The Demand Solutions Blog

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.

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.

 
“What about the liability?”

“What about noise complaints from neighbors?”

“What about the extra costs involved?”

“It will totally change the character of our community, and we don’t want that!”

To anyone who’s been involved in talking about short-term rentals (STRs), the above looks very familiar, right? They’re the most common concerns about the risks (and hassles) involved with allowing residents to sublease their apartments on short-term rental platforms.

Except that’s not where I first heard these concerns. Back in the late 1990s, hardly any apartment communities allowed pets, particularly dogs and cats, in their apartments. When I asked why not, I usually heard the same four objections.

Yet a few intrepid pioneers, sensing the growing importance of pets as part of their prospective residents’ lives, took a risk and started allowing pets.

I remember visiting one of those in the early ‘00s, Archstone South Market, at the edge of the financial district in San Francisco. I was touring and noticed there seemed to be a lot of dogs. So I asked the community manager whether that was true or it was just me thinking it was.

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.

Lately, we've been writing about the possibility of a downturn, and the impact that it will have on multifamily revenue management. It came as no surprise, then, that the changing economic tides appeared to be a recurring theme at last week's Maximize asset management conference in Atlanta.

Although the conference's audience seemed neither preoccupied nor unduly worried by the prospect of a downturn, it formed a backdrop for the program. From the keynote session where economist Ryan Severino assured us that while a downturn is coming it is not happening tomorrow, to individual sessions in one of which I was fortunate enough to be a panelist, there was a decided focus on preparing for the inevitable downturn whenever it comes.

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 😊

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.

As long-standing supporters of the annual AIM conference in Southern California, we had been looking forward to the launch of its south-eastern sister conference – MICA (Multifamily Innovation Conference Atlanta) – which took place last week.

The inaugural MICA event promised a showcase for innovation in one of the nation’s multifamily industry hotbeds, and it didn’t disappoint. An impressive crowd experienced a program that ranged from the creative, cutting edge of marketing to the nuts and bolts of implementing the innovations that residents are increasingly expecting of multifamily providers. 

Sometimes new technologies and strategies change the way that we do business. More frequently, though, things that have worked in one industry find their way into other sectors, leading to fresh innovation. In multifamily, it is often the hotel industry that supplies some of the most plausible new ways to sell, market and deliver the experiences that define our industry.

Just yesterday, Pillow Homes released a white paper I authored, “Allowing Short-term Rentals in Multi-family Buildings: The Benefits and the Risks Based on Real-world Data.” Though in full disclosure I was compensated for my work, I am particularly proud of this piece of analysis as it’s the first time I’m aware of any comprehensive case study of what really happens when buildings actively allow residents to sublet their homes out for short-term rentals (STRs).

The paper was made possible by data collected on the Pillow Homes platform and the courtesy of two management teams of Denver multi-family communities allowing me to interview them to bring their experiences into the analysis along with the “hard” numbers. The study was made all the more interesting as one of the communities was a stabilized property and the other is going through lease-up, thus giving different perspectives from different operating imperatives.