Self-storage operators in Rhode Island are breathing a sigh of relief this month after the 2013 state budget approved May 31 by the House Finance Committee excluded self-storage from a group of services originally proposed for an expansion of the states sales-tax base.

In his budget proposal for next year, Gov. Lincoln Chafee included moving, storage, warehousing and freight services as part of a previously exempt group of businesses he said would bring the state $16.6 million in added sales-tax revenue. The storage group of services, including mini-warehouses and self-storage units, was the only one of four groups removed from the $8.1 billion spending plan the finance committee forwarded to the state House of Representatives. The House could vote on the budget this week.

Members of the national Self-Storage Association (SSA) and the Rhode Island Self-Storage Association met with the House Finance Committee in recent weeks, arguing that applying sales tax to self-storage tenants would burden low-income households and other vulnerable members of the community. The SSA also questioned the arbitrary nature of the services tax on this real estate sector, but none other.

Like many states, Rhode Island is facing severe budget shortfalls.

In an era when weve often struggled to even maintain funding for many of our programs, we were able to get more money to schools sooner than expected, and also speed up money for distressed communities, said Rep. Helio Melo, chairman of the House Finance Committee, in a released statement. Its also good for taxpayers because we were able to prevent several tax and fee increases.

By Tony Jones

The worst mistake one can make in boat/RV storage is to approach the business in the same manner as traditional self-storage. The differences between the two are more than just unit size or type. A failure to adjust the business model to strategically address boat/RV as a specialty, niche market is a surefire way to shortchange what could be a powerful revenue stream. Facility operators who offer boat/RV storage, either as an ancillary service to self-storage or their primary business model, should think like specialty retailers.

While there may be some customer and product overlap between Walmart and Bass Pro Shops, for example, their core customers are not the same demographic. As a general mass merchandiser, Walmart pretty much carries something for everybody, but the primary motivations of its core customer are convenience and price. As a specialty retailer, Bass Pro must meet the higher expectations of a more discerning customer base through quality of merchandise, display presentation and expert staff knowledge.

One can buy a fishing pole at either outlet, but the diehard sportsman is more likely to patronize the retailer that has the best product selection and a 24,000-gallon aquarium than the store where he can also buy office supplies and toilet paper. He will also willingly spend more at the specialty store for comparable products because of perceived quality differences, and a better overall customer experience leads to brand loyalty.

The point is, while self-storage is a service that appeals to general consumers, boat/RV storage applies to a specialty base. The best way to maximize revenue, then, is to attract a core customerone who will likely spend the most and stay the longestby meeting or exceeding his expectations for the product.

Attracting Tenants

Before you can rent space, your facility must appeal to boat and RV owners. Building storage designed for this sometimes fickle, seasonal and transient client takes forethought. Todays successful facilities offer myriad amenities and storage options. After all, the property being stored is generally a valued investment or toy, whether its a travel trailer or motorhome. RV values can range from $5,000 to $500,000, but the personal attachment customers have for their prize is virtually the same.

According to a 2011 University of Michigan study commissioned by the Recreation Vehicle Industry Association (RVIA), a record 8.9 million U.S. households now own RVs, a 7.6 percent increase from 2005. The typical RV owner is 48 years old and married, with an annual household income of $62,000. RV owners are likely to own their own homes and spend disposable income on traveling an average of three weeks every year. That leaves 49 weeks annually in which they need a safe and secure place to store a prized possession.

To entice and retain boat and RV owners, many of todays storage facilities resemble first-rate RV parks with beefed up security. At a minimum, facilities need to offer a convenient and accessible location as well as add-ons such as propane, potable water, a waste dump, a wash rack, power to rental spaces and 24-hour surveillance. Many new facilities offer wide drive aisles (35 feet wide for covered, 60 feet for enclosed), large rental spaces for ease of access, 24-hour access, valet service, and even clubhouse-style amenities for luxury appeal.

RV enthusiasts Kelly Woudenberg and her husband, Dana, recently opened RV SuperStorage in Chandler, Ariz., with luxury and convenience in mind. We have owned RVs for many years and built our facility based on what we had been looking for in a storage facility, she says. We think we have brought a fresh approach to RV and boat storage.

RV SuperStorage features 100 enclosed garages, 300 covered spaces and 50 air-conditioned self-storage units on 11 paved acres. The facility offers power to each space for trickle charging, an ionized wash rack to eliminate water spots, ice and a fully stocked RV store. An onsite mechanic is available five days a week, and the office features concierge staff every day. The office is closed only on Thanksgiving, Christmas Day and New Years Day.

