The Demand Solutions Blog

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

Are We Looking at Property Differentiation the Wrong Way?

Posted by Trachelle Spencer on Jul 2, 2019 9:00:00 AM

I recently read - with interest - the coverage of NMHC's recent spring Board of Directors meeting in Chicago. What really caught my eye was a talk entitled "Seven Ways to Succeed in the Future of Real Estate," given by Dror Poleg, the founder of Rethinking.RE. The presentation discussed how technology is redefining real estate, shifting value from the physical space to the services provided.

In this environment, the logic goes, the customer, rather than the property, increasingly becomes the asset of your business. Space becomes a service and competitors become your partners. From this radical view of an increasingly inverted world, the idea of the customer becoming the asset resonated with me, based on my own experience in the multifamily industry.

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Topics: property management, apartments, apartment operations, multi-family housing

NAA Apartmentalize - A Long View on Short Term Rentals

Posted by Donald Davidoff on Jun 11, 2019 2:41:36 PM

In just a couple of weeks, I’ll be joined by industry veterans Melanie French, Steve Hallsey and Marcie Williams as I moderate a panel, “A Long View on Short-term Rentals” at NAA’s Apartmentalize conference.  I’m excited to further the conversation about a subject that is top-of-mind in our industry.

I still remember four or five years ago when Jaja Jackson from AirBnB first presented to an NMHC conference. To say the reception was a bit cold would be like saying the Pope is a bit Catholic. The Q&A session was one of the most aggressive I’ve ever seen; and when I spoke up to opine that I viewed short-term rentals (STRs) as just another demand stream to be understood and leveraged, I could feel the metaphorical daggers hurled my way by the vast majority of the audience.

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Topics: property management, NAA Conference, Short-Term Rentals

How to Make That Big Box of Unrealized Revenue Your 2019 Resolution

Posted by Jessica Mills on Jan 7, 2019 11:06:52 AM

Happy new year everyone! Now that the holidays are over, we turn to resolute goal setting for the year to come. My gift to you is a big box of unrealized revenue - if you can make it your 2019 resolution to find it.   

The source of this revenue is unit amenities. This is nowhere near a new concept, and I’m sure you are currently utilizing amenity pricing on your assets as most of the industry now is. However, the amount of revenue we’ve uncovered in our client work from doing amenity analysis is always surprising (maybe even stunning) so much so that it’s hard to remark that as an industry, we’re managing amenity pricing well. There aren’t many ways to dig up that much value so quickly, which is why I’m always shocked that more people aren’t regularly doing this exercise. 

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Topics: Revenue Management, property management, New Year's Resolutions

Is Your Sales Process Creating a "Buyer-Beware" Environment?

Posted by Donald Davidoff on Oct 25, 2018 4:40:37 PM

Fall is upon us. As usual for multifamily operators, Halloween preparations and pumpkin spice treats provide the backdrop to the main event - next year’s budget. As we grind through the seemingly endless iterations of revenue and cost numbers and reconciliation between properties and central teams, at some point the light will appear at the end of the tunnel. At that point, we will get to turn our attention not merely to the goals, but how we will achieve them.

We will bring 2018 to a close with a decade of growth behind us. We will enter 2019 facing what is now an annual question "is this going to be the year when things slow down?"  Of course, nobody knows the answer to that question, but there are good reasons to take our preparations for next year as an opportunity to revisit sales. A decade when demand has outstripped supply more often than not has delivered spectacular returns but in many cases, less-than-spectacular sales performance.

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Topics: property management, Leasing Performance, Sales Coaching

The Fill Down Function: A Fast Way to Repeat Excel Formulas

Posted by Donald Davidoff on Sep 12, 2018 9:48:49 AM

I’ve often had customers watch me work in an Excel sheet and ask about various shortcuts they see me use. So, this is the first in a series of occasional blogs on Excel tips and tricks I hope you find useful. 

If you’re not familiar with the “fill down” function, this is a great way to repeat a formula down a column. For example, let’s say that you have a row of unit types with the number of expiring leases and the number of renewals and you want to calculate the renewal rate as the number of renewals divided by the number expirations. In the example below, you can see that the studio rate is 58.3%. 

