NMHC Update - 11/22/2010 (Plain Text Version)
How to Do Business Smarter, Quicker, Better
While there was a lot of healthy debate at the 2010 NMHC “OpTech” Conference, it is clear that sophisticated technology-based tools have dramatically changed the apartment industry in the last 10 years. From marketing to pricing to data mining, apartment companies are leveraging new tools to transform their communications and their operations.
This year’s event, which was expanded to cover Property and Risk Management as well as technology, attracted a record attendance, including CEOs, COOs, CIOs, CMOs, CROs, and CFOs from the industry’s leading firms.
The conference’s mood was upbeat. Leo Horey (AvalonBay) said looking back to January 2010, the rate of rental improvement has been twice what he expected. The Bozzuto Group’s Julie Smith added that in addition to positive demographic trends for the industry, new, more skeptical views of the benefits of homeownership are also driving rental demand; a 1% drop in homeownership translates to 1 million new renters.
This special NMHC Update newsletter reviews the key themes and takeaways from last week’s conference.
Marketing Dominates the Agenda
In a clear evolution from a conference that was once focused on what kind of wiring to run to properties, the dominant theme at this year’s event was marketing with an emphasis on measurement. As Drucker & Falk’s Dan Haefner noted, “if you can’t measure it, you can’t manage it.”
Gone are the days when subjective “I think, I feel” beliefs guided marketing strategy. Today’s companies are using key performance metrics to refine their advertising programs, analyzing cost-per-lead, cost-per-lease and visit set ratios. Panelists recommended cutting any source that costs more than $50 per lead and focusing on those ad sources costing between $20/lead and $50/lead when refining media buys.
They warned, however, that properly sourcing leads is a big problem in the industry. One analysis showed that 70% of leases were attributed to the wrong source. They urged companies to use call center data and guest card matching through a lead-management system before deciding which marketing sources to keep.
Conversion rates are equally dubious. Keith Dodds (AIMCO) reported that when they experimented with not holding site staff accountable for conversion rates and to instead accurately report traffic, traffic was up 50%. “Don’t make decisions on bad data” was a recurring mantra. “We have too much data and not enough tools to make sense of it” was another.
Leading firms agreed that lead-tracking and Revenue Management have to work together in developing a marketing strategy, since firms make money by pushing rents. Using today’s data-driven tools, companies can adjust their lead streams depending on whether they are pushing occupancy or rents.
Contrarian Jonathan Holtzman (Village Green Companies) challenged the industry, stating that he believes “as an industry, we are spending 75-90% too much on marketing; generating more traffic than we need for the number of empty apartments we have.” [return to top]
Don’t Forget: Ours Is Still a People Business
“It’s not just about technology,” noted several presenters. Technology can help us track and manage, but we need to make sure our staff is bright and articulate and can use the data we’ve collected to convert prospects and manage our assets.
Holtzman advises firms to “get your leasing agents from the hotel industry—they train the best people in sales.” Holtzman has implemented a commission-based pay system and allows leasing agents to work exclusively on sales. They don’t take maintenance requests or collect rents. The system works for them, their turnover is 25% compared to 70% for the industry overall. Dan Haefner (Drucker & Falk) agreed, commenting that in the future, they’ll spend more on salespeople and less on marketing.
Technology is also changing the quality of the industry’s staff. Greg Mutz (AMLI) said, “if you are technologically illiterate, you won’t have a job at AMLI, even as a maintenance staffer.” [return to top]
Social Media: “More Art Than Science”
One of the key topics at the event was marketing, with a vigorous debate on whether social media is a productive outlet for apartment firms. While apartment executives may disagree about how much of a firm’s resources should be allocated to social media, they generally concurred that there is a major industry shift underway in how the industry communicates with its customers.
During a debate on the pluses and minuses of social media, Jamie Gorski (The Bozzuto Group) argued that social media is crucial because it “protects and extends your brand” and lets you hear what your customers are saying about you. “To say that it hasn’t generated any leases is missing the point. Social media is just another form of communication with your customer,” said Gorski. “Would you not answer an e-mail?”
AvalonBay’s Kevin Thompson said that social media augments your firm’s marketing plan, making your company more relevant: “Search engine optimization and enhanced customer service alone make social media worthwhile.”
Arguing the other side, Donald Davidoff (Archstone) replied that social media creates a lot of activity but not a lot of results and isn’t easily quantified. Asked whether social media could be an external link strategy to drive traffic to the company’s web site, Davidoff reported that bounce rates from Facebook are twice as high as from an ILS.
Todd Katler (BRE) concurred that there are lots of ways to keep your apartments full that don’t involve Facebook or Twitter, plus social media is not scalable. Both agreed that they may feel differently in three years and conceded that it is important for reputation management.