Much like it sounds, the daily concierge service is predicated on pampering the facilitys members and exceeding expectations on customer service. Our concierge can arrange transportation to the airport, detailing and [repair] service, Woudenberg explains. We have helped with laundry, groceries and many other personalized services. We even found a driving teacher for a customer who had bought his first coach.

All 100 of the facilitys garages are alarmed, and the site features 16 security cameras that can be monitored remotely.

Charging for Value-Added Services

Boat and RV owners demand security to protect their toys when theyre stored but also look for convenience when returning from a long trip. Luxury and convenience may be coveted, but they do not have to be free. Many facilities strike a balance between free or value-added services and additional pay-to-play privileges.

Customers who choose to rent uncovered spaces, for example, generally dont have the same access and conveniences as tenants who opt for covered or enclosed spots. They are completely different customers, and you have to keep exclusivity with your covered and enclosed [renters], Woudenberg says. We are just starting an uncovered phase, and those tenants will not have 24-hour access to the services that our covered and enclosed customers have.

Thus, all customers may have use of the wash bays, waste dump and power, but access comes with a price. All of our customers in covered and enclosed enjoy complimentary use of wash, dump and power, Woudenberg explains. Our uncovered customers will have access only when the office is open, and they will pay for the use of these services. Similarly, enclosed and covered tenants at RV SuperStorage also enjoy 24-hour access to the facility through computerized gates.

Pay-for-use services and higher rents for added privileges and security can enhance profit, but they also come with internal costs. Covered and enclosed spaces, for example, may command higher rents, but have higher building and maintenance costs, explains Lois Nielsen, marketing and site manager for Empire Boat & RV Storage, a $7 million covered-storage facility that opened three years ago in Healdsburg, Calif.

Determining paid services vs. complimentary may simply come down to internal costs. This depends mostly on the cost of maintenance for these services. We charge for almost all services, excluding the dump station (free to all tenants), potable water and the air compressor, Nielsen says. The other services are too expensive to maintain if we dont charge the tenants.

In general, Nielsen says the facilitys best margins come from maintaining high occupancy. The storage rent itself provides the best profit margin, she notes. It does not cost the site anything to add an extra tenant to the facility. We have mostly fixed costs at the facility (employee salaries, utilities, inventory, advertising, etc.), but these dont necessarily increase if we can simply add more tenants.

Raising Rates

High occupancy means rate flexibility for facility operators. Some will raise rents when they hit a target occupancy rate. We examine rate increases based on the percentage of occupancy for particular size codes, Nielsen says. For instance, if the 10-by-20s are 100 percent occupied, we would be more likely to raise rents in that size.

Nielsen admits the newness of Empire Boat & RV in its market has tempered rate increases that a more established facility may have been able to implement. We are being sensitive about rate increases with the motive that we want to build a loyal and consistent tenant base, she explains. In general, target occupancy for rate increases is 80 to 90 percent. We also offer incentives if tenants agree to pay for a year upfront, or if they sign up for longer-term contracts.

Robyn Wilson, a district training specialist with US Storage Centers, agrees that pushing rates during high occupancy is a key strategy for maximizing revenue. US Storage Centers operates 62 storage facilities in nine states, including 18 boat/RV sites in Arizona, California and Florida.

We typically raise rates at six months and then every nine months thereafter, and the amount is about 4 to 6 percent of the rate, Wilson says. Its always a hit and miss with the RV lot because some people go out to the desert for activities during the summer months, so they will cancel the storage.

Despite the seasonality of the business, Wilson says, Many RV lots stay pretty full all year-round. At times we actually have a waiting list.

Creative Marketing Efforts

Getting the word out about your boat/RV-storage facility and marketing your points of differentiation from competitors are critical to success. Many operators use local newspaper advertising and employ Internet and e-mail campaigns, including an up-to-date website that promotes rent specials and explains a sites full features and amenities. Operators should also consider accepting online rental payments. Such functionality will help keep tenants current, and the convenience will be viewed by customers as an extension of your onsite customer service.

The specialty nature of the business, however, means word of mouth will play a major role in facility exposure. Referrals from existing customers can be incentivized and help spur business. Empire Boat & RV Storage, for example, rewards referrals from tenants with rent credit, and provides Visa gift cards for outside referrals.

