It's no secret that recent antitrust lawsuits surrounding multifamily revenue management have led to significant changes in the industry. Operators are shifting towards market survey and pricing solutions driven by public data, and many won't even answer traditional market survey calls anymore. While these shifts have accelerated growth for public data driven platforms like HelloData, they've also made it difficult for many owners and property managers, who are rapidly changing practices to align around a new normal.
We recently posted on LinkedIn about the legal climate around multifamily revenue management and the volume of clients looking for new market survey and pricing solutions, really more to say we hope people like our products because they are great products, not because of the legal climate. But this kicked off an interesting debate on whether or not market data is needed to accurately price rents.
I wanted to write this article to expound on some of the back and forth, and to illustrate why we think it's somewhat crazy to only look at your own property's supply and demand characteristics to set rents.
Some industry professionals argue that revenue management can rely solely on internal data (weekly traffic, applicants, leases, etc), dismissing the need for external market data altogether. They suggest that market data has its place, but it doesn't belong in effective pricing algorithms... I respectfully disagree. Incorporating market data isn't just beneficial—it's required for accurate and responsive revenue management. Here are a few scenarios that illustrate why.
Consider this pretty common scenario: Several new developments just started pre-leasing near your property, increasing the competitiveness of your market significantly. Typically, if you're looking at market data, you'd see this right away and adjust. But since you're ONLY looking at your own traffic and leasing data, you don't see the 2 month free rent concessions they all just started offering... their effective rents are actually below yours now, and the finish quality and amenities at these new developments are superior to yours.
Since you're not surveying the market, all you see is that your metrics are beginning to decline. How long will it take your revenue management system to adjust your pricing to stay competitive? No doubt, it will eventually adjust, but it might take weeks or months. Along the way you're missing opportunities to attract potential residents, which could mean longer times to lease your units, and missed revenue.
If your system analyzed competitor data, or if your team completed weekly market surveys, you'd see this shift in the market immediately and you'd have time to react to it.
Here's another common scenario: You have very high exposure on a particular floorplan, and you need to get those units leased ASAP.
Conventional wisdom would suggest lowering rents to move those units and boost your occupancy. However, if your closest competitors all have low exposure on very similar units, you know they're poised to increase their prices. If they all increase their rents, and you lower yours at the same time, that could mean leaving significant revenue on the table. Try explaining that to your owner as a property manager!
With the knowledge that your closest comps are going to increase prices, you should really aim to price just below them, rather than below your own historical average for that floorplan. If your model only looks at your own internal data, though, how can it account for a scenario like this?
In this case, surveying market data is the difference between raising rents or lowering rents. A revenue management solution that doesn't account for this won't even provide a price that is directionally correct.
If you don't have a good sense of your real competition, it's true that looking at market data won't help you much. One comment on the original post was that "perception of the value of amenities, location, and product offerings change over time, and assigning a value difference between your product and the comps is a guessing game at best." I believe this signficantly underestimates the capabilities of modern data analysis and AI.
At HelloData, we've developed an advanced approach to rent comp selection that removes the guesswork entirely. Our system doesn't rely on subjective judgments or outdated methods. We analyze:
We also provide very detailed unit-level amenity data to help compare renovated units to other renovated units, or classic to classic. When we talk about comps, we're referring to both property AND unit-level comps. We take into account different attributes for each.
This detailed approach isn't a guessing game. It helps our clients make precise, informed comparisons that reflect true market conditions, whether it's for a property they manage or a potential acquisition opportunity.
Most people understand that it's important to look at your own performance metrics AND market data to set prices. One of the comments on the original LinkedIn post gave a great example: If you sell oranges at farmers markets, would you pay attention to prices at nearby stands, or rely purely (or primarily) on read-throughs from your own sales volume to adjust your weekly pricing?
CLEARLY you would look at your competitors' pricing or you'd risk setting a price way above or way below the rest of the market. And that's what HelloData's multifamily market survey solution helps you do (we just do it for apartments instead of oranges).
At HelloData, we believe in integrating both internal property data and external market factors to help optimize rents. Our revenue management solution doesn't just rely on historical data or internal metrics; it actively analyzes supply and demand dynamics across your property and its closest competitors. This comprehensive approach enables you to:
We've built models that rely primarily on supply and demand data at the property itself, and we've built models the rely purely on market data. Both approaches have drawbacks, but if you put them as we are in our latest solution, you get the complete picture of the market you really need to drive pricing decisions.
I appreciate the engagement and differing perspectives within our industry. Healthy debate fosters innovation and leads to better solutions for everyone involved. Transparency is the most important thing for our industry - both in how vendors operate and how pricing recommendations are generated. By standing behind our methods and clearly demonstrating how our solutions produce desired results, we earn the trust of operators and owners alike.
I'm excited about the future of revenue management and the role that comprehensive data analysis will play in it. If you're interested in exploring how integrating market data—and a detailed, AI-driven approach to rent comp selection—can enhance your property's performance, we're offering the opportunity to try our revenue management solution for free in Q1 2025. If you're interested in checking it out, let's get in touch!
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