DALLAS, TX - Bryan Hilton, vice president of revenue management for Denver-based apartment owner Simpson Housing remembers a time when leasing consultants were recording data manually and faxing it. Certainly, things have changed as revenue management has evolved and become an essential practice for the large apartment operators.
“Today, integration of data systems is essential to being able to handle the enormous amount of data that is available,” Hilton says.
Since Denver-based Archstone pioneered the practice over a decade ago, revenue management has grown a tremendous amount. But, there’s still potential for more improvement. Part of that comes with harnessing the enormous potential of revenue management and part of it is just knowing how to focus and strategically use so much available data.
Blaine Davis, a product specialist for revenue management at Santa Barbara, Calif.-based Yardi Systems says his company focuses on four pieces of information—availability (supply), traffic (demand), new leases, and competitive prices. “Each of these factors or trends is looked at individually at first and then aggregated together to identify if we have a dominant overall positive trend, negative trend, or neutral trend,” he says. “In this manner, one change to one trend will not cause an overreaction in price. Additionally, we look at the data in very specific timeframes that are constantly rolling, giving us visibility into the most recent trends and factors going on at the property itself.”
Annie Laurie McCulloh, vice president of business consulting for Atlanta-based Rainmaker LRO, wants to identify the right data elements, derive lead metrics, and then predict future behavior in order to devise actions to either alter the behavior or take advantage of the behavior predicted. “For example, if you are able to identify, statistically, well in advance that your renewals will not materialize as strongly as you have seen historically-- what can you do—either incent existing residents so you get higher renewals or promote to create more new demand,” she says.
The Next Frontier?
As technology providers and apartment owners hone in on gleaning the correct information from their revenue management systems, there are still other exciting possibilities to capture, as well.
“If you look at pricing and revenue management in other industries, the science has evolved from a heuristics-based (aka business rules) calculation to a truly algorithm-based scientific model,” McCulloh says. “The difference in results is phenomenal. We, as an industry, have not only warmed up to the idea of revenue management, but are now understanding these nuances and distinguishing what is a truly scientific and optimized solution. Another area under serious development involves understanding total resident/tenant value or resident/tenant lifetime value maximization.”
Keith Dunkin, a vice president at YieldStar business development for Carrollton, Texas-based MPF YieldStar thinks the next frontier for revenue management is mixing it with other disciplines. “Revenue management is part of a causal chain that converts people into prospects and then applicants, and finally into residents,” he says. “Significant synergy is available by integrating revenue management with marketing and credit screening.”
The people at Simpson want to use data to inform its operation to be at peak efficiency, optimizing for marketing, pricing and operations. “At Simpson, we are relating our revenue management data with our marketing and resident data in our data warehouse,” Hilton says. “We want to get a complete picture of who our residents are; how our residents come to us; what are our residential demographics; how we make our residents happy; and how we can maximize our revenue value on each resident.”
If that happens, the apartment industry will have moved even further away from the days of faxing rent data.
What’s next for revenue management will be one of many topics of discussion at the 2012 NMHC Apartment Operations & Technology (OpTech) Conference in Dallas, TX November 12-14. To join the conversation, visit the OpTech Conference website for full registration and agenda information.