Every year, 600-plus users of RealPage’s suite of on-demand multifamily software applications convene for three days of education on new info, tools, and strategies to maximize how technology can be leveraged to improve operations and NOI at multifamily apartment communities. Held this week in Dallas at the Hilton Anatole, the 2009 RealPage Users Conference saw an exclusive glimpse into the near multifamily technology future with product offerings such as RealPage’s PeerWatch, which promises real-time national, market, and submarket comps in rent and occupancy. Other system improvements and functionality additions across RealPage application verticals, including OpsTechnology, LeasingDesk, CrossFire, Velocity, and YieldStar, likewise promise to deliver an upper hand in sub-market comp-to-comp combat, and according to RealPage founder and CEO Steve Winn, should deliver measurable return on investment within six months of deployment. MFE caught up with Winn at the conference earlier this week, where he shared his thoughts on the economy, technology deployment, the future of apartment marketing (think revenue management), and the ongoing role of a systems provider in helping to improve the professionalism and success stories of its user base.
MFE: Steve, how different is the RealPage of today from what you had envisioned it would become when officially launched in 1995?
WINN: The core foundation for using the Web, having one code stream and serving thousands of customers without having a whole bunch of different versions of the platform, has clearly been around since 1995. I think from there we have serendipitously gotten into each new extension of RealPage. We started out as a property management foundation but it became clear that once you are managing resident data, you know up to the second who lives in every single apartment, and there are a lot of other purposes and uses of that information. The most difficult challenge has been the integration—lots of companies can build these islands of functionality, but integrating it in real time into the resident ledger and then managing the organization change was challenging. So the idea has been around for a long time, and perhaps we’ve just been opportunistic about which extension we have done and in which order.
MFE: You talked about PeerWatch being the eighth wonder of the multifamily world. What can you say about its arrival as the next-generation extension at RealPage?
WINN: I don’t think there is going to be anything quite like PeerWatch. I do believe that it will change everything. For the first time you will be able to reliably benchmark your performance against your peers. A lot of people have been trying to do that for some time and have been challenged in terms of getting accurate data and getting an accurate peer group. What the system does is programmatically determine what the appropriate peer group is so you cannot cheat it. Then it collects real-time data from tens of thousands of apartments so you are dead-on in terms of accuracy. We’re initially reporting on rent, occupancy, and revenue per available square foot, but the idea of PeerWatch is to extend over time to include 15 to 20 operating metrics to compare how they are operating against their peers. Transparency in the multifamily industry is better than it was, but it is still not good.
MFE: How could PeerWatch benefit the fee management side?
WINN: Because of the economy and cost containment, owners don’t want to pay fee managers the traditional three percent. The fee compression argument is simply, “Well, the economy is bad, and you just need to cut your fee.” With PeerWatch, a fee manager can go into that discussion armed with performance data that proves they are operating in the upper quadrants of performance and say, “Well we earn that fee. We have adopted technology and use technology and integrate it into business operations, and the result is that we produce higher returns.” So that level of transparency is likewise valuable for fee managers. They can defend themselves against decompression, and we’ll have larger growth opportunities as owners migrate towards the better performers.
MFE: That’s pretty powerful stuff for a property manager. Do you relish the role of being a partner in creating greater professionalism at the site level?
WINN: Yes, I feel good when our users do well. At the end of the day if our user is going to produce a better product or a better economic profile out of their asset, then we have done a good job. For a long time, we have been focused on helping to redefine the roll of the site staff. I think it is the hardest job in America. They pay $40,000 to $50,000 for a property manager and expect them to run a $20 million asset from leasing to collecting the rent to preparing the books to paying the bills to pricing units intelligently to generating marketing plans. It is a very difficult job for not much pay. A lot of the initiatives at RealPage are trying to simplify that job so that it can be performed by a mortal.
MFE: From social media to big changes in the ILS space, apartment marketing is in flux. Where does the marketing-minded property operator logically head in the next several years?
WINN: I think marketing is going to have to become more efficient. There is still a lot of inefficiency in the way that most apartments approach marketing. The value of different lead generation sources varies considerably: There are some that are very productive, some that on a cost per lease basis are very expensive, and it is difficult to measure performance accurately, resulting in advertising spend that is not optimized. What you really need in our opinion is supply and demand forecasting exercises using the same tools that are used to generate pricing. You don’t want to be spending the same amount of money across the year for lead generation when you have five times more demand in one month than another. Once leads are brought into a lead optimization system, the science of marketing is really going to change a lot of things and make it a much more cost-effective marketing spend that is not as expensive and produces better results. I think there are a lot of people experimenting with parts of that concept. We are certainly very active in that space.
MFE: How challenging is it to bring technology to fruition? What does it take to go live for a system, and what is the relative stress of bringing something such as a YieldStar price optimization application to market?
WINN: That was a lot of stress, a lot of money, and a lot of rabbit trails we went down that ended in dead ends. YieldStar took years and years—a really massive development, and a lot of what we built we did not end up using. But YieldStar is a product that you can plug in on site and have a leasing agent use it within five minutes. Usability and simplicity is really a key factor for all of our offerings, and some of the more difficult technology developments conceptually end up being the easiest systems from a practical level once complete.
MFE: Given economic conditions, can RealPage provide immediate benefits to a user, or is that the wrong way of looking at it?
WINN: No, that’s the right way of looking at it. Nine months ago we had a meeting and decided to stop selling anything that has a year or two year ROI, because no one is going to buy that. Whether there is value to the purchase or not, they are just not going to spend the money in this economic climate. We killed a couple projects and began to focus on providing short-term return on investment that will pay for itself in under six months and ideally under three months. OpsTechnology is doing well in this economy because it allows you to reduce expense. YieldStar is doing very well in this economy because it pays for itself in virtually a month—it’s a no-brainer. If you adopt technology, candidly I think you can overcome a lot of what is going on in the economy.