What Revenue Management is NOT

By Donald Davidoff

Note: The following are strictly the personal opinions of the author and do NOT represent any official opinion or position of Archstone or any other Archstone employees.

As revenue management is increasingly adopted by the industry, it’s interesting to see how various mythologies about what “revenue management is” have spread. Some are unintended, in that ideas form and get passed on from person to person without any real vetting and suddenly become “conventional wisdom.” Others have been carried out with intent, as vendors co-opt the term for marketing and sales purposes and multifamily housing operators co-opt the term to look like they’re doing something cutting edge. Both are actually avoiding the change necessary to implement a true revenue management system.

Here are three things revenue management is NOT:

Revenue Management is NOT just software and technology.

Instead, it’s a strategic program that happens to involve technology. Anyone viewing it as a technology project will be sorely disappointed. Revenue management is a way of thinking about the apartment business, and realizing that  a box is NOT a box is NOT a box. Rather, other important dimensions matter: when the box is rented, how long it is rented and whether it is renewed. Those aspects drive differences in value.

Revenue management fundamentally changes how you view your multifamily business. It will change not only how you price, but also how you budget, how you staff and what kind of reporting and business intelligence you need. And while it does affect your IT department and resources, that’s a necessary, albeit not sufficient, condition to succeed. Revenue management requires CEO or COO commitment – not  just involvement. A technology project, on the other hand, just needs money and a sponsor somewhere in the organization. Not sure of the difference between commitment and involvement? Just think about bacon and eggs: —while the chicken is involved, the pig is committed!

Revenue Management is NOT simply tracking and responding to your comps.

Knowledge of your comps’ pricing is important in setting rents, but it’s far from the most important piece of information for revenue management. Understanding your own value proposition, your own demand stream and your own supply behavior (e.g. what percentage of your leases will terminate early) are all more important, by a long shot. In fact, you can operate a good revenue management system with no comp data if you have to—we’ve done that at Archstone in places where it is very difficult to find reliable comps.

So while comp data can be useful — and a comp data tracking and response system is  better than nothing — it is NOT revenue management.

Revenue Management is NOT cheap.

It’s an alluring idea: maybe I can  get 70-80 percent of the benefit at a fraction of the cost. If you don’t really believe in RM, it sounds like an even better idea because, at least you’ll learn something along the way, right? Even if you ignore the fact that leaving 20-30 percent of your revenue lift on the table results in negative ROI, the simple fact is that the idea just isn’t true.

There is no such thing as a “poor man’s RM” because you can’t get most of the benefit with only simple tools. A good revenue management system involves sophisticated math that takes highly trained modelers (both RealPage and LRO have highly specialized staff for this very purpose) and programmers to develop the technology. That costs something. We all may want something for nothing, but it’s important to remember you get what you pay for. I know all multifamily companies need to be cost conscious, but I’m always surprised when an otherwise smart executive thinks  buying pricing software from a salesperson who emphasizes the low cost of their product is a good idea.

If you’re trying to maximize your own revenues, does it make sense to choose the option whose primary advantage is its low cost? A good system takes time, effort and money to develop. Just ask the two current software providers how many thousands of hours have gone into developing their systems. Execs in this industry, as in others, should be prepared to pay a fair price for them.

The author is Senior Vice President, Strategic Systems for Archstone.

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

With the spring lease up season upon us, MFR.com was lucky enough to huddle with Waterton Residential’s Barney Pullam. With 15,000 units in markets from Washington, D.C. to Southern California, and the core of his portfolio in Chicago, he’s got a balanced, diversified view on what’s happening with rents now, and how revenue management tools are gaming the recovery.

A 20-year vet in multifamily, he gave us the inside scoop on pushing rents as much as 20 percent, the incremental mind-shift that comes with implementing revenue management, and how to toe the line with renewing residents in today’s rising market.

MultifamilyRevenue.com: Waterton’s been using revenue management for the last two years, which I imagine was an interesting window of time to implement this technology. I understand you use the LRO solution from the Rainmaker Group. How has it performed in the current environment? What did you see on the way down, and what are you seeing now?

Barney Pullam, VP of Business Process, Waterton Residential: That’s right, we began implementing LRO in Q1 of 2009, and had it fully deployed by Q3.

As you can imagine, most of our markets at the time were caught up in the slow economy, and had higher exposures. What was interesting was that LRO started reducing rents in an effort to get those exposures down, but it did it in an incremental way, testing each level of lower rents as it went.

