“How much can a revenue management system improve net yield in an apartment company?”
For years observers have asked that question, only to realize that there is no way to isolate the effects of a single initiative in a world where a multitude of factors impact a company’s decisions on a daily basis.
Industry executives cite revenue management as an important tool that provides transparency, consistency, and an easier way to calculate “the right price” than doing it manually. It’s one of several tools that REITs can use to drive results – and they typically are used simultaneously. For example, if marketing, onsite sales and the rental units themselves are in a bad place, then there won’t be much a yield management platform can do in isolation.
In his company’s second-quarter 2008 analyst call, Eric Bolton, CEO of Mid-America Apartment Communities, cites his company’s financial improvements as part of a larger program that includes revenue management and other operational and financial changes.
Mid-America Apartment Communities Inc. Q2 2008 Earnings Call Transcript Excerpt
August 1, 2008
Eric Bolton, Chief Executive Officer
[excerpt]… the strength of our operating platform will help to ensure that Mid-America’s portfolio continues to generate solid performance. We’re confident that our yield management system implemented last year, recent changes in programs for collecting delinquent rent and upgrades made at the start of the year to our inventory management programs were all combined to deliver results that outperform market norms.
As an example you’ll note that same-store physical occupancy at quarter end was down slightly by 30 basis points in the second quarter, as compared to the same point last year, but effective occupancy which is the more meaningful measurement of vacancy loss as it accounts for a vacancy from turnover that occurs during the month actually improved by 64 basis points in the second quarter.
As a result of this increase in the effective occupancy, same-store vacancy loss declined by nearly 9% in the second quarter as compared to last year. This is the direct result of lower resident turnover and our proactive inventory management system, which reduced the number of days vacancy to 24 days as compared to 29 days in the second quarter of last year.
