Marketing Critical in Optimizing Revenue in Tough Market
Looking over the shoulders of the hotel industry, savvy multifamily housing companies are integrating revenue management with their marketing efforts in order to maximize the value of their properties, Steve Lefkovits, founder, president and CEO of Joshua Tree Consulting, told attendees at NAHB Multifamily’s Pillars of the Industry Conference in San Diego on March 18.
With prospects for starting new multifamily properties bleak until the financial markets thaw and the economy stops shedding jobs, speakers throughout the conference stressed that developers need to focus on managing their existing assets to provide the income that will enable them to ride out the current downturn.
“The purpose of marketing is to make more money,” said Lefkovits. By studying information on prices and demand, marketing professionals can make decisions that will yield the optimal return, he said, increasing revenue by 2% to 4%.
Despite the proven effectiveness of incorporating statistically-based, math-driven spreadsheets into the marketing process, Lefkovits said, only about 9% of multifamily companies have revenue management departments, and not all of them have been linked to marketing operations.
At a time when there is virtually “an infinite amount of media outlets” for advertising properties to prospective renters, he said, companies can increase the efficiency of their marketing budgets a whopping 30% to 50% by looking for sources that generate the lowest costs per lead and per lease. They can also “exploit the tradeoff between more advertising and concessions to get more traffic,” he said.
To drive prospective renters to the property, listing vacancies on craigslist for free is an obvious place to start, he said, and “then layer on the least expensive sources.” Proceeding from there, ads should be purchased according to what’s needed to attain the desired yield.
Lefkovits recommended non-traditional advertising sources. “People want to find you in niche places,” he said.
Whatever the source of the leads, he pointed out, there is a good chance that they are getting wasted. Typically, half of e-mail leads are never answered, and 60% of phone calls — which account for four-fifths of all lead activity — are missed. The time spent on the calls that are answered, he said, is “atrocious,” averaging only one minute or so.
Lefkovits said it was important to track leads using a third-party. When internal self-reporting systems are used, the results tend to be misleadingly optimistic. “The closing ratio isn’t what you think,” he said, with the likelihood of a visit to a property being converted into a signed lease perhaps only 25% on average.
Companies should forecast their vacancies over 90 days in order to reach prospects, who start researching the availability of properties 60 days out, he said.
Incorporating marketing into revenue management, Lefkovits said, will help ensure that the property is targeted “at the right price to the right customer at the right time.” Using statistical, “non-emotional” demand functions and data, he said, “facilitates effective rent presentation with no concessions.” Presenting one price, in turn, gives the sales team the opportunity to offer the property at that price and stand by it.
“Revenue management facilitates the distribution of pricing,” said Lefkovits. For more information on how this works, he recommended the Web site www.multifamilyrevenue.com.
For more on why revenue management is successful, he cited a presentation at the 2007 Apartment Internet Marketing Conference by Kathleen Reidenbach, vice president of revenue management and distribution for Kimpton Hotels. Her address provided details on how Kimpton has used revenue management to increase its revenue and market share and to optimize its pricing using demand information.
Pricing Units Is Critical
David Lynd, chief operating officer of The Lynd Company, noted that “pricing units in a deflationary environment is critical,” and can have its pitfalls.
“You need pricing software,” he said, citing one case where managers were dropping prices on all units and floor plans, when demand was actually down for only one-bedroom units on the property and the market would have supported rent increases on two-bedroom apartments.
Just a $50-a-month mistake in pricing for a handful of units on a year’s lease “adds up quickly,” Lynd said. “You need to know how and when to push rents.”
In today’s difficult times and with rents declining, Lynd said his company is focusing on increasing the percentage of its renewals and locking in residents at a fixed price for a longer period of time.
He also reported problems in generating leads and then not having the ability to convert them into leases. A new program, he said, generated 180 leads, but “they went entirely unanswered,” because the platform was complex and his employees already had too many things to do. “The new technology was just another thing on their plate,” he said. “The organization has to be prepared to deal with it.”
Along with becoming more efficient in how it generates leads, Israel Carunungan, director of marketing for The Bozzuto Group, said that resident retention is key to beating the competition in today’s difficult marketplace.
“Retain more residents and the less traffic you need to bring in,” he said. “You do need a formal program,” starting with resident surveys that will help the management team identify issues that should be addressed.
Also important, he said, is maintaining accurate e-mail addresses and phone numbers for contacting residents.
“Rent-to-own programs are also a great way to retain residents,” Carunungan said, providing prospective home owners with a head-start in saving up for the larger downpayments now being required and lining up healthy prospects for the for-sale community.
Also worthwhile is designing Web sites not just to sell apartments but to include portals enabling management to interact with residents and allowing residents to communicate with each other. “You can create a community Facebook page,” he said. “The key to success is engagement,” he added, and for that to succeed the content needs to be actively refreshed.
Social networking is “big now and where we’re all going in terms of marketing,” said Carunungan.
Targeted events for residents are also effective, he said, such as activities for pet owners, restaurant dinner nights and ice cream socials. Events can be timed around periods when there are a high number of leases coming up for renewal. “It does create a sense of community,” he said.
For more information on multifamily resources available from NAHB, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350.
Marketing Multifamily Housing’ Available at BuilderBooks.com
“Marketing Multifamily Housing,” available through BuilderBooks.com, teaches how to successfully market multifamily developments, get referrals, implement unique marketing techniques, boost profits and fill homes without using inflated promises.
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