The result was that it started moving our rates more often, but by a lesser degree. Prior to LRO we would adjust effective rents by adding or reducing the amount of the concession. Concessions might increase from one month free to two months free as our vacancy increased. In actuality, that meant a swing in revenue of about 8.5 percent.

LRO, on the other hand, came in and adjusted rental rates just 2 or 2.5 percent during a given week, and then gauged any resulting change in occupancy before setting the next week’s prices. Basically, it took baby steps, which was interesting.

The other lesson learned we’ve learned from running revenue management is that it puts greater emphasis on the availability of a specific unit type. I really think that helps you to see the trend early, and react and capitalize on the changing market.

On the way back up, LRO did substantially the same thing: it made lots of little adjustments in the range of 2 to 3 percent per week. If those new rents were well received, then it pushed rents higher in an effort to maximize the overall income.

Regardless of the direction, we found the adjustments to be more frequent but at smaller increments than our prior approach. It tests the waters, figures out what the market is willing to accept and goes from there. It gives you a very systematic approach to pricing.

MFR.com: What are you seeing in terms of renewal rates using your revenue management tools today? Leases priced a year ago were presumably much lower.

Pullam: We implemented a more aggressive renewal pricing strategy in Q4 of 2010. Renewal rates have varied by market, of course, and we’ve seen a broad range. We’ve seen renewal offers of just 3 percent in our softer markets, but up to and over 17 percent in our stronger regions.

MFR.com: What’s the average renewal increase that your revenue management tools are recommending across your portfolio now? Are you following them? Are you going beyond them?

Pullam: For our most recent renewal offers on leases expiring in June, we are seeing average increases at 6 percent or better. In general, our communities have been following the renewal offers generated from LRO; any deviations from what the tool recommends have to be approved by the regional manager.

What’s interesting, though, is on new move-ins. In some instances, we have seen our communities push new rents even beyond what the tool recommends.

MFR.com: How is turnover tracking compared to past periods? Are residents “stickier” today? Why do you think we’re seeing this trend now?

Pullam: We have noticed turnover remaining relatively flat. Waterton has averaged a retention rate between 43 and 46 percent of our expiring leases.

I think residents are stickier, and are more accepting to renew at the higher rent levels today. We’ve even seen residents renew leases at rates 20 percent higher than what they had been paying. That’s pretty encouraging.

Of course, we’re also seeing some turnover as residents shop for a lower rate. But that’s fine, we can’t meet everyone’s price point.

I think there are a few reasons why residents are staying put. The first point is that they’re taking their time to shop and understand the going rate for apartments in their respective market. Also, I do think most people realize they received a better deal last year as a result of the economy and therefore are willing to accept a reasonable increase.

From there, it’s really just this economy we’re in. There’s been minimal job growth, and fewer opportunities for advancement at the jobs they have. In a growing economy, you would see people move in because of a new job. Today, they’re not moving out until that opportunity comes along.

MFR.com: You wrote a recent article for your company newsletter that was pretty interesting. You wrote, “We don’t want to be 98 percent occupied as those higher occupancies are reached by compressing rents; nor do we want to achieve a renewal conversion percentage greater than 60 percent.” Can you expand on that? How do you determine the right mix of renewals vs. new leases?

Pullam: It’s interesting. When you start using revenue management, you’ve got to break away from managing toward occupancy. Instead, it’s all about the overall availability of that specific unit type.

If you have a few one bedrooms sitting vacant for a little while, but your overall availability is under 7 percent for one bedrooms, there is no reason to lower the price. Instead, you’ve got to trust it, and let the tool do its job, which is to maximize rents.

If you do that and the apartments still don’t lease, LRO will adjust the pricing down. In some ways, it’s a hands-off exercise.

But in regards to the mix of renewals versus new leases, we don’t have a hard and fast rule. Our experience shows that when retention rates push north of 60 percent, we’re not being aggressive enough.

The challenge with renewals is that you’re putting those offers out 90 days before the lease expires, so you’re really selling a future rate, and that becomes even more challenging when you’re coming out of a slow season and going into a busy one. Sometimes, you need to take that leap of faith and push the higher renewal offer.

We like LRO because it give us the ability to set close to 200 parameters to maximize pricing. We pay a lot of attention to exposure, and leasing velocity and of course, we always have our eye on the competition. But one of our favorite features is looking at the aggressiveness parameter in LRO. It basically helps determines how aggressive LRO will be in pushing your rents, and can be a very useful tool.

