For those of you looking for some great background on RevMan technology and how it evolved before making its entrance into multifamily, check out this interesting and easy-to-read article co-authored by RevMan guru Robert G. Cross. Cross, of course, is author of Revenue Management: Hard Core Tactics for Market Domination, another must-read for RevMan mavens.

Published in the Journal of Revenue and Pricing Management, the article (co-authored by Jon A. Higbie and Zachary N. Cross) traces the emergence of RevMan in the airline industry in the early to mid-1970s, as it rose to prevalence not out of the genius of forward-thinking technologists, but the necessity of competitive survival.  As low-cost operators came onto the scene and deregulation started changing the rules of how airlines could price their seats, American Airlines turned to a new, novel approach for pricing then known as “yield management.” In a wrinkle worth noting, American paired its RevMan practices directly with its marketing initiatives right from the beginning, rolling out what would become its ubiquitous “Super Saver Fares” as an integral part of its strategy. It’s a point we’ve been making on this site for years — that RevMan and Marketing are the same thing – and one the apartment industry is starting to wake up to, especially among progressive RevMan players like UDR.  

The article opens by painting a dramatic picture of what was at stake for the airlines, and the intractable inertia they set in motion by unleashing this new form of business-meets-science to fill empty seats.

“It started as a desperate strategy for struggling airlines faced with the chaos of deregulation. They had only hoped to stem the losses. Instead, they inadvertently created a revolutionary way for all companies to boost revenue and profits by using data and analytics to predict customer behavior and optimize the price and availability of products,” the article opens.

The authors then detail the spread of revenue management into the hospitality industry, and how the de-centralized business models of hoteliers like Marriott called for both regional and global support and oversight, with the main driver for implementation coming from the corporate level. (Sound familiar?)

From there, you’ll learn about how the specifics of RevMan have been applied to rental car fleets, theatre tickets, parcel services and shipping, even financial services and wealth management. It details how Ford Motor Company generated an extra $3 billion in additional profits without making more cars. And it touches on developing customers for life, something UDR CEO Tom Toomey talked to us about last summer.   

(A close reading will also lead you to a citation of this article on RevMan in Multifamily Executive from 2008. Maybe that’s what it is to know you’ve arrived: when someone with Cross’s clout gives you a shout out in his own original work. Or maybe it just shows how new and relatively small RevMan still is in our close-knit industry.)     

The article closes by re-capping the quest of each industry’s RevMan pioneers, and what drove them.

“They knew that they were embarking on a new journey, and they expected to succeed,” the authors write. “They occasionally established new metrics. They invariably measured outcomes and eliminated obstacles to success. Their achievements have been inspirational for others and illustrative of the fact that advances in Pricing and Revenue Management have no boundaries.”

Sounds like they could have been talking about multifamily.

Dubbed Market Comps, it’s the latest offering from the real-time availability experts at Scottsdale, Ariz.-based VautWare, and is powered by listings data from more than 25,000 properties who advertise on Rent.com.

With an interface that’s way more simple than the firm’s PadZing offering, which touted itself as the Zillow for multifamily before Zillow starting doing multifamily, Market Comps offers community managers a single-screen view into their competitors’ pricing. It shows them where their own properties stack up on average rent and rent per square foot, even unit-specific pricing for different floor plans.

Market Comps' baseline property comparison screen.

Not only does that hold the promise of taking a big load off leasing agents who spend at least part of their jobs calling the competition for current rents, it’s a first step toward automated pricing for smaller operators. What’s more, it provides an alternative to full-blown software packages costing tens of thousands of dollars. Multifamily RevMan watchers have often pointed to the price points of those solutions as one of the major impediments to wider-scale adoption of the technology by small and mid-size operators.

“At a minimum, its a first cut of a poor man’s revenue management system,” said Mike Mueller, VaultWare’s CEO. “It’s property specific and takes just minutes to set up. We made it super simple for our industry.”

After fielding feedback from users that PadZing was complicated and confusing to use, VaultWare developed Market Comps to do one thing well: show you the actual pricing at your comps, updated once a week, and where you stack up against them, on one screen. Gone are PadZing’s cumbersome mapping tools, or the myriad filters you could apply to the wealth of data there.

No, instead of giving you too much, Market Comps gives you more by giving you less. The tool has two basic views, graphing your property against your immediate comps, and comparing your property to those around it by unit type. You can pull down tabs for average rent, by unit type, for the last 1 to 24 months, and you can export any of it to Excel for a property-by-property comparison of how you’re doing against your peers. Click here for a video tour of the tool.

