Yield Optimization Strategies April 24, 2008
<ul><li>CIO – AMLI Residential ( www.amli.com ) </li></ul><ul><ul><li>RentWizard – Sold to RealPage in 2003 </li></ul></ul...
Agenda <ul><li>The Business Opportunity </li></ul><ul><li>Statistical Concepts </li></ul><ul><li>Yield Optimization at AML...
Revenue Management is Real Money   AMLI’s property data is computed using the NCREIF formulas, summarized by market and co...
Revenue Management is Real Money   Wachovia REIT Performance
Global Perspective <ul><li>Revenue Management is more than a pricing system. </li></ul><ul><li>It’s about finding incremen...
Transforming the Enterprise <ul><li>Is it Actionable? </li></ul><ul><li>Is it understandable to the organization? </li></u...
Agenda <ul><li>The Business Opportunity </li></ul><ul><li>Statistical Concepts </li></ul><ul><li>Yield Optimization at AML...
Improved revenue on operations <ul><li>Find the optimal price at which you can maintain target utilization… </li></ul>It i...
Computing price elasticity of demand (Sensitivity)
Interpreting the value of elasticity ELASTIC or INELASTIC Response to Price Changes Responsive Unresponsive Proportional V...
Factors affecting the price elasticity of demand <ul><li>Availability of substitutes : the more possible substitutes, the ...
Predicting changes in total revenue <ul><li>Along the elastic range of the demand curve, an increase in price  leads to a ...
Agenda <ul><li>The Business Opportunity </li></ul><ul><li>Statistical Concepts </li></ul><ul><li>Yield Optimization at AML...
Consistent Message and Processes “ HUGO” -  OUR HEGDEHOG
Tier Report   PORTFOLIO AT A GLANCE
Performance Dashboards   <ul><li>If you don’t measure it, You will no be able to effectively manage it </li></ul><ul><li>I...
Key Performance Indicators   DASHBOARDS
Measures Individual Performance DASHBOARDS
KPIs Presented “Over Time” STORE DASHBOARD
Market Survey PROPERTY OVERVIEW
Leasing, Marketing & Servicing <ul><li>Real-Time Internet Unit Pricing & Availability </li></ul><ul><li>On-Line Leasing </...
The New AMLI.com BE MORE CONNECTED
Real Time on AMLI.com UNIT PRICING & AVAILABILITY
Pricing Matrix DELIVERY OF MULTIPLE LEASE TERM PRICING
AMLI is a Leader AMLI IS 3X THE RENT.COM AVERAGE (2006) REIT Performance metrics (YTD 2006) Lead to Lease Conversion – wei...
AMLI Trak CRM LEAD FOLLOW-UP SYSTEM
Prospects RECORDED IN DBMS & EMAILED TO COMMUNITY
Responses COACHED & RECORDED
Follow-up Reminder  IS QUEUED
Another Follow-up Reminder BY EMAIL TO COMMUNITY STAFF
Creates an e-mail Response ALSO COACHED
Also Creates a Future Reminder IF PROSPECT LEASES ELSEWHERE
AMLI  PhoneTrak CAPTURES CALLER DATA AND PROVIDES UNIT AVAILABILITY
AMLI  PhoneTrak CAPTURES CALLER DATA AND PROVIDES UNIT AVAILABILITY
AMLI  PhoneTrak <ul><li>Is a Virtual Call Center  </li></ul><ul><li>AMLI Community Sales Staff Knows Product and Customers...
AMLI  PhoneTrak TOOL FOR COMMUNITY STAFFING DECISIONS
AMLI PhoneTrak   TRACKS CALLS GOING TO ANSWERING SERVICE
Revenue Management <ul><li>Revenue Management Is giving the right customer the right product at the right time for the rig...
Comparison to Other Industries REVENUE MANAGEMENT
<ul><li>Replaces Traditional “Market Rent and Concessions” Approach </li></ul><ul><li>Simplifies Pricing for the Customer ...
Revenue Mgmt Roadmap TRANSITION PLAN Automated auditing and compliance management of all fees and other income No Fee focu...
Revenue Opportunity NET EFFECTIVE VS. CONCESSION BURN-OFF
Revenue Opportunity MAXIMUM CAPTURE VS. FREQUENCY
Actual Pricing EXAMPLE OF “PUSH” REPORTING
Metrics A LITTLE OF THE MATH INVOLVED Occupancy Change Adjusted Availability Traffic Index
Outcomes 64 UNIQUE SOLUTIONS Traffic Index Adjusted Availability Occupancy Change
Anatomy of a Lease OPTIMIZING EACH LEASE FOR MAXIMUM REVENUE Seasonal lease expirations adjustment Front loaded vacancy Tu...
Pricing Matrix DELIVERY OF MULTIPLE LEASE TERM PRICING
<ul><li>Steve Small – AMLI Residential ( www.amli.com ) </li></ul><ul><ul><li>[email_address]  or  [email_address] </li></...
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New Topics in Revenue Management

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Revenue management presentation by Steven Small of AMLI.

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  • New Topics in Revenue Management

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

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