Every apartment community experiences its own unique changes in demand throughout the year. There's historically busy and slow seasons, but there can also be times of unexpected changes.
Property management teams navigate these changes in demand and occupancy in contrasting ways. Poorly run teams are over reactionary, throwing out ideas as if they were darts that hopefully hit the target and solve their problems. Stronger management teams, however, make necessary adjustments at the right time to stabilize their occupancy, even as demand changes.
The difference lies in control: the stronger team can forecast when their occupancy may take a dip, allowing them to make confident marketing and management decisions in advance.
Your team can operate in this manner, too, by applying Future Occupancy Projection and Future Occupancy Target at your community. These are our new, predictive occupancy metrics we're in the process of rolling out for our clients to help them see upcoming changes in occupancy, and set realistic occupancy targets based on each of their community's seasonalities.
Future Occupancy Projection and Future Occupancy Target can serve as your team's compass while demand for your community changes. In this blog, we'll show how they affect a community's decision-making during both its busy and slow seasons.
In order to fully illustrate how Future Occupancy Projection and Future Occupancy Target can direct your decision making, let's apply them to a hypothetical community.
This community has 100 units and has set out for itself an annual occupancy target of 95 percent. It also experiences an average seasonality, meaning it typically sees its busy period occur during the summer months and slower period during the winter months.
Seasonality is determined by measuring a community's website traffic within a 12-month period. We use web traffic as the data point because whenever your community's in high demand, it also correlates to a time of more turnover.
For this hypothetical community, here are the number of visitors to its website, and the percentage of the annual traffic that occurs month-to-month:
|Percentage of Annual Traffic
These numbers provide a roadmap for this community to follow, as they indicate when the busy and slow seasons will occur. Knowing and understanding your community's seasonality is vital, because at the very least, it gives you a glimpse of when you can expect changes to occur. Effective marketers use this data to determine how much they want to spend on digital advertisements and other marketing channels.
To reiterate the need for the Future Occupancy Projection and Future Occupancy Target metrics, our hypothetical community will need its percentage of annual traffic to equal 8.33% every month in order to maintain its goal of 95% occupancy. (Maximum occupancy is simply not possible when taking into account the amount of time it takes to turnover and lease units.)
Because demand changes throughout the year, so too should the occupancy goal. Rather than being at 95% occupied each month, Future Occupancy and Future Target positions communities towards averaging 95% occupancy year round. More on that later.
For our scenario, the busy season begins in April while the slower season begins in September. In the next two sections, we will focus on those two months and apply the principles of Future Occupancy and Future Target to them.
The Busy Season
Future Occupancy Projection counts vacant, leased units as occupied and occupied units that will be vacated soon, as vacant. For this community, the average length of time between when an application is turned in and when a move-in occurs is 21 days.
When that's the case, at about three weeks before the start of the busy season—perhaps sometime in early March—the management team at this community will begin getting reports that indicate a change in demand is impending.
If 93 of the community's 100 units are occupied on March 10, the standard occupancy metric would say that the community is 93% occupied. But if, say, six units were on notice or will be vacant within that next 21-day timeline, the Future Occupancy metric would report an occupancy of 86% on March 10. These two occupancy metrics are very different.
This is why Future Occupancy becomes a predictive metric. By utilizing it, the management team at this community now has the power to make smart choices in regards to how to properly handle the upcoming vacancies. In the time leading up to the start of the busy season on April 1, the community could:
Increase their digital ad spend to increase their visibility online, thus providing their community with the traffic they need during the busy season.
Feature their soon-to-be vacant floorplans on the homepage of their website.
Begin scheduling their maintenance team and outside vendors to turnaround those units in order to have them ready for tours and move-ins sooner.
Also, in that lead up time prior to April 1, the community's management team will also notice a change in their Future Occupancy Target metric. As the Future Target is derived directly from a community's seasonality, it constantly updates the occupancy goal to reflect the time of year. As there's more demand and more turnover during the busy season, a realistic Future Target on April 1 for this community may be around 93-95%. Then in the slower months, when there's less turnover and demand, the Future Target may be higher than 95%.
The Future Target metric provides a sense of balance for communities, as it gives management teams a realistic marker to measure the health of their occupancy. As stated earlier, it positions teams towards averaging their annual occupancy goal each year.
While we strongly recommend partnering with us to apply our Future Occupancy Target metric at your community, because it is highly detailed and complex, you can implement a simple, manual version of this for yourself. While it may be a bit rudimentary, try doing this:
Determine your community's unique seasonality so you know the percentage of annual web traffic you're receiving each month. (Here's how you can find your seasonality.)
For months where the annual percentage of traffic is higher than the standard 8.33%, decrease your occupancy target by approximately .5% for every 1% the web traffic percentage is higher. (9.33% would be 1% higher, for example.)
For months that receive less traffic than 8.33%, increase your occupancy target by .5% for every 1% it is lower.
Now that we've examined how the Future Occupancy and Future Target metrics affected our hypothetical community ahead of its busy season, let's focus on the start of the slow season in September.
The Slow Season
As was the case a few weeks prior to the start of this community's busy season, Future Occupancy Projection and Future Occupancy Target will begin indicating demand will slow in advance of September 1.
Historically, the winter slowdown starts around the same time the school year begins. It's especially true for properties located in college towns. We wrote about the significance of this time period in our last blog.
Future Occupancy Target plays a critical part in the difference between the start of the busy season and the start of the slow season. When there's no longer as much demand, the amount of turnover in a community also decreases. If our community wants to average 95% occupancy year round, the Future Target around September 1 will likely increase to somewhere between 95-97%.
Communities need a buffer zone to get its affairs in order before demand slows down, and the predictability built into Future Occupancy and Future Target provides that precious time. So, in early August, when the management team at our community can see the slowdown is coming, they're prepared to make decisions like:
- Decrease the amount of money they're spending on digital ads and other marketing channels.
- Offer rent specials or other concessions to help fill any remaining unoccupied units before the slowdown.
The time before a slowdown in demand occurs is so critical for communities. The actions, or inactions, that take place during that time may have long-term ramifications. For example, without the advance warning provided by Future Occupancy and Future Target, if a community enters the slow season with multiple unoccupied units that need to be filled, it'll be required to make significant measures—like decrease rental rates—that hurts the property's bottom line.
The difference between strong and poor property management teams lies within control. Predictive metrics, like Future Occupancy Projection and Future Occupancy Target, provide that sense of control by giving teams a glimpse into future vacancies in their community.
With that data, teams won't be forced to react or hustle to solve vacancy issues. They can accurately forecast when changes in demand will occur weeks in advance. They have time to make smart marketing and management decisions, allowing them to successfully navigate both the busy and slow seasons and maintain their community's health.
If you believe these metrics will impact your community, and give your team control over vacancy crises, we highly recommend getting in touch with your Marketing Advisor or start a conversation by providing your information below.