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
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
“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.
Smooth Sailing 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
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.