Greystar Real Estate Partners, the industry’s largest operator, is using data it gathers from more than 750 properties to expand its knowledge about residents’ behaviors, which in turn helps Greystar determine the type and timing of information it sends to them.
With 215,000 housing units spread across more than 100 markets, that’s a lot of information to process, especially when the Charleston, S.C.–based company tracks 50-plus “by” parameters—such as leases by unit type or region—for each property and deposits that information into a centralized data warehouse.
But developing one’s own storage depot is expensive and requires consistent “downstream” sources to maintain. In addition, the aggregation process still outpaces Greystar’s ability to analyze what’s coming in. “The question is, how do you aggregate, organize, and encode the data” to make them actionable? says Greystar’s CIO, Tom Bumpass. And because there’s so little standardization for this kind of data mining, Greystar can’t as yet benchmark its performance against the rest of the industry, says Bumpass.
Technology Still Taking Shape
When it comes to data mining and analysis, much of the multifamily sector appears to be playing in the first quarter of an exciting, albeit still amorphous and unpredictable, new game, one where “business intelligence” replaces “gut feel” and drives how owner–operators and property managers run their businesses, says Donald Davidoff, a principal in the Denver-based consulting firm D2 Demand Solutions and one of the industry’s experts in this field.
Relative newcomers to this game are scrambling to keep pace with the early adopters. “It’s probably a little early to be talking about data mining and warehousing,” admits Matt Birenbaum, AvalonBay Communities’ executive vice president of corporate strategy, which is in the process of constructing an aggregation platform and warehousing system for data collected from its 273 apartment communities with 81,000-plus units.
Chicago-based Equity Residential, on the other hand, has been “on a constant pursuit of information” since 2008, says Michael Manelis, senior vice president of operations and IT. Equity’s data warehouse is now “close to robust” and has emerged as a tool “to help us manage our assets,” says Manelis, particularly on the operations side. Earlier this year, Equity purchased a business intelligence application that provides “flow evolution” for Equity’s reporting dashboards and visualizations.
But is data mining really that critical for a multifamily industry whose volume pales beside that of Walmart or other mega-retailers that slavishly comb through data patterns in search of their consumers’ next buying whim? “ ‘Big data’ is a great buzzword, but what will the apartment industry’s version look like?” asks Scott Wesson, senior vice president with UDR, the Highlands Ranch, Colo.–based REIT. “We don’t have a high-transaction industry like retail.”
That being said, Davidoff asserts the apartment sector is “lightyears” ahead of where it was a decade ago, “when hardly anyone could even spell business intelligence,” he quips. And there’s an awareness among a growing number of operators and managers that “they need to be in this space,” observes Rick Haughey, vice president of industry technology initiatives for the National Multi Housing Council (NMHC).
It’s already conventional wisdom among the industry’s cognoscenti that data mining enhances revenue management. So why not believe that “predictive analysis,” the industry’s Xanadu, is just over the horizon?
How quickly the industry arrives there is still anyone’s guess, although several sources contacted for this article are convinced the time frame could be sooner rather than later. At the very least, “It’s going to be an interesting time ahead,” says Haughey.
Operators Feel the Benefits
Data mining is already benefiting multifamily operators and managers in several ways. “Data collection can answer questions that in the past were difficult to answer” using people, says Wesson.
UDR has been gathering info through “intelligent locks” at key points within its properties to determine, for example, if residents are using a gym frequently enough to justify UDR’s investment in it. The company is also collecting data via guest cards, application forms, and lease agreements, which “inform our sales and marketing strategies,” says Wesson, in areas such as whether the company’s pricing is in line with market demand.
UDR is in the early stages of analyzing service survey scores, social media, and amenities-usage data, partly as a way to improve its “reputation management,” says Wesson, but also to determine how its buildings are being used. For instance, in response to its analysis, UDR now offers smaller “huddle rooms” for residents to gather or work. It is also making its buildings more Wi-Fi friendly. “Our motto is, 'If you see a piece of furniture, there’s Wi-Fi there,' ” Wesson says.
In his presentation during the annual MFE Conference last month, Davidoff spoke about the “data maturation” process, which evolves from reporting and analyzing to monitoring and predicting. He noted that at Archstone, his former company, SQL Server licenses paved the way for extracting, transforming, and loading data into a centralized warehouse.
Davidoff also showed how data mining can help operators control the pace of their leases by, for example, adjusting amenities pricing. “What you should be striving for is a kind of neutrality among customers” toward that pricing, he explains.
However, pulling data from various sources into a central location remains the biggest challenge for the multifamily industry, he says. That’s especially true when properties are entering data using different reporting systems, which Davidoff says is still often the case.
He also points out that while social media generate lots of data, using that information for marketing purposes can be migraine inducing. And on the revenue enhancement side, Davidoff cautions operators not to be overly optimistic about what data mining can achieve, when results historically have been incremental.
Haughey of NMHC sees “a tremendous marketing component” in using big data, and in understanding what residents want from their communities. However, he, too, sees operators and managers struggling to figure out how one piece of data impacts another—the so-called “Internet of Things.” “We have a long way to go, but we’re moving as an industry in the right direction.”
Rite of Passage
Where that direction is taking the industry depends on whom you talk to. Birenbaum of AvalonBay believes that advancements in business intelligence will be an “evolution of technology and scale,” his implication being that larger companies could benefit the most. Bumpass, on the other hand, says the data mining evolution might hinge less on technology and platforms and be “more about the maturity of the owner–operators. It will be very business driven and priorities driven.” Bumpass talks about data mining in terms of helping Greystar “institutionalize our thought process.”
UDR's Wesson would like to see more progress on the demand side of revenue management, although he concedes that the definition of “demand” changes as the number of places where customers and companies can interact increases.
The ultimate goal of data mining, for many companies, is to be able to predict behaviors. Manelis says Equity Residential is already moving toward predictive analysis and what he calls “managing by exception, to dig in and get to root causes.” Such analysis, while not perfect, at least is based on trackable and verifiable data patterns that can be used more reliably for making business decisions than simply guessing what’s next.
“The question isn’t how good the forecast is” using predictive analysis, says Davidoff. “It’s, how does that forecast compare with what you were doing previously?”
There are myriad service providers offering business solutions to the multifamily sector. But there has been consolidation within their ranks, and companies like Real Page, Yardi Systems, and Rainmaker LRO are more dominant as a result. However, none so far has come up with the one-size-fits-all global aggregation and analysis tools that operators and managers dream about.
Greystar currently doesn't use off-the-shelf software for its analytics or reporting, says Bumpass. And Wesson is skeptical that even customized systems from third-party providers could produce the “granularity” that UDR seeks from data.
If the big players develop proprietary platforms and systems, and view these tools as competitive advantages, one has to wonder to what extent data mining will trickle down to smaller and midsize companies.
Manelis thinks the apartment sector might be quicker to seek out and embrace these technologies than some people think. He notes that Equity was a pioneer in revenue management through data mining a decade ago. “Now, it’s commonplace,” he says.
Data mining and warehousing, says Manelis, are fast becoming “a rite of admission into professional management” for companies of all sizes. And the areas that companies choose to focus on “will be where they differentiate.”