Despite the disagreement, it was clear from the hallway conversations and other panel discussions that figuring out social media is high on the industry’s “to-do” list for 2011. [return to top]
Industry Needs to Embrace Apartment Ratings
One thing the social media panel agreed on was the importance of embracing apartment rating sites such as Apartmentratings.com and Yelp.com because apartment residents are using them to make leasing decisions and they have enormous relevancy in organic search results.
Drucker & Falk’s Dan Haefner shared his company’s initiative to get supportive residents to post ratings. He says the company has spent less than $200 per site on education and awareness building and has gone from a 20% rating to an 80% rating. Once they get above 80%, they link the property site to the ratings site.
Jennifer Staciokis (Lincoln Property Company) added that Yelp has more accountability than Apartmentratings.com because it requires at least a first name and photo: “Eighty percent of reviews on Apartmentratings.com are negative; 80% of ratings on Yelp are positive. I’d rather focus on the positive.” [return to top]
What’s the Next Big Thing? QR Codes
Last year’s buzz word—mobile marketing—was still a hot topic this year, but firms report that their mobile applications are getting more traction with existing residents. Greg Lozinak (Waterton Residential) reports bounce rates (users clicking away from the front page) of 50% for prospects with their mobile campaigns, but just 30% for residents. Lozinak reports that 61% of their resident portal traffic is mobile, 39% of prospect traffic is mobile.
He explains that today’s renter cohort is more likely to leave their apartment without their wallet than their cell phone. “It’s their first screen of choice” he says.
This year’s buzz was about QR (Quick Response). These easy-to-produce bar codes can be added to brochures, billboards and web sites. They can store text (instant coupons), URL links, geographic coordinates and more, and anyone with a smart phone or a mobile phone with a camera can scan them. Research reports that 71% of consumers are willing to download and use mobile bar codes.
Don’t Forget the Existing Residents
Despite a noticeable emphasis on marketing, using technology to serve existing residents was a common theme. As Laurie Baker (Camden Property Trust) said, “residents find us online, can apply online, then they move in and we put notes on their doors.”
When asked about budget priorities for 2011, firms indicated that using technology to drive resident retention and create a better user experience is high on the list, including allowing for online renewals, deploying Revenue Management for renewals and creating touch points at different times in the relationship.
Reiterating last year’s takeaway, panelists said repeatedly that the way the industry communicates with existing residents has changed. Half want to be communicated with via text or e-mail. But the industry needs an IT solution for resident communications. Property management systems don’t have fields for Twitter or Facebook accounts or the ability to designate preferred communications, much less implement them. [return to top]
NMHC President Doug Bibby moderated a panel of CEOs from four firms of various size, both public and private. Greg Mutz (AMLI Residential Properties) observed that in terms of technology, “multifamily has largely caught up with the hotel sector and surpassed office, retail and industrial. There are lots of sophisticated tools out there.”
Dale Phillips (Mark-Taylor Residential) offered that “web sites are the most cost-effective way to reach the most desirable resident.” But Phillips added, “you have to understand what consumers are thinking before you move too far on web-based products. Is anyone asking the customer?” As an example, Mark-Taylor thought its web site was great until it held a focus group and learned what it had been doing wrong. Furthermore, concluded Phillips, “the more we listen to our front-line associates, the more we learn about our business and our customers.”
Riverstone Residential’s Walt Smith added that his company’s vision is to touch the prospective resident, make them a resident, “and keep in touch with them through their second lease renewal.”
Deane Dolben of The Dolben Company cautioned that “it’s easy to spend more on technology than it will deliver back. We focus on our people and make sure they don’t forget about doing their job because they’re spending so much time on technology.”
AMLI’s Greg Mutz concluded: “In an information age, information is the currency of the realm. We are trying to use tools to reduce procurement costs, increase productivity and increase residents.” And he added that authorizing sufficient training dollars is critical: “These tools are only as good as the people using them, so don’t be cheap about training. The Israelis have the same airplanes as everyone else but they use them better because they train better.” [return to top]
Another recurring conference theme was Revenue Management software and the way it’s transforming the industry. During the downturn, some companies disabled their Revenue Management due to fear that it would lower rents too quickly. Riverstone’s Walt Smith said he could count on his fingers the number of clients who trusted it when rents were going down.
But AvalonBay’s Leo Horey said Revenue Management “works through all phases. But these are tools and they have to be used in conjunction with other tools and systems. Don’t just turn it on and let it go; adjust it. If you’re in a strong environment you may tell the system that increased availability is acceptable so it will increase rents strongly. And vice versa.”