A formal referral program with local boat and RV dealers as well as repair centers can be among a facilitys most rewarding and cost-effective marketing strategies. We currently have referral partnerships with three RV dealers in the area, as well as participating in two chambers of commerce, Nielsen says. We also work with boat/RV mechanics and detailers to come on site and work on tenant vehicles.

Rewarding business referrals is a necessary and important step in maintaining momentum built on word-of-mouth business. I would say we get 10 percent of our rentals annually from RV repair shops or dealers, notes Wilson. After the new customer stays for three full months, we send the representative from the repair shop or dealer a check for 50 percent of the new customers first months rent.

As the economy continues to recover, the record number of boat and RV owners should grow along with it. In the RVIAs RV Consumer Demographic Profile released last year, 21 percent of all U.S. households indicated intent to purchase an RV in the future.

These purchase intentions are very encouraging for the industry, says Sid Johnson, chairman of RVIAs Market Information Committee and director of marketing for Jayco, an RV manufacturer. These survey results were collected in a challenging financial environment, yet they are very close to the 2005 data when the economy and consumer outlook was much brighter. Overall, the results indicate continued strong demand for RVs in the years ahead.

In the end, maximizing revenue is about more than rentals and ancillary sales, its about customer retention and sustained, manageable growth. To make the most profit through your boat/RV-storage operation, seek to attract that special core customer, and implement as many attractive amenities as possible to keep their business.

The owner of a former skating facility in Jamestown, N.Y., plans to turn the 22,000-square-foot building into a self-storage business. Property owner Jim Sirianno said the new facility will be called RiverWalk Self-Storage and feature 120 to 130 climate-controlled indoor storage units.

Unit sizes will range from 5-by-5 to 10-by-30 feet. The facility will offer tenants keypad access seven days per week and 24-hour video surveillance. The roof will be constructed from steel mesh to assist with ventilation and climate control.

''We spent a lot of time doing feasibility studies relative to storage needs in the area. Especially ones with climate control, Sirianno said. There is a demand for them, and the area has been calling for a facility of this sort.''

The location of the site is near Jamestowns Riverwalk Project development, which is meant to improve physical access, use and views of the citys downtown Chadakoin riverfront area, according to city officials.

The governors of Kansas and Rhode Island recently signed revised self-storage lien statutes into law, providing self-storage operators in those states with expanded procedures for communicating with tenants who are in default.

In Kansas, Gov. Sam Brownback approved an update to the Self-Service Storage Act on June 1. Under the revised statute, prior to any sale of tenant property, self-storage operators are required to notify tenants of their default by e-mail (if an address is provided) in addition to sending notification by First-Class Mail. Second notices also are now required to be sent by both e-mail and First-Class Mail when an e-mail address is available.

The revised statute also removed the requirement that Kansas operators list the items for sale when advertising the lien sale.

In Rhode Island, Gov. Lincoln Chafee last month approved Senate Bill 2255, which updates the states Self-Service Storage Facility Act. The revised statute enables self-storage operators to notify tenants in default either in person, by regular mail or by verified e-mail. The law also allows operators to begin to take action against defaulted accounts after five days instead of 30. Second notifications can be sent as soon as 14 days after default.

The revised statute also includes a clause requiring rental agreements to include statements that stored property is not insured by the facility owner against loss, theft or damage; the existence of lien under the state statute; and the possible sale of property to satisfy a lien.

The national Self-Storage Association (SSA) credited the respective state self-storage associations for their work in getting the state statutes revised. The SSA provided consultation and financial support in the lobbying efforts.

The updates to lien laws in Kansas and Rhode Island follow a trend among state legislature activity. Florida revised its state statute in April, and the SSA said 16 states have passed association-sponsored lien updates since 2008. Lien statute revisions are currently under consideration in Massachusetts, Michigan, New Jersey and Ohio, the SSA reported.

The board of directors for Extra Space Storage Inc., a self-storage real estate investment trust, has declared a quarterly dividend of $0.20 per share on the common stock of the company for the second quarter 2012.

The dividend includes a deficiency dividend of $2,762,033, as defined in Section 860 of the Internal Revenue Code of 1986, as amended, which relates to the company's 2010 taxable year. The dividend is payable on June 29 to stockholders of record at the close of business on June 15, 2012.

Headquartered in Salt Lake City, Extra Space is a real estate investment trust (REIT) that owns or operates 882 self-storage properties in 34 states and Washington, D.C. The company's properties comprise approximately 585,000 units and 64 million square feet of rentable space, offering storage solutions including boat storage, RV storage and business storage.

