Revenue Management
Revenue Management: Understanding "churn"
Self Storage is a lot like the hotel industry. They fill a hotel room for one or two nights, and then have the same space to fill again.
It is the same in our industry. We re-lease the same space over and over and over again. And that is the great thing about our business – we don’t have to rebuild or resupply our product after use (but we do need to sweep it out and keep in clean!)
So what is churn? Churn is the name given to how long a tenant stays at the facility before they vacate, and the time it takes to re-lease the unit again.
In some areas, tenants are in and out quickly, creating high churn. In other facilities, tenants stay longer. Both types of churn present interesting situations for the owner and facility.
A high churn property requires that a facility spend a lot more in marketing, as they are constantly looking for new tenants. There are effective ways to slow down churn at these facilities and retain tenants longer! For a lower churn property, they are faced with unique challenges also.
Do they raise rates? And if so, what happens when a tenant at a higher rate moves out, and the unit re-leases at a lower street rate, causing a decrease in revenue even with regained occupancy?
When working with Revenue Management – a very important part of the self storage industry – all of these factors come into play. Do we offer discounts that erode revenue to get new tenants to store with us, and if so, are they effective in helping to retain tenants or are we just leaving money on the table at the time of the rental?
How far can we increase pricing before a tenant decides it’s time to move on? Does our pricing make sense based upon the actual square footage used compared to other unit sizes and prices? Are we increasing occupancy but not really impacting revenue?
What’s more important, increasing revenue or increasing occupancy? These are challenging questions for sure. If you would like to discuss specifics about your facility with an expert in facility revenue management, contact The Self Storage Marketing Association.
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