Mutz agreed, saying it’s an amazing technology if it’s used right. Now his firm is working on rolling out a module for renewals. [return to top]
Search Engine Optimization (SEO) Tips
Sixty- to 90 percent of users will not make it to the second page of search results, so “it’s critical to dominate page one” Jennifer Staciokis (Lincoln Property Company). The days of brief search engine queries such as “Dallas Apartments” are gone; 80% of inquiries are now 3 to 6 words long, including a specific query (2-bedroom), a location-based component (Boston), and a descriptive (luxury).
Find keywords that are relevant to your business and that make you distinctive. But not too distinctive; rodent control company d-Con invested in “owning” the keyword “rodenticide” until it realized that people don’t search for “rodenticide,” so it pursued the plain-English search term “mouse killer.”
According to Catherine Juon (Pure Visibility) you can also do “competitive research” to learn which keywords your competitors are buying by using Compete.com or Spyfu.com.
SEO expert John Grayson (Genuine Interactive) added that you should ensure your site is an accessible CMS. Wordpress is popular because Google loves it. “You can see Google rankings go up just by switching to Wordpress.” [return to top]
Lauren Brockman (Allied Residential Services) said “green building is here and it’s really going to start driving our industry” in a green building session. “We did a small focus group with University of Denver students. It’s what they expect. They didn’t say ‘it’s what you should do’ or ‘we’ll pay more for it;’ they said ‘what are you doing if you’re building any other way?’”
Ken Buck explained Lincoln Property Company’s experience in certifying Atlanta’s The Goodwynn as an Energy Star-rated building. Architect Sanford Steinberg (Steinberg Design Collaborative) compared and contrasted Energy Star, LEED, EarthCraft and the National Green Building Standard (NGBS), which is the only nationally accredited green building program created with input from the apartment industry.
Finally, Trammell Crow Residential’s Scott Woodward shared best practices for insuring your expensive new green-built property. Clear communication with your broker and underwriter is absolutely required when you own a “Pacific Northwest building with 21 tons of dirt on the roof and a water feature/koi pond. Or you have 20 miles of water piping in a solar-heating system. Or expensive window packages. Or you have a roof covered by solar panels in hail-prone North Texas.”
Unconventional construction is always at the upper end of the pricing matrix. But insurance companies are adapting, Woodward says: “New insurance products like multi-decade warranties for solar panels are coming about.”
To avoid a big increase in your renewals, “though your broker may not agree, establish a relationship with your underwriter. Keep in touch with them, tell them your engineering. Invite them to a Q&A session with your architects and engineers to take the mystique away from the exposure. As green building becomes code, this will become a law and ordinance issue. But for now: Keep good communications with your broker and underwriter and read your policy.” [return to top]
Bed Bug Update
“Know thy enemy,” said Veronica Saltz, Esq. of law firm Saltz Polisher, who led a discussion on how to minimize bed bug liability exposure. “Be vigilant. Catch it early." Recordkeeping is crucial from a litigation standpoint. If there is litigation, you need to show you did everything reasonable to protect your residents. “Have literature in several languages for your residents. Explain what a bed bug looks like. Encourage residents to report any infestation.”
Rethink your leases to include a clause not to place responsibility on the property owner—the apartment owners aren’t bringing bugs in. In short, “the resident needs to realize they need to cooperate.”
Best Technology Advancement
Opinions varied about what the most important advancement in the past five years has been. Mark-Taylor’s Dale Phillips said online availability is the key: “Not just digital pictures of the floorplan, but an interactive display that can show how far the unit is from its parking space and other details.”
One sign of how far the industry has come in just a few years: AMLI’s Greg Mutz said 67% of his firm’s leases this year will be online. “Three or four percent of the time we first meet a new resident when we hand them the key, just like a hotel.” Many of these sight-unseen renters tend to come from overseas, so making your web site available in different languages definitely appeals to them.
Mutz added that online leasing/marketing is important but said that data mining is “light-years ahead of 10 years ago.” Using a Human Resources example, he said, “Every employee gets a grade on 10 metrics, and each position has its own metrics. The key is: don’t make them drink through a fire hose, get it down to more manageable bite-size amounts so they can change their performance.” [return to top]
Energy-Filled Exhibit Hall
In addition to the high-level content and peer-to-peer networking, vendors and service providers including Time Warner Cable Community Solutions, AT&T, Comcast, RealPage, Yardi, CoreLogic, The Rainmaker Group, DIRECTV and many others filled the exhibit hall, sharing information with the tech-savvy apartment executives who packed the space. Four lucky attendees took home new iPads and four more won $1,000 American Express gift cards in eight separate drawings. [return to top]
Mark Your Calendar for Next Year!
Next year’s NMHC Apartment Operations and Technology Conference & Exposition will be held in Fort Worth, TX November 6-8, 2011 at the Omni Fort Worth. [return to top]