Tom Toomey, UDR’s president and chief executive officer, characterized that acceptance rate as “phenomenal,” especially in the relatively short, 9-month time span the company has had the system in place. The news comes as further affirmation of the spreading influence of technology not just on the marketing side of the apartment game, but in operations, as well.

What’s more, at properties where residents had a high propensity to renew online, UDR cut turnover by 2 percent, while boosting rents by 3 percent. The kicker at those outperforming communities? Ninety to 95 percent of residents who live there accepted UDR’s initial rental increase offer, no questions asked.

“Residents can make faster buying decisions and more are choosing to stay with our communities,” Toomey said.

The announcement came on the heals of a simmering debate in the industry, one that’s been trying to pinpoint the exact cost of “churn” in an apartment portfolio, to focus in on the sweet-spot, from a revenue management perspective, of pushing rents versus renewing existing residents.

Satisfacts Research estimates that the average cost for turning an apartment is $4,100, after taking into account average vacancy loss days, concessions, marketing, leasing staff time and repairs. At a company such as UDR, which owns more than 59,000 apartments, those costs can add up to real money, real quick.

UDR was able to push its online renewals by tying offers to its YieldStar Price Optimizer revenue management system, which it used to help generate keep-living-here offers to existing residents. By incenting residents to renew within a pre-determined window of time, or offering add-on amenities such as a color accent wall or custom closet, UDR has been able to introduce an element of the marketing-meets-customer-loyalty programs seen in the airline and hospitality industries.

The initiative helped lead Carrollton, Texas-based multifamily software giant RealPage, which owns YieldStar, to launch a new product line that it’s calling Online Renewals.

“UDR has been outstanding in working with us to develop Online Renewals. Their insight and innovation have created a game-changing product for the multifamily industry,” said Dirk Wakeham, president of RealPage. “Traditional online leasing has been a valuable tool for years. Now, for the first time, RealPage is extending the technology and strategy into the area of lease renewals, enabling property managers to retain the residents they currently have. This should create costs savings associated with marketing to new residents and allow leasing staff to devote more time to other site-level operations.”



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.

Mid-career Americans who didn’t get in before – or have finally gotten out from underneath a toxic mortgage – now see owning a home as more of a nightmare than a dream. For them, renting may seem more desirable – or indeed, be the only option – just as banks continue to shy away from writing more mortgages.

Then, there’s the fact that restricted supply – nobody’s built during the recession, either — helped push rents into the black at the end of 2010 for the first time in two years; they’re now 7 percent higher than when the market bottomed in 3Q 2008, and MPF YieldStar is projecting them to gain another 5 percent in 2011.

For multifamily owners and operators, that perfect rainbow of circumstance equates to the beginning of a golden era in 2011.

At the same time, the industry has been adopting revenue management technologies at an increasingly swift pace. The Rainmaker Group, maker of LRO software, had a banner year in 2010, almost doubling its multifamily client count to approximately 65 companies, according to MFR.com’s internal analysis. And YieldStar chief Janine Steiner Jovanovic says 150 users now tap into RealPage’s price-setting solution. Between the two companies, that represents a combined 1.7 million units whose prices are set using RevMan software.  

A growing number of those new adopters have a different profile than what once was the norm in automated apartment pricing: they’re smaller to medium-sized operators operating in regional markets, not the nationally-focused mega-sized REITs who have been singing the praises of multifamily RevMan for years.

We had a chance to chat with the Rainmaker Group’s Bruce Barfield and Mike Beirne of the Kamson Group, a recent new adopter of RevMan, to get their take on where the apartment industry is on the adoption curve, and where it’s headed in 2011.

MultifamilyRevenue.com: It’s fair to say 2010 was a good year for revenue management in the apartment industry. What does that trend say about adoption of RevMan by the apartment industry in general? Why are we seeing this now?

Bruce Barfield, president, Rainmaker Group: I would attribute a portion of our recent growth to the unprecedented changes in the economy.  Business owners, myself included, have had to approach investment decisions with greater care than in the past several years. When faced with limited investment dollars, it is critical for business owners to have a clear picture of the return potential.  When faced with a decision to invest with the opportunity to grow revenue versus investing in new cabinets or fixtures, revenue management technologies continue to be the logical choice.

