The inaccuracy of polls leading up to this week's election was nothing short of astonishing, particularly those taken in the all-important battleground states. Generous predictions for Joe Biden evaporated, with huge polling leads in states like Michigan and Wisconsin translating to the narrowest of wins, or narrow Biden leads in states like Ohio and Florida turning into comfortable Trump holds. Similarly, Senate seats that were "in play" according to the polls appear so far to have attracted vastly more money than votes.
The non-performance of reputable polls in key races has left even the most seasoned political analysts asking where polling goes from here. As we wonder what polling data will be useful for in future elections, we are reminded of another ubiquitous but potentially misleading form of market intelligence: pricing data. Multifamily revenue management decisions are frequently guided, or at least heavily influenced by competitor pricing data. But whether the data improves the quality of the decisions is far from clear.
When the data gets it wrong
Don't get me wrong; local market conditions are a vital input to pricing, and the movement of competitor prices is contextually important. But where we repeatedly see revenue managers going wrong is with their understanding of the data and the types of decisions that the data supports. Here are just a few examples of the challenges of using data to drive multifamily pricing decisions:
How to get it right
When we think about how we should use comp data, it's important to remember that one size does not fit all. Multifamily communities vary in the extent to which they should treat comp pricing as a factor. There are many cases where following prevailing market pricing trends does more harm than good (especially if the data isn't an accurate reflection of what is really happening in the market).
"Trust the system" is a bad strategy, for example, when the RMS is using wildly fluctuating data to drive pricing decisions. Here are a couple of things that we recommend to all revenue managers trying to put pricing data to make the best possible decisions:
Above all, as we have just learned with polling data, you must not trust it blindly. Understand the data, where it comes from, how reliable it is, and use that to determine which decisions you should and shouldn't be using it to make. This election cycle should make us forever skeptical of absurdly optimistic polling and its potentially nefarious use in fund-raising. Apply the same level of skepticism to competitor data, and your pricing decisions should improve too.
Dom Beveridge is a Principal with 20 for 20, a consulting and publishing firm that specializes in multifamily technology.
The 20 for 20 blog covers the latest trends in multifamily operations and technology, and how innovation is changing the way that we run our communities. We also tend to live-blog industry events, because people seem to like it!