By Alyssa Quill
As we sit in the middle of the “slower” season for the self-storage industry, we have a great opportunity to analyze and tweak our pricing strategies with less risk. In our industry, there are three major categories to consider related to pricing: street rates, existing tenant rates and promotions.
In this article, we’ll focus on street rates, which are the monthly rental rates we quote to potential new tenants. Some operators call them standard rates or asking rates. There are several factors that are important to consider before changing your street rates including current occupancy, expected occupancy, competition, and how potential customers find the rates.
Based on basic micro-economic principles, we know that when demand is high and supply is low, prices should increase. Your street-rate pricing strategies should be based on occupancy for a specific unit size and type, not on the overall occupancy at your facility. For example, if you only have 20 drive-up units and they’re always occupied, keep pushing the rates on those units!
However, if you have 200 5-by-10 units and have never had more than 100 of them rented at one time, try dropping the rates to see if you can capture a higher percent of market share. Some software systems are set up to make these simple adjustments for you automatically. They look at each unit size/type, calculate the amount of time occupancy has been at that level, and raise or lower the unit size/type rate for you.
Current occupancy is not the only important factor to consider, however. To maximize your revenue, use those automated street-rate pricing triggers in your software, but make sure you’re analyzing your base rates at least monthly. Expected occupancy in the coming months should also be part of your planning decision.
Is your facility close to a large university? If so, you should increase the rates on your small units by early March when students begin calling to reserve spaces for the summer. If a tenant renting multiple large units gives you a 30-day notice that he’s vacating, don’t wait until he moves out to adjust rates on those large units. Review and adjust them now.
Competitive rates are also important when considering to discount your facility’s rental rates. If your street rates are already lower than those of all your competitors, dropping them even further may not help increase occupancy at all. Instead, determine why tenants are not renting with you. Perhaps it’s your facility’s signage, curb appeal, sales skills, customer service, products offered or Web presence.
If your current street rates are significantly higher than those of your competitors and occupancy is low, dropping your street rates will surely help you increase occupancy in the short term. But that doesn’t mean you should drop the rates for your existing tenants. You’re just trying to get some rent for the empty space in which you’re collecting nothing on right now. All street-rate changes should be viewed as temporary.
Change It Up
One of the beautiful things about our industry is the month-to-month lease. If you normally rent 10-by-10 units for $99 and move two people in this month at the rate of $79, you have the ability to raise the rates for those tenants any time in the future with 30 days notice. If occupancy is low, it’s probably better to get $79 than $0 now. When occupancy rises, you can raise their rates to $99. If they move out at that point, you’re more likely to replace them with a new tenant at the full $99 rate.