In a 2Q 2010 conference call that provided plenty of nuggets for apartment pricing professionals to chew on, the company reported that it pushed collective rents by 5.6 percent on 28,000 units in May and June.

Even more stunning, though, was one of its submarket standouts: in Richmond, Va., Colonial was able to raise its rates by a whopping 14.7 percent.

Those results came during a quarter in which Colonial beat analysts’ earnings estimates by 2 cents, and felt enough positive business momentum to raise its overall outlook for the remainder of the year.

Chief Operating Officer Paul Earle told analysts Thursday that the company’s latest rent increases came while using the Rainmaker Group’s LRO revenue management software to push pricing. On its 1Q earnings call back in April, it announced it would use the system to test rent increases of 7 to 16 percent in various markets.

On its 2Q call Thursday, execs gushed about the initial results of that push, and the software they used to get there.

“LRO is doing a very good job helping us manage our rates,” Earle said. “We kind of turbocharged the LRO system, and then we let the LRO system start working the rents up or down. If we were too aggressive, it helped us adjust rents back down. And if we were not aggressive enough, it moved rents even higher.”

That was the case at the firm’s Richmond properties, where the company originally targeted a 10 percent increase in asking rents for its apartments, and the revenue management system pushed for even more. “LRO moved them up another 4.7 percent, so in Richmond, we’re up 14.7 percent,” Earle said.

Earle described that extra push as a primary example of why revenue management systems shouldn’t be viewed as an autopilot system for setting apartment prices, while noting that it took guts for the company’s leasing agents to follow its recommendations.

“It’s not a perfect black box. It requires a lot of interaction with on-the-ground intelligence,” Earle said. “And I will say that our men and women out in the field were fearless. They embraced this large rent increase beta test with enthusiasm. They were out marketing the price of their apartments far above the competition in anticipation that the competition would come up and join us, and that is what happened.”

Earle’s insights into the firm’s second-quarter pricing moves came in response to a question from FBR Capital Markets analyst David Toti. Citing guidance from Colonial CFO Reynolds Thompson that the firm’s prices for new leases should catch up to its rates for renewing leases sometime in the third quarter, Toti asked why the company was still maintaining a 96 percent plus occupancy, and not pushing prices even more.

Earle’s answer underscored the impact that revenue management solutions are having on the metrics multifamily pros – and indeed, Wall Street analysts – use to gauge the performance of an apartment portfolio. Namely, in a portfolio that’s managed for overall revenue, occupancy alone is not as important as the sweet-spot between optimal occupancy and optimal rent.

“We are really not occupancy driven,” Earle said. “LRO is set up under several business rules, but it really doesn't trigger specifically on occupancy. It looks at unit availability, traffic, our lease renewal schedule that’s coming and historical information from the same period of a year ago. So there are many business rules that will help us determine what is optimal rent, and there's a delicate balance between occupancy and rental rate."

In other words, when it comes to managing to revenue, occupancy alone is no longer king. At the same time, Thompson explained that company was using LRO to maintain current occupancies in anticipation of the seasonal drop that usually comes in the back-to-school third quarter.

Finally, when asked by Banc of America Securities-Merrill Lynch analyst Michelle Ko whether it was concerned about that double-dip recession we’ve all been hearing about, Colonial’s executive team, which actually boosted its Wall Street guidance on the call for the remainder of the year, said it hadn’t seen any evidence of a secondary slump materializing. When Ko asked whether it was pushing rents any less aggressively in July than in June, she got an uncharacteristically unambiguous answer for a Wall Street earnings call.

“No,” Thompson said. “We actually see the continuation of the positive pattern.”

See the transcript of the call here, and listen to it here.

Colonial Properties Trust has 119 multifamily properties with about 32,000 units.  The average rent across their portfolio is $803, and the properties average 15 years old. Colonial Properties Trust uses the MRI property management system and Rainmaker Group’s LRO revenue management system.

At the 2009 AIM Conference, Colonial’s Ray Thornton, Vice President of Information Technology (pictured below left) stated that the company’s revenue management program has increased their total yield (defined as revenue per occupied unit) versus control properties by about 500 basis points through the first quarter of 2009. Mr. Thornton’s presentation is embedded at the bottom of this post below.

Colonial’s Ray Thornton, Vice President of Information Technology (l)

In the second half of 2008, Colonial had to react swiftly after learning from its revenue management system about some declining fundamentals to lower prices, to boost occupancy and hence improve total yield relative to the overall market.  According to Axiometrics data for their markets, Colonial gained 3.4% in occupancy relative to their peers while sacrificing .5% of their rental rate, a net gain of 2.9% of total yield relative to the market.

Colonial piloted revenue management in two phases.  In its first phase pilot in April 2007, it recognized a 3.2% lift in revenue versus internal control properties.  In the second phase pilot, Colonial gained a 2.2% lift from October 2007 through January 2008.  The declining market of late 2008 gave Colonial a different kind of testing opportunity. They used this period to benchmark their pricing and occupancy versus their competitors and found some compelling data points:

• With third-party data from Axiometrics, Colonial was able to chart the trade-off that its revenue management system charged between rental rates and occupancy.  As its markets declined in the second half of 2008, the revenue management system reacted swiftly to cut rents to gain a disproportionate occupancy – which created a net income gain in yield relative to the market.

• Lowering prices boosted occupancy and improved total yield.  Overall, Colonial gained 3.4% in occupancy relative to their peers while sacrificing .5% of their rental rate, a net gain of 2.9% of total yield relative to the market.

• Revenue-managed properties outperformed peer properties as measured by revenue per unit in two pilot groups by about 5% through the first quarter of 2009.

Colonial Properties Trust’s actions throughout the last 12 months shows that its approach to revenue management performance can benefit companies that stay on course with its overall operations. Maybe your firm can benefit likewise.