these pricing review calls: 

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Topics: Pricing