Green Up With Economic Occupancy
|Copyright 2014 by Virgo Publishing.|
|By: Brad North|
|Posted on: 09/01/2007|
When it comes to gauging success, many self-storage operators focus only on physical unit occupancy. Sure, it may be an ego boost when unit occupancy is high. Maybe you’ve even thought to yourself, “Things are going well because occupancy is at 94 percent.” Perhaps you’ve gotten so comfortable that you’ve cut back on your marketing efforts, putting operations on cruise control. Why not? You have only a handful of units to rent, right?
First, if you’re out of several unit sizes and only have a few to rent, you’re virtually out of business. In other words, you’ll end up turning customers away to someone else. This approach to running the facility can be dangerous. Many times, we run promotions and giveaways to increase occupancy without realizing how much we leave on the table.
For example, storage operators commonly run at 95 percent physical occupancy with an economic occupancy of only 82 percent. This can be devastating to the return on investment. Economic occupancy must be continually evaluated to maximize the profitability of the operation. Why?
As self-storage demand softens in a market (maybe due to increased competition), operators may compete on price to strengthen demand. Instead of being proactive in our sales efforts, we become reactive and tend to “give away the store.” How can we be smarter in these kinds of circumstances?
Every storage operator should compare his units, square footage and economic occupancy on a consistent basis. It’s difficult to improve on an aspect of the business if you don’t know where you stand, but most management software will allow you to determine this easily. As you familiarize yourself with measuring and tracking performance of these areas, it becomes evident how to improve.
Realistically, it’s better to be 90 percent occupied with higher rates and fewer promotions than to be 95 percent occupied and giving business away. This will take confidence in your ability to build value and trust with your customers through a more effective sales program.
The process begins by educating tenants and selling the unique advantages you offer relative to market competition. By being better-equipped to handle inquiries, you’ll create more appointments and customer visits. And industry statistics show that if you can get the customer to the store, he will rent a unit more than 85 percent of the time.
By being more proactive in the sales effort, you’ll also minimize the need to discount rents and offer promotions. This improves economic occupancy because you move closer to renting units at the “street rate” instead of reduced rates, maximizing profitability and real estate values.
Finally, improved selling can translate into better collections and less delinquency. Many of the same skills it takes to become the price leader in your market are the same attributes that improve collections. As you build trust and value with customers through better selling techniques, you’ll become better at getting money from delinquent customers too.
Come On In!
The pinnacle of the phone-sales presentation is setting an appointment for a visit. Operators who create appointments are leaders in the market. If you can bring customers to the facility, you’ll improve physical and economic occupancy, and the more profitable your facility will be. It’s a winning circle. Setting the appointment isn’t just for new customers. It takes a similar skill to hold current customers accountable for rent.
Most operators don’t set appointments with delinquent tenants to collect. At most, they may send a letter or make a reminder call. But it takes much more than this to keep delinquencies down and profits moving forward. Setting appointments for late payments will help minimize the gap between physical and economic occupancy, which is the true measure of any self-storage operation.
End the Vicious Cycle
The self-storage industry is quickly approaching 50,000 locations throughout the United States. Many markets have reached the point of saturation, with an overabundance of storage space. This has incited some operators to be reactive in their fight to sustain or gain occupancy. In turn, their profits have suffered. Those who have become industry leaders are those taking a more proactive approach to improving economic occupancy, accomplished through improving sales while minimizing rental discounts and promotions.
Brad North is founder of Advantage Business Consulting, which specializes in facility management, feasibility, onsite sales, marketing and operational training for the self-storage industry. Mr. North has produced two live videos and workbooks titled “Maximizing Your Sales and Marketing Program,” designed to help managers improve their sales and marketing efforts. He contributes articles to various self-storage publications and is a nationally recognized speaker and consultant within the industry. For information, call 513.229.0400; visit www.advantagebusinessconsulting.com.