In short, it’s easier to ask for more rent when you know your residents like where they live and when the alternatives in the market don’t match your demonstrated customer service levels. “I already have an algorithm that uses social media as one of the inputs to generate renewal price,” said Chicago-based AMLI Residential’s revenue manager Rich Hughes.

Richard Hughes

“It’s a logistic regression and looks at transactional behavior and psychographic and behavioral demographics, and social certainly falls within that. You find that on the front side the pricing is somewhat homogenized because you are exposing pricing to the market and saying OK, who wants the product at this price? On the renewal side you have a one-on-one relationship with these people that allows for bespoke pricing, and there are a lot of strategic levers based on who they are and what they like that affect how much of a price increase you can push.”

Stacy Westbay

Even if you’re not quite up to programming logistic regression algorithms, gauging resident sentiment via social media (including compiling and aggregating ratings on the sites that have them) offers any operator the ability to better determine renewal rates. “I certainly think that resident sentiment can be measured via social to help determine propensity to renew,” says Stacy Westbay, president of Dallas, Tex.-based multifamily revenue management consultancy Revenue Edge. “Obviously a key area to gain uptick in revenue via revenue management is on the renewal side. If you’ve got really strong apartment ratings or scores or if your company participates in regular resident satisfaction type surveys I think you can certainly gauge what your perception is from your residents and know that you can push rents a little bit here or there.”

Still iffy for the apartment set is whether or not social media can be used effectively as a direct marketing channel, or for targeted marketing to create incremental and variable demand to improve revenue management pricing outputs. “On the gaming side with both Facebook and Twitter you can target very specific demographics for push marketing messages as compared to blast marketing to the general population,” Westbay says. “That is a little bit harder to do with multifamily, where fans of apartment companies on Facebook and Twitter are typically going to be existing residents, not prospects.”

Hughes says that even if social media is going to pull prospects in the door, it can still be tied to guest cards as a way to better to gain inferential data for qualifying and selling applicants. Is Jane Doe checking in at the local BBQ joint? Make sure to point out the fire-pits and poolside grills during the community tour. “That and the final element of social of course is the extent that you can get highly relevant long tail tie-ins for SEO lift. You’re not going to rocket up the rankings and knock off Rent.com because you’ve got Facebook at Happy Acres, but in the domain of long tail marketing, which is probably where the smart operators are looking right now, I think there is a lot of value there in social media.”

Have a killer idea about integrating social media with revenue management? Email me at steve@jtimedia.com

• Avoid getting sucked into the concessions game. Train leasing staff to explain the difference between 2-months free rent at a competing property and your monthly rate. The statement “it is like 2-months free rent” can go a long way with a resident or prospect
• At the time of renewal, non-cash incentives are very effective. It not only helps justify the rate increase by offering a greater perceived value but encourages the resident to sign the renewal sooner. For example, “if you renew the lease within the next two weeks, we can provide you the renovation package for free”
• One advantage of a revenue management system is to get away from concessions – a common and costly crutch often used in the leasing office. Ensure your staff knows how to sell the rate increase by understanding the pricing system, sell the value of the property as well as educate the resident why your property delivers greater value than the one offering two months free rent
• Adjusting pricing should be a last resort at an under-performing property. Look closely at all 7 (not just 4) P’s of revenue management before changing your pricing strategies - product (units, community), people (well-trained leasing staff), promotion, policy (a ‘no-pet’ policy in a city full of pet lovers), post-selling (strong resident relations and customer service) and then pricing

The first annual Apartment Revenue Management Conference is a wrap and we are proud to say it was an overwhelming success. A special thanks to our sponsors and the industry leaders who shared their knowledge and insights into successful revenue management practices.

Over the course of the next few days, we will be utilizing this blog to post recaps from the various sessions presented at the conference. So be sure to check back often and we would love to hear your feedback on the sessions and what you take away from them.

Bob Cross Keynote Presentation

Bob Cross, author of the best-selling book Revenue Management: Hard Core Tactics for Market Domination and CEO of Revenue Analytics delivered the keynote presentation at the first annual Apartment Revenue Management Conference, and he did not disappoint. The audience was engaged, laughing, nodding their heads in agreement with his insights and feverishly taking notes as to not miss anything from the “guru of revenue management.” It was truly an honor to have him attend the conference as well as share his expertise in yield optimization. And let’s not forget Bob’s willingness to spend more than an hour signing copies of his book for conference attendees.

