Being Smart About Self-Storage Concessions: Offer Discounts and Grow Occupancy, But Protect Business RevenueBeing Smart About Self-Storage Concessions: Offer Discounts and Grow Occupancy, But Protect Business Revenue

Rate management is vital to maximizing the potential of a self-storage facility. Do it properly, and you can enjoy substantial annual increases in revenue—12% or even 15%. Ignore it at your own risk because your income won’t grow.

The truth is that setting self-storage pricing is more art than science, and trial and error comes with the territory. But experience is a great teacher, and the more you know about your property, staff, market and competition, the better you’ll be at it. It’s actually one of the more interesting aspects of operation because conditions are always changing, and this means continually tweaking your strategy to achieve the best results.

Rate management is a four-headed monster consisting of discounts and specials, street rates, rates for existing tenants, and fees. They’re all connected. If you need to heavily discount your rates, then perhaps you should use a lighter touch with rent increases. If you must increase rentals because occupancy is lacking, you might need to waive more late fees to retain the customers you already have. In this article, we’ll focus on discounts and specials, but remember: This head of the beast isn’t independent from the other three.

During my 15-year stint as director of operations for a mid-sized self-storage operator, rate management fell squarely on my plate. Following are some of the strategies I used to effectively manage discounts and specials. For the purposes of this article, let’s define discounts as any “dollars off the rent” enticement, such as 50% off the first month. Specials are ways other than free rent to sweeten the pot for potential customers. An example might be a free disc lock or three free boxes.

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Doling Out Discounts With Strategy

Self-storage rental discounts can vary greatly, depending on what your company is trying to accomplish. There are move-in discounts that apply for a specific number of months and others that never end. Those continuous monthly reductions include ones for seniors, military, students and first responders. These typically fall in the 5% to 15% range.

Your occupancy targets should drive the use of move-in concessions in tandem with your street rates. For example, when I was doing this job, our goal was to always have a small number of vacant units in a variety of sizes. Roughly 95% to 97% occupancy was ideal because our income goals were being met and we still had units to offer. Even when we were that highly occupied, we still provided nominal move-in reductions.

One of the unfortunate consequences of The Great Recession was the buying public learned to expect some kind of free rent. As time went on and financial conditions improved, our company generally offered 25% off the first month as a win-win for both the customer and our operation. We gave away a modest amount of free rent per transaction, and the customer felt like they received a great deal.

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The discounts you offer might be based on other criteria. For example, let’s say you have one unit size with far too many vacancies. You might offer a very aggressive discount on that one problematic size, such as 50% off the first three months or $40 off per month for six months. You’d be surprised how many customers can make that particular size work when the price is right!

At my self-storage operation, we typically offered 50% off the first month for most move-ins on unit sizes in which we had three or more vacancies. If we had eight or more, we would provide 50% off of two months. We only went to three months when we had to compete with a new facility in the market.

What do you do when the real estate investment trusts offer a $1 move-in? We found we could successfully combat that strategy with 50% off two months. The net result is the same in both cases: You lose one month of rent. However, we would get a more desirable renter who needed the space for at least two months, generally longer. Also, our customers would be less likely to store junk and let it go to auction than someone who had only paid $1 to move into the space.

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One of the best strategies we used was tying a move-in discount to signing up for autopay via Automated Clearing House (ACH). Renters who use this tend to have a longer length of stay and don’t tie up our employees by calling in to make payments. ACH fees are dramatically less than those charged for credit cards, so our company received a financial benefit at the same time our customers did. Again, it was a win-win.

Try Technology

Another recommendation is to use the discount settings in your self-storage management software. Learn how they work and put them to good use. All rates can be pulled straight from your software and onto your website. You can designate that certain sizes or types of units will always or never be discounted. You might also set specific parameters based on data, such as:

Launching a New Facility

When your self-storage property is new and in rent-up mode, be liberal with your discounting. Run concessions that range from three to six months. Those units are mostly sitting empty for a while and something is better than nothing.

Also, in the first year, designate some spaces as charity units to gain some cachet in the community. These might be units on upper floors or those that are irregularly shaped. Be sure to set a limit on how long these will be used for free.

The Effect on Company Culture

Discounts and specials are an important part of any self-storage operator’s revenue-management efforts and need to be constantly managed. How you handle them can play a large role in the company culture you’re trying to create and maintain.

For example, one of the specials we offered in the operation I oversaw was free use of our move-in truck for new customers. This was popular, and we always made it available, no matter how high our occupancy reached. Along with a one-year rate guarantee, the free move-in truck was something that set our company apart from competition. Our employees were required to mention it in every sales opportunity. It was part of our website and all other marketing. That unique sales proposition became part of our team identity.

A Marketing Measure

Another special we consistently used was specific to Yelp. To those customers, we offered a free disc lock. We never used that promotion anywhere else, so when someone came in looking for the free lock, we knew exactly how they found us. It was a good way to provide an incentive on this platform and easily track our marketing efforts.

Concessions Count

Discounts should be reviewed at least monthly along with your self-storage street rates. Again, they’re connected and should be viewed as a whole. Don’t tinker with them too often because you want to have enough data over time to know if your strategies are working. Conversely, don’t wait too long or you’ll miss seasonal and market changes.

Part of the review process should include consulting with your onsite self-storage team to gain their feedback regarding the market. Keep track of your concessions and give direction and training to your employees on how to handle them. They should be counseled to not give away rent when it isn’t required. When occupancy is high, discounts should be low and vice versa. They should never be your primary sales strategy. Rather, use them when warranted to secure more rentals.

Kraig Haviland is cofounder of Haviland Storage Services, a consultancy business that provides third-party management and support for self-storage operations, including audits, manager training and competitor studies. Kraig joined San Diego Self Storage in 2007 as director of operations. He later became director of property management for the 18-facility portfolio before rejoining Haviland Storage Services. To reach him, call 760.401.0297 or email [email protected].