Inside Self-Storage (ISS) has opened the voting for its 2012 Best of Business reader-choice poll, in which self-storage professionals identify their favorite product and service suppliers in more than 30 categories. Categories include Best Customer Service, Most Innovative Product, Best Builder, Best Marketing Services, Best Finance Company and many others. Voting takes place at www.insideselfstorage.com/vote through June 30.

Participants can vote one time in as many categories as they wish. They must verify their e-mail address before they are allowed to vote.

The results of this year's campaign will be published on the ISS website on Oct. 15. The winners will be featured in the November and December editions of ISS magazine. They will also be honored during a ceremony at the Inside Self-Storage World Expo in Las Vegas, April 3-5, 2013.

The winners of the ISS 2011 Best of Business campaign can be viewed at www.insideselfstorage.com/best-of-business.aspx.

For more than 20 years, ISS has provided informational resources to self-storage owners, managers, developers and investors. Its educational offerings include a monthly magazine, annual conferences and tradeshows, an extensive website, an education institute, an online store, and Self-Storage Talk, the industrys largest online community.

Moving and self-storage provider Men On The Move Inc. celebrated the opening of its fourth self-storage facility with a ribbon-cutting ceremony on May 17. More than 250 people attended the grand opening of the Glen Cove, N.Y., location, a two-story, 89,000-square-foot facility that is fully climate-controlled.

Company owner John Beyer invested $3.5 million to renovate a circuit-board manufacturing plant that had been vacant since 2007. Men On The Move gutted the building and expanded its capacity from 52,000 square feet. The new complex offers 835 storage units and is equipped for vehicle storage.

With the nearest competitor six miles away, Beyer said the facility has been well-received in the community. Thus far, customers range from residents storing seasonal items to businesses looking for records storage, he said.

Men On The Move began 27 years ago as a local moving company before expanding into self-storage as way to accommodate moving customers needs. The companys other New York facilities are located in Huntington, Floral Park and Islandia.

To help consumers make smart choices regarding self-storage, the Better Business Bureau (BBB) recently released guidelines on seven factors related to renting storage units: cost, unit size, climate, insurance, security, rental agreement and access.

The BBB received more than 1,000 consumer complaints last year regarding self-storage facilities. Among the most common issues were the inability of customers to access their units after paying a deposit, damage to items stored inside units and theft of belongings being stored. The BBB did not say how many of the complaints were valid or what percentage were resolved amicably with facilities. It does, however, recommend consumers shop carefully before putting items into storage.

For example, when it comes to understanding prices, the BBB recommends consumers get estimates from at least three self-storage facilities and inquire about a range of possible fees, including monthly rents and duration minimums; costs associated with preparation, padding, packing or transportation; and options like pest control and tenant insurance.

The BBB advises potential renters to consider climate-controlled units if they live in an environment that could subject belongings to mold or water damage and encourages customers to purchase tenant insurance either through the self-storage facility or as part of their existing homeowners coverages.

Among other considerations, the BBB recommends customers inquire about after-hour contact in case of an emergency, onsite security, extended-hour access and related fees, unit packing restrictions, and ease of access to units with a car or truck. The organization also encourages customers obtain everything regarding their agreement and the facility in writing, including any chosen options and payment terms.

The organization also advises customers to stay current with payments to avoid contract violations and the possibility of losing their property to auction.

By Kay Schaefer

Would you buy insurance for your self-storage operation that doesnt protect your business? There are many different insurance products available for business owners, but theyre not all the same. Products differ in what they cover, whats excluded, what optional coverages are available, etc. Here are some key items to help you a find a policy that protects your self-storage business from property loss and liability exposure.

The first and most important step for you as a self-storage owner is to share your business details with your insurance agent. By knowing your operation well, he can help you choose the most suitable product and insurance company from the many options available. Your agent is the expert who knows insurance companies, the products they offer, and how well they will service you if you have a claim. In other words, the better your agent knows your business, the better he can help you in protecting it.

Over time, your self-storage operation may change. You might add a new building or service, or outsource some services. Youll need to inform your agent of these changes to ensure your insurance provides protection for these new exposures. In addition, your policy may need to be endorsed (changed) to add or modify coverage and limits. Even if the policy doesnt need a change, discussing your operation with your agent will ensure your policy continues to provide the most suitable protection for your business.

For example, let's say you decide to add another building to your storage site. You have building materials on site during construction, and a new building at the end of the process. Your insurance policy probably provides a blanket limit covering all your owned structures and business personal property. However, because of the addition, your property limit is likely not adequate.