Market Comps' floor plan comparisons and reports exported to Excel.

Finally, you can set up e-mail alerts to receive notification when your own rents hit a pre-determined trigger against your competition. For example, if you want to know when your 1 bedrooms fall outside of a range within $25 of your nearest comp, Market Comps will send you an email telling you so.

“Most other sources are expensive and already out of date when purchased,” said Mike Cornell, VaultWare’s president. “Market Comps does the work for the properties and ensures they are aware of changes to their market conditions as they happen rather than reacting to a trend that happened weeks or months ago.”

Market Comps' email alert tool

Perhaps most compelling about the offering is price: the basic version is free for VaultWare and Rent.com customers, while the Premium offering – which allows you to see your property-by-property comp report, export floor plans and set alerts – is $300 a year. At this time, the product is only available to customers of the those two firms.

Not all of these firms are at the same point in the adoption curve. Some are multi-year veterans who long-ago rolled RevMan out to their entire portfolio. Others may still be in pilots, with just one or two properties online. Then there are those who are still conducting “head-to-head” tests of various solutions at multiple communities.

Regular readers will notice that we’re not tracking the specific solution each company is using.

We’ve made this adjustment for a few reasons. First, what once was a fledging collection of RevMan pioneers in multifamily has now expanded enough for the term “universe” to rightly apply to it.

Yet, just like counting the stars, it’s nearly impossible to keep up with every company using this technology. The subsequent task of accurately tracking which solution each is using has now grown beyond this humble blog’s resources.

The overall goal of MFR.com has always been to track, cover and highlight the use of RevMan in multifamily, and we will continue to do exactly that.

But if you’re shopping for a solution and you want to know which one would be best for you, you’ll still be better served by doing it the old-fashioned way: get on the phone, press the flesh and get out to as many meetings as possible. Ask your colleagues, associates and peers about their experiences. There’s not a Yelp! for multifamily solutions – yet — but we’d wager you can find all the answers you need in your phone’s contact list.

Our goal in the future will be to determine how many units are actually being priced using all flavors of RevMan in the industry, and we’ll be talking with third-party providers who are better suited to gather and track that sort of data.

In the meantime, we will continue to track firms using RevMan, and maintain a broad, if not all-inclusive list. Which means if you fit here, but aren’t listed and would like to be, we’d love to hear from you.

Likewise, if you’re included, but would prefer not to be, email me.

And remember, make sure to get the latest on this and all of multifamily’s tech trends at AIM 2011, set for May 2-4 at the Hyatt Regency in Huntington Beach. And to get the focused download on all things RevMan, keep September 12-14 open for the inaugural Apartment Revenue Management Conference.

And now, the list:

• Abacus Capital Group
• AIMCO
• Alliance Residential
• Allison-Shelton Real Estate Services
• Altman Management Companies
• Amerimar Enterprises
• AMLI Residential
• Apogee Residential, LLC
• Archon Group
• Archstone
• Associated Estates Realty Corporation
• AvalonBay Communities
• B & M Management Company, LLC
• Babcock Brown Residential
• The Bascom Group, LLC
• The Bainbridge Companies
• Barrett & Stokely, Inc.
• Bell Partners
• Berkshire Property Advisors
• BH Management Services, Inc.
• BlackRock
• Blue Ridge Companies
• Bonaventure Realty Group, LLC
• The Bozzuto Group
• Capstone Real Estate Services, Inc.
• The Carlyle Group
• Carmel Partners
• Camden Property Trust
• Carter-Haston Real Estate Services
• Centennial Holding Company, LLC
• CIM Group, Inc.
• Cohen-Esrey Real Estate Services, LLC
• Colonial Properties Trust
• ConAm Management Company
• Continental Properties Company
• Corcoran Management Company
• Crawford Communities
• CWS Apartment Homes
• David Drye Company, LLC
• DEI Communities
• Dominion Management, LLC
• DRA Advisors, LLC
• Dunes Residential Services
• E&S Ring Management Corporation
• ECI Group
• Edgewood Management Corporation
• Epic Asset Management
• Essex Property Trust
• Equity Residential
• Ferebee Properties
• First Choice Management Group, Inc.
• First Communities
• First Montgomery Group
• Flournoy Properties
• Fogelman Management Group
• Forest City Residential Management, Inc.
• Forest Property Management
• FPI Management, Inc.
• Freeman Webb Company
• Gannon Management Group
• General Investment & Development
• GF Properties Group, LLC
• GMH Capital Partners
• Grand Peaks Property Management
• Greystar Real Estate Partners
• Griffis/Blessing, Inc.
• Grubb & Ellis Company
• Gumenick Management Co., LLC
• Hamilton Zanze & Company
• Henderson Global Investors
• HHHUNT
• Hirschfeld Properties, LLC
• Holland Residential
• Home Properties
• IMT Residential
• Interland Corporation
• The Irvine Company
• JBG Residential
• J.C. Hart Company
• JPI
• Julian LeCraw Company
• Jupiter Communities
• The Kamson Corporation
• KBS Companies
• Korman Residential
• Landmark Residential
• Laramar Group
• LaSalle Investment Management
• Legacy Partners
• Lewis Operating Corporation
• Lincoln Properties
• Madison Apartment Group
• Mark-Taylor Residential, Inc.
• MC Companies
• MEB Management Services
• Mid-America Apartment Communities
• Mission Residential
• Morgan Group
• Morgan Properties
• NOI Capital Partners
• Noland Real Estate Services
• Northland Investment Corporation
• Olympic Investors
• Orion Real Estate Services, Inc.
• Ovation Property Management
• Pacific Living Properties, Inc.
• PASSCO Companies, LLC
• PEM Real Estate Group
• Pinnacle — American Management Services
• The Prime Group, Inc.
• Prometheus Real Estate Group, Inc.
• Post Properties
• PRG Real Estate Management
• Regional Investment & Management (RIM)
• Renaissance Property Group, LLC
• Resource Residential
• Riverstone Residential Group
• RREEF
• Sack Properties
• Sagebrush Capital Management
• Sares-Regis
• Sentinel Real Estate Corporation
• Sequoia Equities, Inc.
• Shea Properties
• Sidal Realty Company
• Simpson Property Group
• The Sobrato Organization
• Sterling American Property, Inc.
• Steven D. Bell & Company
• Stockbridge Real Estate Funds
• Stonemark Management
• Sunrise Management
• Switzenbaum & Associates
• TIAA-CREF
• Trammel Crow Residential
• Transwestern
• UDR, Inc.
• Univesco
• Verde Apartment Communities
• Walton Communities
• Washington Real Estate Investment Trust
• Waterton Residential
• Weinstein Properties
• West Coast Redevelopment
• Westcorp Management Group
• Westdale Asset Management
• Western Rim Property Services
• Wilkinson Real Estate Advisors, Inc.
• Woodmont Real Estate Services
• The Worthing Companies
• ZRS Management, LLC

Shea Properties is seeking a Revenue Manager to operate its Revenue Management Software (Yieldstar)

Candidates are required to have a Bachelors or Advanced Degree, with Regional Property Management, Asset Management, or Market Research experience preferred. The ideal candidate will have advanced technical skills, be detail oriented, analytical and methodical, with an outgoing, yet direct communication style. The position will report to the Sr. Vice President and work regularly with Community Managers, Regional Managers, and the V.P of Marketing to maximize Portfolio Revenue in sunny Southern Calif.

To learn more information and apply – link here:
http://tbe.taleo.net/NA1/ats/careers/requisition.jsp?org=SHEA&cws=1&rid=360

The AIM 2010 Conference theme – Many Marketing Channels: One Goal – reflects the needs of owner/managers and their service providers to master many channels to drive and validate their impact on net operating income. AIM 2010 will feature cutting-edge business education designed to help simplify using multiple marketing channels to achieve a targeted ROI occupancy. With more than 200 companies that own and operate apartments in attendance, it’s an event you can’t afford to miss!

We’ll be meeting at the beautiful Hyatt Regency Huntington Beach Resort and Spa in Huntington Beach, California. The location is fantastic and has to be seen to be believed. It’s right on the beach with lots to see and do in the immediate area. Best yet, it’s a family-friendly resort so bring the family and stay the weekend! There’s more information about the Hyatt and how to reserve your guest room at the special AIM Conference rate at www.aimconf.com. Be sure to make your reservations soon before our room block sells out.

There’s an exceptional line-up of presenters this year. Keynote conference speakers include Google’s Sam Sebastian, Director of Local and B2B Markets; Greg Sterling, Founding Principal of Sterling Market Intelligence; Danny Sullivan, Editor in Chief of Search Engine Land; Gary Angel, President of Semphonic; and Vivek Sodera, Co-Founder of RapLeaf. AIM 2010 also features intermediate and advanced sessions specifically developed with topics and speakers that address the challenges of using multiple marketing channels.