For those who were not able to attend the conference and missed out on hearing Bob speak – here are some of the key concepts he discussed:

• The guru of revenue management never took a business or marketing class. Revenue management started as a common sense discussion with key business personnel including executives and members from the operations, marketing and sales departments.
• Don’t view a revenue management system as the solution. It is a life-long learning process.
• The biggest competitors to successful revenue management are not the communities down the road but ignorance and inertia in the process.
• Don’t shut off your brain when engaging in revenue management, combine people and technology to generate the most success.
• Effective revenue management is resident-centric, however, a prospect should never know more about the market than your leasing staff. Make sure your onsite leasing staff is educated about pricing, the competition, supply and demand and the value of your product.
• One of the most common misconceptions about revenue management is the idea “you are the one sticking it to the customers.” Revenue management is really about ensuring “everyone wins.” The customer gets the product they want at a price they are willing to pay with built in perceived value while the company receives the targeted revenue goal.
• Even companies like Southwest Airlines, who many think doesn’t practice revenue management because they are not charging extra for checking bags or change fees, really do practice revenue management. The company has simply adjusted the model so it works best for them.
• Finally, Pop-tarts will sustain life during a hurricane along with some beer and ice too. Bob referenced a survey conducted before the major hurricane season 2005. The survey was conducted to determine what people would purchase to prepare for the storm. Though the results showed consumers said they would purchase the essentials, water, batteries, canned food, the actual purchases were completely different.  Strawberry pop-tarts were the most purchased item. This survey is a prime example that customers say one thing but often do or buy another. They don’t know what they want or what they will do. You can’t rely on a customer’s word to drive your revenue.  Utilize supply and demand as the foundation for your revenue management practices.

Over the course of the next few days, we will be utilizing this blog to post recaps from the various sessions presented at the conference. So be sure to check back often and we would love to hear your feedback on the sessions and what you take away from them.

Amenity Pricing Roundtable

Three of the industry’s leading pricing experts, Donald Davidoff, senior vice president strategic systems, Archstone; Dave Romano, vice president, pricing and revenue management, Equity Residential; and Kevin Huss, director of revenue, Resource Residential, sat down to discuss amenity pricing, the mechanics of determining price and how to get a handle on multiple amenities that can create value among prospects and residents. Here’s a run-down from the round-table discussion:

• Walk the property, understand its amenities – views, balconies, even square footage have different value to residents and prospects. Understand where the value is, establish a dollar amount for each amenity and blend this pricing with marketing to generate a perception of increased value
• Listen to your managers. They know what units always rent and which ones never rent. This information helps identify the amenities that generate greater value for residents, revenue for the community and can even pin-point undervalued and overpriced units
• Try to maintain consistent amenity values within a specific market but be aware it may not always work. Adjust pricing based on the unit’s exposure and amenity mix
• Amenity pricing as part of the effective rent strategy can range from 5-8% on the low side and 13-17% on the high side for a garden-style apartment. High rise communities can price amenities at 30-40% in the upper floors for views and highly sought after units with balconies
• Be careful. Bundling too many amenities together can quickly price your community out of the market

Monday also happens to be the kickoff of the 42^nd season of Monday Night Football—a doubleheader with New England at Miami (7:00) and Oakland at Denver (10:30).

So, football and revenue management. Interesting combination and it got me to thinking: We’ll have the top revenue management minds in the country gathered in Scottsdale at the conference. I wonder if they could show us how to employ yield optimization strategies in online betting to maximize our earnings? Hmmm, I wonder….

No, seriously, there is a great example of how revenue management works in the sports world, particularly in regard a certain product’s value in different market segments. That product? Super Bowl tickets.

Consider this: The average price for Super Bowl XXX tickets was $250 if purchased from the National Football League. However, the going rate for tickets in the secondary market was $1,450. That meant people who were able to purchase tickets directly enjoyed an average consumer surplus of $1,200. Talk about revenue.

What it boiled down to was perceived value; that is, certain customers valued the Super Bowl tickets more than others and happily paid more for them.

Revenue management techniques are extremely useful in dealing with opportunities presented by the variance to values that a product represents to different customer segments. In fact, the survival of your business may depend on your ability to identify such opportunities and capture that consumer surplus.

At the conference, you’ll learn more about RM tactics—market-based pricing, segment pricing and forecasting on the micromarket level—that will help you best deal with the differences in how market segments value your products.

I look forward to seeing you there.