MFR.com: We’ve been having an interesting discussion on the site and the LinkedIn Apartment Pricing Professionals group lately about factoring turn costs into your RevMan tools. Are you factoring in turn and marketing costs when you’re setting goals for pricing? How do you determine the point when a new lease starts paying for the cost of turning the unit?

Pullam: We do consider turn costs. LRO allows the user the ability to factor in turnover and marketing costs when establishing pricing for both move ins and renewals. We look at all costs associated with turning the apartment, including marketing, maintenance and vacancy, and input that value into to model.

MFR.com: What are the best practices you’re using to explain the market to residents now, while remaining firm on price?

Pullam: You know, one of our community managers was talking about this recently, and what she said was pretty straight forward, but it made sense to me. She’s really emphasizing the importance of taking the time to speak with the resident regarding the renewal increase. You really can’t just send a renewal letter. You’ve got to call and speak with the resident about the offer. It’s pretty fundamental, but it’s so true, too. Site teams need to sit down and talk with residents about what’s happening in the industry.

We’re reminding them that rents were lower when they moved in because the economy was pretty bad. Now that things are getting better, rents are increasing. We also encourage our residents to shop around to confirm that our prices are in line with the market.

MFR.com: What trends do you anticipate for the rest of 2011?

Pullam: We think the remainder of 2011 is going to show continued, solid growth in both new leases and renewal rates. We’re going to focus on continuing to push rents until we find the ceiling. Once we get there, we’ll focus on maintaining those higher levels.

MFR.com: Thank you for your time.

Pullam: You’re welcome, thanks for the opportunity.

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.

MultifamilyRevenue.com: Given its life-cycle so far, it seems revenue management was born into a recession in our industry early on, before gaining some momentum during the boom. But it seems like the current recession has stymied that enthusiasm again. Is that an accurate assessment?

Rich Hughes, AMLI: It is. For me, the interesting thing is that obviously, all revenue management tools are multivariate systems. Basically, you’re looking at a subset of the past, and trying to form an inductive model to predict what you should do in the future.

Given the fact that we came out of a very good time and went into a very bad time, I wonder how well some of the models responded. Did they still induce from a good time, and use a “good time” set of rules to try to predict what you should do in a bad time?

Anecdotally I’ve heard of people turning their revenue management systems off during the bad times. We certainly did not, but I think the confidence in revenue management’s ability to make money went down.

Of course, during the bad times, a revenue management system should manage the downside as well as it did the upside. That’s really what we are hoping for.

MFR.com: How did Rent Cheque respond?

Hughes: It made the right directional changes. I think with hindsight, we can ask whether the magnitude of the changes was large enough. Again, sometimes people think they can outperform the system. They may feel their product is worth more than it is. But it’s the market that tells you how much your product is worth, and we have to be very, very clear about that.

Getting caught in the vanity of the past is a loser’s game. Personally, I think all of our product is worth a lot more than you can rent it for right now. My advice would be, if anyone is looking to rent an apartment today, get in there quick while you can still get a deal.

MFR.com: The commercial and retail sectors measure results on a square-footage basis. From a revenue management perspective, would it be useful for us to measure ourselves on an NOI per square foot basis, for example?

Hughes: Again, it’s a bit of a different animal. Commercial and retail, when they’ve got blocks of space, have the ability to divide and subdivide that space, and find the cleverest fit for their tenants to make the most money from it. When a tenant moves out, they can elect to do that all over again if they want. So they’ve got flexibility in their product.

We don’t. We have one bedrooms, two bedrooms and three bedrooms, and I can’t make a three bedroom into a two bedroom and a one bedroom. That’s just not going to happen.

Also, we know empirically that small apartments have higher rent per square foot than larger apartments. The reason for this is that every apartment has certain capital intensive requirements; things like bathrooms and kitchens cost a lot of money. Bigger apartments can divide these costs across a lot of square feet, and smaller apartments divide them across fewer square feet.

The interesting thing is, if you run a regression analysis, you’ll find there’s actually a fixed component for any apartment, regardless of size. We did it with one of our high rises.

Let’s say that fixed component is $500 for every apartment. Once you subtract that out, the variable, per-square-foot rent is actually very linear, regardless of apartment size. But of course, the industry doesn’t look at it that way at all.