And we’re grateful to our sponsors who make it all happen. They include Apartment All-Stars, Apartment Finder, Apartment Guide, Benson Media, Capture the Market, First Advantage SafeRent, G5 Search Marketing, Grace Hill, Level One, Move, Multi-Housing New, Numeric Analytics, On-Site.com, Property Solutions International, RealPage, Realty DataTrust (Founding Sponsor), rentbits, Spherexx.com, The Rainmaker Group, and Yardi.

True to its reputation, the AIM Conference is going to be packed with educational value, growth opportunities and plenty of networking. We’ll see you there!

Register here for AIM 2010.

Click here to view AIM 2010 press release.

According to units, each week, Garver calls and incorporates community managers on pricing decisions by confirming the accuracy of the program data and adjusts any part of the program that property managers think are not competitive with others’ rates, or not appropriate for the current market place.

Dave Woodward, CEO of the Laramar Group, attributes their high occupancy rates (high 90s across the board!) to the use of both the LRO system and a pricing manager. “You can’t buy the software, flip a switch and assume it will work,” he says. “We’ve heard of companies that take this black-and-white approach, but it doesn’t allow on-site community staff to have ownership of the system. We’ve taken an approach to empower the field and let them have a say in the pricing.”

Garver echoes Woodward saying a successful implementation requires buy-in from property staff. “We didn’t want property managers left out of the process – they are experts who live in this every day,” she says.”

Read on about Garver and Laramar’s integration of the site staff in their expanding corporate initiative to stay on top in their markets at the following link: Priceless Input

“We believe it is most efficient to find local management with local expertise, and we don’t expect a single fee manager to understand every market either,” says Kyle Ellis, one of the managing partners of Abacus. “We’re perfectly comfortable working with several ‘best-in-class’ management firms across our portfolio.”

The first major issue is when multiple fee managers are used they all use different data and their own internal metrics and strategies.

The second problem with using multiple fee managers is inconsistent reporting. “When there are different types of reports coming in, on different schedules, it can be quite difficult to keep up with what’s really going on out there,” Ellis says.   “What you want is a single, consistent, and methodical approach to pricing and an accurate and timely reporting solution that’s used by all managers.”

Abacus adopted a standardized pricing strategy by deploying RealPage’s Yieldstar revenue managemnent system to help eliminate many of the inconsistencies they were experiencing.

Revenue management systems for multifamily generate pricing based on several factors, including current and expected vacancies, projected demand, recent rental rates, amenities, lease term, move-in date and existing market dynamics. Optimized pricing can be achieved daily, which in turn will help operators generate more income and improved financial results.

Read more about the Abacus case and other Yieldstar case studies on optimized pricing here:

Multiple Fee Managers, One Revenue Management Solution

Atlanta, GA (PRWEB) November 3, 2009 — Every company is addressing the current market challenges differently; some more aggressively and successfully than others. In late 2008, Lincoln Property Company decided to test a new price setting process to see if it could improve revenue. Lincoln’s executives designed a scientific test of the newest multifamily housing revenue management technology and used it at eight of their communities in separate markets. To ensure an objective evaluation, they paired test properties with similar communities in the same markets that continued to set prices with their customary process. The results proved a definite increase in lease rents at the automated properties – in spite of the economy.

“Seven of eight properties using automated rate setting had better results than our control group setting rates manually,” said Scott Wilder, senior VP, property management for the Lincoln Property Company residential division (shown at left). “Our perception entering the test was that we would activate the ‘black box’ and it would do the thinking. We were encouraged how engaged our team became; by using LRO and contributing to our weekly pricing calls, they became more focused on rate setting and the factors that drive revenue.”

Lincoln Property Company has a corporate culture of diligent pricing analysis and rate setting. “We are good at what we do but wanted to evaluate automated multifamily revenue management software tools and test the one we thought would be the best fit,” Wilder said. The company selected the LRO system, from The Rainmaker Group, which is widely used in the multifamily industry.

4.3% lift from LRO
Lincoln, which manages more than 350 conventional communities nationwide, began its six-month pilot in February 2009 with eight test communities using LRO to set rates, while staff at eight control properties continued their established price-setting process. To ensure test results were valid nationally, Lincoln selected communities in the Atlanta, Dallas, and South Florida markets. At the pilot’s conclusion, LRO properties showed a 4.3% lift over the eight control properties. The LRO system analyzed hundreds of historic and current economic, market, and comp-set variables, and traffic information to deliver updated rate recommendations daily.

“The surprise was the LRO recommendations caused our on-site and regional managers to engage more with their markets and the price-setting data and became more familiar with who their real competitors were and why they were gaining or losing leases,” said Wilder. “Our managers do a great job of rate setting, but the automated system is more detailed and looks at many more variables than you would think of including manually.”

