Revenue Management in a Declining Market Ray Thornton,  Vice President of IT Applications and Support Colonial Properties ...
Agenda <ul><li>Company Background </li></ul><ul><li>History of Revenue Management at CLP </li></ul><ul><li>Observations fr...
Company Background <ul><li>Colonial Properties Trust (NYSE:CLP) </li></ul><ul><ul><li>Headquartered in Birmingham, Alabama...
Company Background <ul><li>Multifamily Capabilities </li></ul><ul><ul><li>119 properties with 32,000 units </li></ul></ul>...
History of Revenue Management * * CLP is currently rolling out remainder of portfolio PILOT1 PILOT 2 +3.2% +2.2% ROLLOUT P...
Observations from the Field <ul><li>PROS </li></ul><ul><ul><li>The daily price changes created a sense of urgency to close...
Internal Controls – Best Practices <ul><li>Change Management </li></ul><ul><ul><li>Senior Management Buy-in? </li></ul></u...
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 <ul><li>KPIs Tracked </li></ul><ul><ul><li>Revenue Per Occupied Unit (RPU) (Internal) </li></ul></...
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? <ul><li>ImprovingStabilized Markets </li></ul><ul><ul><li>RM reacts quicker and drives rents up faster th...
Ansley and Reagan say THANKS!! <ul><ul><li>THANK YOU! </li></ul></ul>
Upcoming SlideShare
Loading in …5
×

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

1,679 views

Published on

Ray Thornton, Vice President of IT Applications and Support at Colonial Property Trust presents a case study on the benefits of using revenue management system in a declining market.

Revenue management systems automate the discipline of rental unit pricing and take the emotion out of pricing and presenting offers. Yet multifamily adoption of revenue management happened as markets recovered and rents were moving upward for everybody. Does revenue management work in a downward-trending market? Ray presents case a study examining whether revenue management adds the same value in a declining market like the one we’re currently experiencing.

Published in: Real Estate, Business, Technology
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
1,679
On SlideShare
0
From Embeds
0
Number of Embeds
102
Actions
Shares
0
Downloads
77
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide
  • Thank you for the opportunity to discuss what I believe is an industry shaping topic – Revenue Management in a Declining Market. The penetration of RM within our industry is amazing. I don’t know the % of penetration but I can tell you that when we took a quick inventory that only two of the major publicly traded REITS had no sort of RM software. I have only been in the industry for three years…and I love it. But I am amazed at the herd-mentality of this industry. Once a few major innovative players break loose and start something new…the rest of us are not far behind. The case is certainly true of RM…lets face it…if RM doesn’t work in this tough market…a lot of us are in major trouble. So…I will go ahead and cut to the chase….does it work? It depends… Seriously…you are going to see a lot of numbers from me…as with anything else…interpretations differ on what they mean…
  • "Revenue Management In A Declining Market" - Ray Thornton (Colonial) - 2009 AIM Conference

