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New Topics in Revenue Management

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Revenue management presentation by Steven Small of AMLI.

Revenue management presentation by Steven Small of AMLI.

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  • Transcript

    • 1. Yield Optimization Strategies April 24, 2008
    • 2.
      • CIO – AMLI Residential ( www.amli.com )
        • RentWizard – Sold to RealPage in 2003
        • RentCheque – 2 nd generation implementation
      • CEO – Yield Dynamics, Inc.
        • YieldWizard – “ A NEW GENERATION OF SOFTWARE FOR EQUIPMENT RENTAL YIELD MAXIMIZATION”
      • CEO – Yield Technologies, Inc. ( www.yieldco.com )
        • RevenueRaptor – Revenue optimization framework
      Steve Small PRESENTER BACKGROUND
    • 3. Agenda
      • The Business Opportunity
      • Statistical Concepts
      • Yield Optimization at AMLI
    • 4. 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
    • 5. Revenue Management is Real Money Wachovia REIT Performance
    • 6. Global Perspective
      • Revenue Management is more than a pricing system.
      • It’s about finding incremental opportunities.
      • People and process first; Technology second.
      • Key aspects:
        • Install business transparency.
        • Feedback business results and metrics in real-time .
        • Make it easy to for customers to do business with you.
        • Invest in your Internet presence.
        • Take a disciplined statistical approach to capital investment and pricing.
      KEY ASPECTS
    • 7. Transforming the Enterprise
      • Is it Actionable?
      • Is it understandable to the organization?
      • Can everyone participate?
      • Yield Optimization is about actionable ways to improve marketing, product mix, customers, and business processes.
      YIELD OPTIMIZATION
    • 8. Agenda
      • The Business Opportunity
      • Statistical Concepts
      • Yield Optimization at AMLI
    • 9. Improved revenue on operations
      • 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
    • 10. Computing price elasticity of demand (Sensitivity)
    • 11. 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
    • 12. 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.
    • 13. Predicting changes in total revenue
      • Along the elastic range of the demand curve, an increase in price leads to a decrease in total revenue.
      This graph shows the relationship between elasticity along a linear demand curve and total revenue. Note the following:
      • Along the inelastic range, an increase in price leads to an increase in total revenue.
      • Revenue is maximized when Ed=1.
    • 14. Agenda
      • The Business Opportunity
      • Statistical Concepts
      • Yield Optimization at AMLI
    • 15. Consistent Message and Processes “ HUGO” - OUR HEGDEHOG
    • 16. Tier Report PORTFOLIO AT A GLANCE
    • 17. Performance Dashboards
      • If you don’t measure it, You will no be able to effectively manage it
      • Instills competition with peer team members
      • Focuses attention on Key Performance Indicators that you want to affect
      MONITOR ORGANIZATION IN REAL TIME
    • 18. Key Performance Indicators DASHBOARDS
    • 19. Measures Individual Performance DASHBOARDS
    • 20. KPIs Presented “Over Time” STORE DASHBOARD
    • 21. Market Survey PROPERTY OVERVIEW
    • 22. Leasing, Marketing & Servicing
      • Real-Time Internet Unit Pricing & Availability
      • On-Line Leasing
      • AMLI Trak
      • PhoneTrak
    • 23. The New AMLI.com BE MORE CONNECTED
    • 24. Real Time on AMLI.com UNIT PRICING & AVAILABILITY
    • 25. Pricing Matrix DELIVERY OF MULTIPLE LEASE TERM PRICING
    • 26. AMLI is a Leader AMLI IS 3X THE RENT.COM AVERAGE (2006) REIT Performance metrics (YTD 2006) Lead to Lease Conversion – weighted average per property
    • 27. AMLI Trak CRM LEAD FOLLOW-UP SYSTEM
    • 28. Prospects RECORDED IN DBMS & EMAILED TO COMMUNITY
    • 29. Responses COACHED & RECORDED
    • 30. Follow-up Reminder IS QUEUED
    • 31. Another Follow-up Reminder BY EMAIL TO COMMUNITY STAFF
    • 32. Creates an e-mail Response ALSO COACHED
    • 33. Also Creates a Future Reminder IF PROSPECT LEASES ELSEWHERE
    • 34. AMLI PhoneTrak CAPTURES CALLER DATA AND PROVIDES UNIT AVAILABILITY
    • 35. AMLI PhoneTrak CAPTURES CALLER DATA AND PROVIDES UNIT AVAILABILITY
    • 36. AMLI PhoneTrak
      • Is a Virtual Call Center
      • AMLI Community Sales Staff Knows Product and Customers Better
      • Measures Call Follow-up and Responsiveness
      • Captures Better Customer Traffic and Demographics Data
      BENEFITS
    • 37. AMLI PhoneTrak TOOL FOR COMMUNITY STAFFING DECISIONS
    • 38. AMLI PhoneTrak TRACKS CALLS GOING TO ANSWERING SERVICE
    • 39. Revenue Management
      • Revenue Management Is giving the right customer the right product at the right time for the right price
      • Goal is to maximize rental revenues through the proper balance of occupancy and rental rates
      AMLI Residential RENT CHEQUE
    • 40. Comparison to Other Industries REVENUE MANAGEMENT
    • 41.
      • 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
    • 42. 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 &quot;Push&quot; &quot;Pull&quot; 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 &quot;When we got around to it&quot; Pricing Frequency End State Transition Previously Concept
    • 43. Revenue Opportunity NET EFFECTIVE VS. CONCESSION BURN-OFF
    • 44. Revenue Opportunity MAXIMUM CAPTURE VS. FREQUENCY
    • 45. Actual Pricing EXAMPLE OF “PUSH” REPORTING
    • 46. Metrics A LITTLE OF THE MATH INVOLVED Occupancy Change Adjusted Availability Traffic Index
    • 47. Outcomes 64 UNIQUE SOLUTIONS Traffic Index Adjusted Availability Occupancy Change
    • 48. Anatomy of a Lease OPTIMIZING EACH LEASE FOR MAXIMUM REVENUE Seasonal lease expirations adjustment Front loaded vacancy Turn cost amortization
    • 49. Pricing Matrix DELIVERY OF MULTIPLE LEASE TERM PRICING
    • 50.
      • Steve Small – AMLI Residential ( www.amli.com )
        • [email_address] or [email_address]
        • 312-283-4900
      AMLI Residential CONTACT INFORMATION

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