How to Win Big in a Downturn with Revenue Management

Watching pricing performance since the downturn started and reflecting on all the things we’ve done with our clients over the past three months reminds me of a key lesson I learned about pricing and revenue management (PRM) in the 2002-03 and 2008-09 recessions. The opportunity to outperform competitors with PRM is actually GREATER in a downturn than in growth conditions.

That may sound a bit odd until you consider a few realities of PRM and recessions. For example, we should recognize the psychological bias that PRM systems are there to help increase rents. In reality, they exist to maximize rental revenue. Most of the time, that means controlling the pace of rent increase, but there are times when maximizing revenue means lowering rents to grow or protect occupancy. Not surprisingly, a recession is one of those times.
“Outperformance” does not necessarily mean sequential growth. My experience from the two past recessions was that LRO helped our sequential reduction in rent to be materially lower than the competition. We outperformed the competition, but it didn’t feel good because revenue was still down. Growing revenue by 4% when comps are up 3% feels great while reducing revenue by 2% when comps are down 4% doesn’t feel all that good, even though the latter is outperforming comps by an extra 100bps!
When PRM Systems Come Into Their Own
Since the current downturn started, on this blog, we’ve counseled system users not to blindly “trust the system” as they manage through unusual market conditions. It’s critical to understand how the ……

Multifamily’s BI Evolution (Not Revolution)

When we come to write the history of the changes that coronavirus forced upon multifamily, there will be plenty to say about its impact on technology. With social distancing virtualizing property operations, demand for proptech has skyrocketed, for example (as we will discuss on this blog in the next few weeks). But as companies have accommodated work from home, another, more traditional technology has come to the fore: Business Intelligence (BI).
With social distancing and virtual office arrangements now commonplace, we have fewer opportunities to walk properties, meet with teams, and understand at first hand what is going on. In this environment, the need to draw insight from data is greater than ever, heightening the focus on the quality and accessibility of this most precious of assets. It is interesting, then, to consider the ways that companies are adopting BI in our industry.
What We’ve Learned About Multifamily Adoption
Over the last couple of years, we at D2 have researched an industry white paper: 20 for ’20, which is based on 20 interviews with senior multifamily leaders. Somewhat surprisingly, in each of the last two years, BI emerged as a major finding, but for different reasons each year. 
In our 2019 edition, we noted that the adoption pattern of BI was different from other enterprise technologies. Unlike with CRM or revenue management, for example, there has been no “big bang” of BI adoption. The pattern is more like a slow trickle of implementations over many years. Second, we were struck by ……

How Multifamily Pricing Systems are Handling this Downturn

Over the last few months, we at D2 have been developing and sharing insight about the state of the market and the ways that companies are managing it. As the world has lurched from crisis to crisis, we have held weekly discussions to figure out what’s going on. Last week was no exception, although we focused on an area that’s close to our hearts: pricing and revenue management (PRM) systems.  
PRM is at its most powerful in a downturn. Operators who have strong PRM strategy and execution gain a larger-than-usual advantage over competitors who think they do. The PRM system plays a pivotal role in delivering that advantage, but downturns are not a good time to simply “trust the system.” PRM systems are based on statistical models. They work well when the pattern of the near future looks like that of the recent past. However, when the market changes sharply (as it has done recently), revenue managers need to understand what their systems can and can’t do.
What we’re learning from this downturn
With this in mind, we asked our group of industry PRM leaders what has been working and what hasn’t. Here are some of their answers:

Our system has returned to its normal level of accuracy and is working well now that we are three months into the downturn (the early weeks required more intervention).
Seasonality for 4-8 week pricing has been a challenge in some cases, adjusted for higher closing ratios compared to the early weeks.
Shortening the number of Leasing ……

Is Your Fall Revenue Management Playbook Ready?

Each week we have been summarizing insights from our weekly “downturn” round table conversations. This week we share a few highlights of our most recent call (May 27). 
On our most recent call, we continued what is now an almost 2-month long trend as participants reported consistent improvement in leasing:

[Denver based] Last week’s leasing was fantastic. It’s been building for a few weeks. This week started off strong.
Saw a significant shift in leasing over the past two weeks in Orlando with 26 leases. We think the announcement about Disney and Disney Springs reopening may have shifted the tide. 

