I’m at this week’s NMHC OPTECH show in Las Vegas. I’m looking forward to a few days of excellent content and networking opportunities afforded by the show. One of the things that we’re most excited about this year is the opportunity to further the conversation about an area that’s important to everybody – lease renewals.
In preparation for the Snap Session: Renewing the Renewal Process that I’m presenting on Thursday, I reached out to several customers to ask them about some of the biggest challenges with lease renewals. We recently released the LRO Renewal Manager, a major functional enhancement designed to solve several longstanding problems with the critical area of pricing renewals, so I was keen to speak to some users to get their take on the biggest areas for improvement.
From my research and discussions, I uncovered three major things that people feel is wrong with the way that renewal pricings works right now.
First, from a process perspective, we process our renewals in batches. But the way batches work tends to assume that one size fits all. In fact, that’s not the case – we will get to that later.
Secondly, the approval process for renewals is stuck in the 1990s. The operators have not found good ways through technology to make that work flow better, and it’s hugely costly in terms of time and focus.
And finally, reporting on the success of renewals is very limited, meaning not only is it hard to track how renewals are doing, but it’s also difficult to define what success even looks like when defining future strategy.
The Problem with Batches
To start with, let’s talk about batches. By batches, we mean a group of renewals, for example, those that are occurring at the same time, that we create to generate renewal offers. There are a couple of broad things that are wrong with the way the batches are typically handled nowadays: the nature of the batches themselves and the processes that technology allows you to perform on the batches you create.
If we start with the problem of the definition of batches, they’re too broad. They don’t allow you, for example, to work with different parameters across communities. Nor are you able to take a different slice of renewals in a batch – for example, a particular unit type across different properties. Greater flexibility would enable users to perform analysis at a level that is likelier to yield more accurate results.
All renewals are not created equal, and that’s important when it comes to making renewal pricing decisions, as different unit types have varying levels of demand associated with them. To define a good renewal strategy we need to segment them in a way that makes the most sense for a property or a group of properties. But until now the technologies that we use to process renewals have hindered rather than helped such segmentation.
Talking about the way technologies work, one of the big drawbacks with the way people handle renewals currently is that there is not a good way to save renewal batches while you work through them and through the approval process. In fact, most technologies will override batch renewal prices while you are in the review process if you don’t turn them around quickly. This is not a good situation given that renewals inherently are not that quick to turn around. It has long seemed clear to us at Rainmaker that the industry has been crying out for a radically different approach.
The approach that we have taken creates a sandbox, which is an environment specifically created for analysts to test out different renewal scenarios, to understand which one is going to yield the best results for the property and ultimately bring rigor and consistency to the renewal process.
The sandbox allows users to organize their renewals into batches that best support their analysis – across unit types, dates, properties, and so on. Within the sandbox, different scenarios can be tested to predict their impact on revenue performance. And of course, the analysis of each batch of renewals can take as long as necessary to come to the best solution – a particularly important attribute when we consider the approval process.
Streamlining Approvals for Renewal Pricing
The second big area for improvement that was revealed by the conversations was the approval process. The problem with today’s approval process is that communication is very long and time-consuming. There isn’t a single source of truth for approvals, which means that we end up with spreadsheets being sent around to a broad community stakeholders involved in the approval process. This opens up the opportunity for major inconsistency in the way that the process is executed and, of course, human error.
The current process involves too much negotiation between different stakeholders, and this leads to a couple of problems. First, it’s time-consuming, and it takes a lot of management time and attention to go through the process. But secondly it places downward pressure on pricing because the tendency is for people to want to reduce price increases, so negotiation tends to mean too many opportunities for to bargain pricing down before it even reaches the resident.
So today’s renewal approval process is very time consuming and potentially costly in terms of revenue. Again – this looked to us like a problem that was well worth solving. In Renewal Manager we have created is a way for people to be automatically alerted to renewals that need to be approved. Not only does the technology improve the way we conduct renewal pricing, it also allows for actual approvals to be executed through the application. This streamlined process makes the entire renewal practice easier, removes the randomness of sending spreadsheets around, and brings consistency to a process that has historically been fairly ad hoc.
Time for Robust Reporting
And now that we have everybody singing off the same hymn sheet – reviewing renewals in the same way with the same data through the same application – we have a natural opportunity to deliver the best renewal reporting ever. The technology managing the process is also setting the renewal pricing, we can now report in a very consistent and a very granular manner on how renewals are performing.
For example, this data makes it extremely easy to understand the deltas between the offer and the current rent, or current renewals and the move-in rent pricing. Further, you can easily slice and dice the same information by different unit types across different properties. We believe that this not only will give operators the ability to understand how successful they're being but it will also show what success looks like for future planning.
As you can tell, we’re hugely excited for the release of LRO Renewal Manager and the benefit it’s already delivering to customers. It’s an improvement that the industry has needed for a long time. And if you’d like to know more, please come to my Renewal Manager session, which takes place at 5:30 on Thursday on the Trade Show floor.
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