GlobeSt.com: How can revenue management software, like Price Optimizer revenue management, help multifamily operators when the real estate market is in transition?
Jovanovic: The first benefit is the ability to make frequent, proactive price adjustments at a unit type level. By evaluating the supply and demand situation for each unit type in a given property on a daily basis, Price Optimizer is able to quickly identify situations where too much inventory is exposed and make measured downward price modifications to prevent occupancy deterioration, which is very costly. Conversely, certainly unit types, even in a down market, will experience sufficient demand to increase rates.
Without Price Optimizer revenue management, when a property experiences excess supply in a volatile market, operators typically discount rates on a wholesale basis, even when there are unit types in that situation that are experiencing higher demand and can sustain price increases. With Price Optimizer revenue management, every day presents a new opportunity to maximize revenue in a methodical and statistical manner to a degree that cannot be achieved by even the most experienced and talented operators in the industry.
Second, while Price Optimizer always contemplates competitive market influence, the main drivers for pricing are:
- The property's internal supply and demand situation;
- Recent leasing velocity, and;
- Recently achieved effective rents for each unit type.
Third, the flexibility introduced to the leasing and renewal process with Price Optimizer revenue management is a tremendous benefit, as it leads to increased closing ratios and retention and reduces average vacant days. Price Optimizer properties can offer multiple price options for a given unit to new lease prospects and renewing residents, based on different move-in dates and/or lease terms.
Price Optimizer pricing accounts for:
- Days that a prospect may ask to hold a unit after it becomes available;
- Turn costs, which are amortized based on lease term, and;
- Projected lease expiration date to ensure that exposure is controlled.
Fourth, Price Optimizer provides visibility into property performance at a level available nowhere else in the industry. As asset hold times continue to increase and markets remain in a tumultuous state, focus on revenue and operations is more critical than ever. The Price Optimizer dashboards provide clients with daily insight into performance at a unit type, property, region and portfolio level. Effective rent, occupancy and revenue is reported on daily, trended over the last 30 days, compared quarter over quarter and year over year, highlighting successes as well as areas requiring attention. Today, Price Optimizer clients are leveraging the Price Optimizer dashboards to facilitate weekly performance reviews in which underperforming regions, properties or unit types are highlighted and remediation plans are discussed.
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