There’s a fundamental truth that every hotelier knows:  heads in beds earn income and un-booked room nights hurt the bottom line.  The same can certainly be said for multifamily, where the lost opportunity cost of vacancy, like rotting bananas, is a perishable that can’t be brought back.

Enter revenue management programs to help multifamily operators optimize the market rate prices for rent to fill un-occupied units.  As the Hotels.com of apartment rentals, these services provide great insights at the lease-up stage that are changing pricing dynamics, especially in major markets where supply and demand plays a greater role in setting competitive rents.

Running apartment communities and hotels are, of course, not the same. While both industries focus on providing shelter with a variety of distinguishing amenities, the fundamental difference is that multifamily needs heads in beds for extended stays of 365 days or more.  Here is where all the back-end questions come in about why residents leave a lease or leases terminate early.  Putting aside normal transience associated with renting, most operators would identify poor payment performance as a reason units turnover. Statistics for late payments, evictions et al will vary from community to community, but residents who pay on time don’t usually create the majority of work for community staff.

As surprising as it may seem, the hotel industry can actually share a few insights on building stable renter populations.  Think about what happens when you check into a hotel.  You confirm your rate, you agree to terms, and you provide an assured form of payment in advance so that the hotel knows they won’t be left with an unpaid debt.  You are required prior to consuming a perishable (the hotel night) to assure that payment will be paid n-full and on time.  And you expect to be asked and you think nothing of it.  Now hotels don’t screen guests before taking a reservation.  They don’t check credit, stay history, or other variables.  They just want to be assured that payment has been secured in advance.

What do you think would happen if multifamily operators were to go beyond a standard screening and require all applicants to make arrangements as a condition of lease signing to assure their rent would be paid on time?  Would people balk at the idea?  Unlikely.  In fact, it’s fair to say that it has become the societal norm to ask for a means of payment in advance for large ticket items like rent, airline tickets, hotel stays and other high value purchases.  The people who plan to pay their rent on time certainly won’t mind being asked to make arrangements for on time delivery of funds.  The people who object may be the ones you really need to require to make advance arrangements that meet your risk tolerance in order to be sure their payments don’t perish along with your rental income.