The Demand Solutions Blog

Hitting the Slopes: Why Lease Expirations Matter at Year-End

Posted by Donald Davidoff on Dec 3, 2019 3:44:00 PM

As we head into the winter months, it’s normal to think about slopes - especially if you live in Denver, as I do.  Denver is famous, amongst other things, for both skiing and multifamily leadership, and the “slopes” that we find ourselves discussing with multifamily leaders at this time of year are the profiles that describe a property’s lease expirations.

Lease expiration management (LEM) is particularly timely now as we lease December/January move-ins, soon moving on to February (which many are already sending renewal offers for) and then March. Now is the time where we get to move expirations out of undesirable expiration months into more desirable months. 

Miss your targets in the next few months, and you’ll have to wait another year to try to fix that pain. It should be simple enough, right? We know there’s seasonality, so we know what good and bad months for expirations are. All we need to do is stop signing leases with bad expirations and only sign leases with good expirations. As my good friend and former colleague now at RealPage, Rich Hughes would say, “Done and done,” right?

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Topics: multi-family housing, pricing and revenue management, Renewals

The Statistic that Predicted the Last Recession

Posted by Donald Davidoff on Nov 20, 2019 9:24:46 AM

There's been a lot of talk of downturns lately in Pricing and Revenue Management (PRM) circles. It was a major theme of the recent NAA Maximize conference and was also covered at NMHC OPTECH last week. While no one knows when the downturn is coming, everyone seems to agree that it's a good idea to plan for it. While occupancy and rent growth are still strong, the sheer length of the recovery since the last recession has everyone wondering how much longer this bull run can last.

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Topics: LRO, pricing and revenue management, Multifamily Trends

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

Blurring the Lines in Housing - FLEX 2019 Conference in Review

Posted by Donald Davidoff on Oct 28, 2019 10:35:35 AM

I just got back from attending the inaugural FLEX conference. More than 200 industry professionals spent a day and a half focused on the issues of short-term rentals (STRs) in this “first of its kind” event. Here are a few thoughts and recollections while still fresh in my mind:

1. Content was king! Kudos to Stephen Lefkovits and Dennis Cogbill for curating an excellent set of content. The content covered all angles, discussing pros and cons, finance questions, operational and service issues, regulatory challenges and more. Most importantly, presenters shared real-world scenarios, actual results based on data and generally gave the audience information they could take back to their offices and use.

2. The Lines are Blurring. If I were to sum up the conference lessons learned in one word, it would be “blurring.” There’s a blurring of lines. Housing is blurring with hospitality; vacation stays are merging with business travel, and vendors are combining to offer a range of overlapping services, etc. On the one hand, it’s quite confusing as it’s increasingly hard to label anything or keep our processes in neat metaphorical cubbyholes. On the other hand, it’s incredibly exciting, posing many opportunities for those who can embrace the increased uncertainty/risk to expand and optimize the use of space.

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Topics: pricing and revenue management, Technology, Short-Term Rentals

Gross Potential Rent: A Case Study in Wrongheadedness

Posted by Donald Davidoff on Oct 22, 2019 8:54:05 AM

In recent weeks we've been both thinking and writing about two things: pricing and revenue management (PRM) skills and the possible impact of an economic downturn.  A recent conversation reminded me of another related topic: the metrics we use to measure performance.

Given the importance of pricing and business analytics to our success, the metrics we choose to measure performance matter.  Yet while the industry has made great strides in employing ever-more sophisticated software, many processes and rules of thumb remain that have not caught up to where the technology is.

There is perhaps no better example than the metric "gross potential rent" (GPR). This metric is so ubiquitous that many property management systems (PMSs) embed it in their data model and standard reports.

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Topics: Revenue Management, pricing and revenue management, financial performance, Leasing Performance

Why Price Optimization Doesn't Happen Without Tension

Posted by Donald Davidoff on Sep 24, 2019 4:31:43 PM

Do your community and regional property managers have such a great relationship with their pricing and revenue managers that there is no sense of tension at all? They never escalate an issue because they always agree? If you answered “yes” to either or both questions, then you are likely leaving money on the table.

