The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
When looking at the self storage business, the metrics you really want to pay attention to are your marketing metrics and your revenue management. You’ll be able to bring yourself to the populations you’re looking to serve by paying close attention to your click throughs and conversion rates, while your revenue statistics will show you just how well your increases and other metrics are working.
Richard Wilson: What metrics drive the success of the self storage business?
John Manes: Something as simple as your conversion rates online, you know, your – you’ve got to have a great website, you’ve got to have a marketing company, you know. And you know we’ve partnered with Fineview Marketing and they drive those results and those metrics for us so being able to not only drive the clicks to your website, but the click throughs and how they convert to actual reservations and actual rentals and/or phone calls means a lot. The revenue management, so what I know is 6.9% of your population moves out at any given time for whatever reason, and when you send rent increases 7.2% of the people move out with rent increases. So the difference in your delta is like .03 when you send rent increases. So knowing that, I always say revenue management is a fear based program, so if you fear that you’re going to drop occupancy, or you fear you’re going to lose revenue and so on, go to the numbers and you know that the medium is call it 7%, so if you send a bunch of rent increases and 18% of the people moved out, stop sending rent increases. If you send a bunch of rent increases and 3% of the people moved out, you weren’t aggressive enough, send some more. So these kind of metrics are what we look at on a constant basis. What our volume is, what our conversion rate percentage is, and then that’s on new customers, and then on existing customers if you send them rent increases what that new conversion looks like.
I could throw all kinds of statistics at you. The industry is $6 for every move-in on merchandise, we average $20. I mean the industry standard is 1% on late fees, we average 3%. So what I look at when I’m looking at a deal is if they have a $10 late fee on the 10th of the month and no other late fees? I’m like “Yeah, baby! Let’s buy that store!” So I look at all those kind of averages knowing what we do and then knowing that we do 3%, but I budget 2, so that I have a little wiggle room and they’re only getting 1%, I know I can make money on it.
Richard: Right, right.