Are You Leaving Money on the Table?
By Donald Davidoff
Whether it is calculating seasonality, forecasting demand or tightening your focus on renewals, there are ways you can better optimize pricing.
I'm looking ahead to Maximize, October 1-3 in beautiful San Diego. With its original roots as the Apartment Revenue Management Conference (it was wisely expanded a few years ago to cover all aspects of asset management and re-branded as Maximize), it’s the only gathering dedicated to all functions that create NOI and value in apartment housing.
One of the things I like about Maximize is the is the opportunity to dig into more analytical concepts than are offered at many other conferences, and this year is no exception. Back by popular demand after a one-year hiatus, Annie Laurie McCulloh (now a senior vice president at Brookfield) and I will present a two-hour session digging into the deeper math behind pricing and revenue management (PRM). This is the third time in the past four years that we have presented deeper concepts behind pricing, and I particularly appreciate that this venue offers the chance to get past mere PowerPoint slides and into some real math.
If you’re a pricing manager or an analyst, we’ll teach you ways you can improve your performance; if you’re an operator, marketer or asset manager, we’ll give you a deeper perspective into how your PRM system (and pricing managers) support you.
Here’s a preview of what we’ll cover. I hope you can join us there!
- Calculating seasonality. We all understand that demand is seasonal, and we frequently use terms like “high season” and “low season.” But what do they really mean mathematically? There are simple ways to calculate seasonality using straight averages; and there are more complicated ways that do a better job of capturing the typically sinusoidal nature of demand.
- Forecasting demand. We all know how critical demand is to pricing; operators and asset managers alike regularly talk of demand being “strong” or being “weak” to drive (or justify) pricing (and even investment) decisions. It’s one thing to talk about demand and yet another to measure it. We’ll discuss how to calculate demand by breaking it up into its constituent parts—average de-seasonal demand, seasonality and lead-time curves.
- Renewal statistics and likelihood to renew. Renewals often represent most of the leases on a rent roll, yet we find that operators typically spend many more hours in training, pricing support and sales execution for new leases. We’ll provide a method of analysis that we guarantee will add at least one percent to your renewal rent revenue. If that sounds too good to be true, come check it out and let us know what you think afterwards.
- Lease-to-guest card ratios. Like a continuous reading of Goldilocks and the Three Bears, the market is constantly giving us feedback about whether our pricing is too high, too low or just right. We just need to know how to measure and calculate this metric in way that truly reflects what is happening.
- Diagnosing an underperforming property. The “holy grail” of pricing and revenue management (PRM) analytics is to be able to diagnose what is happening at an underperforming property. Is it lead generation? Sales execution? Back door issues? Pricing? Or what? With 31 years of PRM experience in the apartment industry housing combined between the two of us, Annie Laurie and I will share how we go about diagnosing underperformance. It’s not easy, but with the right math and business judgment, it can be done effectively.
And, as we discuss the topics above, we’ll sprinkle in some interactive activities to keep everyone involved. So, it’s time to get your inner geek on and join us in San Diego for a deep dive into some of the math behind PRM!
Donald Davidoff is President of D2 Demand Solutions.