Apartment managers can control turnover. Focusing on service boosts resident satisfaction and retention.
Overheard at an industry roundtable discussion on the topic of resident retention: “It doesn’t really matter what you do. Turnover is turnover. There’s not much you can really do to change it.” This is a sentiment that has echoed throughout the multifamily industry, and with an economy as challenging as this one has been, it seems that this line of thinking must be true. However, the 2010 SatisFacts Index revealed convincing research to the contrary. As a result, when the sentiment arises, “You can’t reduce turnover!”, our research says, “Baloney!”
As owners and operators have been tightening their belts over the past few years, one metric that has been closely monitored is the percentage of residents who, when asked how likely they are to renew their lease, indicate they are “very likely.” Some managers might have predicted that recession-related factors such as uncertainty in regard to job loss and the shadow market might cause the likelihood of renewal to decrease. One might also expect that the recession would lead residents to question value more than ever, due to the significant percent of their monthly income that housing represents. As a matter of fact, results from our clients’ resident surveys showed the opposite to be true. Focusing on service delivery and satisfaction has a clear impact on turnover and bottom-line property financial performance.
Better Service Equals Better Retention
The 2010 SatisFacts Index, based on survey responses from all clients, revealed the percentage of residents who indicated they are “very likely” to renew has increased from 43.6 percent in 2007 to 48.3 percent in 2010. Even more importantly, the percentage of residents who indicated they were “not likely” to renew has decreased dramatically from 20.3 percent in 2007 to 13.1 percent in 2010.
The shift in residents’ renewal likelihood and enhanced perceptions of value were driven by operators’ consistent improvement in the best practices proven to impact retention, the index shows. Year after year, our research has confirmed there are three key areas that impact the resident experience most significantly: a culture of responsiveness, communication effectiveness and service-request resolution.
A key area of educational focus by SatisFacts has been the top five satisfaction topics that have the greatest impact on renewal likelihood. At the top of the list is, “Office staff: promptness of response to calls and e-mails.” Since 2008, this metric has improved from 4.0 on a 5-point rating scale to 4.19. This focus on promptness has shifted resident perceptions of how responsive and dependable the office staff is; this score grew from 4.03 in 2008 to 4.21 in 2010. Findings show that when communities focus on what matters most to residents, residents see it and appreciate it. The payoff is increased retention and reduced resistance to rent increases.
Survey results have shown a strong relationship between the percent of residents who have an outstanding service request and their level of satisfaction. The fewer outstanding maintenance issues, the greater their satisfaction, which leads to more residents indicating they are “very likely” to renew. As communities have become more and more focused on an efficient service request process, the impact has been clear: The percent of residents who submitted a work order in the past year who cited a problem still exists has dropped from 29 percent in 2008 to 23 percent as of the 2010 SatisFacts Index (see “2008 - 2010 SatisFacts Index: Service Request Process” on p. 72). This improved service request process continues to help push satisfaction, perceived value and renewal likelihood.
All told, every best practice metric on the SatisFacts Index has steadily increased from 2008 to 2010. The overall satisfaction score has grown from an “average” score of 3.98 in 2008 to a solid “superior” score of 4.12 as of the 2010 SatisFacts Index. The bottom-line impact is that more residents were very likely to renew their leases and the percent citing they were “not likely” has dropped dramatically. While NAA’s Annual Survey of Operating Income & Expenses in Rental Apartment Properties shows national turnover rates have fluctuated between 57 percent and 62 percent, a focus on the best practices SatisFacts monitors has led clients to report turnover rates more than 17 points lower than the national average.
An examination of residents who did not respond that they were “very likely” to renew similarly revealed the impact of improved service. (See “Why Not ‘Very Likely’ to Renew” below.)
• Despite the horrific recession focusing residents’ attention on expenses more than ever, the percent who cited “value” as the reason for not being “very likely” to renew dropped dramatically, from 27.2 percent in 2009 down to 21 percent as of the 2010 Index. This shows that companies’ steadily increasing staff focus on what matters most to residents (responsiveness, service delivery and communication) had a huge impact on perceived value.
• The percent of residents citing staff-related or staff-controllable issues dropped dramatically from 53.9 percent for 2009 down to 46.1 percent as of 2010. Residents clearly appreciate the superior level of service delivered.
• As service delivery improved, the percent of residents citing apartment-related issues also dropped from 79.2 percent to 73 percent in one year. The more satisfied residents are with their homes and the service provided, the more likely they are to not only renew, but renew with a rent increase.
Focused Improvement
A shining example of the impact focusing on best practices can have on renewal likelihood is Dominium, a Minnesota-based management company with a portfolio of 19,000 apartments.
In 2009, 13,000 of the company’s apartments were surveyed for the first time, and the portfolio achieved a score in the high average range (3.5 – 3.99 on a 5-point scale).
Based on those results and our recommendations on areas requiring focus regarding service delivery, Dominium’s regional managers, with the assistance of the properties, created and implemented property action plans.
“The regional managers would come up with various steps to improve areas where we saw less-positive results on the survey,” says Heidi Jehlicka, Marketing Director for Dominium. Because the survey indicated most of the top factors affecting renewal involved office staff, many of the steps were designed to improve onsite staff communication.
For instance, one step was to encourage community managers and maintenance supervisors to set up daily meetings to discuss service requests and make sure they weren’t missing any new issues.
Another was to emphasize the importance of responding to e-mails the same day they are received, rather than waiting until the next day.
“The plans included results-oriented tasks,” Jehlicka says. “Those action plans were reviewed at monthly meetings to see how staff members were improving and where improvements could still be made.”
In 2010, their focus on best practices paid off. The portfolio scored in the superior range (4.00 – 4.49 on a 5-point scale). More important, the percent of residents who indicated they were “very likely” to renew increased 16 points.
COO John Segner says the company saw a portfolio-wide 21 percent reduction in vacancy losses in 2010.
“Reducing turnover was a major corporate goal in 2010 because in 2010, the market was still not bearing rental rate increases,” Jehlicka says. “So the goal was to improve NOI by reducing turnover and turnover expenses. We achieved that substantially.”
The relationship is clear. The more an organization focuses on the best practices of service delivery, the more likely residents will renew—even during a recovering market with increasing rents. You can’t reduce turnover? Baloney.
Jen Piccotti, VP of Consulting Services, leads client support for SatisFacts, including satisfaction survey action planning, productivity studies, quality assurance, process evaluations and educational services. She has over a decade of resident loyalty and process efficiency experience. She can be reached at jpiccotti@satisfacts.com. Doug Miller is founder and president of SatisFacts and has worked in the multifamily housing industry for over 20 years. He can be reached at dmiller@satisfacts.com.