Such data will be parsed into bite-sized marketing messages and strategically redirected back to us in an effort to parlay our every preference into a purchase.
The TV news show, 60 Minutes, did a story, the Wall Street Journal recently reviewed the topic, and the last issue of Multihousing Professional included an editorial piece about prospective renter profiling as drawn from big data analytics.
The maturation of data mining techniques is a neatly wrapped gift for the forward-thinking management team with resources. The first step in the hunt is to determine the appropriate demographic match (target market) to your product or asset (apartment class, type, features). Devising such strategy will be to the chagrin, even peril, of those competing down the street who may choose to ignore the opportunities afforded by the budding competitive edge of big data analytics.
Monda Watson, certified public accountant and independent consultant based in Dallas, Texas, explains the quandary that the multifamily industry faces: “There is no established data mining technique, but rather executives with field experience that use historic market knowledge to make strategic decisions. It was not until recently that we’ve had the luxury of the data deep dive.”
She adds, “Our “analytical reporting” was exclusively the ability to apply comparative data records to prior performance.” Watson’s two decades of financial experience includes JPI, Legacy Partners and Behringer Harvard Residential and affords her inside knowledge: “Three or four years ago our software focused on KPI, (key performance indicators) incorporating a few prescribed market components collected together in a template management summary.”
Sound business decisions begin with solid data, but also requires management insight.
Jim Charles, most recently with NWP Services Corporation, takes the concept even further, “The Internet is transforming from an information highway into an information nervous system. As the so-called ‘Internet of things’ emerges, we are seeing more and more Internet traffic associated with monitoring and controlling physical devices and sensors (examples—refrigerators, lights, etc.). As we begin to operate and manage physical things using the Internet, high availability, managing big data, and data mining of business intelligence will become significant issues for portfolios.”
Jackie Rhone, senior managing director for owned assets at Greystar Real Estate Partners, recently returned from the United Kingdom where she is responsible for 6,000 student beds. She adds international context to big data decision, “When I compare the U.S. multihousing industry with its counterparts in other countries, I would say that we have been very successful in applying business intelligence to the benefit of our residents and clients. However, when I compare our industry with larger industries, such as the retail, I would say we tend to lag closely behind in applying this technology. In considering the opportunities and potential challenges that come with big data, I feel it’s better for the industry to be on the leading edge, as opposed to its cutting edge.”
Traditional methods enhanced by modern influence might be the simplest means to the end explains Lisa Bednarz, regional vice president at The Lynd Company based in San Antonio, Texas. “There is so much data available today as it relates to markets and their trends. I don’t believe that we need to reinvent that wheel. Gather from a reliable source, listen to what the market is telling you, and then develop your plan to meet both the short and long term goals of your assets.” Watson reiterates that such market influences will mitigate our reliance on human interpretation as data handling is replaced by better automated decision-making. “People need to get out of the mindset that historic reporting is the answer, and shift to predictive analytics and strategic planning. The reality is our tenured executive talent is opting for retirement and with their departure means a loss of important historic detail.”
Watson expresses concern over the adoption of this new technological wave, “Undoubtedly, application of such technology remains limited. Accuracy becomes a challenge, especially when relying on integrated data sets from multiple sources. I believe this a precursor to the new business intelligence suite Yardi recently rolled out, though it is still in its infancy, and somewhat ineffective. It will require an industry-wide effort to gather improved content and mature the process.”
Making heads or tails of all the information available at our fingertips is difficult, but manageable given the right approach. This is what makes business intelligence. Creating strategic insight comes by processing large amounts of both internal and external data including corporate details, consumer content, economic trends, and marketing forecasts.
The good news is that we are all capable of engaging in this wide ocean of opportunity, especially since the majority of companies in the multifamily industry already bring an working baseline: Internet savvy, financial software, and hold operational and marketing data. The level of engagement for corporate data mining will depend on the executive team’s comfort with technology, as well as professional adoption, IT sophistication, ownership endorsement and strategic vision.
Charles reiterates the value of big data operations within multifamily while demonstrating the increasing influence it has over our information technologies. “Utility information data mining is analyzing large data sets in order to find patterns. Such indictors help to isolate key variables that build predictive models for management decision- making.” He continues, “Data mining helps portfolios to optimize their processes so that their residents receive the most relevant services. As well, the costs of serving residents are proportionate to the value of the profits earned from them. Data mining enables portfolios to segment their properties and tailor energy-funded projects to the needs of individual properties that are performing below average benchmarks.”
