Implementing Rate Increases
Did you experience increases in some of your operating expenses last year? Many self-storage operators resign themselves to the fact that their expenses will most likely increase year after year, but they're unwilling—or more truthfully, afraid—to increase their rental rates. It's unreasonable to believe that the rates you charged last year or 10 years ago should remain the same while utilities, taxes, payroll, etc., continue to climb.
It's a crude analogy, but I liken the implementation of rent increases to boiling a lobster. If you try to put a live lobster in a boiling pot of water, he will try mightily to get out! But if you place a lobster in cool water and gradually turn up the heat, the next thing you know, you have a delicious meal.
The same is true with your tenants. If you send out notice of a substantial rent hike after years of no increases, it's likely that a large percentage of tenants will move out. But if you modestly increase rates each year, your incidence of move-outs drops significantly. Also keep in mind that for every $1 you increase your rent, you add $150 in value to your asset.
The Importance of Staff Training
Any efforts you make to manage and increase rental rates will not succeed if your staff is not competent or trained to effectively execute them. Today's economic climate the competitive nature of our business demands that self-storage managers be better trained and more knowledgeable. If you want to successfully use sophisticated revenue-management tools, charge different rates for different classes of customers, and implement common-sense rate increases for existing tenants (and you should want all of these things), you must have onsite staff who can make these things happen.
Does your team know how to sell a potential tenant on the benefits of renting from your facility, or are they simple order-takers and babysitters? If they're not good salespeople, your efforts to manage rates based on supply and demand are going to fall flat. If your staff has not bought into the idea of charging different rates to different classes of customers, those efforts will fail. If your employees refuse to take ownership and confidently defend your modest rent raises, then don’t waste the stamps.
Your management team needs the tools to successfully implement all of these revenue-enhancement techniques, and it's your responsibility as an owner to ensure they have them. Far too many owners are still acting like they manage a mom-and-pop shop. Your self-storage operation is a "big business," and you can use these systems to start treating it as such.
When it comes to your revenue, it's time to break free of "communist" ways of thinking and embrace a new pricing regime.
Bob Copper is partner in charge at Self Storage 101, an industry consulting firm that assists facility owner/operators and managers in developing more effective and profitable operational systems. It also aids in conducting performance reviews and providing the necessary tools to perform at higher levels in a competitive industry. To reach him, call 866.269.1311; e-mail firstname.lastname@example.org.