What You Need to Know About Self Storage Revenue Management
In the last five years the self-storage industry has seen significant growth. The market has shown an increase in the number of facilities, along with continuing shifts in conditions. Combined with multiple industry variables, these factors, if not managed properly, can have an adverse effect on profitability.
The evolution in market conditions means that revenue management challenges have to be addressed. The traditional methods of using outdated pricing techniques and occupancy levels to set prices can be inaccurate. These outmoded methods are reactive and don’t account for key factors like rapid shifts in demand, local competition, balanced promotions, and strategic rate adjustment.
Pricing is one of the biggest challenges faced by operators. Because of limited staff and time, some operators don’t even consider the competition, while others use valuable time and resources for traditional secret shops.
What are the biggest pricing challenges?
- The first one is seasonality. The busy season for storage usually begins in March or April due to residential moving, spring cleaning, and college students vacating their dorms. The slow season generally begins in August and peaks in February. Demand, however, can shift rapidly due to competition and other economic variables.
- Competition is also a key piece in the pricing puzzle. Operators are not sure how to deal with that new facility down the street and the number of rentals observed in their stores.
- Rents have to be aligned with customer value based on unit size, location, and amenities.
- What promotions to offer and when to offer them can also be problematic. Balancing specials with expected length of stay can be difficult to determine.
- Rent increases have to be adjusted to the right frequency based on customer move-out sensitivity as a function of rate increases.
The right revenue management system can take the guesswork out of managing potential and actual revenue to maximize return. The good news is that digital revenue management systems are not just for the big players. Small to medium-sized self-storage operators can invest in a system that will provide them with the right technological tools to compete in the current landscape.
What Should You Look for When Choosing a Revenue Management System?
According to Prorize, “Your revenue management system should have a core algorithm that adapts to your local market conditions and evaluates different business scenarios, the worst to the best cases.” This means that to maximize revenues, the system has to understand the market, predict customer activity, and measure customer price reactions so that when prices fluctuate, you, as the operator, understand how to respond.
In addition to the right algorithm you have to look for some other things before you choose a system.
- Educate yourself on the system and the company. Can they provide testimonials and/or client reviews? What type of ROI in revenue increases can you expect?
- Is forecasting accurate, and is the system forward thinking or rule-based?
- Do they evaluate customer lifetime value, and do they estimate customer reactions to rate changes?
- Are discounts and promotions taken into account?
- Do they differentiate between web prices and walk-ins?
- How complex is the system. How much configuration is necessary, and who does it?
- How is customer service and technical support? This is important because you don’t want to waste time and money waiting days for someone to return calls and/or emails.
Revenue management is a key element in your decision-making process. It is wise to choose a company that is not judgmental or rule-based but forward thinking. Perform your due-diligence so that you know which system is the best fit for you and your business.