At the beginning of the year, as tradition demands, we assess, evaluate, and begin to plan ways to improve. One of the topics on many property management lists this year is revenue management – i.e., using data to establish the “perfect rent” with the ultimate goal of maximizing the revenue generated by an asset. While the tools and methods vary, revenue management has moved from a “nice-to-have” theory to a “need-to-have” business practice in our industry.
We’ve been researching revenue management for a number of years as we develop the revenue management piece of our comprehensive property management platform — Entrata Pricing — and would like to share some of the strategies we’ve learned that can help set you up for success. If you’re thinking about adopting new revenue management tools or evaluating your current strategies in the new year, read on!
Rethink Occupancy Goals
Remember that revenue management strategies are built specifically around finding ways to help a property generate the most revenue at any given time. Too much emphasis on occupancy goals can actually become counter-productive. Sure, undercutting rents may help you fill more units, but it won’t help pay the bills. Take a close look at current goals and incentive systems and be sure to communicate the importance of finding the right balance between occupancy and revenue goals to your leasing agents.
Embrace the Data
You can do revenue management without contracting with a software provider, it’ll just take a lot of time. That’s because the most effective optimization depends on huge quantities of data, not all of which are easily accessible for at-a-glance perusal. Implementing revenue management software can simplify access to data and clarify how decisions are impacting your bottom line. The best revenue management software will help you avoid bad pricing habits by sending up red flags when you’re tempted to repeat an unprofitable decision. Basically, the more data a system is able to leverage, the more it can help you optimize rents for maximum revenue.
Revenue management is a powerful tool that will forecast the best possible revenue outcome based on available data. But like any tool, revenue management software depends on savvy, informed users and accurate, timely inputs to create those benefits: e.g., Which settings and features make the most sense for a given community? Should you use an established competitor set list or hand picking competitors for comparisons? Do you want to apply pricing to all unit types or would you prefer to try on a single unit? Remember, even the best revenue management software can’t replace the unique knowledge provided by your team members who have years of experience working in their communities.
Don’t Ignore Change Management
You already know all about change. Working in property management is like a crash course in high-speed problem solving. But that doesn’t mean that change comes easy – especially at the site level. Make sure to prepare your on-site teams for new revenue management strategies before you roll out new tools. This is especially important if you’re shifting from a static rent model to an optimized rent system. Make sure teams understand why their tasks are changing and work with your provider to provide access to trainers and consultants that will help them establish new daily routines and be on hand to troubleshoot through the transition.
Whether you’re already using specialized software for revenue management or have created your own system that relies on your own reports and research, the days of the static rent rate are fading. This is a great year to take advantage of all that revenue management has to offer. Entrata is happy to help. Check out Entrata Pricing or contact your CSM for more information.