P.S. Even though I don’t really know much about football – my picks: Pats over the Dolphins and Broncos over the Raiders.

TRANSPORTATION & PARKING

The Westin Kierland Resort is located 20 miles from downtown Phoenix and the Sky Harbor International Airport, and convenient to the Greater Scottsdale Airpark and its executive jet service. 

• Airport Transportation:

Airport transportation to The Resort is available through Transtyle Transportation with advanced reservations. Return transportation is available from the Front Drive 24 hours a day.

Curbside Pickup: $55 Sedan / $75 SUV

“Meet & Greet”: $75 Sedan / $95 SUV

Sedan will seat up to 3 guests; SUV will seat 6. Gratuity is not included, and prices are subject to change. To schedule airport pickup with at least 48 hours notice from your arrival, please submit the online request form or call (800) 410-5479.

Taxi service is available outside all terminals. Estimate for taxi to The Resort: $50–$60

• Car Rental:

Hertz Rental Car is available at The Resort, conveniently located in the Front Desk area of the main lobby.

Hours of Operation

Monday–Friday, 8 a.m. –5:30 p.m.

Saturday–Sunday, 8 a.m. –3:00 p.m.

480-624-1239

• Parking:

The Westin Kierland features a large parking lot directly in front of The Resort for complimentary self parking. Valet Overnight Parking is a charge of $27 per night.

REGISTRATION

The Registration Desk will be open:

• Monday, September 12, 3:00 p.m.–7:00 p.m.
• Tuesday, September 13, 8:00 a.m.–6:00 p.m.
• Wednesday, September 14, 7:30 a.m.–11:15 a.m.

CONFERENCE HIGHLIGHTS

• Welcome Networking Reception (Monday, September 12, 5:30 p.m.–7:00 p.m.)
• Opening General Session with Robert Cross (Tuesday, September 13, 9:15 a.m.–10:15 a.m.)
• Networking Reception (Tuesday, September 13, 5:00 p.m.–6:00 p.m.)
• Networking Breakfast (Wednesday, September 14, 7:45 a.m.–8:45 a.m.)
• Business Lounge (Tuesday, September 13, 8:00 a.m.–4:15 p.m. and Wednesday, September 14, 7:30 a.m.–11:15 a.m.)

SPONSORS

Many thanks to our sponsors, without whose support this conference would not be possible. 

• ApartmentGuide.com
• Assurant
• Benson
• CoreLogic/SafeRent
• Experian
• G5
• MarketSurveyTools.com
• On-Site.com
• Property Solutions
• Rainmaker
• Yardi
• YieldStar

 We look forward to seeing you at the conference!

More and more prospective residents are turning to such sites as ApartmentRatings.com, community Facebook pages and Twitter feeds to research a community as well as rant or rave about their experience. The article “Reputation Management is Revenue Management” on HotelNewsNow.com examines how closely revenue management and reputation management are connected.

The article discusses how Manchester Grand Hyatt in San Diego realized the importance of consistently monitoring your online reputation and leveraging that information to help drive revenue management practices. Manchester customers were using online forums to rate the hotel and express displeasure with pricing for amenities they felt should be included in the price. After consistently seeing these comments, Kristen Spitz, Electronic Sales and Marketing Manager for the hotel, took this feedback to a management meeting. By communicating how the hotel’s reputation was suffering online, Spitz and the revenue manager were able to develop a new package offering customers the amenities they assumed were free. 

Spitz goes on to say reputation management teams and revenue management teams working together is the way of the future. “There will be the revenue manager and the reputation manager,” she said. “Those two positions really go hand in hand. Take advantage of the people who are doing the marketing for you online.”

As a revenue manager are you working hand in hand with your marketing team and more importantly your social media manager?

To learn more about how to leverage revenue management practices from other industry, don’t miss the first annual Apartment Revenue Management Conference at the Westin Kierland Resort in Scottsdale, AZ. September 12-14, 2011.

The referenced article is the third installment of a 4-part series entitled “Building a Reputation” by Jason Q. Freed.

If you are coming in early or plan on extending your stay to do some sightseeing, you might be interested in some of the area attractions. There’s s little bit of something for everyone, whether you are an art enthusiast, thrill seeker or just like having fun.

