The Demand Solutions Blog

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

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

9 Take-Aways from NAA Apartmentalize 2019

Posted by Donald Davidoff on Jul 10, 2019 2:54:43 PM

A little over a week ago, 10,000+ apartment industry colleagues descended upon our hometown of Denver, Colorado for NAA’s annual Apartmentalize conference. Along with entertaining keynote speakers and many different dinners and parties, there was an excellent program of education, networking and one-on-one meetings. Here are a few highlights from what we saw and heard:

1. Despite political uncertainty (and even a few economic concerns), the industry is still very much a confident group of people. With annual rent growth still above the long-term trend, we continue to enjoy the longest bull run in the modern rental housing industry’s history. Perhaps the best implication of this is that the run is now so long, we no longer hear baseball references around “what inning” we are in 😊

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

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

3 Steps to Avoiding Pricing Complacency

Posted by Donald Davidoff on May 29, 2019 1:13:12 PM

The legendary golfer, Jack Nicklaus is often quoted as saying, "Complacency is a continuous struggle that we all have to fight." We have frequently argued on this blog and elsewhere that the decade of growth has blunted many of the tools that have delivered success and shareholder value in our industry over the last couple of decades. Rising tides lift all boats, and when growth is all-but-guaranteed, competitive capabilities atrophy.

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Topics: pricing and revenue management, Multifamily Trends, Technology

The Next Big Thing in Multifamily Revenue Management

Posted by Dom Beveridge on Apr 23, 2019 9:42:19 AM

Pricing and Revenue Management (PRM) in multifamily turned 18 years old this year. For those interested, the first-ever deployment of a PRM system took place in February 2001 at the Hunters Run apartment complex in Austin, TX. When we sat down recently with 20 multifamily executives to discuss the industry outlook towards 2020 and beyond, we invited them to provide their perspectives on the current state of PRM.

We discuss the results of our research in greater detail in our 20 for '20 white paper. Below we have summarized the feedback that we received on possible future PRM advancements and areas of opportunity.  We found that PRM system-specific feedback fell into two broad categories: how to improve the current models; and more radical improvements and future direction.   

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Topics: pricing and revenue management, Multifamily Trends, Future