Mastering Revenue Management to Maximize Profits

There are two dials in self-storage, the Rate dial and the Occupancy dial. How you use them changes everything.

Over a decade ago, I was introduced to this concept through a simple yet memorable illustration. A crudely drawn bathtub on a whiteboard represented a facility, with a faucet at the top symbolizing move-ins and a drain at the bottom for move-outs. A bold line sketched across the tub represented the "water level" or occupancy. Finally, two dials were added to the drawing, with one labeled rate and the other occupancy.

Like hot and cold, it was clear that these two dials were the key to the illustration. Turn one up, and generally, the other goes down; turn one down, and likely the other goes up. It wasn't a perfect science, but it made sense, and learning to balance the art and science of it was vital.

Learning to use the dials to your advantage was the name of the game. It would take some finagling, but finding the right temperature and balance through trial and error made it easy to understand. The teaching point, of course, was to maintain, grow, and improve the water quality and occupancy level despite the drain always being open. Today, managing and understanding how these dials work is more critical than ever.

Even if you've put someone else in charge of managing your facility, you must understand how the fundamentals of revenue management work in your self-storage operations.

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Simply Complex

Although our business seems simple from the outside, a broad spectrum of strategies exist to win.

Owners are unique, and their goals don't always align with others. Some owners' primary goal is to maintain high occupancy at all costs, while others may prefer a slow and steady approach, holding rates per square foot values as the mighty sword. But much like the tortoise and the hare, strategies vary among operators, and it's not always the tortoise that comes up on top. Both can win.

Our simple business has become quite complicated. Some like it hot, some like it cold. Some keep it simple, others analyze everything, but ultimately, maximizing the value of your "bathwater" is the key to winning. How you manipulate the rate and occupancy dials directly affects how the water comes into the bathtub, the flow, the pressure, and, ultimately, the water's value.

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Occupancy or Rate? 

Today, operators tend to fall into two general camps regarding the balance of rate and occupancy: those prioritizing speed and those focusing on rate. I personally lean towards speed.

My first significant project in 2015 involved leasing up a large three-story facility with about 580 units. Achieving 85% occupancy in just nine months was considered a monumental success, and I was on top of the world. Truthfully, we were lucky. I didn't realize how many advantages we had at the time. Almost no competition, an incredible market, and tons of new residential growth. It was wildly successful, yet we were oh-so lucky. We built our site on third base at just the right time, and all we had to do was bring it home. But it wasn't always this easy.

Countless lease-up stores later have yet to match the success of that first one, and I've been humbled along the way. However, learning to manage the dials of rate and occupancy has been invaluable for our success and has pushed me to consistently challenge the status quo

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Tools of Today

Years ago, you could rent a car faster than you could a storage unit—it was ridiculous. Thankfully, that has changed. Along with improved customer technology, our operating tools have also evolved significantly. The most transformative of these tools are revenue management platforms. Remember when I said our business has become complicated? Take a peek behind the curtain of today's revenue management platforms, and you'll be blown away by the sophistication and depth of analysis these systems offer.

Data moves fast, and daily rate changes have become the norm. What used to take multiple hands now takes just a few simple clicks. Rate changes can occur instantly across thousands of stores. Not only are rates more volatile than they have ever been, but these machines are learning, and they're here to stay.

Despite the new complexity, the fundamentals of our business can still be simple. The real key is to set yourself up for success by learning the basic principles of the industry. Do the math, learn the formulas, and make it your mission to understand it better than anyone else you can.

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Start with Why 

One of my favorite authors, Simon Sinek's famous book "Start with Why," is one of my all-time favorites. In his book, he states the value of understanding why we do what we do. For business, your why is the hinging point, around which everything should be built. So, taking the extra time to understand and pursue why you do what you do is essential.

The truth is you will leave money on the table. It will never be perfect. You may not know how or what to do exactly at the time, but you'll know why. Comprehending and acknowledging that is the most important step to fully grasping the opportunities ahead.

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Seek to Understand

As the self-storage industry continues to evolve, our incredible sector is finally catching up with the times. The business's principles remain tried and true; the fundamentals are straightforward. However, understanding why we do what we do is crucial if you want to succeed in 2024 and beyond. Whether you're a seasoned operator or just starting out, take the time to deeply understand the business to maximize your operation's potential. The dials are there. How you use them is what separates you from the rest. Embrace the changes, leverage the tools, and always keep learning. 

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