MultifamilyRevenue.com: How is revenue management changing the multifamily lease-rent price setting process? How is it changing how residents shop for apartments?

Bruce Barfield: As more and more companies adopt revenue management and as the footprint grows, the concept of frequently changing rents in response to market dynamics is becoming the norm.   The rent setting process is no longer a manual one where rents are determined at the beginning of the month and changed on an ad-hoc basis.  Making incremental changes in pricing is logical from both a revenue management and a sales perspective and allows one to differentiate true market response.

Over time, we’ve seen customers’ shopping processes evolve, as well.  Customers today are more sophisticated in their shopping methods researching in advance and narrowing down their selection criteria to speed up their decision making process.  With the transparency of pricing on line, the major Internet listing sites have real time pricing feeds incorporating lease term options. On site leasing associates are weaving that “prices can change on a daily basis” into their sales process.

MFR.com: Kamson Corp. is an owner and manager of about 15,000 units in New Jersey, Pennsylvania, New York and Connecticut that recently adopted LRO. What led you to adopt revenue management now? What are you expecting in 2011?

Mike Beirne, Kamson Corp.: We realized that traditional rental paradigms in our markets are changing, and consumer behavior is changing, too. The apartment industry is now paralleling other industries, such as airlines and hospitality; we’re starting to change the way we do business. The old ways of renting seem to be hitting a turning point.

MFR.com: For much of the past five years, large REITs were the main adopters of this technology in the apartment industry. At 15,000 units, you’re not small, but you’re also not running 50,000 apartments. What advantages do you see for smaller portfolios using this technology? At what point/unit count is it cost-prohibitive?

Mike Beirne: Well, I’m certainly not expert enough to say what’s cost prohibitive for others. But I do know if revenue management delivers on the returns we’ve seen with other adopters, in my opinion, there can’t be a point where it is ever cost prohibitive. It comes down to does the model work, and can its processes be learned?  From what we and our competitors are doing, I believe its becoming more the norm, not the exception.

MFR.com: How were you able to justify your investment across your portfolio? What type of analysis did you conduct to ensure you would get a return on your investment?

Mike Beirne: We are still evaluating that, but there’s just a gut check aspect to it. We’re already seeing that given proper guidance, our rental staffs are successful. It’s all about making those incremental gains. You only have to do the simple math to discern how the trend will play out.

MFR.com: How do you plan to support staff at the property level in terms of research and pricing info using this solution? What will they need to do to use and support the solution?

Mike Beirne: I think it’s a team effort. Our market data has to be timely, and we have to become proficient at the key indicators that LRO provides and be comfortable with them. We also have to support a cultural change with our leasing staff so they know how to “sell” based on the information LRO provides, as well as understanding the strategy you’ve built into your pricing decisions. Training is key.

MFR.com: What has impressed you most about using revenue management thus far? Where would you like to see more or better functionality?

Mike Beirne: The Rainmaker Group has been extremely timely and receptive to our questions. Everyone there is very well educated in the product they sell. That’s important to us, because at a company like Kamson, you need to have buy-in from the entire organization.

I terms of my wish list, I’d like to see a stand-alone, leasing agent boot camp for all things LRO aside from the support and training they already provide. As I said, I think training is the biggest key to success, and you have to learn any new technology to leverage it. The Stealth fighter is a great technology, but you’ve got to have highly-trained pilots to fly it. Why not do that for the apartment business, too?

Editor’s note: Don’t forget to mark your calendar for the inaugural Apartment Revenue Management Conference September 12-14, 2011 in Park City, Utah.  You’re gonna wanna be there.

The nuggets above came, respectively, from our interviews with Colonial’s Glenn Chmura, AMLI’s Rich Hughes, and the godfather of multifamily RevMan himself, Archstone’s Donald Davidoff.

Along the way, we’ve also heard about the dynamic and compelling corporate housing market from Oakwood’s Jeff Young – as well as how renting short-term units isn’t that much different from selling cruises, renting cars or even getting people to go to Disneyland. Lately, we heard about how UDR’s Mike Lacy transitioned from an acquisitions role at the REIT to help determine pricing for its 58,796 units.

