Technology in the rental housing industry is at a tipping point, the likes of which hasn’t been seen in 15 years.
During the late 1990s and early 2000s, the industry experienced an onslaught of game-changing technologies:
Automated credit screening, pricing and revenue management (PRM), Web-based Property Management Systems (PMS) and resident/prospect portals.
The ensuing 10-plus years saw, at best, minor advancements in process through technology; but that is clearly changing. While not yet certain exactly how they will play out, technologies such as artificial intelligence (AI) and machine learning, smart-home devices and short-term rental (STR) marketplaces will clearly have a major impact in how we do business—a much bigger impact than the new technology that has entered our business since the early 2000s.
Based on interviews with 20 COOs and CIOs to get a sense of the “state of the state” for rental housing operations, a glimpse into where the industry is headed with technology during the next couple of years became apparent.
The white paper “20 for 20: Where Multi-Family Housing Operations is Heading by 2020” addresses the situation.
The Top 5 Observations
1. One big project
Half of those interviewed for this paper had a technology project in 2018 that basically dominated resources to the exclusion of any other major project; and 70 percent of those were either a transition to a new PMS or a major upgrade to their existing PMS.
These infrastructure investments only pay off if they are followed by significant projects that build on top of that infrastructure.
2. Short-term priorities and tech hype not yet aligned
The key topics presented at NMHC’s OpTech Conference in November included AI, smart-home platforms and STR technologies. Yet none of the COOs or CIOs interviewed listed any of those among their “top three” priorities for 2019.
That doesn’t mean they have no interest or activity (intentional double negative), but it does mean the rental housing industry is a bit early in the hype cycle for each of the three.
There is the first-mover advantage in AI and STR because efforts from those movers learn and mature sooner than others and can maintain that cultural advantage for years.
Conversely, the smart-home tech may have a first-mover disadvantage if it ends up investing in the Betamax version in a VHS world.
3. Recruiting and retaining talent
Everyone said that recruiting and retaining quality talent was increasingly difficult. As challenging as they said it was in 2018, all stated they expect it to be equally difficult (or more difficult) in 2019. Most are focusing on culture (creating a sense of belonging to something with a greater purpose), policies (e.g., loosening tattoo and piercing standards to attract a wider talent pool) and investing in career development and training as key strategies for dealing with this challenge. On the development side, the clear No. 1 priority is investing in sales (leasing) performance improvement. That is not surprising given a 10-year bull-run in apartment performance doesn’t exactly leave metaphorical sales muscles at their peak level. For executives peering into a future rife with possible slowdowns, it seems wise to improve those capabilities in preparation for potential clouds ahead.
4. Business Intelligence (BI) adoption
Several interviewees mentioned BI projects as a key area of focus though few were completely satisfied with their results to-date.
We noticed that the pace of the adoption cycle for BI has differed from the technology mentioned earlier. Those were clearly led by owner-operators and followed a path where early innovators spent years getting just a handful of customers before hitting a tipping point of rapid adoption.
In contrast, BI is following a slow, steady pace of adoption with no rapid increase and seems to be equally led by fee managers as by owner-operators. The motivation for fee managers is the need to meeting their clients’ expectations for quantity, quality, pace and customization of data and reporting.
Candidly, most BI projects are not set up for success. They tend to be IT-led and/or report-centric rather than business-led and focused on dashboarding and predictive analytics. A company driven by analytics is highly recommended.
5. PRM turns 18
This month is the 18th anniversary of the very first property that went live on LRO (for any trivia buffs, it was Hunters Run in Austin, Texas). When asking executives what they thought was missing in PRM, CIOs told us they haven’t been involved in PRM for years and COOs struggled to articulate any driving needs.
It’s concerning that executives have become complacent about PRM. Other industries (e.g., hospitality) view PRM as a Sisyphean task and never stop working on refining models and processes. At a minimum, there is opportunity in better lease-up pricing, unit amenity evaluation, renovation return analysis and ongoing development of PRM associates.