By Bob Copper
I love my wife and everything about her. Well, almost everything. Despite my best educational efforts, she's still a closet communist. She doesn't understand why Southwest Airlines charges a different price every time I book a flight or why mountain-cabin rentals are more expensive during the peak fall season than in January. Of course, the reason those circumstances exist is ... say it with me ... profit!
While I've come to accept my wife's way of thinking, I'm having a difficult time understanding why so many self-storage operators adhere an outdated financial system in which their unit prices always stay the same, regardless of the situation. They fail to capitalize on existing and potential revenue because they don't use a revenue-management system. Those operators could increase their revenue and profit by using a couple of simple techniques proven to work across all facility sizes and markets.
Supply and Demand
The reason Southwest Airlines consistently charges a different airfare is simple: supply and demand. Their rates increase and decrease based on the demand, or lack thereof, for seats. The person who books his flight at the last minute is likely to pay more than someone who booked well in advance. And although the airlines are always aware and sensitive to what competitors are charging for the same flight, they're also aware of their own inventory and charge accordingly.
Can you operate your self-storage facility using a similar technique? Of course you can, and many sophisticated and successful operators do. They generally have the highest market rates and occupancy levels. These operators base their rates on their own supply and care little about what their competitors charge.
Many facility operators are far too concerned about competitor pricing and pay little attention to their own inventory levels. If you have only one or two vacant 10-by-10 units, why shouldn’t that next potential renter pay a bit more than the person who rented when you had 10 units available? If you print your rental rates on brochures or business cards, you can't effectively manage them. If you want to increase revenue and profit, start using supply-and-demand rate management.
Convenience and Customer Service
When I book a Southwest flight online, I can typically get a lower "Web only" rate that is not available if I call an agent. If I’m willing to buy online, I pay a lower fare than someone who feels the need to speak to a person.
More self-storage operators are starting to offer Web-only rates, and the evidence is clear that they do entice renters to make online reservations. If a customer walks into the facility, he will likely pay a higher rate one who reserves on the Web. Well-trained salespeople should be able to charge more for a walk-in rental than an anonymous online rental.
When I fly, I have no idea what the other people on that plane paid for their flight. Your self-storage customers also don't know what other customers paid. The evidence provided by operators who charge different rates to different "classes" of customers shows that this method works to increase revenue and profit. If you market web-only rates on your website, you'll find potential customers are more likely to reserve space online because they believe they're getting a special deal.