Using this industry-wide knowledge base as a foundation, we wanted to open it up to you, noble MFR.com reader, to tell us what topics you’d like to hear more about when it comes to using RevMan in the apartment business. Is it RevMan’s potential to act as a valuation tool on the underwriting and M&A side? Is it mixing in risk-based rents and lease terms based on an applicants’ screening criteria? Or is it using RevMan to develop lifetime customers, much as UDR has started to do with its renewals engine?

Tell us what your thoughts are for the potential of RevMan in the multifamily industry. Is this technology here to stay, or will it have all the relevance of TheGlobe.com? What has surprised you – or even underwhelmed you – about using this technology to price apartments? What applications do you see for it down the road?

Of course, if you’re a revenue manager in the industry, we’d love to include you in the MFR.com interview, too, so let us know if you, or someone you know, would make for a good read. Send thoughts, comments and suggestions to joe@ameredit.com.

Finally, don’t forget to  mark your calendar for the inaugural Apartment Revenue Management Conference September 12-14, 2011 in Park City, Utah.  It’s an event you won’t want to miss.

            Following Colonial Properties Trust's impressive rent push during 2Q 2010, Equity Residential reported similar gains in its own pricing. On its earnings call July 28, the Chicago-based REIT said it has now grown base rents by 8.5 percent year to date.

            That gain compares to a 1.4 percent increase, on average, for U.S. apartment rents during the first six months of 2010, according to MPF Research, the analytical market research arm of Carrollton, Texas-based multifamily technology company RealPage, which also sells the YieldStar Price Optimizer revenue management solution.

            Equity Residential uses the Rainmaker Group's LRO revenue management software to help it determine rental prices for its apartments. Last month, Colonial, which also uses LRO, reported some of the most significant gains of any of its apartment REIT peers, including a campaign in Richmond, Va. that pushed rents by as much as 14 percent.

            Equity reported that compared to the same period a year ago – i.e., in the last 12 months — its strongest gains have come in Denver, where July renewals came in 6.7 percent higher than in 2009. For its portfolio as a whole over the past year, it has raised base rents by 5.8 percent. (Since rents fell more steeply in the second half of 2009, Equity's year-to-date increase for 2010 had to reclaim some of the negative ground it gave up late last year. That helps explain its 5.8 percent increase for the entire year, versus its higher, 8.5 percent gain for the year-to-date period.)

            Those gains have surprised market watchers, who had expected a slower and less pronounced rebound, particularly since overall job growth has still been relatively modest, according to official government jobs reports. On the other hand, multifamily economists often point to apartment demand as a better leading indicator of actual jobs creation than data from the Bureau of Labor Statistics, which are always backwards looking and constantly revised.  

            Yet, as positive as the collective rent pushes among Colonial, Equity and their peers have been for the first half of the year, David Neithercut, Equity's president and CEO, may have just cried uncle. He sounded a cautious note on the company's earnings call, and it seemed to be derived from what his 137,000-unit portfolio — one of the largest in the country — was telling him: that absent significant jobs creation in his submarkets, positive rent pricing momentum can't be maintained, no matter what process or technology is used.

            "Clearly, since January we've been aggressively pushing our rents," Neithercut said. "We're continuing to keep our foot on the accelerator. We just have to believe that without job growth and rising incomes, we will meet some point of resistance at some time."

            Of course, that view – that jobs create apartment demand – is nothing new. What was surprising on Equity's call, though, was how the company seemed to be drawing its conclusions: not from the macro-economic outlook reported by the government or economists, but from the very process it uses to price its apartments on a unit-by-unit basis.

            In response to a question from Banc of America-Merrill Lynch analyst Jeffrey Spector, who asked what assumptions Equity had built into its view going forward, Neithercut pointedly deconstructed the company's revenue management model.

            "We budget based upon every single property and what's happening with that property in its individual market," Neithercut said. "That includes any competition, what's going on with new supply, if any, what's going on with local employers, current occupancy, and current loss-to-lease. That's really the foundation upon which we project our expectations for that individual property. We add up 500 properties and that's how we come up with our number. This is not a top-down process here at Equity Residential."

            Neithercut's breakdown was insightful, if only for the fact that he emphasized his company's analysis is based on what it sees everyday on the doorstep of every one of it's properties. And while it may have seen reasons, from that analysis, to push rents in the first half and even into the third quarter of 2010, something it sees there now seems to be causing it to flinch.

            "Clearly… we need job growth to continue this trend," Neithercut said. "In terms of both job growth and rising incomes, the rate of [rent] growth we are currently experiencing is not sustainable."

