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Revenue management software turns setting rental rates from an art into a science. Just this month, Palo Alto, CA-based Essex Property Trust Inc. adopted M/PF YieldStar Price Optimizer from Carrollton, TX-based RealPage Inc. for its 133 multifamily property portfolio. GlobeSt.com spoke to Janine Steiner Jovanovic, president of M/PF YieldStar asset optimization systems, about the product and its potential in the multifamily industry.

GlobeSt.com: Some say setting rents is like walking a tightrope. How does software like Price Optimizer simplify that balancing act?

Steiner Jovanovic: By focusing on near term supply and demand, recent leasing velocity and market conditions, Price Optimizer provides pricing that accelerates rent growth while adjusting when exposure rises and occupancy needs to be maintained. Daily pricing management is critical, since exposure can fluctuate from day-to-day. Also, while we consider competitive rates, they are not the driving force behind the pricing recommendations, thus precluding the potential for overreaction to decisions made by the competition.

GlobeSt.com: Can you tell me some of the clients, besides Essex, who are using Price Optimizer?

Steiner Jovanovic: We represent a diverse and rapidly growing collection of multifamily organizations of all sizes. Our clients include REIT’s, fee managers, owner/operators and institutional investors. For example, UDR, Lane Company, Trammell Crow Residential, JPI, Morgan Group, Sares Regis, Steven D. Bell and Archon Group use Price Optimizer. These firms represent less than 25% of our total client base. Since Price Optimizer is compatible with various property management systems including: Yardi, Intuit’s MRI, E-Site, Powersite, Rent Roll, and RealPage’s OneSite Leasing and Rents, we have been able to meet the needs of the industry. Price Optimizer has consistently delivered a 2% to 3% revenue lift above market, regardless of the property management system a client may be using.

GlobeSt.com: What standardization and efficiency can the software bring to the rent-setting process?

Steiner Jovanovic: Reviewing pricing recommendations generated by Price Optimizer is notably more efficient, timely and reliable than traditional methods of managing pricing through manual data collection and analysis. Since the fundamentals of Price Optimizer are consistent with the core pricing components used by our industry, we can provide daily pricing recommendations based on key facts and statistics and present them in a way that is easy to understand and use. In addition, within Price Optimizer, we offer controls that allow clients to establish a threshold of rent change that does not require manual intervention. Through this process, clients can manage by exception and focus on pricing for units that need particular attention. Our clients say they typically spend 10 minutes per day reviewing pricing for a community.

There are other efficiencies as well. Through our executive dashboard, clients can review current and trended values of revenue, occupancy and effective rent on a portfolio, region, property or floor plan basis. This visibility allows clients to identify performance issues and empowers them to respond proactively and promptly control their exposure.

GlobeSt.com: Price Optimizer leverages RealPage’s market research data, including area occupancy rate and rent forecasts, to help property managers see what the market will bear on a day-by-day basis. Can you explain a little more how it works?

Steiner Jovanovic: We have a distinct advantage in being part of RealPage, in that we have access to the extensive M/PF Research and RealPage OneSite Leasing and Rents data stores. M/PF coverage represents more than 31,400 sites (6.2 million units) nationwide. We have also begun including aggregated transaction level data from more than 7,000 conventional OneSite Leasing and Rents apartment properties (1.4 million units), which are growing at a rate of 300 to 400 new properties per month. We also allow clients to supply competitive information directly into Price Optimizer. That said, Price Optimizer only uses comparative rental rate information as an input to the pricing process, not occupancy.

GlobeSt.com: What’s more important: the key operational metrics the program uses or the confidence the software gives a management team to price the units aggressively?

Steiner Jovanovic: The key operational metrics (available for review with our decision support tools) and the confidence the product gives our clients through positive results are invariably linked in empowering them to aggressively price units. Confidence is also built upon the fact that reasonable and logical explanations can be provided for every pricing recommendation that is made by the system. We value the expertise of our clients and have designed Price Optimizer to provide them with pricing recommendations that they can review and accept or adjust if needed. This method is intended to pair a scientific approach based on advanced statistics with the practical and valuable experience of our clients. Further, when we implement Price Optimizer, we partner with our clients to ensure that appropriate resources are available through the client organization or ours, to provide the operations teams with ongoing support needed to maintain confidence in the system.

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