At first blush, that probably sounds provocative at best and just flat out wrong at worst. Admittedly, in most situations, leaders strive to remove tension in the relationships that exist between co-workers who collaborate to create business success. However, pricing and revenue management (PRM) is different.

Lately, we’ve been writing a lot about PRM capabilities as well as pricing strategy, but even if both are perfect, the nature of inter-departmental relations still has a heavy influence on performance.  In my thirty years of experience in PRM (20 of that in multi-family housing PRM), I have found that a lack of tension almost always indicates one of two situations. Both are bad for maximizing revenue:

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Topics: property management, pricing and revenue management

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

What Santa Claus Can Teach Us About Pricing Math

Posted by Donald Davidoff on Sep 4, 2019 10:02:57 AM

I’m looking forward to the upcoming Maximize revenue and asset management conference September 23-24 in Atlanta. Kicking off the conference late morning on the 23rd, I’ll be presenting another session in a series of deep dives into the math behind pricing and revenue management (PRM).

This presentation series started a few years ago. I had observed that while conferences were including multifamily housing PRM content, they studiously avoided any math or equations in the presentations. I thought that this was severely limiting - restricting sessions to only “beginner” level material. Math lies at the heart of all PRM systems and software, so its omission from conferences felt like a significant oversight. 

I started by running a session at Maximize a few years ago that was designed for advanced PRM practitioners, sharing the stage with my colleagues and good friends Annie Laurie McCulloh and Rick Hughes. I was pleasantly surprised to find that many of the people who attended the session were not those directly responsible for pricing. And I was even more delighted to find that they found the session valuable. My favorite quote of feedback was, “I’m not sure I understood all of it, but I’m really glad there are people in the business thinking about this stuff!”

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Topics: pricing and revenue management

It’s the (Revenue Management) Strategy, Stupid!

Posted by Dom Beveridge on Aug 14, 2019 11:03:51 AM

You reach an age when everything reminds you of something in the past, often for reasons that aren’t immediately obvious. A few weeks ago I was talking to a seasoned pricing and revenue management (PRM) practitioner, and I found myself reminded of an old political slogan.

Most readers of this blog are probably too young to remember the 1992 US general election. But after Bill Clinton won it, it came to light that the mantra “It’s the economy, stupid,” had been drilled into campaign staff. The slogan was intended to remind them never to stray from the core theme of the campaign, which was the plight of the American worker. An overarching strategy begat an overarching message that dominated an ultimately successful campaign.

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Topics: Revenue Management, pricing and revenue management, Future

The 5 Top Attributes for Successful Revenue Managers

Posted by Donald Davidoff on Aug 6, 2019 8:18:00 AM

Pricing and Revenue Management (PRM) has been in mass-adoption in multifamily for more than a decade.  During that time, an industry talent pool has developed around the core technologies that companies use to manage pricing.  The systems are sophisticated, enabling better decision-making and returns at companies that have been successful in incorporating them into their business processes.

Yet our experience tells us that some companies integrate PRM systems and processes into their businesses more effectively than others. While companies may use the same PRM software, many don't get the same returns as other companies that use it. Much depends on the human skills that companies deploy to ensure that the system is configured and operating in the way that it should be.

Given our depth of talent and experience in PRM, clients frequently ask us what they should look for in a good pricing and revenue manager.  Our industry often places a heavy emphasis on multifamily experience when recruiting new associates, often for reasons.  However, there are compelling reasons to apply different rules to PRM recruits (the discipline of PRM came from different industries, like hospitality and airlines, after all). While awareness of multifamily operations can undoubtedly be helpful, it honestly is not the most important qualification for a successful revenue manager.

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Topics: multi-family housing, pricing and revenue management, business intelligence, Multifamily Trends