            What do you think? How has your revenue pricing model behaved as a leading indicator of what's happening in your market? Are you still pushing rents in the absence of meaningful job creation? Email me, or post your thoughts to the LinkedIn Apartment Pricing Professionals page.

To kick off our regular series of Revenue Manager Q & A interviews, we chatted with Hughes about the revenue management career path within multifamily, the adoption of yield management in the current environment and how revenue management principles are slowly but surely changing key metrics for the apartment industry. Check back for Part 2 of our interview, coming soon.

MultifamilyRevenue.com: Thanks for joining us, Rich. You worked in the hospitality industry before coming to revenue management in multifamily. Is that a typical career path? How do you become a revenue manager in multifamily today?

Rich Hughes: Typically, there are two paths. One is sort of the hospitality background, which is the side I come from, and the other is for the very “quant” heavy folks. They tend to come from operational research and industrial engineering. I’ve done a bit of that as well in a former life.

When I went to grad school at Cornell, I was looking at all the different paths in finance. I enjoy revenue management because it is fairly new as a science. It’s also applicable in lots of places, but has not yet been deployed on a widespread basis. And finally, revenue management is about making money, which of course gets us all excited.

MFR.com: How did you get involved in LRO?

Hughes: I was very fortunate to get to work with Donald Davidoff, who for my money is the pioneer of revenue management in the multifamily space.

What became LRO was initially a Manugistics’ product, and Donald worked there, specializing in the heavy quant models for different industries. When Archstone engaged Manugistics, and eventually bought the product from them, Donald came with it. I was fresh out of school, and had some ideas about revenue management and apartments, but had never really gotten to play with live wires.

We spent a lot of time in the later stages of development working on the nuances of the application. I was very fortunate to work with Donald and his team, and I learned a lot. I’m very thankful.

MFR.com: What revenue management solution do you use today?

We employ a proprietary solution that’s been developed in-house, known as Rent Cheque.

MFR.com: There’s been a lot of focus on how revenue management has behaved in the current environment. What are you seeing at AMLI?

Hughes: In general, we’ve seen good results.

But one of the bigger hurdles is the cultural side. You need buy-in from your people. They have to believe that the technology works.

That can be a challenge, especially in times like these. When people have been beaten up by low occupancy and low rent expectations for a couple years, it’s important to remind them that we’ve seen rents higher than this four years ago, and that we can get back there.

When you haven’t had strong occupancy for a while, and your occupancy finally starts coming back, people can become  fearful that their occupancy will fall away again if they start pushing rents and revenue growth to the bottom line. But that’s what the model is recommending. Sometimes, it just takes faith to follow it. It’s about being as bold on the upside as you were on the downside.

MFR.com: Let’s talk about occupancy in the multifamily industry. It’s possible to have 90 percent occupancy with strong rents that are right on the edge of sustainability, as well as 100 percent occupancy with lower rents that leave money on the table. Given the adoption of revenue management in the multifamily industry, and our ability to move the rent needle in a targeted way, is occupancy still the right metric to look at to gauge a property’s performance?

Hughes: Occupancy is a legacy metric.

In days of yore, I think occupancy was a fairly good proxy for how well you were doing. If you’re 20 percent full, you don’t have your prices right. And I think we would all agree that if you’re 100 percent full, you’re leaving money on the table.

It’s really just a question of how much you’ve missed by. In the airline business, they like their planes to take off with one empty seat, because then they know there was one customer that wouldn’t quite pay that amount. It lets them know they were on the verge of being just the right amount of expensive.

From our standpoint, occupancy is still much more powerful than straight rent, though, for an important reason. When a unit goes from empty to full, you’ve got that instant — and often very large — revenue lift. You don’t get that with incremental tactical pricing changes, as the airlines do.

However, for the long-term sustainability of your business, you also cannot grow occupancy to 130 percent, so the future of your business and revenue growth has to come from your rates. It’s really about finding the balance between the two.

MFR.com: In the hospitality industry, occupancy has become less important, and yield per available room has taken on more prominence as a leading metric. Will occupancy become less important in multifamily, as we get more mature with revenue management?

