By Steve Lefkovits
Multifamily technology and innovations drive new revenue. As technology increases in complexity and scope, the need for a cross-functional sponsor that can advocate for the entire organization and anticipate the competing demands of the enterprise is becoming a requirement. Responsibility for profitable innovation is shifting to dedicated senior executives and new roles like Chief Experience Officers, Innovation Officers and Vice Presidents of Strategic Initiatives. These roles open up new responsibilities beyond simply implementation, but thoughtful consideration on impacts to the organization when making a change.
Consider some of the new revenue being driven (or projected to be driven) by new-ish tech. Unlike the point solutions of the last decade, today’s tech touches most or all departments in a company, and impacts core operations:
- Amenity services like dog walking, catering, laundry outsourcing, and retail experiences may soon earn a portfolio $5-10 per unit per month. In order to achieve this, the management company and its service provider must coordinate access (operations), setting up an app (marketing), marketing to residents (legal, vendor), insurance (risk management) and resident engagement (operations again.)
- Smart home upgrades from companies like Stratis and SmartRent promise operational savings (reduced staffing, self-guided tours), enhanced monitoring of property risks such as water leaks, and a convenience amenity for which some residents will pay a premium. Early adopters have discovered rent premiums of $25-40 per month or more, in exchange for a capital cost that can range from $500-1,000 per unit. Innovators might manage a retrofit project (project management, operations, maintenance, legal, vendor), strategizing and delivering increased rent or amenity fees (operations, marketing, revenue management), installing and connecting to a secure network (IT, risk management), contracts (legal), equipment finance and cost allocation (finance), training (training, operations), and ongoing operational security (vendor, IT).
- Homesharing and short-term rentals, like all lodging, have been severely impacted by COVID-19. But with alternate demand from first responders and critical infrastructure workers, some short-term rental companies have pivoted to longer rental periods, hung in there and will survive the emergency. When travel returns, the excitement of flexible rental income will return. By many estimates, two nights of homesharing could deliver to the property owner an extra 1% of rental income per unit per month. And, depending on the investment waterfall, on a portfolio that is meeting its preferred return, incremental flexible rental income may fall substantially to the sponsor. To achieve this revenue, the sponsor needs to solve new issues in every department of the company:
- Operations – staffing, unit availability,
- Marketing – messaging to residents, marketing to guests, user experience
- Finance – accounting for nightly or weekly revenue
- Risk management
- Legal – Regulatory review
- Maintenance – access, unit turns and wear and tear
- IT – providing bandwidth to guests
- Telecom infrastructure and contracts – modifications may be required to achieve desired results
Innovation, iteration and risk-taking have created technology-driven revenue opportunities that far eclipse what we considered innovation 20 years ago. In order to realize the revenue, new people, new skills and collaborative working groups have to solve all these problems and turn the opportunity into a solution.
If you don’t have an SVP of Strategic Initiatives like Karen Hollinger of AvalonBay Communities, a Chief Experience Officer like Mike Gomes at Cortland Properties, or even a Chief Innovation and Technology Officer like Jeff Kok of Mill Creek Trust in your organization – consider reaching out to third-party experts like Ian Davis at Davis Craig, PLLC for advice about how to smoothly integrate revenue-generating technology, or RealtyCom Partners who have many resources to share. We’d be happy to share our knowledge, as always, just send us an email at email@example.com.