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Revenue Management Now

By on May 8, 2020 in News

Are you thinking about fine tuning your revenue management program to meet the challenges of COVID-19? The current market is impacting demand and pricing, and it’s time to consider new strategies for managing your assets with both a short- and long-term focus on collections and occupancy.

 

As some states are already planning to open up within phased approach guidelines, Yardi Matrix data shows that demand is bouncing back from an initial drop of about 30% during the first two weeks of March. Plus, move-outs have slowed down. Looking at data collected from 11.5 million apartment units, April collections were better than expected according to the NMHC Rent Payment Tracker which showed 84% of apartment households made full or partial rent payments by April 12 and 91.5% by April 26. While that’s good news, the coming months are a bit unpredictable due to growing unemployment and delays for many people in getting their benefit payments.

“It is encouraging that apartment residents continue to meet their rent obligations whether that’s with the support of the federal relief funds, credit cards and alternative, flexible options provided by the industry’s owners and operators,” said NMHC President Doug Bibby. “But their financial security is unclear as many may not qualify for federal relief, while others are drawing down savings and facing greater financial challenges, including higher health care costs. For that reason, lawmakers need to act now to enact a direct renter assistance program.”*

One growing trend is undeniable: leasing has shifted online, so be ready to handle more virtual traffic to your properties. Your revenue management strategy should adapt smartly to these changes in demand and interactions. Many initially thought a lockdown on rental pricing increases made sense but could be a knee-jerk reaction. There’s more to consider for success moving forward — including pricing and rules that protect current occupancy and a long-term plan to safeguard current rents. Also important to consider: rent deferrals and payment plans along with easily trackable collections reporting.

According to Dhar Sawh, industry principal at Yardi, many clients are successfully taking the following approaches to revenue management for a short-term focus on collections and occupancy:

  • Set renewals to zero increase for the next three months
  • Switch to “winter rules” which favor occupancy vs. rate growth
  • Remove premiums where applicable
  • Increase hold days and other discounts without sacrificing base rent
  • Implement a deferral payment solution

For a long-term focus on occupancy, Sawh recommends that clients consider the following:

  • Extend lease terms
  • Remove premiums where applicable
  • Protect current rent

While the months ahead are still uncertain, for multifamily real estate managers seeking to be proactive the message is clear: without a flexible revenue management strategy you could risk losing current residents and missing out on good prospects.

Ready to learn more from the experts? Check out a free webinar on Revenue Management Strategies for Multifamily Real Estate.