The legendary golfer, Jack Nicklaus is often quoted as saying, "Complacency is a continuous struggle that we all have to fight." We have frequently argued on this blog and elsewhere that the decade of growth has blunted many of the tools that have delivered success and shareholder value in our industry over the last couple of decades. Rising tides lift all boats, and when growth is all-but-guaranteed, competitive capabilities atrophy.
We found ourselves pondering this issue after reviewing the research for our recent 20 for '20 white paper. Having spoken to 20 technology and operations senior executives about their priorities, and the outlook for the next few years, we grew concerned that Pricing and Revenue Management (PRM) may be falling victim to complacency.
One of the most salient findings among those detailed in the white paper is a strong reason to fear that almost all operators may have taken their eye off the ball. When speaking to heads of technology, every single one of them shared that they had not been close to PRM for years; and of the 20 executives that we interviewed, none had an obviously pre-conceived answer to the question "what's next in PRM."
We found a pervasive attitude of "we've checked the PRM box"; and that, in our view, is a problem, for a couple of reasons. First, PRM systems are complicated and require constant monitoring and regular reviews of, for example, system settings. Further, markets change, which means your PRM practices also have to. Multifamily communities - much like elite golfers - face changing competitive pressures. You're unlikely to keep winning if you never innovate your strategy and capabilities.
While we are concerned about the risk of complacency, we recognize that the confidence that many operators display comes from the maturity of their PRM capabilities. We also think things are mostly going well! There are, however, several things all MFH operators should be doing - I've detailed the top three below.
Recent client work has shown us that there are many ways that you can challenge the processes and technology that you already have in order to drive long-term improvements in your PRM results. The above just begins to scratch the surface.
PRM systems are complex and highly sensitive to the way that they are set up and managed. As we assess PRM platforms and increasingly serve as a "fractional PRM team" for several clients, we are shocked at how key settings can slip as market conditions change, and the downstream impacts these anomalies can have on revenue performance.
We have recently published articles on how unit type groupings and their configuration impact asset performance, yet surprisingly few companies take the time to understand and make the right decisions. Competitor sets and data, renewals strategies, amenity audits, and even basic training are all areas that yield low-hanging fruit for operators who may well have been running PRM solutions for years.
Jack Nicklaus managed to keep winning majors over a period of more than a quarter century. I don’t imagine he would ever have seen his game as “going fine”. Challenge yourself.
Donald is CEO of Real Estate Business Analytics (REBA) and principal for D2 Demand Solutions, and industry consulting firm focused on business intelligence, pricing and revenue management, sales performance improvement and other topline processes