Are your rental rates on the rise? If not, it’s time to kick it in gear. You can count on your competitors to systematically increase their rates over time, and by keeping your rates competitive, you’ll be able to boost profits while continuing to gain new rentals. Ready to get started? Read on to learn how implementing automated rate changes at your facilities is the best way to increase your revenue while keeping tenants happy.
Yield management is a variable pricing strategy based on supply and demand, customer behavior, and timing. A common example is airline fares, which tend to get more expensive the longer you wait to book your trip or when traveling on weekends, around the holidays, or to in-demand locations. As customers of hotels, we’re also used to paying different prices for the same thing depending on when we’re staying at the hotel, how close to our check-in date we booked the trip, and the demand for the room based on any events or holidays.
The goal of yield management is to generate the maximum possible revenue from your inventory of storage units. Revenue management has an even wider focus - it also includes your ancillary sales of boxes, locks, and packing supplies, insurance commissions, and profits from late fees.
As a storage owner, your goal with yield management is to rent the right unit to the right customer at the right time for the right price.
A successful yield management strategy can help you increase your facility’s profit margin and improve your economic occupancy. It doesn’t have to be as complicated as airline fares - any storage business can utilize yield management strategies to increase revenue and get the most out of their storage space.
Most new storage facility owners choose their rent rates by comp shopping competitors in their area and finding a “Goldilocks” rate (not too high, not too low) for their spaces. If you’ve been open for a while, and your occupancy is at a stable level, you’re probably wondering if your rates are too low and if it’s time for a price increase.
Other things to consider when setting your rates:
If you’ve decided you need to raise rent rates, the question just becomes when to increase prices and by how much. The best way to manage your rate changes is to make rate increases standard for all tenants, no matter who they are or how long they’ve been a loyal customer, and apply the increases on a standard schedule. The industry standard for price increases is to increase rates every nine months, but many publicly-traded storage brands increase their rates even more often than that.
If none of your tenants are complaining after a price increase, you didn’t raise rates high enough.
Create your own rate increase schedule based on the specific needs of your market. When tenants know they can expect a rate increase once a year in January, they’re less likely to grump about the sudden change or move-out as a result. In fact, it’s rare for tenants to move out as a result of a rate change. Remember, moving out costs renters money, too: they often have to rent a truck to haul things and take time out of their schedule to sort through stuff that they’re ready to part with. As the old industry saying goes, “if none of your tenants are complaining after an increase, you didn’t raise rates high enough.”
Check out this blog post for an in-depth look at rate changes, with tips on when to increase prices and by how much, which tenants’ rates to increase first, how to break the news to tenants, and how to handle complaints after a price increase.
To keep tracking of when the last rate increase occurred, for which tenants, and how it affected rentals at your facility, you’ll either need to a) become a spreadsheet whiz-kid or b) use automated rate management tools in your software. Automated yield management tools can help you keep track of rates across unit mixes and unit types, compare rates at one facility to another, find opportunities for rate increases, and prepare tenants for upcoming rate changes - without spending hours looking at a spreadsheet. You can even set your rates to automatically increase or decrease to match trends in occupancy.
When I dig into the rates for all tenants in my 10x10 units, I can see that new renters are coming in at higher rates in response to recent rent increases, and rates are being raised systematically over time for current tenants.
If you don’t have software that includes this nifty feature, you’ll want to set up reminders in your calendar to analyze rent rates at your facility, organize and make rate increases, and explain the reason for the rate change to tenants with an email or letter beforehand. To make your analysis easier, pull your rate increase report to find out key information on tenants’ historical rate increases such as move-in rate versus current rate, length of rental, and variance in what you’re charging new tenants versus long-term renters.
Your software should provide easy ways for you to automate rate changes for occupied or unoccupied units or simply make a one-time rate change for a tenant who hasn’t seen a price increase for a while.
If you’re not systematically increasing rates across the board for tenants, you’re missing out on potential profits. Rent rates are not a set-it-and-forget-it action - you’ll need to create routines around looking at yield management for both occupied and unoccupied units even if you’re utilizing automation to continue to drive rents onward and upward at your facility.
Thanks for reading! If you liked this article, you may also like: Revenue management: The short-term and long-term solution to your storage facility’s value, How to handle a price increase, and Competing with the REIT next door: How small storage businesses can thrive in today’s market.