"Revenue Management In A Declining Market" - Ray Thornton (Colonial) - 2009 AIM Conference

Revenue Management in a Declining Market Ray Thornton, Vice President of IT Applications and Support Colonial Properties Trust May 1, 2009

Agenda
Company Background
History of Revenue Management at CLP
Observations from the Field
Internal Control of Revenue Management Process
KPI Performance History

Company Background
Colonial Properties Trust (NYSE:CLP)
Headquartered in Birmingham, Alabama
Commercial (Office and Retail) Capabilities
57 Properties
Sunbelt Markets (Atlanta, Orlando, Dallas are largest)
MRI CM for Property Management
www.colonialprop.com

Company Background
Multifamily Capabilities
119 properties with 32,000 units
Average Rent of $803
20 Sun Belt Markets (Atlanta, Charlotte, Orlando, Dallas are largest)
Average Age is 15 Years
80% of Company NOI
MRI RM for Property Management
LRO for Revenue Management
www.colonialprop.com

History of Revenue Management * * CLP is currently rolling out remainder of portfolio PILOT1 PILOT 2 +3.2% +2.2% ROLLOUT PROGRESSION IMPLEMENTATION MSA Units April 2007 Pilot properties from Mobile, Richmond, Savannah, Raleigh, DFW, Atlanta, Greensboro, Orlando, Charleston 2300 October 2007 Phoenix 950 November 2007 Orlando 1300 November 2007 Bradenton, Sarasota, Tampa 700 December 2007 DallasFort Worth 3500 January 2008 Raleigh 1900 January 2008 Richmond 1200 January 2008 Virginia Beach 500 December 2007 Atlanta 3424 August 2008 Charlotte 4100 August 2008 Savannah 600 21,100

Observations from the Field
PROS
The daily price changes created a sense of urgency to close the deal on the prospect.
Multi-term pricing allowed the leasing associate to have more options and focus more on the prospect’s needs.
Consolidates all supply-related data (traffic, expirations, leasing velocity) into a 16 week pricing forecast.
Pricing follows a disciplined and “non-emotional” approach that would be more defensible for fair housing.
The pricing model allowed for a smooth lease expiration matrix.
LRO has made management transition on the properties easier.
Pricing process is automated to where all pricing sources (WebsiteILS) are in synch and much of STARS pricing approach is automated.
Pricing process automates renewal generation process and requires that renewals are not less then the expiring lease (unless overridden).
CONS
System is expensive at first glance. Make sure you do a business case with a hurdle rate.
System could “dumb down” some of the pricing decisions at the property level (i.e. “The computer told me to do that.”)
System is somewhat unproven in a down market.

Internal Controls – Best Practices
Change Management
Senior Management Buy-in?
Regional Management is the Key!
Traffic
Entered Promptly
Marketing Sources Correct
Market Comps
Shopped Weekly
Shopped Accurately
Pricing
Awareness of Previous Rents
Minimal Overrides
Calls are Attended

Market Comps – Shopped Weekly SAMPLE

Market Comps – Shopped Accurately SAMPLE

Pricing – Awareness of Previous Rents SAMPLE

Pricing – Minimal Overrides SAMPLE

Pricing – Calls are Attended SAMPLE

KPI Performance History
KPIs Tracked
Revenue Per Occupied Unit (RPU) (Internal)
Net Effective Rent (External)
Physical Occupancy (External)
Lease Expirations (Internal)

Revenue Per Unit Indexed (Pilot 1) Source: CLP Data

Revenue Per Unit Indexed (Pilot 2) Source: CLP Data

RentOccupancy Gap (RevMan vs NonRevMan) Atlanta Charlotte Source: AxioMetrics

RentOccupancy Gap (NonRevMan vs RevMan) Dallas Overall Source: AxioMetrics

Effective RentOccupancy (CLP to NonRevMan Peers) Effective Rental Rate Gap Occupancy Gap Source: CLP Data, AxioMetrics

Lease Expirations Source: CLP Data

So Does It Work?
ImprovingStabilized Markets
RM reacts quicker and drives rents up faster than manual process while maintaining occupancy.
Many studies and pilots prove this.
Declining Markets
RM reacts quicker and drives rents down faster than manual process in order to preserve occupancy. But does it react too quickly and discount too aggressively?
Per Rainmaker, ASN and Simpson have proven it works in a declining market.

Ansley and Reagan say THANKS!!
THANK YOU!

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"Revenue Management In A Declining Market" - Ray Thornton (Colonial) - 2009 AIM Conference

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"Revenue Management In A Declining Market" - Ray Thornton (Colonial) - 2009 AIM Conference — Presentation Transcript