Self storage owners/operators wear many hats. They have to understand the fundamentals of sales, marketing, hiring, and lien laws. In addition to that, an operator has to define markets, determine rental rates, choose the best advertising, understand online marketing, and keep expenses reasonable. This all has to be accomplished while closely managing revenue to maximize return.
Revenue management requires planning, know-how, and a good understanding of the market. On top of your countless day-to-day responsibilities, it benefits you to develop deep insight into your customers as well as your business. This helps to inform your decisions as to when to raise and lower street rates and when to add or remove specials depending on the availability of space, customer demand, and urgency.
This not only sounds like a lot of work – it is. The good news is that Pinnacle Storage Managers has over 25 years of combined experience. They are guided by their understanding of the market, their expertise, and an array of technological tools to aid in maximizing your returns.
Revenue Management Factors
The evolution in market conditions means that revenue management challenges have to be addressed. The traditional methods of using outdated pricing techniques and occupancy levels to set prices can be inaccurate. These outmoded methods are reactive and don’t account for key factors like rapid shifts in demand, local competition, balanced promotions, and strategic rate adjustment.
Rate Adjustment
Rent increases have to be adjusted to the right frequency based on customer move-out sensitivity.
For example, we typically adjust to a 6-8% increase on any tenant who has been with us over 180 days. The present market trends and high occupancy rates enable us to increase at 90 days and again at 180 days at a 15-20% increase. Volume allows us to create forced vacancies; and, with the market being strong right now, those units are refilled quickly.
Rate increases are done on a monthly basis at all locations and only on customers who are under the standard rate. We take into account the length of time a customer has been renting, as well as the time of their last increase.
The longer a customer has been with us, the more likely it is that they will continue renting from us. Additionally, customers who do not live in the area but have items stored with us are more likely than a local renter to stay for the long term.
Shifts in Demand
Vacancy rates have to be as accurate as possible, and rents have to be aligned with customer value based on unit size, location, and amenities.
If a particular space is overpriced in the market and increases are implemented, the price may have to be lowered when tenants move. This means that customers are not moving in at a higher price than that of the previous customer.
Occupancy is a major factor. We don’t apply large increases if there is a high rate of vacancy in a specific size and type of unit. That would result in more vacant spaces in those units.
Final Thoughts
Revenue management is a key element in your decision-making process. It is wise to choose a company like Pinnacle Storage Managers that is not judgmental or rule-based but forward-thinking. Perform your due diligence so that you know which system is the best fit for you and your business.