By Amy Campbell
In the world of self-storage, the phrase, “My facility is 100 percent occupied,” was once considered a great statement to make. However, if you claim it nowadays, you might be in for a lecture. A full facility is no longer the stick by which to measure a storage facility’s success. Rather, today’s operators are looking at a number of different metrics, including physical occupancy, to determine the business’ health.
But let’s get back to the original premise: reaching 100 percent occupancy. How could this not be a good thing? Simply put: You could be leaving money on the table. Sure, all of your units are rented, but at what rate? This is where revenue management plays a critical role. With self-storage demand at an all-time high, you simply can’t ignore the importance of having a proper plan in place.
Here’s an example. Let’s say Mrs. Turner has been renting a 10-by-20 unit for a couple of years now. This is by far your most popular size unit. You’ve only increased the rate on Mrs. Turner’s unit once, and her rent is far below your street rates for 10-by-20 units. Clearly, it’s time for another increase. However, you may have several tenants in the same situation as Mrs. Turner. Perhaps you have 30 customers occupying 10-by-20 units who haven’t had a substantial rate increase in 12 months or more. Or maybe your stand of 10-by-15 units are full as well.
Fortunately, you have several options to bring in more revenue while maintaining an occupancy in which you can be proud. Many of the larger storage chains have complicated algorithms they use to adjust their street rates as well as those for existing customers. Other operators depend on their facility’s management software to set rates for existing and new tenants. Additional options include adding rental increases on the customers’ anniversary date, or raising the rent on units in demand. There really is there’s no “one-size-fits-all” approach to revenue management. You might even try one or two different approaches to see what works best for your facility. The important thing is to build some kind of revenue-management plan that helps you achieve the results you want.
Of course, there may be times when you’ve increased your street rate as well as passed on rental increases and still find yourself at 100 percent physical occupancy. What then? That’s the conundrum one Self-Storage Talk moderator found himself in this summer. Other members chimed in with some ideas, one of which was to add more storage units, if possible. In fact, many operators have found themselves in this very situation. Those with land and some capital have opted to erect new buildings, while others have turned to portable-storage units to create more rentable space.
The industry has long followed many rules that includes adhering to rate cards, aiming for 100 percent occupancy and offering rental discounts. It’s time to throw out the rule book. We’re entering a new era. Quality facilities led by professional operators who offer superior customer service will prevail. Skip the discounts, build a solid revenue-management program and offer your customers the storage experience they seek.
Do you have a revenue-management program in place? Share your rental-rate strategies by posting a comment below or on Self-Storage Talk.