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Is Your Fall Revenue Management Playbook Ready?

Is Your Fall Revenue Management Playbook Ready?

Each week we have been summarizing insights from our weekly "downturn" round table conversations. This week we share a few highlights of our most recent call (May 27). 

On our most recent call, we continued what is now an almost 2-month long trend as participants reported consistent improvement in leasing:

  • [Denver based] Last week's leasing was fantastic. It's been building for a few weeks. This week started off strong.
  • Saw a significant shift in leasing over the past two weeks in Orlando with 26 leases. We think the announcement about Disney and Disney Springs reopening may have shifted the tide. 

However, urban coastal markets continue to lag in leasing more than the rest of the nation. They are improving, as indicated by one operator sharing, "Leasing has been great over the past two weeks, but we are still down 29% on year-to-date applications. We haven't quite caught up, but if we can [sustain this] pace going forward, that will definitely be nice."

The improved leasing performance has not come without its costs. Rents are clearly down, as participants shared:

  • [Mostly A Class] The recovery is happening, but net effective rents are far below last year. 4-6% declines
  • May leasing is slightly above last year, but rents are down 4.5%
  • May leasing is up double-digits over last year, but we see 2% rent declines
  • Renewal rents are stronger than new leases. For example, 1-3 percent renewal growth flat on new leases

The Gathering Storm

This brings us back to the topic of last week's blog: while we are grateful for less pain than we expected, we are concerned that this could lead to complacency in the face of storm clouds not-too-distant future. We, therefore, have our eyes on September as a critical time for the industry. To recap on the reasons why:

  • It's unclear whether and how much the federal government will continue to support or extend payroll protection and unemployment benefits. While it is hard to imagine that they will cease entirely (though it's possible), benefits will almost certainly ratchet down
  • The seasonality tailwinds we're enjoying will turn to headwinds
  • Our health care system risks being overloaded should we experience some combination of the SARS-COV-2 virus's strength and a collision with the seasonal flu cycle. The resulting extended lockdown could be devastating

Anyone who tells you they know what will happen in the fall is either trying to fool you or is fooling themselves (or both). Being ready for turbulence from September onwards has more to do with disciplined planning than it has to do with predictive capabilities. 

 

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