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The 20 for 20 Blog

NAA Education Conference – Fitbits and Other Fashions

The week before last the membership of the NAA convened in Denver to celebrate its 75th birthday at an excellent annual Education Conference. The event offered its normal high standards of insight, networking opportunities and thought leadership. And there were some clear themes emerging from the sessions and the buzz on the conference floor. One theme in particular caught my attention: the openness of systems.

A good example came from one of the sessions that covered benchmarking. The Fitbit was held up as an example of the kind of benchmarking approach that the multifamily industry could embrace. For those who don’t know, a Fitbit is a wearable technology that tracks physical activity, enabling users to track their daily number of steps, etc. using a mobile app. As an example of data sharing, users can not only track their own performance, they can also track it against other Fitbit users. This competitive element gives users a target to strive for, and hence the motivation to work harder.

The opportunity to compare your performance to a large population of other Fitbit users is an exciting one. But is the Fitbit model for gauging personal performance the right one for multifamily performance, as the panelist at this session suggested?

Multifamily performance and personal fitness have a few things in common (the desire to get better being the most obvious). But they are very different in several important ways. Like other revenue management industries, multifamily features conditions of fixed capacity and variable demand. So the amount of product that an operator can sell and the competitors with whom each operator competes are largely fixed. And the fixed assets in a given sub-market have to compete with one another for the (variable) demand of renters.

When both supply and demand are somewhat finite, the requirements for performance benchmarking change. Decades of experience from other revenue management industries has shown that the key to good performance benchmarking is the consistency of metrics. It would be hard to be successful as an airline that didn’t track RASM (Revenue per Available Seat Mile), for example, just as it would be hard to find a successful hotel company that has not embraced RevPAR (Revenue per Available Room) as its core revenue metric. While “choosing your own adventure” is a great idea for establishing tactics, the ultimate measure of how successful those tactics are should be the same for all competitors, just as it is in other industries.

And that’s why the openness of systems is so important. If multifamily were to follow the Fitbit example, operators would be limited to comparing themselves exclusively to companies that happen to use the same technology platforms that they do. That is clearly suboptimal – technology is itself a competitive market – it is unlikely that a single technology platform will ever achieve enough coverage of the market to allow the kind of peer-to-peer comparisons enjoyed by other industries who have separated their benchmarking data from their technology decisions. The inability of multifamily to benchmark users of one technology against users of another is an obvious weakness that the Fitbit model will never address.

The activities and the buzz of this year’s NAA event were suggestive of a broadening industry debate about the openness of technology platforms. It’s an enormously important debate, and one to which we at MDX will continue to contribute over the coming months.

 

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