A Consultative Approach to Enhancing Revenue Management
The analytics of an effective revenue management tool go a long way toward helping a multifamily property realize its full potential. But the real trick to getting the most out the software that has redefined multifamily management in recent years goes deeper.
The churn in analytics that balances supply and demand for maximizing revenue growth is heightened when owners and operators get a helping hand from a knowledgeable revenue management professional, especially when tackling special circumstances.
When milestone events like changing market conditions, renovations and new lease-ups occur, communication and a consultative approach is essential. It’s what makes a great tool even greater.
Getting everybody on the same page when conditions change
David Danish, Vice President, Professional Services at RealPage, Inc., says a successful approach to revenue management is getting everybody on the same page, not only during the day-to-day course of business but when the playing field alters.
The multifamily industry’s return to normalcy in 2017 that affected revenue growth and occupancy was cause for recalibration in some markets. For RealPage customers, such shifts typically required some fine-tuning of the company’s YieldStar revenue management system to stay the course for meeting strategic goals.
As conditions changed, the YieldStar staff went into high gear and began frequent discussions with customers to make the necessary adjustments for maximizing performance.
“It’s not about just having the conversation but about having it frequently,” Danish said. “A stable, healthy market doesn’t require as many check-ins with your stakeholders as a market or asset strategy that is shifting. We expect to have an increased level of engagement with clients or properties who are in that situation.”
Danish said it wasn’t unusual for asset managers and owners who had not been on scheduled calls to get on the horn. Many were concerned about how the changing market, especially in Houston, affected their portfolios.
The lingering effects from the energy downturn in Houston coupled with consecutive years of significant supply growth drove occupancy down significantly in major markets and submarkets. Institutional investors, for example, were often less concerned about maintaining physical occupancy levels, and were instead anxious to protect the rent roll. The task became carefully managing occupancy reductions (as much as 3 – 5-percent in some submarkets) to preserve revenue integrity.
Danish said understanding their clients’ needs in that situation helped the YieldStar team make the necessary adjustments to leasing protocols to minimize the impact. Advisors typically provide data and insights into the range of possible outcomes and how to align the whole organization around meeting any revised goals.
“It’s not for a lack of trust from our clients,” he said. “There can be an understanding that this is unchartered territory for your organization and having us walk you through it, lay out the options for you, talk through what is likely to happen in different scenarios and what we can do to mitigate the risks or take advantage of any opportunities becomes increasingly important.”
Combining the power of analytics and keeping customers in the know
Each client has its own strategies and touchpoints that signal the need for change. Just as those who wanted to protect rent rolls, others looked at protecting occupancy.
YieldStar works off of disciplined analytics that balance supply and demand to maximize revenue growth, backed by the industry’s deepest repository of transactional data and experienced data scientists. The convergence of the wealth of data provides clients with more than a speculative approach about charting a path.
But frequent updates by the YieldStar staff on key indicators like supply shifts helped keep customers in the know so they could make informed decisions, Danish said.
“We don’t want to go based on hearsay or what’s happening in the broader market if your submarket is somehow exempt from that or behaving differently. We find out what your needs are as an operator and then we guide you towards that.”
But there’s always a breaking point and priorities change along the way, an even greater reason to stay in touch with clients.
Getting hands-on with lease-ups and renovations
Managing initial lease-ups and renovations also requires some personal attention.
Most operators understand that leasing up a new property in multiple phases requires a keen sense of timing and effective lease expiration management. Yet making it happen manually can be a challenge, sometimes leaving the property with most of its lease terms expiring at the same time.
A better approach, Danish said, is working with clients to create flexible lease terms throughout the delivery phases, a key feature in RealPage’s revenue management system.
“Companies that have done a lot of lease ups are familiar with this concept, but they either don’t put into effect or don’t put it into effect very well,” Danish said. “From the first day, your revenue management system should calculate an ideal lease expiration management schedule for your property. It’s really a proactive approach to expiration management but adaptive to the delivery schedule associated with the lease-up building. You can’t match it manually.”
The approach to renovations is probably what varies the most client to client, he said. Typically, RealPage works with clients to customize the approach because of the wide variety of renovation programs, different ways they are measuring program success and a broad array of expectations of those programs.
“There is no one-size-fits-all solution to optimizing your asset performance through the renovation process,” Danish said.
Operators who perform well are typically highly engaged with YieldStar staff and share how success is to be measured.
Because the renovation process shifts over time, it’s important to monitor progress right from the start. Getting feedback from the onsite team about market response to the first few leases and what they leased for is a part of the process.
Separating the good from the great
Danish said the company’s revenue management system works their best when goals for an asset are clear at the time of implementation, when performance monitoring and reporting is ongoing, and when system settings are fine-tuned appropriately to account for any milestone events in the asset’s life cycle.
Proactively managing those special circumstances is what separates the good from the great.