A declining occupancy rate: it's hard to think of something that's more likely to keep an apartment operator up at night.
When a community's occupancy dips below targeted levels, revenue goals are jeopardized, budgets are quickly derailed, and investors' expectations are compromised. For third-party managers, relationships with owner-clients can be put at risk.
The possible answers to an occupancy problem are many. Below are some of the potential culprits and suggestions for how to address them.
Marketing and advertising campaigns. Is your community getting the right ROI from its marketing dollars? Does it focus its advertising spend on the channels that deliver the most qualified leads? Does it have an energetic presence on the right social media outlet? Is it targeting the right demographic?
It's imperative that an operator has a system in place for continually evaluating the performance of its advertising and marketing sources in delivering a sufficient number of qualified prospects. If a community's strategy and tactics in this area are off, occupancy will suffer.
As for onsite marketing, communities should be diligent about signage: sometimes a strategically placed banner or sign directing passersby where to enter the community or park is all it takes to gain an edge over your competitors. And make sure that your community is kept clean - for the sake of both prospects and your current residents.
Are the grounds well maintained? Is there pet waste everywhere? Are your vacant units or models clean, fresh smelling and well lit? All of these factors can play a role in converting prospect tours to leases.
Onsite leasing agents. Sometimes a community's onsite staff isn't very good at managing leads. Perhaps they aren't terribly friendly on the phone when prospects call or aren't careful enough about gathering the right information to properly follow up with leads. Maybe they are giving ho-hum tours to prospects who visit the community.
An operator should have a method for regularly monitoring and evaluating the performance of its leasing agents. Call monitoring/scoring and secret shopping are two ways many apartment managers make sure their onsite staffs are getting the job done when it comes to wooing prospects.
The interactions of a community's onsite staff with current residents could be a source of occupancy troubles as well. If associates are not responding promptly to maintenance requests or, for example, not keeping the grounds clean or not communicating with residents about issues affecting the property, residents are bound to look for greener pastures when renewal time rolls around. An onsite team that works tirelessly to provide a best-in-class resident experience is critical for driving occupancy rates.
Price. The reason behind a rising vacancy rate could be fairly simple: maybe your community is just pricing itself out of the market. Many communities rely on onsite leasing agents to keep close tabs on what the competition is charging and to calibrate pricing accordingly. But agents have an abundance of demands on their time - maybe they're not able to devote enough hours to this important task or maybe they're just bad at gathering this information.
Revenue management systems use sophisticated algorithms and carefully consider the competition in the surrounding submarket to recommend market-appropriate pricing for units. They can help an operator strike the right balance between pushing for rent growth and not pricing a unit out of the market.
Generally speaking, though, operators should be extremely careful about reducing pricing to address occupancy problems and should exhaustively investigate all other potential culprits before doing so. Additionally, should you opt to use a revenue management system, it is imperative that you hire a qualified revenue manager to oversee the program. Calibrating demand and supply parameters, as well as ensuring the onsite team is engaged and "buys into the pricing," are two critical components of successful revenue management. Though reducing rent is often an operator's first instinct when faced with rising vacancy rates, rent reductions can quickly devalue a property, cause you to lose money, and wreak havoc with budgets.
Online reputation management (ORM). As challenging as it may be to effectively monitor and respond to your community's online reviews and ratings, it's vital to do so in this day and age. Consider this: more than 91 percent of prospects rely, at least to some extent, on online reviews and ratings when searching for their next apartment home, according to a study conducted by Kingsley Associates on behalf of RentPath. Obviously, you want to limit negative reviews in the first place by having top-notch onsite operations, but prospects also want to see how communities respond to any feedback - good or bad.
The dos and don'ts of ORM could take up a separate blog. But for the purposes of this piece, here's a quick summary: respond to both bad and good reviews - and do so quickly; don't argue with reviewers; implement a clearly defined response procedure so that responses are written and posted in an efficient manner; and consider a software solution that allows your team to see and respond to all of a community's online reviews in one place.
Maintaining a high occupancy rate is obviously one of an apartment operator's core missions. By making sure their communities are functioning well in the areas outlined above, apartment managers can make sure that vacancy woes are kept at bay.