- July 21, 2014
- July 15, 2014
- July 15, 2014
Broad, fluid, dynamic and democratic characterize the apartment competitive sets that progressive owners are using to set prices and benchmark performance using revenue management technologies. Competitive sets, or “comps” as they are commonly known, continue to assist property managers with community and portfolio performance, and the process for shopping competitive properties for data has become a sophisticated, analytical process for maximizing revenue management output and asset manager business strategies.
“We’re going on comp blitzes and sending teams of five to seven individuals across a variety of departments to shop anywhere from 10 to 15 competitors in a day,” said MAXX Properties Director of Revenue Management Trachelle Spencer, who joined Cottonwood Residential Director of Property Management Operations Kathie Savage and MPF Research Vice President of Research and Analysis Greg Willet on the Better Input = Better Output: Benchmarking and Comps panel moderated by Satteron Enterprises President Jim Kjolhede at the 2013 Apartment Management Conference.
“As always, our comps are competitors that are in the same submarket, of the same age, in close proximity, with similar amenities, and where we are typically exchange our traffic and demographics,” Spencer said. “By looking at rents, deposits, fees, and value comparisons of the communities from different departmental perspectives, we achieve a very broad index where everyone knows exactly what a given submarket was about.”
Cottonwood Residential has a similar democratic process in setting comps, reported Savage, who also noted that benchmarking property performance against itself historically and against a submarket as a whole help to enhance the understanding of asset performance. “By benchmarking on those different levels you are going to get a true indication of how a property is performing,” Savage said. “To identify comps, the first person we go to in choosing comp sets is the community manager because they know who they are losing customers to. Then the regional manager and also the acquisition guys get in on any necessary number crunching, so yes, it is a democratic process for us.”
Willet cautioned immediately incorporating or discounting comps simply based on location proximity and amenity quality and curb appeal, or lack thereof. “Even if it doesn’t look like a comp, if it is at the same price level, it’s a comp,” Willet said. “But within that discussion, it’s also much better to have a big comp set than a smaller one. We also like to include properties that are a little step up and a little step down in the competitive set, because there are market shifts that impact how you can position your property relative to both better and worse performing peers.”
Above all else, validate comp sets for accuracy, panelists said. “Keep apprised of your markets and be dynamic and fluid in maintaining your comp sets,” said Spencer, who has witnessed managers who choose only poorly performing comps to amplify fundamentals, and even one who chose a comp three hours away because it was built by the same developer and had similar floor plans. “You always have to validate information,” agreed Savage. “Particularly since the availability of data is going to continue to expand, allowing us to be more thoughtful and analytical in regard to the competitive set at both an aggregate and a granular level.”
Willet concurred, and offered that best in class comp benchmarking isn’t so much about first place as it is about personal bests. “The goal is not to outperform the competitive set,” Willet said. “It is to understand your position within the competitive set. That is the strategy that will ultimately give you the most revenue lift.”
For more, download the Better Input = Better Output: Benchmarking and Comps presentation.
This information was presented at the 2013 Apartment Revenue Management Conference.
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