Market-based pricing – minus emotion
Another surprise was how the pricing system responded to the soft market. “LRO’s analysis of market conditions, including guest traffic, revealed that significantly lowering rates was unlikely to produce a proportional increase in demand in the softening market,” said Wilder. “We took a measured approach and accepted the systems recommendation that we lower rates in small increments. This kept our LRO properties from deeply reducing rates unnecessarily.”

Looking forward to market recovery
“We ran our six-month pilot in a very soft market and the system helped us,” Wilder said. “LRO was good in the down market and when the economy corrects, the real value will come in the renewal cycle. Renewal rate setting is especially difficult where managers have relationships within their community. LRO’s renewal price setting removes the emotion from the decision. I expect higher revenue will be the result.”

“The transition to automated pricing is all about change management,” Wilder said. “Shifting communities to automated pricing changes the way we do business. LRO’s most solid benefit is that it helps our onsite people and regional managers do a better job. The longer you use it, the better you become at optimizing rents.” Lincoln expects to roll out the LRO revenue management system to its owned properties over the next two years and recommend revenue management to all their third party clients.

The November issue of UNITS magazine will feature an article profiling the Laramar Group and how it uses a pricing manager whose daily duties are entirely devoted to managing Laramar’s revenue-management software. By using a pricing manager to incorporate feedback between Laramar’s property managers into the revenue-management program, they are able to maximize the value of their revenue management system.

According to the article, Laramar’s pricing manager includes the community managers on pricing decisions on a weekly basis, confirming the accuracy of the program’s generated data. This overrides any aspects of the program that the property managers think are out of line with competitors’ rates or not appropriate for the current market place. When they decide to override the program based on observations of the property managers, the appropriate pricing adjustments can be made within 30 minutes.

For the entire article, check out the November issue of UNITS magazine arriving to National Apartment Association members and UNITS subscribers in mid-November.

Dr. Jian Wang

In a recently published white paper, “The Implementation of an Apartment Dynamic Pricing System,” Dr. Jian Wang, vice president of research and development for The Rainmaker Group, describes in great detail the implementation of an apartment dynamic pricing system with particular emphasis on setting optimal rental rates for new leases. The system he describes “has been helping several leading apartment operators offer prospective tenants a menu of rent options for the last six years. It sets the optimal rents everyday, which are presented in the form of unit type, move-in week and lease term.

Click here for entire white paper

Apartment operators struggle with a myriad of issues, one of the most important is setting rental rates for new and renewal leases. Traditionally, rents are typically set with the goal of achieving market share, maintaining occupancy and remaining profitable. Rents are determined by various factors including market condition, competition, condition of property, and vacancy rates. Management experience also plays a role in determining rental rates.

Revenue Management (RM) has emerged as another way to determine lease rates for apartment operators. This methodology uses data-driven pricing to find the optimal price for individual apartments based on current and forecasted market conditions.  Apartment Revenue Management Systems (RMS) is a rapidly growing trend for setting rental rates in the apartment industry. Once limited to the airline and hotel industries, RMS has seen significant growth in the apartment industry since multifamily-specific software hit the market several years ago.

The article includes a study of the characteristics of apartment rental firms compared to hotels from a revenue management perspective. The characteristics that apartments and hotels share:

• Both are perishable products (they are worthless until they are occupied again)
• Both have constrained supply (there’s only so much to go around)
• Both are effected by advance consumption decisions (customers reserve product before using)
• Both have censored demand observations due to product availability and/or pricing constraints

However, the apartment industry does distinguish itself with the following characteristics:

• Longer lengths of stay
• Fewer transactions
• No repeat customers
• More renewals
• Riskier decisions
• No group booking
• No walk-ins
• Concessions

Dr. Wang outlines his expert view on the design of an optimal multifamily revenue management system with modules including:

• Data Aggregator – links the property management systems and the RMS
• Statistics Operator – estimates a number of business statistics based on the aggregated historical data
• Demand Forecaster – predicts the remaining unconstrained demand for a finite planning horizon, which will be fed into the Rent Optimizer module
• Supply Forecaster – predicts the number of units available for lease for a finite horizon of future weeks
• Reference Rent Calculator – estimates reference rates
• Rent Optimizer – calculates optimized rents from which the optimal rental rates are derived in the Rent Recommender module
• Rent Recommender – module that recommends optimal rents by disaggregating optimized rents

Dr. Wang has more than 16 years of experience in mathematical modeling, system architecture, and implementation in engineering and software vendor industries. He’s a demonstrated leader in operations research and is published in several top journals.

Click here for entire white paper