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Revenue Management: Two Heads are Better Than One

Revenue Management
September 2018

When trying to fill vacant rental homes, the price lever is big, prominent and probably brighter in color than the rest of the levers that could be pulled.

But pulling the price lever is rarely the best first answer to an occupancy challenge. There are numerous others that can be pulled, but they require getting two associates – revenue managers and community mangers – with distinctly different backgrounds and perspectives on the same page.

The sometimes insurmountable blockade between the worlds of a revenue manager and a property manager can be transcended with an age-old solution to relationship issues – communication. With a formal process, a seek-to-understand first approach and transparency, revenue management and property management can come together to maximize revenue, according to the “Revenue Management: Two Heads are Better Than One” session at Apartmentalize 2018.

“You should be setting your revenue management system to reflect what your overarching goals are for the property,” says Tim Reardon, Chief Operating Officer of Bridge Property Management. “Your revenue managers should know what those goals are and know how to ask what other levers we can pull rather than the big pricing lever.”

On the flip side, the property manager has to also understand the goals of the revenue manager and effectively explain how pricing was set for prospective and renewing residents.

"We have to help communicate the why so it’s not, ‘corporate people are doing it’ or ‘the system just spits out the price,’” says Sarah Turner, Regional Manager at Olympus Property. “It’s important to understand and look at the big picture. The big picture might be that you’re offering a $43 a month increase, but the resident is paying $150 under the market.”

If a particular prospect or renewing resident is unable to grasp the reasoning, the problem isn’t always that the price is too high for the prospect, according to Reardon.

“We don’t see a correlation between renewal rate and retention,” he says. “That doesn’t mean you can double someone’s rent and they’ll pay it, but they might not move out of that 25-year-old home because they have a bunch of stuff they don’t want to move or they have children with friends in the neighborhood.”

There could be a litany of other factors, including poorly communicated reasoning for the rent rate, ineffective marketing that isn’t generating enough leads, understaffing due to associates leaving, community maintenance, etc. Discovering these alternate issues requires open communication as part of a consistent process that is designed to discover all potential sources of occupancy issues.

“In general, community managers and revenue managers need to prepare for their pricing calls,” Reardon says. “We’ll usually send out reminders before the call with what we want site managers to have at the ready. When there isn’t a lot of prep, we have to follow up later, but follow-up is a lot harder than handling now.”

The preparation to ensure open regular communication designed to meet the property goals could be the path to solving problems that increase revenue, rather than pulling the pricing lever at the first hint of the price being too high.