Revenue Management is Real Money AMLI’s property data is computed using the NCREIF formulas, summarized by market and compared against the lowest meaningful index Simple compounded rate of the most recent four quarters is used for comparison Data in the chart to the right is for 2Q06 through 1Q07 AMLI vs. NCREIF – Annual NOI Growth 0.30% 4.80% 5.10% Florida 0.79% 5.21% 6.01% Total Portfolio 1.04% 5.02% 6.06% Seattle 1.05% 5.35% 6.40% New Jersey 0.71% 4.47% 5.17% Southern California 0.38% 6.17% 6.55% Kansas 0.78% 5.03% 5.80% Denver 0.64% 5.20% 5.84% Chicago 0.77% 5.45% 6.21% Atlanta 0.73% 5.51% 6.24% Dallas 0.54% 5.48% 6.02% Austin 0.68% 5.72% 6.40% Houston Rolling 1 Year NOI Return Variance NCREIF Index AMLI Properties Region
Revenue Management is Real Money Wachovia REIT Performance
Find the optimal price at which you can maintain target utilization…
It is instructive to understand elasticity of the conversion ratio for demand. Elasticity measures the responsiveness of quantity demanded to a change in price, with all other factors held constant. ELASTICITY
Computing price elasticity of demand (Sensitivity)
Interpreting the value of elasticity ELASTIC or INELASTIC Response to Price Changes Responsive Unresponsive Proportional Value of Elasticity E d > 1 E d < 1 E d = 1 Demand Elasticity Elastic Inelastic Unitary elastic Magnitudes of Change % Q D > % P % Q D < % P % Q D = % P Type of Elasticity Elastic Inelastic Substitutes Available Many Few The main determinant of demand elasticity is the availability of substitutes
Factors affecting the price elasticity of demand
Availability of substitutes : the more possible substitutes, the greater the elasticity.
Degree of necessity or luxury : luxury products tend to have greater elasticity.
Proportion of the purchaser's budget consumed by the item : products that consume a large portion of the purchaser's budget tend to have greater elasticity.
Time period considered : elasticity tends to be greater over the long run because consumers have more time to adjust their behavior.
Permanent or temporary price change : a one-day sale will elicit a different response than a permanent price decrease.
Replaces Traditional “Market Rent and Concessions” Approach
Simplifies Pricing for the Customer and the Leasing Staff
Easy to Implement, Manage & Measure
“ Gross Potential Rent” is a meaningless number
Revenue Management NET EFFECTIVE RENT PRICING
Revenue Mgmt Roadmap TRANSITION PLAN Automated auditing and compliance management of all fees and other income No Fee focus, (admin, app.. Etc) No Fee focus, (admin, app.. Etc) Fees & Other Income Sophisticated compliance validation and exception reporting Manual checking, time consuming Manual checking, time consuming Compliance New and Renewal New leases only New leases only Prices Generated Opt Out Opt in No forced ownership Ownership Integrated / Automatic "Push" "Pull" Information Delivery 256 and beyond 64 Information pulled from disparate reports Separate logic cases Daily, or as required (after each new transaction?) 2 or 3 times a week "When we got around to it" Pricing Frequency End State Transition Previously Concept
Revenue Opportunity NET EFFECTIVE VS. CONCESSION BURN-OFF
Revenue Opportunity MAXIMUM CAPTURE VS. FREQUENCY