• The Phoenix Zoo, featuring a Safari train, giraffe feeding, Monkey Village and more
• The Heard Museum, showcasing the history and art of native tribes of the Southwest
• The Desert Botanical Garden, hosting one of the world’s finest collections of desert plants
• CrackerJax Family & Fun Sport Park, offering go-carts, bumper boats, driving range and arcade games

By the way, rooms at the Westin Kierland Resort are now sold out. If you have not yet registered, you can call the resort (1-800-WESTIN-1) and ask to be placed on the waitlist. An overflow room block has been set up at the nearby Fairmont Scottsdale Princess, with room rates of $160 per night. (Call 800-344-4758 or 480-419-3155.) The cut-off date to secure a room is August 26, so be sure to make your reservation soon!

I hope to see you at the conference!

If you’re also lucky like me, and have the likes of Steve Lefkovits sending you those emails, you take notice that much more.

Aside from the fact that Steve is my boss and publisher, he’s also one of those professionals you come across who has an unsatiable curiosity for the industry he’s involved in, and an uncanny way of making you view the industry you thought you knew so well in a new way.

Today, I received one such email. It’s definitely a plug for the upcoming Apartment Revenue Management Conference, slated for Sept. 12-14 in Scotsdale, Ariz. But it’s also just really interesting, and I’ll bet you’ll find it interesting, too. So without further ado, here’s a view into my inbox. Enjoy.

Revenue Management and Short Stay Rentals

By Stephen Lefkovits

Single-night rentals of homes, apartments and rooms have become convenient thanks to sites like AirBnB.com, a three year-old website that matches those who want to rent a room for a night (or three or five) with housing owners who have extra rooms and empty homes for short periods. Suddenly, anyone – including apartment managers – can easily rent their empty space for short stays.

AirBnB.com has opened up a new micro-market that will enable apartment properties to arbitrage daily revenue on annual leases of $50-80 against pricing of $100 – 300 per one-day rental. While there are operational challenges (furnishing, key management and regulatory), it’s clear this new micro-market has the potential to provide more rental days, incremental revenue and dramatically greater opportunity in optimizing lease terms.​

Yield optimization is about to become a lot more important than it already is.

AirBnB.com attracts the renters, shows the homes, advertises availability, transacts the payments and monitors reputations on both sides of the transaction all in one website (Internet Listing Services take note.) This new market-maker puts the apartment industry on the threshold of a big breakthrough with the potential to create new, incremental asset value of 5-10% by renting units for short stays in between long-term leases. The discipline of revenue management will make it possible, and extend the yield of companies that pursue micro-leasing as a strategy.

A 200-unit property will rent 73,000 unit nights per year (200 x 365 days). A 5% average vacancy rate leaves 3,650 unrented nights of excess inventory per year. Revenue managers will immediately see the implications of this previously unsold inventory and its potential impact on the annual bottom line and as asset value.

In other words, AirBnB.com has given the apartment industry a way to to:

• Uncover hidden demand which allows opportunistic pricing
• Increase revenue without increasing asset investment
• Capture a “found” revenue opportunity
• Stake out a new niche markets with possible higher rents and varied utilization patterns.

As you know, revenue management is more than software. And this sure sounds like revenue management to me.

We’ll be discussing all kinds of topics around yield optimization and pricing including finding new micro-markets at the first annual Apartment Revenue Management Conference September 12-14 at the Westin Kierland in Scottsdale, Arizona. We hope to see you there. Check us out at APTrevenue.com.

RevMan Guru Bob Cross

Now, the inaugural Revenue Management Conference has announced that Bob Cross, author of the above mentioned title, subject of this recent article and the preeminent RevMan guru for any industry, period, will have the podium during the confab’s keynote speech.

 “As a first-wave innovator in revenue management, Mr. Cross helped to generate more than $10 billion in incremental revenue for the travel, lodging, automotive, communications, consumer goods and manufacturing industries,” said Stephen Lefkovits, the ARM conference’s executive producer and publisher of this Website. “We are deeply honored to announce his participation at this year’s ARM Conference.”

If you’re interested in RevMan in the apartment industry, and you haven’t signed up for this conference yet, Cross’s addition to the program should remove any hesitation you’ve had. Why? Because as our recent article points out, Cross has an uncanny knack for zeroing in on the unique characteristics that influence revenue management performance in industry-specific situations.

In other words, he’ll be able to tell you exactly what RevMan’s strong (and weaker) points are when used to help price apartments, maximize the revenue generated by your portfolio, and the strategies you can employ to get the best Rev bump possible.

The conference is slated for September 12-14, 2011 at the Westin Kierland Resort in Scottsdale, Ariz. Check out info for the event here.