One of the keys to success in the self storage industry is setting your rental rates competitively.
So, what does it mean exactly to have competitive rates?
Pricing your self storage units competitively means that you strategically set the rental rates relative to the competition in your market. Competitive pricing occurs in industries where the products being sold are pretty similar to each other like toothpaste, gasoline and, of course, self storage units.
To many customers, a storage unit is a storage unit. That means if you offer a 5×5 for slightly less than another facility down the street, then you’re likely to fill more 5×5 units at that price. Of course, if your facility fills up all of its 5×5 units, the other facility may choose to charge slightly more for 5×5 units because they know there is a shortage in the area.
When pricing competitively, you can choose to either price your storage facility below the market, at the market or above the market. The path you choose will depend on local supply and demand forces, as well as your financial goals. Your aim may be to lease up a facility as quickly as possible or your aim may be to maximize revenue per rental. Either way, it pays to do your research and know the local market.
Determining Rental Rates
Determining the optimal rental rates for any facility is a challenge that requires plenty of analysis and constant adjustments. This can be time consuming, especially if you are using a manual method of calling competing facilities or searching prices online. Rental rates are always changing, so keeping up with the competition is a never-ending process.
Today, many facilities use revenue management tools built into their facility management software to help automatically determine pricing. This not only eliminates much of the time spent on research, but also ensures rates don’t lag the market. Revenue management tools use aggregated, up-to-date market data to automatically adjust rates based on parameters you set.
With more storage facilities offering units online, having competitive rates is more important than ever. Customers that do their research can quickly find the best deal with just a few clicks. A revenue management system ensures the price you offer online via your website is always accurate and adjusted accordingly to local market forces. This means the rental rate is always optimized to help you reach your business goals.
The Hidden Cost of Lagging Rates
Failing to set your rates competitively could impact the value of your facility. If you allow your rates to fall far behind the market rates (for example, not increasing your rates for the last five years) that could cause your facility to have a lower net operating income than other facilities in the area. This directly affects the valuation of your facility, as buyers will see the facility was generating below market returns. Making sure your rates are set competitively will help maximize the price an investor will pay for your property should you ever decide to sell.
By taking a competitive approach to pricing units, you’ll generate more revenue per rental. This, in turn, will increase your NOI and boost the value of your facility. Whether you use a pen and paper to update rates weekly or you use revenue management tools to dynamically update prices in real-time, setting competitive rates is essential to growing your self storage business.
Al Harris is the editor of the Storage Beat and content manager at Storable. Based in Austin, Texas, Storable is the world’s leading provider of self storage technology, delivering a full suite of products including management software, websites, access control, insurance, payment processing and the internet’s largest marketplace for renting self storage units. Storable’s mission is simple: to empower storage operators to do more.