Hold the Phone: Why Pricing Calls Work with Revenue Management Systems
In the past, price setters have relied on weekly or periodic calls with on-site staff to finesse rates to drive traffic and secure leases. Today’s software systems, however, do much of the legwork by helping determine rates based on daily and historical market trends and other factors. In turn, they reduce the number of hours devoted to pricing discussions to find that sweet spot rent number.
Those calls, though, are still necessary, analysts say. Only they are now to determine how well the systems are working, and to enable managers and operators time to address challenges and other opportunities.
“There are things that the system can’t know that you’re going to glean from those calls,” said Scully Co. Regional Property Manager Karen Mette ARM, CAM, CAPS. “If there is construction out front of your business that is prohibiting the traffic from getting in, that might be the reason that they did not have any traffic that week. That’s why you need to be connected and know how the systems work, how they interface and know the expectation.”
Working with staff to understand revenue management maximizes system
Mette steered a three-year effort to implement a revenue management system at Scully Co. She began looking at systems in 2009 to help the company reduce vacancies and eliminate concessions across its portfolio, which includes properties on the East Coast.
After choosing a provider, the company ran a pilot that included one of the top properties in the portfolio and another at the bottom in different demographic markets. The lower performing community improved significantly, and the top player strengthened its position. For some line items that drive revenue management, Scully experienced 9-10 percent growth year-over-year in certain markets.
While she applauds the revenue management system, Mette says taking a hands-on approach and capitalizing on all the information such software provides is a big reason why the portfolio is better able to manage growth. Working with onsite managers to help them understand processes and keeping communication lines open helps maximize the efficiencies of revenue management systems.
“I would tell you to do your homework,” she said. “I pull reports. I cross- reference all of those reports every Wednesday morning. Really understanding how things work, how they are supposed to work and what the objective is, that’s paramount.”
Calls reveal intangibles beyond pricing that can affect rent growth
Weekly revenue calls with property managers are crucial to determining how well the system is working, as well as how best the staff is selling established rates, Mette said. Within those calls, she can dig also down to the unit or floorplan type and see if traffic or other activity is being accurately recorded. This special care can make an impact during peak leasing seasons at properties.
“Our system breaks it down specific to unit type,” she said. “So when we’re going for our weekly call, we’re talking about unit type specifics, how many prospects came through the door, how many leases you got from it.”
Certain circumstances and community location can play into traffic volumes in a given week, she said. But the system can’t understand some of the circumstances that may affect traffic flows, for example, so having those conversations can offer insight.
Discussions help establish and create a routine that promotes consistency
Waterton Residential has had revenue calls every other week mostly since going with a revenue management system four years ago. Pricing Director Jeremy Boelens says they are important because they contribute to establishing a repeatable, routine process that helps promote consistency. The conversations force managers to prepare and ultimately better understand their markets.
“The community manager prepares to talk about pricing changes since the last call, the renewal progress, and also the replacement rent growth,” Boelens said. “So, if at any given time the senior executive asks that community manager how it’s going with renewals or replacement rents, they’ll know that off the top of their head. So, they have a good sense of the market, their comps and also how their rents are tracking.”
Through Waterton’s online pricing, Boelens has a good idea of how well leases are being turned. Prospective residents, he said, often do their homework and know quite a bit about a property when they walk through the door by shopping online.
If the property is getting traffic but no leases, something else is at play.
“If you have 10 pieces of traffic and no leases, it’s probably not a price issue,” Boelens said. “You’re getting them in the community, but for whatever reason they are not leasing. I would look at performance of personnel, cleanliness of available apartments and whether or not we are bringing in qualified traffic.”