You and your insurance agent should consider what limit is needed to cover all your property, which might include buildings, materials under construction, security systems, maintenance equipment, lighting, fences, office equipment, managers apartment furnishings, signs, golf carts and any other business property.

Let's say the wind blows some shingles off your roof. Do you perform regular maintenance and inspections of your property? Most insurance policies will exclude wear and tear that causes deterioration. If youve performed inspections and maintenance, your insurance company probably wont hesitate to pay for the damage. But if your roof is simply worn out, this could be your responsibility to repair.

Policy Exclusions

Every insurance policy has exclusions. Its important to know what exclusions apply to your property under your insurance contract and discuss any youre concerned about with your agent. For example, most package policies providing property and liability dont cover loss to your property due to earthquake, flood or pollution.

However, an optional coverage or another policy might be available for purchase. Discuss with your agent whether you should obtain insurance coverage for these exposures or self-insure, meaning youll bear the cost of any loss.

Loss of Income

If you experience a significant loss, such as a fire, you could also experience a loss of income due to your inability to rent units or resume normal operation. Review your policy to ensure your limit for loss of income is sufficient for your business. Here are two important questions to ask: How long will it take to get permits and rebuild, and what will you do if tenants must vacate the undamaged portion of the building while its repaired?

In many areas, there are ordinances or laws that may delay or add costs to your repair or rebuild. A partial loss to a building could even require the teardown of the remainder of the building, or the addition of a fire-sprinkler system that wasnt previously part of the building. How will your insurance respond, and what will you be responsible for paying? Again, your agent will be a great resource to help you with these questions.

Liability Coverage

One source of liability for self-storage owners thats moving up on the industrys radar is the need for compliance with the Americans With Disabilities Act (ADA). Title III of the ADA of 1990 prohibits private entities from discriminating against individuals with disabilities by maintaining places of business that are not physically accessible.

The application of this federal law to storage facilities is not new. Special consideration for access by disabled persons has been important in consideration for all new construction and renovations since 1993. New Title III ADA regulations issued in July 2010, which became effective in January 2012, have increased the responsibility of self-storage owners and their exposure to litigation.

Its especially important for storage operators to be aware of ADA requirements and take appropriate measures to bring their facilities into compliance. Lawsuits brought by individuals or public-interest groups for failure to comply are not covered by a self-storage owner's liability-insurance package.

In addition to examining your ADA exposure, consider your liability exposure during renovations, repairs, maintenance or new construction on your premises. To help determine if you have adequate limits when hiring contractors, ask what limits of liability they carry in their insurance policies. You should also obtain certificates of insurance from any workers at your site. This will verify their insurance. Your agent might also recommend some changes that you require from their insurance, such as increased liability limits or naming you as an additional insured.

Another consideration is the insurance required if you offer vehicle storage or other types of services such as wine or records storage. You may also rent space to other businesses. What is the nature of their operation, and does it affect your business liability? Discussing these issues with your agent will ensure your policy and insurance carrier are covering you for these additional exposures.

Other Considerations

In addition to the above, you must consider other business coverage, such coverage for tenant's stored goods. Do you require that all tenants have their own insurance? Your customers may rely on their homeowners insurance to provide protection for their stored property, which may not be adequate.

Outside your rental agreement, you can add a service to assist tenants with protection, or you may have storage-insurance resources available for them at your site. But what if a tenants comes to you after a loss? Is your limit for customers' goods legal liability adequate? Consider what could cause an occurrence and how many units could be affected.

You should also consider your business lien practices. What limit do you carry for sale and disposal liability? You know that once your tenants goods have been sold they become priceless. Many claims presented by tenants after a lien sale are due to a mistake made during the lien process. You should review the deductible with your insurance agent and make sure you have adequate limits.

Maximizing your insurance coverage takes work on your part. A regular review of your operation with your insurance agent will ensure your policy coverage is up to date with your business and keeps you aware of things not covered by the insurance contractitems you may be responsible for if a loss occurs.

To protect your business with the most suitable insurance, work closely with your agent to consider all aspects of your business, and understand how your policy coverage, limits and exclusions protect your self-storage operation.

Kay Schaefer is the senior underwriter for Deans & Homer, an insurance managing underwriter providing specialized coverage for the self-storage industry since 1974. Schaefer has more than 30 years of experience writing unique insurance coverage. For more information, call 800.847.9999; visit www.deanshomer.com.