Imagine being an athlete with several different coaches, each with different philosophies and varying motives. Now imagine that none of them are the head-coach—who do you listen to?
Many multifamily organizations approach resident retention and lease renewals in a similar manner. Several departments can be involved—including operations, revenue management, asset management, marketing, IT and customer experience teams—but it's often ambiguous which one is ultimately responsible. Each department approaches resident retention with different timelines, ambitions and end goals.
For instance, operations, revenue management and asset management teams might dedicate their attention to the bottom line, while marketing and customer XP teams might be uber-focused on the resident experience. Meanwhile, IT and systems teams are more concerned whether any potential adopted technologies will work within the company's tech stack.
Despite this lack of clarity, organizations have been slow to update their approach to renewals. It's puzzling, to say the least, considering the significant impact that renewals can have on an operator's revenue stream and expenses. In this cooling apartment market, resident retention has become exceedingly vital to overall financial health, and too many cooks in the proverbial kitchen aren't helping.
In recent years, the apartment industry has increasingly leaned upon automation to conquer banal daily tasks. Many of these are prospect-facing, such as timely follow-ups to leads and the use of AI-fueled chatbots to answer introductory questions about a community. Yet operators have been far less proactive in finding innovative ways to manage renewals.
One would surmise that customer experience teams—a somewhat new concept to the industry—would be the department most poised to exhibit greater focus on renewals. But in many organizations, their focus is rooted more toward amenity spaces, smart home tech and buzzy attractions for current residents. Oftentimes those in customer XP roles haven't reached a decision-maker level, as well. Some industry organizations are a bit more advanced regarding this role and its responsibilities, but it remains a rarity.
That means, with a significant contingent of the resident base nearing renewal at any given time, there is no centralized view of the process, little clarity surrounding negotiations, few insights into the behavior of these residents and no control in dispersing renewal offers in a timely manner. The latter can be especially harmful, as each state has its own rules regarding when a renewal offer must be sent.
In Florida, for instance, renewal notices must be sent at least 60 days before the end of the lease. One property planned to increase rents 10 to 11% but sent its renewal notices later than the allotted 60-day window. Savvy renters aware of the rules questioned the property and were able to renew their leases for increases of less than 5%. The property was essentially forced to offer the lower rate to avoid legal action. This would have been a preventable scenario with a modernized approach to renewals and defined compliance measures in place.
That is one of many examples of how a disorganized approach can either leave money on the table or lose residents all together. Fortunately, tech advances in the industry can help operators automate much of the renewal process, gather critical insights and develop a centralized strategy to improve retention. A more automated process with timely communication can ensure compliance, drive renewal rates and even point departing residents toward other communities within an operator's portfolio.
The industry is constantly seeking ways to increase net operating income, make daily tasks more efficient and give valuable time back to team members. It seems only fitting for operators to take the same approach with renewals, considering their pronounced impact on an organization's bottom line. Otherwise, operators will continue to have too many cooks in the renewal kitchen with no idea who is the head chef.