The decade of growth that came before COVID-19 covered a multitude of sins in our industry. As we have written in these pages, pricing and revenue management (PRM) both benefited and suffered through this period of unprecedented growth. It isn't that hard to make money in an environment where demand, rent and ultimately, asset prices are on a seemingly never-ending rise.

As markets have turned, we have seen the qualities of revenue management departments and individuals come to the fore. With no defined template for managing such unusual market conditions, 2021 will favor those with intellectual curiosity and an ability to understand data and act on it. Those leaders who understand how to use a revenue management system (RMS) have been out-performing those who are led by their RMS, which is an important distinction.  

The qualities of the individuals doing the revenue management are, of course, important in determining success. And one of the most important of those qualities is the ability to foster the kind of collaboration that organizations need for PRM to work well. The natural focus of that collaboration is the pricing call, and it's an aspect that often fails to get the kind of attention it deserves. If you haven't thought about your pricing calls for a while, and maybe if you have, the guidelines below might help you to improve.

Remember, there are four Ps

One of our favorite PRM mantras is that pricing is only one of the "Four Ps." The others: "Promotion" (marketing in the case of multifamily), "Place" (which multifamily operators can take to mean sales), and "Product" are all just as consequential. Lowering price should be the last course of action we consider to address demand issues, not the first. So the expectation of the call should be that participants should be prepared to discuss each of the four areas.  

• Marketing (Promotion): It is squarely the job of the pricing call and its participants to understand how effectively a community is reaching its target market. On the call, participants should determine whether or not a community is generating enough leads and what is being done to drive traffic, including specials and concessions. This is also a good time to discuss whether the plan to retain current residents is working. 
  
  
• Sales (the Place): Leads are all well and good, but they count for nothing when property teams fail to convert them into sales. Conversion ratios give us some indication of sales performance, although the metric's shortcomings mean we should never read too much into them. A review of week-over-week and year-over-year leasing performance should take center stage in the pricing call.
  
  
• Product: When leasing numbers are down, it is not always to do with sales execution. The people involved in pricing all need to understand enough about the community to make good decisions. Issues from tour paths to turn times should be discussed and understood on the call, along with the critical area of amenities. 
  
  
• Pricing: This should entail more than merely a debate over whether or not the rate generated by the system is the right one. Stakeholders must understand the system parameter settings so that the system recommends the right premiums or discounts. Each property should, of course, review an extensive set of week-over-week and year-over-year pricing indicators. In addition, floor plan groupings, competitor mappings and amenity premiums are a few of the many sets of decisions that stakeholders must review on pricing calls.  

Don't overlook renewals

So far we have focused mainly on the considerations affecting new lease pricing, but renewals are just as important, even if they are absent from many companies' pricing calls. Residents whose leases are expiring usually account for most of the rent roll, yet most of our attention ends up being focused on new leases. 

In many cases, Community Managers or Regional Managers determine renewal pricing separately from the pricing call. By separating the new and renewal pricing discussions, operators miss an important opportunity, as new and renewal pricing strategies cannot be optimized in isolation. For this reason, D2 recommends that the revenue manager should also oversee renewals pricing and that it should be included, alongside the four topics above, as an essential ingredient of your pricing calls.