To avoid concessions, student housing managers must get a handle on leasing earlier in the season.
In the past, student housing managers may have been able to look at the previous year's rents, increase them 3 percent and get ready for move-ins. But with so many factors now that can affect demand, in many markets those days are long gone.
"You need to take enrollments, concessions, exposure, economic and target goals into account [with pricing]," said Connie Aldape, Director of Revenue Management for Pinnacle Campus Living, at NAA's CampusConnex conference this February in New Orleans.
In markets with new development, community managers must be prepared to compete for their residents. "Students are transient and often want the shiny new thing," says KrisAnn Kizer, National Director of Leasing & Marketing for Pierce Education Properties.
One way to blunt those threats is to know what attracts students in the first place. "For students, it's not just about pricing," Aldape says. "It's about where our friends are choosing to live and other social events/gatherings."
Kizer agrees. "Friends [are] the selling point," she says. "If you can get those [first] couple of people, it snowballs and you win. Then you're not spending money on Apple watches and things like that."
With concessions increasing in a number of markets, Kizer's point is salient. If student housing operators can find ways to retain and attract residents early in leasing season, there will be less pressure to offer incentives to fill beds later on. "It's a race, and if you get behind you're going to give away the farm," says Aldape.
Ownership groups want high occupancy when the end of leasing season is approaching, and student operators will take bold steps.
"The majority of the time, the leasing is reactive [by offering giveaways] instead of looking at the data and the pro formas," says Jake Jarman, COO of Redstone Residential.
The problem is, most of the data is, well, dated, Jarman adds. "If you're moving as fast as student housing moves, especially at the end of leasing season, it's hard to rely on month-old data."
Trying to decouple all of the fees some student communities are adding, such as furniture, amenities and trash, can make it harder. "It's a challenge to break out the data you need," Kizer says.
The concessions can sometimes also get lost in pricing. "The furniture, gift cards and Apple watches make it tough to get accurate information," says Kizer.
Pinnacle Campus Living relies on the industry's data providers, and overlays what its community teams are telling it with that information. Those teams tend to survey their competitors for pricing information, but Jarman says they often need better training: "The manager [will] give it to the lowest-level employee, and you never get correct data," he says.
Property managers use this data to make pricing decisions. A rent reduction can bring down the value of a building, which means incorrect surveys can have a major impact on valuations.
"There are millions of dollars at stake and we're leaving the task of market intel-gathering [market surveys] out to the lowest-level employees," Aldape says.