    1. 1. Revenue Management in a Declining Market Ray Thornton, Vice President of IT Applications and Support Colonial Properties Trust May 1, 2009
    2. 2. Agenda <ul><li>Company Background </li></ul><ul><li>History of Revenue Management at CLP </li></ul><ul><li>Observations from the Field </li></ul><ul><li>Internal Control of Revenue Management Process </li></ul><ul><li>KPI Performance History </li></ul>
    3. 3. Company Background <ul><li>Colonial Properties Trust (NYSE:CLP) </li></ul><ul><ul><li>Headquartered in Birmingham, Alabama </li></ul></ul><ul><li>Commercial (Office and Retail) Capabilities </li></ul><ul><ul><li>57 Properties </li></ul></ul><ul><ul><li>Sunbelt Markets (Atlanta, Orlando, Dallas are largest) </li></ul></ul><ul><li>MRI CM for Property Management </li></ul>www.colonialprop.com
    4. 4. Company Background <ul><li>Multifamily Capabilities </li></ul><ul><ul><li>119 properties with 32,000 units </li></ul></ul><ul><ul><li>Average Rent of $803 </li></ul></ul><ul><ul><li>20 Sun Belt Markets (Atlanta, Charlotte, Orlando, Dallas are largest) </li></ul></ul><ul><ul><li>Average Age is 15 Years </li></ul></ul><ul><ul><li>80% of Company NOI </li></ul></ul><ul><li>MRI RM for Property Management </li></ul><ul><li>LRO for Revenue Management </li></ul>www.colonialprop.com
    5. 5. 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
    6. 6. Observations from the Field <ul><li>PROS </li></ul><ul><ul><li>The daily price changes created a sense of urgency to close the deal on the prospect. </li></ul></ul><ul><ul><li>Multi-term pricing allowed the leasing associate to have more options and focus more on the prospect’s needs. </li></ul></ul><ul><ul><li>Consolidates all supply-related data (traffic, expirations, leasing velocity) into a 16 week pricing forecast. </li></ul></ul><ul><ul><li>Pricing follows a disciplined and “non-emotional” approach that would be more defensible for fair housing. </li></ul></ul><ul><ul><li>The pricing model allowed for a smooth lease expiration matrix. </li></ul></ul><ul><ul><li>LRO has made management transition on the properties easier. </li></ul></ul><ul><ul><li>Pricing process is automated to where all pricing sources (WebsiteILS) are in synch and much of STARS pricing approach is automated. </li></ul></ul><ul><ul><li>Pricing process automates renewal generation process and requires that renewals are not less then the expiring lease (unless overridden). </li></ul></ul><ul><li>CONS </li></ul><ul><ul><li>System is expensive at first glance. Make sure you do a business case with a hurdle rate. </li></ul></ul><ul><ul><li>System could “dumb down” some of the pricing decisions at the property level (i.e. “The computer told me to do that.”) </li></ul></ul><ul><ul><li>System is somewhat unproven in a down market. </li></ul></ul>
    7. 7. Internal Controls – Best Practices <ul><li>Change Management </li></ul><ul><ul><li>Senior Management Buy-in? </li></ul></ul><ul><ul><li>Regional Management is the Key! </li></ul></ul><ul><li>Traffic </li></ul><ul><ul><li>Entered Promptly </li></ul></ul><ul><ul><li>Marketing Sources Correct </li></ul></ul><ul><li>Market Comps </li></ul><ul><ul><li>Shopped Weekly </li></ul></ul><ul><ul><li>Shopped Accurately </li></ul></ul><ul><li>Pricing </li></ul><ul><ul><li>Awareness of Previous Rents </li></ul></ul><ul><ul><li>Minimal Overrides </li></ul></ul><ul><ul><li>Calls are Attended </li></ul></ul>
    8. 8. Market Comps – Shopped Weekly SAMPLE
    9. 9. Market Comps – Shopped Accurately SAMPLE
    10. 10. Pricing – Awareness of Previous Rents SAMPLE
    11. 11. Pricing – Minimal Overrides SAMPLE
    12. 12. Pricing – Calls are Attended SAMPLE
    13. 13. KPI Performance History <ul><li>KPIs Tracked </li></ul><ul><ul><li>Revenue Per Occupied Unit (RPU) (Internal) </li></ul></ul><ul><ul><li>Net Effective Rent (External) </li></ul></ul><ul><ul><li>Physical Occupancy (External) </li></ul></ul><ul><ul><li>Lease Expirations (Internal) </li></ul></ul>
    14. 14. Revenue Per Unit Indexed (Pilot 1) Source: CLP Data
    15. 15. Revenue Per Unit Indexed (Pilot 2) Source: CLP Data
    16. 16. RentOccupancy Gap (RevMan vs NonRevMan) Atlanta Charlotte Source: AxioMetrics
    17. 17. RentOccupancy Gap (NonRevMan vs RevMan) Dallas Overall Source: AxioMetrics
    18. 18. Effective RentOccupancy (CLP to NonRevMan Peers) Effective Rental Rate Gap Occupancy Gap Source: CLP Data, AxioMetrics
    19. 19. Lease Expirations Source: CLP Data
    20. 20. So Does It Work? <ul><li>ImprovingStabilized Markets </li></ul><ul><ul><li>RM reacts quicker and drives rents up faster than manual process while maintaining occupancy. </li></ul></ul><ul><ul><li>Many studies and pilots prove this. </li></ul></ul><ul><li>Declining Markets </li></ul><ul><ul><li>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? </li></ul></ul><ul><ul><li>Per Rainmaker, ASN and Simpson have proven it works in a declining market. </li></ul></ul>
    21. 21. Ansley and Reagan say THANKS!! <ul><ul><li>THANK YOU! </li></ul></ul>

    ×