- So What Is Revenue Management?
- The Four Major Revenue Management Concepts For Self Storage Businesses
- Ways To Deal With Price Rate Increases
- Managing Prospects and Their Needs
- Things To Consider When Managing Revenue In The Self-Storage Industry
- Moving Into Technology For Self Storage Revenue Management
- Choosing a Good Self-Storage Revenue Management System
- Final Thoughts
In light of the most recent methods and technologies, self-storage business investors and general property owners have searched for answers to this question.
Effective revenue management not only offers a clear roadmap for pricing and optimization, but it also gives a self-storage business a way to access its performance more accurately.
Therefore, there are several considerations to make in order to choose the best strategy.
To help stakeholders make the best choices at the appropriate times, we will provide a fundamental overview of revenue management and explain some of the most popular techniques.
So What Is Revenue Management?
Revenue management is a business strategy that makes it possible to optimize your inventory data and increase your earnings.
Its precise characteristics change throughout time as a result of new artificial intelligence systems, procedures, automation, and generally improving industry-leading technologies, but its fundamental characteristics stay the same.
The Four Major Revenue Management Concepts For Self Storage Businesses
Revenue management in self-storage businesses involves using targeted distribution channels to market the best accommodations to the right consumers at the right times and at the right price. This offers a practical solution while still assisting in ensuring client happiness.
Redefining pricing structures and creating strict pricing methods in the self-storage industry is part of this revenue management category. Predicting the value provided to consumers and then setting particular prices to capture that value is the main goal of a pricing strategy.
Most of the value comes from pricing plans that closely track market circumstances and demand, especially at a sector level. A corporation may choose to price against their competitors or even their own products.
Price methods establish how a corporation really obtains the value once a pricing strategy specifies what a company intends to do. To respond to changes, continuously capture value, and increase income, these tactics entail using dynamic pricing solutions.
For instance, price optimization seeks to maximize profits by continuously optimizing a number of variables, including price sensitivity, price ratios, and inventory.
A self-storage business’s profitability can be significantly increased by a strong pricing strategy backed by analytically sound pricing techniques.
Revenue management in self-storage is generally focused on how to price or distribute capacity when it is concentrated on controlling inventories. You may first offer goods at a discount in an effort to boost volume.
A business may overcome slow demand, improve market share, and eventually boost revenue by reducing product pricing.
On the other hand, self-storage businesses frequently overbook in order to maximize income from full capacity when there is a high demand for a product but a risk of cancellations.
Instead of maximizing customer mix, overbooking focuses on raising the overall volume of sales in the face of cancellations.
By periodically lowering the price of their items, sales, discounts, and price promotions help businesses sell more things. In order to balance volume growth and profitability, revenue management systems track consumer response to promotions.
When there is ambiguity regarding the distribution of consumers willing to spend, an efficient promotion helps optimize revenue.
Marketing and promotions aid in luring clients who will sign contracts and generate money over a long time when a self-storage is marketed as a long-term commitment, like internet or telephone service.
When this happens, self-storage businesses must plan their promotion roll-off procedures as well as when to start raising contract costs and how much to raise them in order to keep clients.
Optimizing revenue management is helpful in managing promotion roll-off factors to increase revenue while reducing disengagement.
In the self-storage industry, strategically directing income through various distribution channels is part of revenue management through channels. Customers with various price sensitivity levels could be represented by various channels.
Customers who purchase online, for instance, are typically more price-conscious than those who shop in a physical location. Different channels frequently have various costs and margins attached to them.
Revenue management practices in self-storage businesses can determine the proper levels of discounts for businesses to offer distributors.
This is done through channels to push more products without losing integrity with regard to the general public's perception of quality when confronted with different channels to retailers and distributors.
Ways To Deal With Price Rate Increases
Many things stress out self-storage business owners more than fee increases. You worked very hard to get your renters to sign the lease, and now you're concerned that some may evict them after receiving a notice about rent increases.
Did you know that most rate increases result in just 1% of customers leaving? Operators fear a mass exodus that almost never occurs. Additionally, you are losing money since you aren't implementing the raise while you are worried about it.
How much more can you lose before you eventually decide to increase rates unanimously? These are some ways in which you can deal with the rate increases:
Assess What Tenants Can Bear
Decide what the tenants can handle. Price increase should be consistent for all renters, regardless of who they are or how long they have stored with you, according to the majority of storage facility owners.
Consider Your Timing
Apply a uniform rise to everyone and go on with your busy day if you have problems deciding to boost rates after glancing at the tenant roster.
The majority of self-storage management software comes with an automated rate-increase option that enables you to specify a monthly escalation level and forget about it.
There is, nevertheless, some merit in increasing rent based on the renter. Make a list, for instance, based on the most recent increase each renter experienced.
As a result, you might be able to raise rates more often than you might with a "flat". You may also be aware of who is able to bear more and who is not. There is no requirement that you increase everyone's rate by 6%.
Doing Damage Control
Learn what to say when a renter complains about a price rise. How will you respond? There are several reasons you may provide.