Rhone adds, “Big data presents both great opportunities and potential challenges for multihousing professionals. Certainly, the abundance of data provided by the market and our systems gives us the opportunity to serve our residents and clients better.” She concludes that success comes with caveats of professional responsibility, “The potential challenge will be in continuing to standardize this data across our industry to improve our services and measure performance, while maintaining the highest ethical standards to protect privacy and safeguard personal data.”
The five key verticals for multifamily: payments and financial services, online advertising, resident screening systems, resident communications platforms and ancillary revenue management. These are the core operations by which management companies and communities conduct business. Supplier organizations deliver analytical teams that scour data to create and project trends for their marketplace, helping management learn more about consumers, as well as themselves.
As the five core operations are woven together for profitability, developing business intelligence (BI) delivers growth and profitability as executive teams monitor, analyze and plan.
Arlene Clements, senior sales executive at PayLease, explains how management can parlay supplier data mashing techniques, “At PayLease, we use in-depth analytics and data to provide quarterly metrics and marketing plans to help identify areas for increased online payment usage. This ultimately helps increasing ROI.” PayLease’s web-based programs integrate with management websites: “Data automation allows clients more time and resources for focusing on strategic activities. With customized reports, management can get a variety of reports and notifications that deliver a real-time picture of their finances. Those who take advantage of these metrics and data ultimately see improved cash flow due to a higher percentage of online payments.”
Reporting and analytics must be included in the suite of services we receive from our suppliers, otherwise we are unable to benchmark our success, spot trends and mitigate future risk factors outside our own organizations. Holding providers accountable for data access and correct content is not just the executive’s responsibility. Management must ensure teams are trained and attentive when interacting with these systems. We need effective processes in training ideologies to ensure the data we input is accurate, especially when that data is integrated into other applications, which can result in errors.
Applying her 21 years of industry experience, Lisa Bednarz shares these comments regarding data and leadership management; “Effective training begins and ends with simplistic guidelines and replication. The measure of training success is when the trainee has a comfort level in which they can assume the role of the trainer.”
Rhone adds, “While this is not new, the increasing volume of data available from mobile technologies, social media and other smart systems is requiring the industry to address these opportunities and challenges at a much faster pace. Industry organizations such as the NAA, NMHC and IREM will continue to play a vital role in helping multihousing professionals navigate the use of big data through committees, policies and education.”
Bednarz and Rhone both agree that enhanced training is necessary, especially as external factors, such as governmental controls, are forcing the hands of asset holders. If dealing with skyrocketing utility costs aren’t burdensome enough, our industry is becoming a data warehouse of economic infrastructure, ladled with high-level monitoring and reporting requirements.
“Understanding new regulatory disclosure reporting is required for large portfolios and owners to meet complex and varied reporting requirements arising across the U.S., adds Charles as to the government’s thirst for industry’s amass of energy data. “multi-site clients must keep up with the new and changing regulations. In the past year, nine cities and two states have been impacted by new legislation that requires energy reporting for properties that meet certain qualifications. In an effort to drive down energy consumption and promote sustainability, new legislation requires reporting through Energy Star Portfolio Manager. This trend is expected to continue with several additional cities and multiple states expressing interest or considering similar requirements.”
When asked about incorporating financial controls with promotional trends and market profiling Watson sighs, “This is the elusive fundamental in our industry. Many are challenged and it’s exactly where we need to concentrate our data handling efforts.” She adds, “Property management software varies in infrastructure and value statements. Big companies need a robust accounting program incorporating strong data management controls, but everything is centered on leases” She concludes, “My main focus is to help lease units advanced through successful reporting. If your system includes a financial core and ancillary modules to increase productivity, you are on a solid platform.”
Doug MacFarland, president of Regency Consolidated, a 17 property, 3,500-unit student portfolio in the Midwest, brings the topic full circle. “I’m pretty much an old school, low-tech kind of guy. What has worked for me over the past 40 years in the industry is to focus on unit availability and delinquencies.” He explains his simple, yet, effective reporting style. “I track unit availability. I know if there is more than a 2-to-3 percent spread between leased and occupied percentages, my occupancy is headed south in the next 30-90 days. Conversely, I can expect an increase. I developed graphs showing property-specific leasing activity for the past 5 years by unit type. “ Past due rent tracking is his other trending watch point.
“Delinquencies are an early barometer to problems at the property. I have found that by closely tracking them you can portend other issues such as marketing and screening efforts.” He shares today, what every frustrated management executive won’t say, “In the end, all the sophisticated reports and analysis cannot replace good people on site. We are in a people management, not a property management business.”