Units - July 2011 - (Page 48)
Capitalizing on Revenue Management: Real-World Examples
BY JANINE STEINER JOVANOVIC Veteran apartment industry professionals share results you can expect from using revenue management.
Proactive Versus Reactive Pricing
“Revenue management evaluates all the same data we previously used to determine pricing, but at a rate that just isn’t possible without it. The way we used to price involved too much looking in the rear view mirror and reacting to existing challenges that were allowed to develop. Today, our revenue management system calls attention to potential, emerging challenges and allows us to address them before they can impact results.”
—SCOTT VILLANI, DIRECTOR OF MULTIFAMILY REVENUE MANAGEMENT & MARKETING, FOREST CITY
evenue management in multifamily has come a long way over the past decade, with 10 percent to 15 percent of the industry using revenue management today. Adoption rates over the past few years have grown dramatically, and more and more owners and operators are getting on board. Those who wait are likely to find themselves at a competitive disadvantage. How is revenue management making a difference for companies that have adopted it? Following are real-world examples of companies that have implemented revenue management systems and found real results.
With traditional pricing practices, awareness of performance trends comes after they have impacted results, when month-end reports demonstrate what has already occurred. Revenue management allows operators to observe emerging trends and conditions, address challenges before they can impact results negatively, and capitalize upon opportunities the moment they present themselves. Real World Stories continues on page 56
What Revenue Management is NOT
BY DONALD DAVIDOFF Knowing what to expect from revenue management—and what’s off the table—can help apartment companies make knowledgeable decisions about investing. s revenue management is increasingly adopted by the industry, it’s interesting to see how various mythologies about what “revenue management is” have spread. Some are unintended, in that ideas form and get passed on from person to person without any real vetting 48 UNITS
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and suddenly become conventional wisdom. Others have been carried out with intent, as vendors co-opt the term for marketing and sales purposes and multifamily housing operators co-opt the term to look like they’re doing something cutting edge. Both are actually avoiding the change necessary to implement a true revenue management system. Here are three things revenue management is NOT: Revenue management is NOT just software and technology. Instead, it’s a strategic program that happens to involve technology. Anyone viewing it as a technology project will be sorely disappointed. Revenue management is a way of thinking about the apartment business and realizing that a box is NOT a box is NOT a box. Rather, other important dimensions matter:
when the box is rented, how long it is rented and whether it is renewed. Those aspects drive differences in value. Revenue management fundamentally changes how you view your multifamily business. It will change not only how you price, but also how you budget, how you staff and what kind of reporting and business intelligence you need. And while it does affect your IT department and resources, that’s a necessary, albeit not sufficient, condition to succeed. Revenue management requires CEO or COO commitment—not just involvement. A technology project, on the other hand, just needs money and a sponsor somewhere in the organization. Not sure of the difference between commitment and involvement? Just think about bacon and eggs—while the chicken is involved, the pig is committed!
w w w. n a a h q . o r g
Table of Contents for the Digital Edition of Units - July 2011
Units - July 2011
Common Area Ideas
Attendees Leave Las Vegas Educated and Energized
If You Market, They Will Come
From Data to Profit
Security Without the Deposit
Rent Past Due!
Units - July 2011