Revenue Manager Q & A: Oakwood’s Jeff Young, Part 1
As one of the leading temporary and corporate housing firms in the market, Los Angeles-based Oakwood Worldwide maintains a portfolio of readily-available housing around the globe. Boasting a portfolio of 15,000 units in 4,000 locations across North America, Europe and Asia, its job is to provide short-term housing solutions – often on short-term notice – for its corporate, government and entertainment clients. Ever seen Jay Leno knock on the doors of celebs at Oakwood Toluca Hills? Yup, that’s one of their properties.
But since Oakwood doesn’t own all the units it rents out – it often leases third-party unfurnished units, furnishes them, then charges a premium on those lease terms – gauging its own supply and demand variability can be a complex task. That’s especially true since Oakwood’s supply of apartments tends to be elastic, with its demand affected by both seasonality and the general business climate. To help with that challenge, in 2009 the company brought in Jeff Young, a revenue management professional with 15 years experience ranging from auto rentals with Hertz, hospitality with Disneyland Paris and the cruise line industry with Princess Cruises. We chatted with him to get his take on the unique challenges of revenue management in this sector of the housing business.
MultifamilyRevenue.com: Thanks for taking the time to talk with us today, Jeff. Let’s start with your company, Oakwood Worldwide. What do you do?
Jeff Young, Oakwood Worldwide: Thanks for the opportunity.
Oakwood Worldwide has been in business for 50 years. While we started out as a more traditional multifamily owner, today, our main focus today is providing temporary and corporate housing solutions.
As part of that model at Oakwood, we have a number of properties which are fixed inventory buildings. These are the Oakwood buildings that are fully branded with the Oakwood name, fully staffed and fully serviced, in locations such as Southern California, Bellevue, Washington, Northern Virginia, Gaithersburg, Md. and, and Chicago.
A lot of people know about our Toluca Hills building in Los Angeles, right off the 101. That’s where Jay Leno goes around knocking on doors, asking people questions for his show.
So that’s the core of our portfolio.
Beginning in the 1990s, many of our corporate clients started asking us whether we could meet their needs in other markets, where we didn’t have dedicated Oakwood properties. We started engaging other owners and partners, to aggregate housing supply to meet that demand.
Today, along with many of our competitors, we negotiate leases for individual units and buildings throughout the country. We may take down half the apartments in a single building in New York City for six months or a year, and then remarket them as Oakwood apartments to our customers.
Of course, we also have individual and leisure travel customers that may be interested in an Oakwood apartment for a period that’s longer than a typical hotel stay, as well. But our core model is the B2B market.
MFR.com: What is the average term of your lease on the corporate side?
Young: We see an awful lot of business in the 30 to 90 day range. We also have good volume on the shorter-term side, from five days to one or two weeks.
Of course, we can also accommodate longer periods – for instance, we’re helping with the relief efforts in the Gulf right now. Many of those leases range from six months to a year.
MFR.com: You have extensive and broad experience with revenue management, having worked at the Disney Company, Hertz and Princess Cruises. How did you become a revenue manager in the multifamily space?
Young: Oakwood’sExecutive Committee is very progressive. , are very progressive. They were looking for someone to come in with significant experience to define and drive Oakwood’s pricing mission, developing the tools needed to succeed in the process.
I was contacted by a recruiter for Oakwood. My job here is to develop not only systems within the company to deploy a revenue management strategy, but to create a foundation for the processes and organization that need to be in place to do so.
MFR.com: What revenue management system are you using today?
Young: We are not on anything right now. That’s really why I’m here, to build this thing from the ground up.
We’re in the process of evaluating different options at the moment, and I hope that we’ll have made a decision in the next six months to a year. There are good solutions out there, such as LRO from the Rainmaker Group and YieldStar from RealPage.
But you’ve got to remember, ours is a more complex model than traditional multifamily. Because we have an elastic and perishable amount of supply, it’s imperative that we take into account the cost of the leases we enter into with other owners, as well as the number of leases we need to maintain in order to meet projected demand.
That’s a few more layers of complexity than what’s available in off-the-shelf solutions, so we’re still in an evaluation phase.
MFR.com: How does that added complexity affect the variables you look at, in terms of your revenue management model?
Young: The longer I work here at Oakwood, the more parallels I see with both the rental car business, in terms of managing the supply side, and the cruise line industry, in terms of the advance booking profile and buying behavior.
At Hertz, I worked on a four year project that looked at the variable revenue contribution of our fleet, and the interdependencies inherent in both supply- and demand-side decisions.
I'm a pricing guy at heart, and it's great to talk about demand forecasting, but what was interesting at Hertz was that we were able to optimize our fleet purchases, as well as our distribution decisions, in order to save a significant amount of money system-wide. Of course, if you have the right supply in the right place, you're going to be able to capitalize better on your demand opportunities. That was the whole point of what we were trying to do there.
What I didn’t anticipate, and what we learned at Hertz, was that about three times the return on investment ended up on the supply side of the equation.
So that's something I’m looking at here, which is managing our supply more effectively.
MFR.com: What similarities do you see with the cruise industry?
Young: At Oakwood, we have negotiated business with our corporate customers, but we also have a volume or block business that’s more akin to the group model in hotels, and especially, the cruise line industry.
And if you think about it, a multifamily leasing decision is not unlike a cruise purchase decision. They’re both big decisions, in terms of money. If you’re making a decision on where you’ll live for the next three to six months, that’s not dissimilar to a $20,000 decision to take your family on a cruise across the Pacific this summer.
At Oakwood, how we set up that block business, and then the type of inventory risk we take to satisfy that block demand, I think there is a close parallel there.
MFR.com: Where is your business coming from at Oakwood? Who is the "travel agent,” so to speak, that’s helping you fill your apartments?
Young: Today, we have an experienced sales force out there talking with our major accounts, such as the U.S. Department of State, or Microsoft, which is a recent win for us.
But for example, our top 100 accounts in New York City only comprise two-thirds of our total business there. So overall, you have a highly fragmented business. That fragmentation, of course, makes the supply side and pricing in general that much more complex.
At Oakwood we’re working to standardize our negotiated pricing process, and our block or group pricing model. Right now, it's still very much the Wild West out there.
We might only know about a given demand two weeks before we need to fulfill it, and if we don’t already have enough supply in that market, we have to take down additional units to meet those needs.
Keep in mind, our landlords, many of whom are using lease rent optimizers, or similar tools, are not foolish, either. They're not just out there giving us the space for free.
We may have to take it then, or in many cases, we may have already negotiated pricing with them, on the supply side, six months to a year ago. Now, in some cases that may be a good thing, but given the recent environment, you can also get stuck with a lease that’s more expensive than current market rates.
So it’s all very complex, and each factor impacts the overall model, which directly impacts our margins.
MFR.com: That’s a lot of moving parts.
Young: It is, which is why we're so committed to tightening up the pricing model. We’re very focused on hedging against those kinds of risks. In doing so, you win some, and you lose some, and hopefully you come out better on the other end.
Check back for Part 2 of our Interview with Oakwood’s Jeff Young soon.




