Revenue Management Has Come to Student Housing
Using revenue management software on your student housing properties to ensure the best pricing is more important than ever. With so much attention being placed on rental rates these days, student housing owners and operators can no longer price student properties using conventional or more “static” methods. Patterned after the technology used to price airline tickets and hotel rooms, these software programs weigh competitors’ rental rates, market conditions, seasonal trends and other variables to recommend the highest feasible rent for each apartment at a given time.
Among the technology’s biggest proponents is Katy Smerko, National Director of Leasing and Marketing for Campus Advantage. She took part in a session at the 2013 NAA Student Housing Conference & Exposition back in February, titled “Better Pricing Power in Student Housing.” She stated, “What we discussed was pricing power -- not necessarily going in and setting flat rates at the beginning of the season. We talked about closely monitoring your lease-up so that you can increase revenue throughout the leasing season. It’s important to really be aware of what is going on in your market and at your property to be able to do that.”
Campus Advantage is a third-party provider of student housing, with nearly 50 properties nationwide. “We rolled the revenue management program out about a couple of years ago at three of our assets that we manage. This year, we rolled it out at an additional seven properties that Campus Advantage manages.”
With the program, student housing properties can guarantee a rate as “the best price today,” while adding a sense of security by providing them with printed quotes. This locks in the rate even if the price on that room increases because of demand. In addition, students are also given a sense of urgency, knowing that the quoted price is only for a limited time. It encourages faster leasing decisions at a better price, which in turn helps operators reach your occupancy goals more quickly and at the highest possible rents. When student housing communities use the program, beds are always optimally priced based on the owner’s objectives, internal supply and demand characteristics, and market conditions.
Smerko remarked, “Leading the market is always a nice thing. But if you are right in the middle, you know that your price is probably just about where it needs to be. Basically, the biggest thing with revenue management is changing the way we internally think about leasing. For so many years, the thinking has been: ‘The first property that fills up … wins!’ With revenue management, you are definitely holding on to certain unit types that you know you can fill later in the season – studios, one-bedrooms, things that people really want. So, you kind of hold on to those units, because you know you can charge more at the end of the season when no one else has them. It’s changing the way you think about leasing, in general. As long as you know your market and there’s always going to be people there in the summer, you’re going to be able to go ahead and fill up those units, as well.”
She continued, “It’s a little bit of a change in how you do things. And it can be a little gut-wrenching on some properties when you are seeing lower numbers than you had the year before. But just know that you’re going to be able to make those up in the summer. I think the biggest benefit is the increased revenue and really being able to look at your rates -- not only against your comps, but against yourself and knowing that, ‘OK, we have a few of these units left and we can raise them $10 because no one else in the market has any.’ ”
Revenue management software is about a lot more than just price. Advanced users of the programs leverage the data from their system to uncover performance drivers that have nothing to do with pricing -- organizational effectiveness, product quality, and so forth.
Looking ahead, Smerko is feeling upbeat about the future of revenue management. “I think it is going to become more and more popular,” he stated. “I think people are looking a lot closer at their revenue and not necessarily their occupancy. You might have a really high occupancy rate, but you filled up at rates that were much lower than everybody else in the market. It’s definitely the wave of the future. We’re going to see a lot of sites going to this. The software has been around for quite some time for conventional properties. But it hasn’t been in the student housing market as much. The companies will be pushing themselves to understand student housing in order to come into this arena.”
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