The Hurt of the Free Month

Beware the self-storage freebie, my friends. Not only is it potentially risky to use the word "free" in relation to self-storage advertising and promotions, the execution of free offers can be a detriment to your own business, as well as to other storage businesses in your area. (Not that you care about them, but some of you are more focused on the bigger picture, i.e., the health of your industry market as a whole.)

On the coattails of last week's Legal Learning webinar, "No Such Thing as ‘Free’ in Self-Storage: The Potential Cost of Dicey Words," I've been seeing a lot of activity on the Self-Storage Talk forum, posts from operators wanting to know if others are using free-month offers to increase rentals, how those offers are working, how they're affecting the bottom line, and how competitors are responding. A recent thread titled, "Free Month" has been particularly hot.

The upshot of the conversation is operators all over the country are experimenting with various specials to see what will draw in customers. Some self-storage businesses are more fixated on income in the immediate moment rather than long-term effect: Get the money in the door today; don't worry what it does to year-end revenue. For some, I'm sure it's a necessity, but for others, it's a knee-jerk reaction to the facility up the street and may be needless.

Even the REITs are feeling a pinch. This week, Sovran Self Storage released its financial results for the fourth quarter of 2008. According to the company report, "Although average occupancy was only 50 basis points lower during the fourth quarter of this year compared to last year’s same-store fourth quarter, it was expensive to maintain that level as the Company continues to make extensive use of move-in incentives. During the quarter, almost $2 million in 'first month free' incentives were granted; more than double that of last fall." (For a summary of the report, read "Sovran Self Storage: 4Q 2008 Financial Results, Expectations for 2009.")

But even though Sovran acknowledges the fiscal challenges created by use of the move-in incentive, the company intends to stay the course in light of a down economy: "Sovran is anticipating reduced consumer demand in many of its markets and for conditions to become increasingly more competitive. It expects to use leasing incentives as well as increased advertising and aggressive marketing to improve occupancy and, accordingly, estimates a decline in same store revenue of 1 percent to 2 percent."

I'll repeat the invitation I served up in last week's entry: Tell me about the special and/or free offers you are using as part of your self-storage survival strategy. How are they working? Do you feel pressured to offer specials based on competitors' activity?