Changing One Company’s Culture of Revenue Management
When Tim Reardon joined Bridge Property Management in 2012, he discovered that pricing services were the norm.
The problem was that Bridge’s revenue management department was nonexistent.
That reality made it difficult for employees at Bridge, a 30,000-unit firm with more than $4 billion in investment properties across 16 states, to find adequate data to justify their recommendations.
Reardon, the Director of Revenue Management, wanted to change this.
“Bringing a culture of revenue management and data analysis leads to a result that is somewhat more tangible,” Reardon says. “You can see the net effects of the revenue system being in place.”
Revenue management’s impact shows up in a number of places for Bridge. It has helped the company outperform expectations in certain markets, allowed Bridge to quickly adjust rents and instilled the confidence to sacrifice occupancy for rent.
About four years ago, Bridge launched the beta version of Yardi RENTmaximizer, and has never looked back. With RENTmaximizer, Reardon and his team can grasp the bigger picture of what’s unfolding based on an analysis of real-time inventory, traffic and market conditions.
This information allows Reardon to maximize rental revenue by pricing leases based on an algorithm that combines rent values with vacancy rates and several other factors. For Reardon, the benefit of using RENTmaximizer is most apparent in rental markets that are “solid, but not explosive.”
For instance, in Dallas Reardon has seen average increases of eight to ten percent, which is well above the four to six percent average achieved in most of the submarkets where Bridge competes.
“We’ve had some great growth there, and if we didn’t have this system in place, we wouldn’t be seeing the gains we’re getting,” Reardon says.
With RENTmaximizer, Reardon can add another level of insight to what his operations teams see in the field.
“I like seeing how the patterns emerge from the data collection,” Reardon says. “I like being able to get my finger on the pulse of what’s happening and see what the numbers are saying as opposed to asking questions and having a site manager tell you what’s happening.”
Because RENTmaximizer prices leases daily, Reardon can quickly modify plans and make changes to rates based on the latest market conditions, all while adjusting for vacancy loss, turnover costs, inventory hold days and expired lease management. With that information at his fingertips, he can keep rental inventory percolating, and he feels the results speak for themselves.
“In the first year, we realized a 9.4 percent increase on same store sales on properties we owned for at least 18 months,” Reardon says.
Adopting RENTmaximizer has allowed Reardon, who came to the apartment industry from the sports memorabilia business, to challenge industry orthodoxy.
“The bulk of the industry grew up on the idea that: ‘We need to be 95 percent occupied, period,’” Reardon explains. “We’ve been conditioned to believe that if the number is above that, everything is great, and if it falls below that percentage, we panic.”
In Reardon’s experience, the “95 percent rule” does not account for some of the unique challenges certain properties may face.
“We have a property that has never been occupied above 94 percent in the two-and-a-half years we have owned it, but they’ve still been able to drive rent growth by over 25 percent,” Reardon says. “That’s because we paid attention to where the market was actually going and understood that we never made up ground when we dropped rates.”