MFR.com: Does revenue management have the potential to change the focus of “keeping the heads in beds” in the apartment industry, to say, maximizing the yield per unit instead? Do you see that happening now or in the future?

Hughes: That’s a great question. I think that you’re basically asking whether NOI is a helpful number. The answer is, for development and underwriting, it is the helpful number.

The problem for us from a pricing standpoint, though, is that a lot of the expense side of NOI is built in by the time we get to the equation. Of course, to set price, the only expenses we really care about are the ones that influence the demand function, such as marketing.

For instance, one of the great questions of revenue management is, ‘Would you spend a dollar in marketing or customer acquisition to get two dollars in rent somewhere in the future?’

‘Absolutely,’ is probably the right answer.

The trouble is, marketing is not NOI. You can say the same thing about certain amenities. Can you get extra rent if you have a 24-hour doorman?

For costs that have a demand corollary, you may be able to get a better quality resident, or higher paying resident, or just more residents. But those costs are really just a very tiny subset of the overall expense structure, which includes the physical structure, maintenance and everything else.

So when you use NOI, you have this tiny bit on the expense side that’s good and meaningful in terms of revenue management, and then this whole massive part that you can’t affect at all. NOI, from a pricing standpoint, becomes very nebulous.

I would certainly make the argument that we should start looking at breaking out expense categories so that we can look at just those items that influence demand. That would be absolutely legitimate. NOI as a whole is just too cumbersome and holistic to be meaningful for revenue management.

MFR.com: Revenue management has obviously been a game changer for the industry. How has revenue management changed the way that you do business at AMLI?

Hughes: Our focus seems to have gotten more and more granular. Back in the old days, we looked at the portfolio or asset level, and said okay, AMLI at Happy Acres is doing okay.

Of course, that’s a very broad statement. Maybe the one bedrooms are doing great, and the three bedrooms are doing terrible, and it averaged out to be okay.

As we’ve gotten more and more granular, we’ve started optimizing unit types. Then, we’ve used amenities to optimize units, and now, we optimize leases and lease options.

So when you rent a unit, you look at the specific unit you want to rent. We have a basket of potential options that you can choose to customize your lease. We know that you can only pick one of those options, but we make sure every option we offer is profitable, or at the very least cost neutral, for us.

People talk about submarkets of one, and micromarketing and things like that. We are actually getting there. As we try to de-commoditize our product and move from renting blocks of space to the selling of apartment homes, which is what we all really want to do, it’s about tailoring a very, very specific offer to the customer. That may be a little bit more retailing than revenue management, but that is the pathway that we’ve been following.

MFR.com: What would you say to young professionals who want to pursue a career in revenue management in multifamily today? How should they prepare themselves?

Hughes: It’s funny. Not every company agrees on where revenue management lives and who should be in charge of it.

Some people think it’s an IT function, because it certainly is very technologically heavy.

Others would put it in more of a finance role, because it’s about making money.

Some people put it in operations, because it’s all about managing people and process.

And then there’s the fact that marketing is clearly a part of revenue management, too. It’s a part of the demand function, and that’s revenue management.

I think the right answer is, be prepared to embrace all of these disciplines. Be able to bring all of them to the table in a way that those departments can all feel vested in the outcome, and be stakeholders in the process.

It’s not one very specialized pathway, although it sounds that way from the job description. It sounds like a very specialized job, but you will touch a lot of other departments and a lot of other disciplines in order to fulfill your revenue management goals.

Revenue management works when the system works, when people have faith that it’s working, and when it has upper management support. So there are a lot of moving parts, and a lot of  cross-disciplinary aspects to good revenue management. I think you have to bring all of them together in order to be a success.

MFR.com: Thank you.

Hughes: It was my pleasure. Thank you for the opportunity to share my thoughts.

The AMLI case study is important because the company takes a “people and process first” approach to performance.  They treat revenue management as simply one form of optimization, a technology among a number of quantifiable efforts they use to drive incremental results.  AMLI has about 22,000 apartment homes in 11 different markets.  They are headquartered in Chicago.  Hear from Steve Small directly below.

Part 1 – 2:20  “AMLI’s Use of Revenue Management”

Part 2 – 2:40  “Elasticity in Revenue Management”

Part 3 – 5:36  “Monitoring and Reporting Tools”

Part 4 – 2:18  “Pricing Console – User Interface”

Part 5 – 3:30  “Lead-to-Lease Success”