Hughes: Although we are certainly revenue manageable, there are some nuances to our situation that are different from other industries. The big one for us is the slow inventory cycle. You sign a lease for 12 months. The advantage to that is we don’t have the price volatility that you see in the hotel business, where you can go from full to empty in three days.

The apartment business is much more incremental and marginal. I think occupancy will always be a high-level metric that C-level executives look at. If you’re at 70 percent, you’ve got problems. Even if you’re getting huge premiums at that occupancy, you’ll never convince me that the marginal dollars you’re making on one or two leases will make up for 30 percent vacancy. The math will never work that way.

I would say that at low occupancy regimes, you know what your problem is. The interesting thing is when you get to the submarket average, or what you might deem a strong occupancy position, whether that be 92 percent, 93 percent, or higher. Then it’s a question of what incremental dollars we can make on our available leases, versus the opportunity cost of people not leasing those units. And that, of course, is the very exciting question that revenue management attempts to address.

MFR.com: Even though we’ve seen concrete results in the multifamily industry from the use of revenue management technology, in terms of adoption, we’re still in the high single or low double digits.  Why do we still have relatively low revenue management penetration in our industry, even though we’ve seen results at this point?

Hughes: First of all, we are a traditional industry. We are probably not the quickest to embrace change. There are a few reasons for that.

We can embed a rent roll, and be fairly stable in terms of operations. We don’t have very high transaction density, as you might see in retail or banking. So the utility of this technology – and this kind of thinking, frankly – may be less relevant for us than it is for other industries.

With regard to adoption, let’s not forget that there is an expense to having revenue management. There’s a cultural expense, a salary/payroll expense, and an expense for actually using and deploying the technology.

For the big players, the REITs primarily, that’s an expense that you can bear over lots of units. But our industry is massively fragmented. By far the biggest leaser is mom-and-pop. They own more than 80 percent of the rentable space, but with just a few units each. For them, the cost-benefit analysis may not make sense. It might be a “nice to have it” right now, but given the current economic environment, I’m probably not going to spend the money for something that I may not fully understand, and certainly don’t fully believe in, in terms of the faith I have in the technology.

If only 8 or 9 percent are using it, I’m fine with that, because that 8 or 9 percent are going to do very, very well.

Look for Part 2 of our Revenue Manager Q & A with AMLI’s Rich Hughes next week.

The two multifamily revenue management mavens outlined how their respective solutions – the Rainmaker Group’s LRO and RealPage’s YieldStar Price Optimizer — behaved during the downturn, and what they saw in the first part of 2010 as markets began to recover.

Steiner Jovanovic said her clients were able to respond to falling demand with more moderate pricing adjustments and that YieldStar properties were able to sustain occupancy levels without the rent loss experienced by the general market. In general, she pegged her clients’ outperformance of the market at 3.2 percent nationally in terms of rent and occupancy.

While she didn’t detail the difference between YieldStar users and the market on the way down, she did give comparative numbers for the rising tide of 2010.

“If you compare our results in the first quarter of 2010 to the first quarter of 2009, [YieldStar] properties outperformed 3.7% in revenue, which was made up entirely of net effective rent,” Steiner Jovanovic said. “The markets are still catching up on occupancy, but because YieldStar properties were already in a more favorable occupancy position through the recession, they’re able to push price much more aggressively now.”

For Archstone’s Davidoff, perhaps the earliest adopter of revenue management technology in the multifamily industry, having his LRO pricing tool was the saving grace of an otherwise brutal two-year period.

“It’s fascinating to me,” Davidoff said. “I honestly don’t know how anyone could have made it through this past cycle without a revenue management tool.”

He said that LRO started reacting to the reduction in demand as far back as December 2007, even though seasonality was still giving many operators a false sense of strength, just as they approached the abyss in 2008. Then, the system started projecting strong demand at a time when much of the market was still in the doldrums – and scared into paralysis – when it came to pushing rents back up.

“We’ve had spectacular rent growth in the first quarter of this year, and our year-over-year numbers are up substantially,” Davidoff said. “It all started in the fourth quarter [of 2009], before operators could feel it, before there was that visceral understanding of what was going on in the market. But the statistics were bearing it out. The guest card counts were rising, the leasing velocities were more steady and solid, and supply wasn’t quite as brutal, and all of that played together.”