However, urban coastal markets continue to lag in leasing more than the rest of the nation. They are improving, as indicated by one operator sharing, “Leasing has been great over the past two weeks, but we are still down 29% on year-to-date applications. We haven’t quite caught up, but if we can [sustain this] pace going forward, that will definitely be nice.”
The improved leasing performance has not come without its costs. Rents are clearly down, as participants shared:

[Mostly A Class] The recovery is happening, but net effective rents are far below last year. 4-6% declines
May leasing is slightly above last year, but rents are down 4.5%
May leasing is up double-digits over last year, but we see 2% rent declines
Renewal rents are stronger than new leases. For example, 1-3 percent renewal growth flat on new leases

The Gathering Storm
This brings us back to the topic of last week’s ……

Virtual Tour Apartment Checklist – Before, During & After a Tour

Virtual Tour Apartment Checklist - Before, During & After a Tour

Live Video Tour Checklist
Step 1: Visualize the Tour Path

Do you want to start your live tour from the leasing office then proceed to show them the clubhouse, outdoor amenities, and then on to the unit(s)? Or do you want to start the live tour from the unit itself? These are key considerations to think through first to ensure a smooth, cohesive tour experience.
Know how you plan to walk through the unit, what you will focus on and showcase, and how much time you’ll spend in each general area in order to keep the tour flowing.
Be mindful of the time you scheduled for the tour. Run through your agenda for the tour so you aren’t rushing at the end.

Step 2: Walk the Tour Path and Prep the Area

Are the spaces clean (just as they would be for an in-person tour)?
Are the lights on, toilet seats down, relevant doors open, and blinds adjusted?

Pro Tip: Depending on the weather or the time of year, you might want to have blinds tilted up or down to manage light flare. Don’t close them all the way though as you want natural light coming in to best capture the space. Any relevant doors you want open, go ahead and open them prior to starting the tour and prop them open if they self-close so that you’re not struggling to hold the device and open the door at the same time.
Step 3: Start the Tour

Whether you want to or not,……

Reopening Strategies for Apartments

Reopening Strategies for Apartments

Each apartment community has had its own set of unique challenges during the pandemic, but they’re relying on each other for advice when it comes to the next steps. Multifamily properties are creating phased reopening strategies; improving communication with their teams and residents, while making sure everyone stays safe; and deciding how they start to begin in-person apartment tours again. 
As part of our recent virtual panel, Reopening for In-Person Tours, we talked to three experts from multifamily property groups — Jamin Harkness, EVP and Partner for The Management Group, LLC; Heidi Jehlicka, Senior VP of Marketing & Employee Development of Bainbridge Companies; and Steve Ostipow, Director of Marketing at Drucker + Falk, LLC — to share how they’re approaching life after lockdown.
Apartments Cautious about Reopening Fully
During the discussion May 21, 40% of property representatives who took our webinar poll said they’re still not sure when they’d be reopening the leasing office to the public and residents, while 25% said they already had. Rounding out to 10% each: Within the next week, within two weeks, within the next month, and more than a month.
Virtual, self-guided and video tours are still widely being used and will continue. Our panelists said many of their properties started out with cell phone video tours and used them on YouTube, on social media or their website to attract and engage prospects. Today, some are also using outside resources to shoot professional videos.
While the process has been slow to get started, some properties ……

Owners Are Keeping Credit Screenings Steady, Considering Cash for Keys Policies, and Preparing for September 1

Each week our “downturn” roundtable enables us to discuss current pricing and revenue management (PRM) issues with some of the most experienced PRM practitioners in the industry. Each week we summarize the most recent insights. 
Below we summarize the audience responses to prompts (all answers are anonymous) on our most recent call (May 20) along with some information we re-shared from RealPage. If you have different insights or questions that you would like us to address in the coming weeks, please leave them in the comments or contact us through the site.
This week we opened up with a discussion about some key metrics we saw in a RealPage blog:

Despite the pandemic, occupancy April remained well above the prior ten-year average and slightly above April 2019. Strong February and March occupancies helped with that as April 2020 occupancy was below March 2020. Normally April occupancy is higher than March
Through mid-April, canceled move-outs were roughly double the historical norm. We look forward to future reports to see how long this tailwind sustains
Retention rates in April were at least 400bps higher than normal (at 57.9%)
All the above was at the expense of rent growth. Effective asking rents went from >2.5% YOY to 1.0%, the largest drop we’ve seen in our entire history in the industry
The focus on asking rents can be misleading: executed effective rents were down 4.5% YOY, and likely will drop further

What are you seeing on any changes in the eviction moratorium? Do you have any ……

3 Reasons Multifamily Needs to Prepare for September 1

During these first few months of the COVID-19 crisis, the two things that multifamily operators are most concerned about are rent collections and leasing volumes. So far the results have been more than a little bit interesting (and to many people counter-intuitive).
On the leasing side, we saw a massive drop in demand in the first three weeks. Overall, leasing was down more than 50%, and some urban coastal markets were down 80-90%. Since then, however, leasing has recovered such that most secondary and tertiary markets are now at or above prior year volume while the urban coastal markets are generally within 20-25% of prior year volumes.
Meanwhile, rent collections were a topic of great angst, first for April 1; then, when April numbers came in generally off only 4-6 points from prior year, there was a great concern that May 1 could be a disaster. Based on data from NMHC, May appears to be coming in slightly better than April.
Candidly, we’ve been surprised by leasing resilience though obviously very glad to see it. However, we were not surprised by rent collections. Very early on, we realized that most hourly workers were going to receive more in unemployment benefits than they were earning working, thanks to the $600 per week federal boost. We were concerned that timing (i.e., cash flow) could be an issue since state unemployment offices were inundated with filings and likely to be delayed in approving claims and issuing checks. If states got behind in March and early April bu……

Unemployment Subsidy Making a Positive Impact on May Rent Collections

For the last few weeks, we have been running a weekly “downturn” roundtable discussion for our clients (a group that includes some of the most experienced pricing and revenue management practitioners in the industry). Each week we have been summarizing the insights that were shared during our latest discussion.
The content below summarizes audience responses to three prompts (all answers are anonymous) on our most recent call (May 13th). If you have different insights or questions that you would like us to address in the coming weeks, please leave them in the comments or contact us through the site.
This week we opened up with a discussion about demand as we enter week nine of the crisis. We shared some statistics from our own internal aggregate data that showed very similar patterns to early RealPage and Yardi numbers. To summarize:

There was a huge drop for three weeks from mid-March, but there have been steady demand increases since then
Secondary and tertiary markets are showing YOY increases in recent leasing, so we appear to be making up some of the lost demand from the first few weeks
Coastal urban markets are, in most cases, back to within 25% of prior year leasing

We don’t know that this will last, but the good news is that we are seeing positive effects from seasonality and some pent up demand from earlier shutdowns.
How are your May collections rent doing?

94% as of today which is 2% higher than this time in April
NMHC reported ……

How To Best Follow-up with Rental Prospects During the Pandemic

How To Best Follow-up with Rental Prospects During the Pandemic

The leasing process has undergone major changes since the coronavirus pandemic started and the tried and true rules of leasing have been upended.
Your prospects are likely no longer stopping by the leasing office or property. They are browsing your website at all hours of the day. Meeting your customers virtually and on their timeline will build the trust necessary to close the deal. Sounds like you may be working around the clock? Not with the right technology, process and product. 
What Technology Tells You About Customer Preferences
With the right technology, your prospect will leave a digital footprint. You know what area they are looking in, what size of living space they are looking for, and what amenities interest them. Most importantly, the way they engage with you indicates their preferred communication style, the time and day their search is top of mind, and it provides insight into how close they are to making a decision.
“With social media, chatbots and artificial intelligence, prospects don’t want to wait for office hours or phone calls anymore,” says Catherine Azar, Director of Property Management with Barratt Asset Management, headquartered in Indianapolis and specializing in the acquisition and management of multifamily apartment communities. “They can immediately go onto your site and start selecting what they want. What’s important to our leads is that instant gratification and personalization tailored exactly to what they are looking for. Have an apartment home pop up for them that fits their needs and they are immediate……