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Next Up: Revenue Management

HCP Exec Previews Fall Conference Session

Amid increased competition and pressure to boost revenue, dynamic pricing strategies can help building operators capture dollars that might have otherwise been left on the table.    

“We need to think differently as an industry about pricing,” said Kai Hsiao, executive vice president, senior housing asset management, HCP, Inc., a large REIT based in Irvine, Calif. “Operators who don’t, will be left behind.”

Hsiao will detail cutting-edge pricing strategies at the 2016 NIC Fall Conference, September 14–16, Washington D.C. He will appear with several other experts at a session titled: “Thinking Offensively: A Game Plan for Enhancing the Value of Your Operations and Real Estate.”


In a conversation with NIC to preview the session, Hsiao noted that seniors housing lags far behind other industries in the area of revenue management—defined as the application of analytics to adjust pricing based on demand.

For example, American Airlines generated an extra $500 million in revenue by adopting the strategy. National Car Rental staved off bankruptcy with revenue management.

Some real estate sectors have already embraced revenue management. The hospitality industry adopted it about 20 years ago. The multifamily sector introduced revenue management a decade ago.

“It’s surprising that most seniors housing operators still raise rents once a year,” said Hsiao. “That approach does not take into account the ever-changing dynamics of supply and demand.”

Hsiao gives the example of a building with one studio apartment and 10 one-bedroom units for rent. Using revenue management, the rent on the studio apartment would be raised since it’s more in demand. The price of the one-bedroom units would be lowered because they’re less in demand.

The same strategy can apply to community fees. “Maybe the operator should be asking for a higher community fee for certain units, or in certain markets,” said Hsiao.

Revenue management can be a big plus for large operators with multiple properties in a single market. Pricing can be differentiated by building to target certain consumers thereby avoiding direct competition between co-owned properties, said Hsiao.  

Revenue management is data driven, and operators need to invest in systems to collect and interpret data, said Hsiao, adding that the expenditure more than pays for itself. “Operators must be able to determine the true rental rate and community fee,” he noted. That means factoring in any discounts and incentives to find the rate on every unit for a certain period of time.

Hsiao believes about five years worth of data is necessary to build a reliable pricing model. And though operators may think they need to track competitive rental rates, Hsiao says that information can be extrapolated by analyzing historical changes in leasing volume.

Though revenue management practices are not widespread in the industry, Hsiao hopes his presentation at the NIC conference will encourage seniors housing operators to at least consider the idea. Revenue management can help maximize rents for operators under pressure to meet escalations in triple-net leases. And, as more new buildings open and create more competition, the strategy could be crucial to success. “It’s more important than ever to have dynamic pricing,” he said.

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