Developing a Pool of "Replacement Residents"

Ever since I started in the apartment industry, one thing has bothered me:  Problems with occupancy, specifically for well-run communities.  Although supply and demand should level out across a large enough market, when you are talking about an individual community, I couldn't seem to get my arms around why a well-run community should have any problems whatsoever.  There are so many poorly run apartment communities in existence that it seemed odd that any well-run community couldn't have enough supply of prospects to fill up possibly twice the number of apartments that they had. 

But that ultimately was the problem.  No matter how amazing the community, they had a finite supply, which means that they physically couldn't lease double the amount of apartments.  Instead, they were capped at the number of units they had, and using normal courses of business, they couldn't progress beyond that point.  So because they had a finite amount of product, they couldn't pull ahead in any way, which also meant that any hiccup could quickly bring them back to the masses.  In fact, it doesn't even take a "hiccup", as on average 20% of residents are un-savable, meaning they are going to move regardless of your service.  This means that the great community is going to be only 80% occupied at the very best, without an influx of new residents. 

Now I know what some of you are thinking:  Every business has to replace lost customers to some extent.  This is true, but the problem is often in the timing of the sale.  Since there is a finite amount of product AND the customer often has a small window in which to lease at the community, this creates problems with matching new residents with lost residents.  For example, let's say that you lose 15 residents in February and have 20 qualified new move-ins.  But since you can't oversell and place all 20 prospects, you lose 5 potential customers.  Then in April, the reverse could be true, with only 15 qualified prospects to 20 move-outs.  Taking the average for the two months would show business harmony between move-ins and move-outs, but in reality, you are down five residents. 

Airlines work through this by overbooking, which is surprisingly legal.  However, that is not a practice that is realistic or even ethical in my point of view.  So we need some way for excellent communities to progress ahead given this conundrum.  We need a way to either over-sell the community or have immediate fill-ins for inevitable move-outs.  Here are two concepts I would like you to consider:

Expanded Waiting Lists

Every single community not only should have a waiting list, but they should also enhance it to provide real benefits and even a real cash flow stream.  Not all apartment hunters have inflexible timing.  For example, some may be looking to move out of a friend or family's home, which gives them alternatives on their move-out date.  Others are already on a month-to-month cycle.  And still others are not moving for six months and just want to get an early start.  For this last group, I've seen too many times a leasing consultant kindly tour them, but ultimately provide no solution as their availability only showed 60 days out.

But there is no reason you cannot "sell" to these types of prospects even if you do not have current availability.  If someone likes your community enough, they will be flexible, which means that you have now "pre-filled" a later-available apartment.  So when availability does come up, instead of casting that wide net for all possible apartment prospects, you now have someone already interested, already qualified, and already "sold" on your community.

But I would also recommend expanding the waiting list concept entirely.  It might be difficult to sell someone on leaving a deposit for an unnamed, untimed apartment in the future.  So instead, create a new tier of customer, those who pay a one-time fee to the community while they are waiting for their apartment, but now get access to all community amenities, benefits, social media programs, and events, as well as locking in their price for their future apartment.  Make this fee go towards their first month rent, which will be a nice bonus if they had forgotten they paid it, but it is nonrefundable if they decide not to move in.  (Refundable if you were not able to provide the type of apartment they wanted, however).   

Now, instead of having to scramble to fill pending move-outs, you have a crop of residents waiting in the wings.

Hyper Targeted Marketing

When you have a new move-out, you are trying to fill that vacant unit from organic walk-ins, as well as traffic from your ILS listings, print ads, and all other marketing sources.  I am not advocating removing or changing any of these marketing sources, but I do want to point out that communities have an enormous amount of data regarding targeted prospects, and they have no idea they have it.  Imagine Jenny, a 24 year old looking for a 2 bedroom apartment for her and a roommate, in March 2009.  At the time, she really liked your community but was able to get a ridiculous concession at a community down the street.  And as the ridiculous concession implies, Jenny ended up experiencing a host of issues, such as poor maintenance, constantly broken access gates, and rude on-site staff.  But guess what?  Your community has three key pieces of information!  1) You know that most likely Jenny's new lease is up in March 2010; 2) You know Jenny's contact information since you dutifully logged it; and 3) You know that Jenny liked your community originally.

Instead of throwing an enormous net across the giant pool of apartment hunters looking for an apartment in March 2010, wouldn't the best route be to send Jenny a quick email asking her how she liked her current apartment, and include all the reasons she said she liked your community in the first place!  (another piece of data you should have collected)  And this isn't limited to Jenny...   You should have data on all your prospects for each time frame, as well as data from those who moved out!  In another example, Rick moved out at the same time in 2009 because of XYZ reason.  Although not all former residents can be good prospects, for example if they move cities, but why not use them as your first go-to marketing option? 

Ultimately, all of this comes down to having a list of "replacement residents".  Instead of having to crank up the marketing machine for move-outs, you can develop a secondary pool of qualified, interested prospects which will lower marketing costs, reduce turnover time, and improve occupancy.  And in the end, that extra time, money, and effort that was previously focused on leasing can be spent on resident retention, thus lowering turnover and making this entire process even more powerful as it is focused on a smaller amount of excess supply every month.

What do you think?  Will you share any ideas about your waiting list program?  Or do you have any other unique ways to create your secondary pool of potential residents?