Proactive versus reactive pricing.(FROM DATA TO PROFIT)

"Revenue management evaluates all the same data we previously used to determine pricing, but at a rate that just isn't possible without it. he way we used to price involved too much looking in the rear view mirror and reacting to existing challenges that were allowed to develop. Today, our revenue management system calls attention to potential, emerging challenges and allows us to address them &pre they can impact results."

--SCOTT VILLANL DIRECTOR OF MULTIFAMILY REVENUE MANAGEMENT & MARKEXING. FOREST CITY

With traditional pricing practices, awareness of performance trends comes after they have impacted results, when month-end reports demonstrate what has already occurred. Revenue management allows operators to observe emerging trends and conditions, address challenges before they can impact results negatively, and capitalize upon opportunities the moment they present themselves.

Consistency and Discipline

"In today's environment, market conditions are changing faster than ever, so it's not enough to just look at the local market comps to determine pricing. You have your unit inventory to consider, historical and recent leasing velocity and demand, forecasts for the coming months, and more variables that quickly outpace the pricing capabilities of even the most talented management team. The objectivity and consistency of revenue management is a great asset," says Dean Holmes, COO, Berkshire Property Advisors.

One of the greatest benefits of revenue management is the consistent, methodical approach it brings to pricing. Traditional pricing practices necessitate an unavoidable amount of decentralized authority within the pricing process, making it challenging to control pricing decisions in the field.

With revenue management, system-generated price recommendations are reviewed in the field, but controlled closely by a central pricing authority, with audit reports ensuring the expected use of approved pricing.

Improved Leasing Experience

"We achieved a revenue boost of over 3 percent with revenue management, and these were our best-run properties--the ones that should have been the hardest to squeeze more profit out of," says Sue Vickery, Managing Director, Trammell Crow Residential.

Revenue management delivers flexibility to accommodate each renter's specific needs, creating more opportunity to capture demand. Traditional pricing methods are restrictive in terms of how long a unit can be held and the duration of a lease. Exceptions are discouraged and require special approval. Revenue management, on the other hand, offers flexibility to say "yes" to virtually any move-in date and lease terms desired, while maximizing revenue on every transaction. And since price changes more frequently, greater urgency is created with renters, who are motivated to make decisions sooner.

Integrating with Property Management And Marketing Systems

Effective data flow between revenue management systems and property management and marketing systems is critical to ensuring price consistency across all channels. Today's revenue management technologies interface to varying degrees with the lead property management systems (One-Site, MRI, Yardi and eSITE) and marketing services (Level One, Vaultware, Property Solutions, etc.).

Some revenue management providers can communicate on a real-time basis between systems. This communication helps to prevent price inconsistency for a prospect, ensuring they do not see one price on an Internet Listing Service (ILS), a different price when reaching a call center, and a different price again when visiting the property in person. The ability for each revenue management system to interface effectively with leasing and marketing solutions is an important consideration.

Handling All Stages of the Asset Lifecycle

"Our acquisition and disposition due diligence is faster and smoother because of the exceptional analytics in our revenue management system, which enables our properties to achieve better results," says Mike King, SVP Property Management, Legacy Partners.

Asset strategies change and today's revenue management systems need the flexibility to support those adjusting strategies. For example, properties need pricing guidance during lease-up to achieve as much revenue as possible.

Revenue management systems can carefully monitor progress toward pro forma goals while ensuring expirations are well managed and preventing unnecessary exposure upon stabilization.

Properties undergoing renovation programs require segregation of renovated from non-renovated units, with proper application of amenity values. And when the time comes to sell an asset, rent and occupancy must be in a state that generates the greatest return, both at the outset of the disposition and during the entire marketing process.

Accommodating All Asset Classes and Market Types

"We've seen revenue management contribute to consistent outperformance throughout the country. This has held true across all property grades and in deteriorating and improving markets. During the last two quarters, the Greystar assets using revenue management beat their sub-markets year over year by 5.3 percent and 4.1 percent respectively," says Michael Greene, Senior Director, Business Services Greystar Management.

Today's revenue management systems have proven to be effective for all asset classes, in all markets, in both up and down economic conditions. There are significant advantages to improved pricing practices for A, B and C class assets, in major and tertiary markets, coast to coast, regardless of revenue management system.

Each system handles nuances differently, however, such as the influence of students or a tax credit component, which is a consideration when evaluating revenue management options.

Performing for Both New Leases and Renewals

"Using revenue management for renewals allowed us to get ahead of the market, and helped take the emotion of raising renewal rents out of the equation. Most importantly, we were able to maintain our retention rates while being aggressive on renewals, which, when coupled with our new leases, helped grow our in-place rents significantly over the past year," says Dan Gumbiner, CEO, Orion Residential.

In general, renewals are perceived by the industry as a more personal transaction, requiring greater individual attention, which invariably leads to unnecessary concessions. In today's market, new lease pricing power has returned, and many operators have recently experienced a reversion, where renewal pricing has fallen below new lease pricing, which is where substantial revenue is left on the table.

Revenue management systems can be leveraged to protect properties from allowing renewals to fall below front-door pricing, and to ensure renewal pricing is as aggressive as new lease pricing. Advanced users believe the opportunity to capitalize on revenue management today is more heavily weighted towards renewals than new leases.

The Time for Revenue Management Is Now

"Revenue management is the new reality," says Jeff Smith, SVP Business Development Westdale Asset Management.

Over the next five years, we predict the majority of investment grade apartment properties over 100 units will be leveraging revenue management. With that level of potential growth, those who wait to get on board will likely trail in their performance results and will eventually be forced to adapt regardless. Timing is everything, and the time to capitalize most upon revenue management is now.

[ILLUSTRATION OMITTED]

Janine Steiner Jovanovic is president of YieldStar and MPF Research, where she is responsible for delivering RealPage's revenue management solutions and market intelligence to the multifamily industry.