Speaking of raising rents, the two apartment execs also had an interesting perspective on the potential for “green” amenities to push rents in the coming cycle. Spurred by MFE’s moderator Chris Wood, who asked whether revenue management systems could generate “green” premiums in various markets, the two pricing pros were surprisingly optimistic.

“There are already premiums within specific portfolios being garnered by green buildings, I would say particularly within the Pacific Northwest,” Steiner Jovanovic said.  “With regards to YieldStar the results will be there…  any component that drives demand will be capitalized on by the system in the form of affecting rent growth.”

Davidoff, who said Archstone hasn’t explicitly discussed using LRO to get a “green” lift in rents at the company’s properties, pointed to the science of revenue management to say that if green buildings are valued more highly by prospects, they will, indeed, be priced accordingly.

“Where residents or prospects favor green buildings, and if we do our marketing job correctly in communicating those benefits, we will see demand rise, we will see our own internal supply drop and LRO will respond by raising rents,” Davidoff said. “The value of green, or any amenity or feature of a property, is ultimately going to be realized in the demand response.”

You can access the full exchange here.

New White Paper: Archstone Test Shows 1.5% Revenue Increase from Call Center’s Capture of Incremental Leads

Revenue gains in 40-community trial validated by international independent consulting firm

Emeryville, CA, February 25, 2010 – Multifamily strategy consultant Steve Lefkovits, operator of MultifamilyRevenue.com, announced the release of a white paper documenting a nine-month test by Archstone, a leading multifamily operator.  The test evaluated multifamily revenue management using The Rainmaker Group’s LRO (“LRO”) lease rent optimization system and professional prospect guest card creation utilizing Level One’s Central Leasing Office.  Results of the study showed that Archstone’s communities that used Level One’s call center and automated lease rate optimization from LRO generated 1.5% more revenue than test communities relying on self-management of inbound phone call leads.

“Archstone’s nine-month, 40-community test of professional lead handling and guest card creation proved that increased lead volume can drive higher revenue per unit, even in a soft or declining market,” said Steve Lefkovits, who authored the white paper documenting the test. “Archstone’s 1.5% revenue boost resulted from harvesting new leads from existing marketing sources and automatically feeding that prospect traffic to the LRO system.  LRO moved rents in response to demand, increasing revenue per unit in the test properties. “We estimate that on a “typical” property, this kind of result would equate to an incremental $45,000 – $67,500 in annual net operating income.  This new white paper (linked here) lays out the analysis.”

The Archstone trial compared 20 test properties with 7,200 units using Level One’s call center against an equal number of properties in a control group that did not use the call center Level One answered the phone 98-99% of the time, versus 50-60% of the time at the control properties.  Additional guest cards were captured, effectively increasing demand for the properties.  LRO set rental rates based on scientific demand analysis in both the test and control groups.  The 1.5% revenue increase in the test group was validated by an independent international consulting firm.  “The revenue increase was not from increased occupancy, it was from real-time visibility into the new, higher demand,” Lefkovits explained.  It’s exciting that even a sophisticated company like Archstone can increase prospect leads and income by having 98-99% of their inbound sales calls answered.”

To download the white paper, please use this link below:

http://www.multifamilyrevenue.com/wp-content/uploads/2010/02/archstone_increases_revenue_using_levelone_lro.pdf

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.

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Below are selected videos taken from a presentation given by Kathleen Reidenbach of Kimpton Hotels. In the short videos, she shares revenue management practices and strategies used by the lodging industry and draws parallels to the multifamily industry.

Revenue and Market Share Lift from Using Revenue Management

Kathleen Reidenbach, Vice President of Revenue Management and Distribution for Kimpton Hotels was kind enough to speak at length to the 2008 AIM Conference.  Her presentation detailed Kimpton’s increased revenue and market share from revenue management, how they optimize pricing using demand information, and the deep integration of marketing with revenue management and the staffing required to reach the right customers with the right offers at the right time.

For those interested in managing advertising in social media, the last video will be especially useful as she details how they use public feedback from ratings sites as a management tool, and how Kimpton manages their brand reputation in an environment with customer-generated content.

Reidenbach’s complete presentation is available on this site to view.  Above and below are four video excerpts of some of the most directly applicable lessons she shared with the multifamily industry.

Revenue Management Staffing and Infrastructure

Automatic Distribution of Pricing
Across Marketing Channels

Reputation Management – Customer Ratings and Comments