Prorize The Science Of Pricing: Using Data To Adjust Prices And Maximize Revenue At Self-Storage Facilities
When they initially invested in self-storage facilities in 2014, Stein Investment Group found it easy and manageable to monitor and update rates for the few stores they owned. But as the company continued to acquire more facilities, the finance team was more focused on analyzing acquisition targets. As a result, they had less time dedicated to analyzing rates. Oftentimes, weeks would go by before the team was able to properly analyze pricing and communicate to the field.
After debating building their own solution and reviewing other pricing companies, Stein chose Prorize’s Self Storage Revenue OptimizerTM (SSROTM) as their revenue management system. Since deploying in 2020, they have:
Increased their agility to quickly and easily adjust prices on a daily basis
Raised street rates on properties that historically struggled and simultaneously improved occupancy rates
Removed the reliance on emotion and individual biases and instead utilized data and science to justify rate adjustments
Found a balance between occupancy and revenue to maximize returns on individual properties
Pricing Deserves Attention
Stein Investment Group was already a leading real estate investment firm in the South in 2014 when they happened upon self-storage facilities due to a couple of default banknotes. Already an investor in multi-family properties, Stein quickly realized how simpler and low-maintenance self-storage was in comparison and started focusing on the industry as an investment strategy.
“With multi-family, you have 300 toilets to manage; with self-storage you have two,” says Cliff Hite, vice president of operations for Stein Investment Group. “Between being lower maintenance and more recession-proof, we felt like it was a worthwhile investment to pursue.”
With the initial properties, Hite and an analyst utilized self-built formulas in Excel based on competitor prices and past move-ins to adjust prices weekly. But as the portfolio of self-storage facilities grew, their time was allocated to not just managing and adjusting rates but also evaluating acquisitions. Reviewing prices once a week turned into twice a month or even once a month if they were lucky.
“When we had a few self-storage facilities, it was easy to manually review rates,” says Hite. “But as we added more facilities, we could not give our pricing process the attention it deserved, and we started making costly mistakes.”
Their Third-Party Solution
In 2019, Stein researched two paths to elevating their pricing process. The first was to build an in-house solution. In theory, customized software seemed like a feasible solution, but then they realized they didn’t have the domain expertise to back up the technology.
“We’re specialists in real estate development, not pricing,” Hite says. “We realized that even with a system built to our specific needs, we still did not have the data science experts to understand what is needed to go into the technology or how to extract value from the data.”
After tabling a customized solution, Stein began looking at third-party solutions. Their goal in finding a new solution was three-fold:
Remove the reliance on a single person’s perspective on pricing
Make pricing decisions based on data and science
Remove the human emotion out of pricing and let the rationality of data and science dictate prices
Initially, Stein reviewed two pricing solutions built for the self-storage industry, but based on negative industry feedback, the company did not move forward with either option. Then, at the Georgia Self-Storage Association (GASSA) event in the Fall of 2019, Hite was referred by another self-storage investor to listen to a presentation by Prorize CEO, Dr. Ahmet Kuyumcu, and Chief Growth Officer, Peter Hansen. This prompted Hite to reach out and investigate Prorize. In addition to being impressed with Prorize’s Self Storage Revenue Optimizer (SSRO) solution, Hite was also impressed with the pedigree of the Prorize team and their work outside of the self-storage industry.
“We appreciated Prorize’s scientific approach to pricing and their extensive experience in other industries like multi-family and senior living,” says Hite. “This was a welcome and needed alternate perspective which pushed us to go places we may not have otherwise gone.”
Knowing they had found the right partner, Stein accelerated contract negotiations. Within a month, the agreement was signed, and the project was kicked-off in early February 2020.
In addition to their pricing expertise, Prorize also played the role of IT consultant, helping Stein overcome data issues during the implementation. From purchasing hardware to extracting the data from their data management software, Prorize brought additional domain expertise to help Stein get their data in the format needed for the SSRO. By May 2020, Stein was generating prices and sending them to the field.
Goodbye To Guesswork
For Hite and his team, Prorize has taken a weight off of their shoulders.
Stein can now quickly and easily adjust prices on a daily basis. What used to take hours now takes minutes, because they trust the prices that Prorize’s SSRO recommends, knowing those suggestions are based on data and science vs. one person’s intuition.
Plus, they appreciate how SSRO pushes them to change prices when they would not otherwise. This includes raising rates for certain properties where it never would have been considered feasible. Stein also observed improved occupancy in some properties that have historically struggled.
“Ninety percent of our business is lease-up, and we’re always debating what matters most: occupancy or revenue,” says Hite. “Before it felt like we were just putting our finger in the wind and guessing, but now we have a system that rationally looks at more factors than we humanely ever could and gets it right almost every time.”
“With Prorize, it’s like we hired an entire revenue management team,” says Jeff Stein, CEO of Stein Investment Group. “The SSRO system has freed up our finance team’s time and increased efficiency. They are happy and that’s a win-win.”
And while the field used to push back on price hikes, they now accept prices received from corporate knowing data and science are driving decisions vs. personal perspective.
Stein is confident that the system will only get stronger over time as they acquire more data. They see dozens of opportunities to fine-tune their processes and analyze the data differently, which will only benefit the business.
“If we can deploy Prorize in 2020, during a pandemic, and see value, then we’re bound to see even better returns down the road,” says Hite. “We are excited to see what we can do with Prorize in 2021 and how it can help us improve our bottom line.”
About Stein Investment Group
Stein Investment Group is a family-owned and operated real estate investment firm. Its portfolio is a mix of commercial real estate investments including office, retail, self-storage, and multi-family. Their self-storage portfolio is branded as Space Shop Self Storage and includes industry-leading storage facilities across the metro Atlanta, South Carolina, North Carolina, and Ohio.
Prorize is a global leader in revenue management solutions now serving clients in nine countries across four continents. The only pricing company to ever win the world’s top prize for advanced analytics, the Franz Edelman Award, Prorize’s proprietary software and pricing consultants help clients capture maximum revenue from their assets. Prorize’s data-driven approach focuses on providing value through mutually beneficial transactions and optimum price points allowing for sustainable and profitable growth of the enterprise.