Some operators price the most desirable units of a certain size/type at a premium. For example, you can probably rent the 10-by-30s inside on the first floor near the building entrance for 10 percent or 20 percent more than you can rent a 10-by-30 unit upstairs, 100 feet from the elevator.
If your occupancy is not very high and some of your competitors are priced really low, you can use a similar strategy to match their rates. Choose the least desirable units on your property of the major size/type categories and price those closely to the competitor. Leave all the other units in that category at the higher street rate. That way, you have something to offer those few tenants who only care about rates, but don’t lose opportunity by pricing all of your units that low.
When you take the potential tenant on a tour of your facility and show him the cheap unit on the third floor in the back corner of the building, he may say, “Do you have anything closer to the elevator?” You can then show him the more convenient units, and he can choose what’s most important to him—convenience or low rates. Some customers just want to feel like they have choice and made a good decision. Having two good options at your facility may prevent customers from shopping other competitor properties as well.
Beware of Your Internet Specials
Another key factor to keep in mind when making street-rate pricing decisions is where potential tenants are finding your rates. If they just drove by and stopped in the office, there’s usually no need to offer a discounted rate. They’re probably planning to rent from you already!
However, if they’re looking online, they may find your rate on a website that lists you and some of your competitors. They may also look at your website and then quickly check the websites of three other storage facilities. It’s more important to have competitive rates online these days. Many storage operators are offering online specials or Web-only rates on their websites for this reason.
In many situations, dropping street rates can absolutely help you quickly increase occupancy. It may come at a cost, however, as 40 percent to 50 percent of potential self-storage tenants do not price shop and you can get an even higher rental rate.
All self-storage operators are trying to maximize their achieved revenue by balancing occupancy and rates. This delicate balance requires and deserves time analyzing the factors listed above, reviewing the results, and tweaking over and over again. Hopefully, these ideas and tips will help make this year the most profitable one so far for your storage facility!
Alyssa Quill is an owner of Storage Asset Management Inc. (SAM), a third-party management and consulting company that currently manages 30 self-storage facilities across the mid-Atlantic and Northeast regions. For more information, call 717.779.0044; visit www.storageassetmanagement.com .