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Topics: property management, Technology

Ways to Maximize the Value of Your Renewal Policies

Posted by Jessica Mills on Jun 30, 2017 1:00:00 PM

Most companies wisely set renewal policies by month and by property. Certain times of the year may call for different strategies and you’ll want to consider property performance as part of the overall renewal strategy. However, it can be a quite subjective practice to set renewal parameters. There are a few guidelines to keep in mind when doing so:

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Topics: property management, Renewals, Leasing Performance

3 Keys to Retaining Multifamily Residents

Posted by Donald Davidoff on Sep 30, 2016 12:00:00 PM

Ask any group of multifamily operators what they worry about or what keeps them up at night and occupancy will be at the top of their lists. Every day an apartment sits empty represents a lost revenue opportunity that can never be recovered.

Being in an industry where demand is typically driven by things outside of their control, it is important for multifamily operators to focus on what they can control to keep occupancy rates optimized. Retaining residents is one of those areas of focus.

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Topics: property management, Renewals

Sales is Finally Starting to get the Attention of the C-suite

Posted by Donald Davidoff on Mar 10, 2015 6:00:00 PM

In the past, I’ve written about the underlying challenges that have distracted from the focus on sales. Just think about the history of leasing-related practices:

  • Late 1990s: Applicant screening is revolutionized by the introduction of  immediate credit scoring system.
  • Early 2000s: Pricing is revolutionized with the implementation of Lease Rent Options (LRO), the industry’s first automated pricing and revenue management system.
  • Mid 2000s: Web- and cloud-based Property Management Systems (PMSs) become de rigeur, forever changing how information is collected, analyzed and distributed to better run communities.
  • Mid to late 2000s: The eCommerce wave washes over multi-family housing. Online leads, leases, service requests, payments and host of other activities radically alter how we generate and process leads as well as how we communicate with residents.

Throughout these years, there’s still one significant aspect of leasing that is modeled, trained and coached almost exactly the way it was done 20 years ago—leasing itself  (aka sales). Yet everyone I know agrees that prospects surely don’t shop the same way they did back in 1995. Google has even documented this phenomenon in their seminal study about the “Zero Moment of Truth.”

The reality is that prospects are typically doing 65% or more of their search and decision making BEFORE they ever talk to a salesperson. So while we’re at “square 0,” that prospect on the phone or coming in for a tour is almost always way ahead of us—and sometimes “on the last lap.” With that much of a disconnect, I sometimes think that the only reason anyone gets leases is because everyone is equally out of synch with their prospects.

The good news is that after years of neglect, the C-suite is starting to take notice. I think the combination of a) the obvious need for authentic, contemporary sales models coupled with b) the reality that many companies (in fact most of the NMHC top 50) are using price optimization and have entered the digital marketing age, means that COOs and CEOs are beginning to recognize that yesteryear’s sales models and training are not optimal for today’s prospects and salespeople. We need an approach that:

  1. Treats the prospect as the intelligent, knowledgeable individual they are.
  2. Recognizes that our sales associate base is not going to change.
  3. Is quick for our associates to learn and master since we will have 30% (or more) turnover at the leasing associate level

C-suite executives are also beginning to recognize the power of more effective sales for the bottom line. While occupancy may have a cap, systems like LRO, Yieldstar, Pricing Portal and Rent Maximizer all will push rents higher if sales velocity is better. And with cap rates in the 5-6% range, each incremental dollar of rent is worth $16-20 of property value. That’s a big multiplier and one that is starting to catch their attention.

So the question isn’t really whether you’ll update your sales approach and training—IMO, it’s just a matter of when.

Free Webinar: 5 Questions (And Answers) To Ensure Your Sales System Is Built For Success

 

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Topics: property management

Is Your Bonus System Hurting You?

Posted by Donald Davidoff on Sep 26, 2013 5:26:00 PM

Funny thing about bonus systems —you often get exactly what you incent. Now that doesn’t mean you get what you want. It means you get what you incent. So here are a couple of pet peeves of mine that I’'ve seen w.r.t. bonuses in multi-family that at best just waste money but at worst actually hurt our pricing and revenue management efforts:

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Topics: Revenue Management, apartment, property management, apartment operations, apartment pricing, multi-family housing, pricing and revenue management, financial performance