Over the past several years, due in part to increased competition, third-party management has become more of a necessity than an option—especially within the highly populous MSAs (metropolitan statistical areas) where numerous REITs (real estate investment trusts) and larger storage operators have set up shop.
While smaller operators have been able to keep their properties afloat without the assistance of a third-party management company, the continued consolidation of the industry, increasing new supply being delivered to the market, and a tidal wave of new technology will leave others stranded and searching for a lifesaver. Third-party management and an affiliation with a recognizable brand can help keep storage operators from drowning in the rising expectations of self-storage customers.
Benefits For Buoyancy
According to Joe Margolis, CEO of the Salt Lake City, Utah-based REIT Extra Space Storage, Inc., third-party management has raised the bar for the industry and will continue to do so through scale, resources, data, and experience. He adds that third-party management offers a platform that is “impossible for smaller operators to replicate” independently.
Successful third-party management platforms, such as Extra Space Storage’s Management Plus, can provide operators with the means to increase revenue through higher occupancy levels, lower costs, and maximized rental rates. For starters, synergy provides contract savings and scale reduces expenses. Third-party management also takes a lot of weight off an owner’s shoulders. “Owners can have more time and fewer responsibilities,” Margolis says.
Moreover, Margolis notes that, as the largest third-party management company in the self-storage industry, the scale of its third-party management platform enables storage operators to enjoy advanced resources that would otherwise be too costly and time consuming to implement on their own. Some of those resources include a national call center, robust marketing, innovative websites, and sophisticated revenue management tools.
Access to a proprietary call center with thoroughly trained and knowledgeable agents allows facilities to convert more leads into reservations and provide self-storage managers with back-up assistance. Call centers are beneficial during busy office hours, as well as after hours, when managers are unable to answer the phone. Ensuring that no call goes unanswered is imperative nowadays, especially when customers expect an immediate response and competition is abundant. Certainly, busy signals, endless rings, and unprofessional answering machine messages can persuade callers to dial the facility down the street.
In addition to call centers, as Margolis mentions, Internet marketing is essential in this day and age. Similar to other third-party management companies, Extra Space generates web awareness and drives engagement through paid advertising, organic SEO (search engine optimization), and social media.
“Our scale allows us to spend a tremendous amount of money with Google,” he says, adding that the company continues to strengthen its mobile marketing platform and capabilities for a distinct competitive advantage. And, according to the company’s website, it “actively manages millions of pay-per-click keywords a day, including hundreds of unique keywords per site”.
Per Extra Space’s 2015 Annual Report, “This approach was validated in early 2015, when Google launched a new way of ranking results. This new algorithm benefits mobile-friendly websites like ours. Unlike smaller operators that lack the technology resources to adapt to this change, we were well prepared for ‘Mobilegeddon’ and well positioned to capitalize on it. As a result, more than half of consumers now find us through mobile search, a meaningful increase over 2014.”
Then there’s revenue management, which enables operators to frequently adjust rates for maximum revenue. Extra Space’s revenue management platform tracks and predicts supply and demand in real time, allowing the company to vary discounts and rates by sales channel, set optimal street rates for new customers, and increase rates for existing customers. Those advanced capabilities provide for careful management of rates and discounts during the various storage seasons. For instance, facilities can set and receive higher street rates in the summer months—the peak storage season.
“By giving us the information we need to maximize revenue, optimize occupancy, and increase length of stay, our revenue management platform once again helped us achieve superior operational and financial results,” the 2015 Annual Report states.
Diving Into Data
Third-party management also enables storage operators to gather and utilize pertinent customer data that can help operators better understand their customers. As noted in the 2015 Annual Report, “With more than 800,000 current customers, millions of previous customers and transactions, and millions more calls and website visits, Extra Space Storage has an enormous–and growing–set of data. Our analytics capabilities allow us to utilize this vast collection of information to better understand customer behavior and preferences. As a result, we can tailor our offerings to meet the unique needs of similar customers while maximizing revenue for our business. For example, we can predict which prices, discounts, and special offers are more likely to lead a specific prospect to convert to a customer and stay with us longer. The insights we gain from our technology enable us to deepen our understanding of consumer behavior, fine-tune our marketing approach and test new offers. With these insights and capabilities, we are well positioned to meet customer needs, optimize revenue, and deliver strong results.”
Margolis states that Extra Space’s high transaction volume—and six million unique website visitors—presents the company more opportunities to test customer reactions. The tests are conducted to prove data-based propositions. “Nothing is left to chance,” says Margolis.
As an example, the company ran multiple tests to determine which color to use for the “click to call” button on its mobile website. The results of this particular test showed that Extra Space’s mobile customers responded best to orange, much to their dismay.
While making a decision to hire a third-party management company may seem like a daunting task, Margolis assures owners that there’s “no bad time to turn to a third-party management company”. In other words, your property doesn’t need to be floundering to net the benefits of third-party management. In fact, many third-party management companies are eager to take on facilities that are under development or in the planning stages.
“The sooner the better,” says Margolis, in regards to when a developer should decide to choose a third-party management company. “We can help with the design to maximize value.” Determining the unit mix, for example, is one area in which a third-party management company’s decades of experience can be most helpful.
Nevertheless, like any other vendor or supplier, it is important to do some research and find a company that best suits your facility’s unique needs. Margolis adds that owners should have chemistry with the third-party management company in order to build a positive relationship.
A Rising Tide
Overall, Margolis believes that, with its numerous benefits, third-party management can serve as the rising tide that lifts all boats. “More sophisticated operations can increase professionalism and customer experiences,” he says. “And a more sophisticated revenue system can help the market as a whole.”
Erica Shatzer is the editor of Mini-Storage Messenger, Self-Storage Now!, and Self-Storage Canada.