For more than a year now the Multifamily Data Exchange (MDX) team has been evangelizing the idea of standard multifamily performance metrics. The powerful idea of being able to compare the revenue performance of competing properties has been gaining ground during this period. So much so, that we are frequently confronted with the question: “Why hasn’t anyone done this before?”
It’s a pertinent question – the multifamily industry is several years into its mass-adoption of Revenue Management technologies. Yet curiously, it remains the only Revenue Management industry that has not developed a way to benchmark revenue. This seems like a glaringly obvious gap – the sole purpose of Revenue Management is to improve revenue performance, so there should be a way to measure it.
Without a way to measure achieved revenues, we are left making the apples-to-oranges comparison between asking rents and achieved rents. And while performance relative to budget, year-over-year, etc are important data points, today’s market provides the perfect example of how a rising tide lifts all boats. Revenue benchmarks must identify the overall trend relative to competing properties – something that can only be accomplished when companies agree to share data.
The hotel industry provides an excellent example from of how to benchmark revenue. Despite the similarities of the hotel and multifamily industries, one industry has a satisfactory solution to the problem and the other doesn’t. Below are the four main reasons we’ve encountered that explain why this is the case.1. It’s difficult
Hotel stays are short – less than two nights on average. Nightly occupancy is something that is easily measured – and is captured consistently by every professionally-run hotel. Multifamily is different – the duration of leases means that more work is required to translate lease data into – for example – monthly occupancy and net effective rent figures.2. Our systems don’t always talk to one another
To calculate performance metrics we must gather data at the individual lease level from as many operators as possible. That means gathering data from multiple different property management systems. System architecture and the motivation of system providers to co-operate in data sharing has further complicated the process.
3. We're concerned about privacy
Most other revenue management industries are in the travel sector, and travel spend is discretionary. Multifamily operators are responsible for providing homes to their residents. This raises the standards of privacy and confidentiality of data, as well as the terms under which confidential data can and should be shared.
4. It isn't what everyone else does
The survey-based benchmarks that the industry currently uses are widely used by buyers, sellers, and operators of multifamily properties. The industry has the habit of using them, despite their obvious inaccuracies. The status quo is usually the hardest hurdle for any innovation to get over
Over the last year the MDX team has come to understand these conditions of the industry and has learned how to handle them. We gather data exclusively at the individual lease level and compile that data into property statistics like Revenue Per Unit (RPU) that allow apples-to-apples comparison of property performance. We gather data through our interfaces into all major PMSs. Through extensive legal research we curate the exchange in a manner that protects confidentiality. And – finally – we are getting the industry over its natural inertia by offering MDX reports FOR FREE!
For a more detailed analysis of the above points, download our white paper: “On RevPAR – the State of Multifamily Performance Benchmarking”.
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