Over the past year, we've slowly introduced a new way of thinking about marketing your apartment communities. We developed our ideas around this simple premise: what if we could forecast changes in occupancy?
The answer comes in the form of two revolutionary metrics that give your team the ability to see changes in demand in advance, and to know whether or not those changes are going to become a problem. They're called Future Occupancy Projection, which shows your future vacancy now, and Future Occupancy Target, which establishes your future occupancy goal.
How these predictive metrics work is rather simple and profound, but understandably, the concept behind them can sound a little tricky. Thankfully, there's nobody better to explain how they work in a way that's easy to understand than RentVision Founder and CEO, David Watson.
David recently held a webinar hosted by Rent Manager called, 'Predictive Apartment Marketing: How to Minimize Vacancy Before It Occurs'. In this blog, we'll provide you some key takeaways from his presentation, which you can also view in its entirety via download at the end of this blog.
1. Apartment communities are limited when relying on common occupancy metrics.
The three most commonly used metrics in the multifamily industry are occupancy, leased, and trending. However, these metrics offer only a historical truth and fail to provide apartment communities a glimpse of what's coming down the road.
Without knowing when changes in demand are going to occur, apartment communities are left exposed to sudden vacancy crises. And more often than not, when an unexpected shift like this happens, those managing the property tend to overreact and only make the situation worse.
"One of the things that has happened through the years is that
we'll have a client call us, and they're in a panic because they have a
vacancy crisis," David said. "Typically, a lot of these only have a single lever response,
and that is to lower their price or to add specials. But they don't
know what else they can do to solve the problem."
This is why we felt it was prudent that apartment communities needed data at their disposal that predicts upcoming vacancies weeks in advance so they can take control of it. In order to gain that control, the goal for communities should be to:
- Predict when it's coming
- Know if it's going to be a problem
- Be prepared to fix it
2. Future Occupancy Projection takes into account move-ins and move-outs.
The leased metric takes into account these three items:
- Vacant, pending move-in units
- Occupied units
- Occupied units on notice
The standard occupancy metric counts only occupied units and occupied units on notice.
Here's what Future Occupancy Projection calculates:
- Vacant, pending move-in units
- Occupied units
- A percentage of occupied units on notice
Notice something different there?
Rather than counting all occupied units on notice, our Future Occupancy metric counts a portion of units as occupied that are occupied on notice, and a portion of units as vacant that are occupied on notice.
This is how timing of move-ins and move-outs factors into the Future Occupancy equation. We can measure the average amount of time it takes from the day a potential resident applies to live in your community to the day they occupy one of your units. The average is about 21 days. So in those three weeks, communities will typically use standard metrics and signify that the vacant unit that's leased is an occupied unit. Future Occupancy Projection offsets that by counting any occupied on notice units as vacant during that same time period.
"How we do that is the closer a unit is to moving out, it is more likely to become
a problem because you're going to need to start generating demand for it,"
David explains. "Generally, units moving out in the next few weeks are
counted as vacant, but if they're moving out in
the next 45 days, they're usually counted as occupied because doing
anything in your marketing or pricing right now isn't going to move the needle necessarily."
3. Future Occupancy Target takes into account your community's seasonality.
Each apartment community experiences its own unique seasonality—the busy and slow seasons a property experiences usually has nothing to do with the one down the street. Even though most people in the multifamily industry know that demand changes all the time, many make the mistake of establishing a static occupancy goal.
So, say you set an annual occupancy goal of 95%. That isn't realistic to achieve year round if you know you're going to experience a busy season and a slow season. If demand fluctuates, so too should your occupancy goal.
Here's another way to look at it:
More Demand = More Turnover = More Vacancy
The equation above explains what happens during an apartment community's busy season (summer in most places). When your demand is high, that also means you're experiencing more turnover. Thus, your property has more unoccupied units available than at any other time throughout the year.
"We want more leases to expire (in the summer), and we want more turnover and
more vacancy," David said. "We expect it and we're comfortable with it, because we
know the demand is there to fill the units that are turning over."
The same methodology is then reversed during your slower season:
Less Demand = Less Turnover = Less Vacancy
This is why Future Occupancy Target is a smarter metric. Our algorithm analyzes your web traffic data to predict your future demand, and then sets an appropriate occupancy goal based on it.
When you have high demand and more units available, your occupancy goal should realistically be around 93%. When you have less demand, and therefore have less units available, it's more sensible for that target to be higher around 97%. Over time, hitting those targets means you've accomplished that 95% annual target.
Here's how you can identify whether or not you're about to have a vacancy crisis on your hands:
Future Occupancy Projection < Future Occupancy Target
That's how our predictive metrics give you control over vacancy, because you can see it coming and have the time to begin fixing it.
4. Dynamic marketing provides you the right amount of demand when you need it.
A typical overreaction communities have when they're in a vacancy crisis is buying more advertising or implementing concessions, which ultimately hurts the property's revenue.
In order to maximize your community's bottom line, you need to establish a marketing budget that's dynamic rather than static.
There's a simple way to implement that:
- Set a budget for good vacancy
- Set a budget for bad vacancy
This is where predictive metrics like Future Occupancy Projection and Future Occupancy Target are so powerful. When your Future Occupancy is going to be less than your Future Target, we can trigger the budget you set for a bad vacancy because you need more demand from your digital advertising. Vice versa, when your Future Occupancy will be greater than or equal to your Future Target, we can pull back on your ad spend and help you save money.
Conclusion
Not only does RentVision Founder and CEO, David Watson, present on each of the aforementioned topics, he goes into specific detail about how our predictive marketing solutions can benefit your apartment communities.
Other noteworthy topics David mentions include:
- How web traffic data has proven to be statistically accurate year over year (and almost to the day) in portraying change in demand.
- Pre-planned management steps you can take when your Future Occupancy Projection is short of your Future Occupancy Target.
- How Rent Manager information can be integrated into the RentVision Platform.
Complete the form below to watch our webinar presentation for free today!
Note: At the time this webinar was recorded, David referred to these predictive metrics by their original labels, RentVision Occupancy and Target RentVision Occupancy. For better clarity, we've since changed their names to Future Occupancy Projection and Future Occupancy Target.