Pricing can be an obscure concept. There is no absolute right or wrong rate, necessarily, but problems can arise if you’re too far off in either direction.
While many variables factor in as to how apartment communities arrive at their rates, 2020 has introduced another in the form of the pandemic. The effects have meant different things to different markets, which adds another dynamic when attempting to accurately price units.
“Even in a tough year, we’re seeing solid results for our Entrata Pricing clients, over 2 percent lease trade-out increase year-to-date,” said Entrata Pricing product manager Matt Schultz. “This is a testament to the value and discipline that pricing software adds for our partners.”
With so many moving parts to consider, relying on guesswork or gut feelings generally fails to serve as a solid strategy. And with pricing as the primary component of NOI, it’s monumentally important to arrive at rates that strike the balance of making sense for the community while not alienating potential renters.
As with many facets of the multifamily industry, a data-driven approach works best. But the data must be accurate and transparent in order to become genuinely actionable. As such, operators want to be confident that the tool they’re utilizing is based upon smart calculations and a holistic approach to generating rates.
They also want to have influence as to how the software functions when driving their pricing strategies, rather than being pigeonholed to a rigid system with no wiggle room. And they want to have transparency and honesty from their provider about the components that factor into the pricing algorithm.
With pricing so vital to the bottom line, a pricing platform is not a place where apartment operators should take shortcuts. In addition to the objectives above, an effective pricing tool should also offer:
Dual capabilities: Pricing systems must allow users to set preferences while also being able to adapt to market-specific trends. The resulting data output can be utilized to generate rates behind the scenes.
Pricing consulting: Sometimes software guidance is needed, particularly in something as crucial as pricing. The best services offer a consultant, but not one intended to replace the revenue management team. Instead, the consultant should possess detailed knowledge of the platform and deftly answer user questions or quickly troubleshoot issues.
An S-Curve model: The S-Curve factors in daily variables that can affect rents and modifies optimal prices in gradual fashion, avoiding reflexive reactions that can leave prospects mulling such significant price volatility on a daily basis.
“With the myriad factors that go into the rate setting process, it’s untenable to expect any person to be thorough, consistent, and unbiased across an entire portfolio over time – especially when there are inevitably many other demands for their attention,” said Schultz. “Pricing software can do the heavy lifting so the user can bring the human element for analysis and strategic direction. We want to empower the pricing decision-maker to scale up.”
Pricing is always among the most important concepts in the apartment world, and communities are facing even greater challenges with regard to morphing prospect behavior, wavering competitor rates and sometimes-drastic shifts in lead volume. The need for a capable and intuitive pricing platform to ensure your rates are on point has never been greater.