The market has changed, your facilities have undergone changes, or you are just keeping up with it since your property taxes increased this year.
You should know that when and by how much tariffs were adjusted most recently so you can manage complaints with ease.
Additionally, consider beforehand if you'll grant concessions to consumers who do object. Will you cut his rent for the next six months or offer to share the difference with the tenant? Or are you going to be adamant and maybe lose a client?
Once more, a little pricing adjustment usually causes a renter to exit a storage facility.
Most of the time, if you give your disgruntled renter good reasons for the raise, he will understand them and accept them for what they are. You will be able to rent those apartments at the new, higher cost if you do have one or two move-outs.
Managing Prospects and Their Needs
Prospect management is very essential in selling the storage unit to the customers.
For some facility managers, this may not be a simple task because it requires a lot of salesmanships. The bottom line, however, is that your facility will increase in income if you can execute it well.
Things To Consider When Managing Revenue In The Self-Storage Industry
To come up with the best tactics to manage revenue, it will frequently be necessary to employ analytics and comparable data sources. Here are a few typical variables that can be examined.
What Are The Payment Methods?
There are a lot of payment methods that self-storage businesses can utilize. However, managing your revenue is heavily dependent on the payment methods and their ability to seamlessly store and retrieve payment data.
For you to do a good job at getting your revenue together, you may have to consider your payment methods like wire transfers, e-wallets, or even crypto.
Do You Keep Cash?
Keeping cash can make it difficult for businesses to accurately manage revenue data. Some businesses make it clear that they do not accept cash and it is for management reasons.
If your self-storage business deals in cash, it is very important to properly input payment data into a computer.
How Much Do You Deal With Monthly?
This variable depends mainly on the size of your business. It is only normal for big businesses to realize more ROI (quantity-wise) at the end of the month.
A small business might not find it challenging to manage their revenue. This is because they don’t deal with large amounts of money.
Moving Into Technology For Self Storage Revenue Management
Many storage businesses still use "old school" pricing strategies that establish costs based on historical or present occupancy levels.
Additionally, despite the fact that the mix of demand changes over time, many operators frequently apply identical rate adjustments to all customers.
Some business owners don't think about their rivals, while others use classic mystery shopping methods to scout out what their rivals are up to at any given moment. This strategy uses every last member of the crew.
As a result, informed pricing modifications aren't as frequent as they need to be. Some of the larger operators adjust their prices every day, while others do it more than once.
All of these "conventional" pricing strategies are reactive and fail to take into account crucial elements like anticipated client demand (both move-ins and move-outs), leaving numerous potential for revenue growth unexploited.
The world is becoming more digital, and big businesses are seeing millions of dollars added to their bottom lines thanks to artificial intelligence and machine learning algorithms.
You must be equipped with the appropriate technology tools to bring the self-storage sector into the digital era if you want to be an effective competitor in an occasionally saturated market.
Choosing a Good Self-Storage Revenue Management System
The self-storage sector has access to a number of revenue management solutions. Finding the one that works best for your business is crucial. Many applications for revenue management are rule and judgment-based. For instance, it's risky to be unaware of competition.
Following a pure cut and paste technique, in which every price you set is a response to the market, is almost as risky.
For competitive pricing response, many systems utilize weighting schemes that they blindly obey or rely on rules for. This tactic is hazardous since it frequently implies giving rivals control over establishing prices.
A fundamental algorithm built into a good self-storage revenue management system like Booking Ninjas should examine many business situations, from the worst to the best, and adjust to local market conditions.
In the self-storage business, predicting demand at various price points is necessary if you want to optimize your income.
In order to forecast move-ins and move-outs, comprehend general market signals, quantify client price sensitivities, and predict what customers will do when prices change, a system must look ahead.
You won't optimize income if these criteria aren't incorporated into your main algorithms.
What Is Revenue Management System?
A revenue management system examines a variety of competitor rates, historical rates, market dynamics, and inventory levels In order to forecast demand as well as provide rate recommendations.
The complete process will be automated by a competent revenue management system, which will also produce rates that may optimize income and profitability.
Things To Consider When Choosing A Revenue Management System?
Other criteria to consider while selecting a revenue management system include the following:
- Find out as much as you can about the business and the revenue management system.
- Consider if the solution has customers who are currently utilizing it effectively or if they offer testimonials.
- Find out the kind of ROI in terms of revenue growth that may be anticipated while utilizing the system.
- Figure out how precise their forecasting of moves-in and moves-out is.
- Is the system rule-based or prospective?
- Understand what variables are taken into account when changing rates for current customers.
- Consider how simple the system is to operate and maintain.
- Consider what level of configuration is required and who does it.
- Finally, pick a system that offers strong technical support and customer care to assist with your price inquiries.
To manage revenue for the self-storage industry, it is always a good idea to consider top-notch property management systems (PMS) like Booking Ninjas.
Booking Ninjas Self Storage Property Management System offers online automation software for big and small self-storage businesses.
It has different payment options, online reservations, gate access integration, facility maps, and great customer relationship management features.
To learn more about what Booking Ninjas has to offer, schedule a call now!