Apartmentsapart, a serviced apartments provider I have an interest in, was hit quite hard in 2008 when the recession began. We suffered perhaps more than average because we rent properties on a long term basis from the owners and sublet them by the night. When demand dried up we still had fixed overheads of rent and staff in cities where we were active. If you are a property owner with a mortgage you might be in a similar situation to us. When money is squeezed it’s tempting to let quality standards drop, but that is the path to ruin. Here are some tips to help deal with declining revenues.
Fact: People become blind to problems with time.
Small problems tend to compound. Was there water damage in the past that was not completely repaired? Perhaps some clothes hooks fell off the wall and left residue behind that cleaners ignore. Or cupboard door / toilet seat hinges loosen up making equipment appear broken. Curtain rails get broken and shower curtains come loose. Shower pipes start leaking, cracks appear between tiles or kitchen surfaces.
All these problems are niggles which cheapen the property but are small enough that a poorly trained cleaner will not mention them. All of them cost little to fix. Instead of sending a handyman to fix them one by one after a complaint, do a full audit of all these niggles and get them fixed in one go. You’ll save on travel time and your customers will thank you with good reviews.
Involve all stakeholders in the solution
Fact: If you do not ask, you will not get.
If you have been leasing a property for many years and it needs a renovation done, then you should demand one. The property owner may put up straw arguments along the lines of “the tenant should pay for damage” or “your rental deposit covers the damage”, but you should not stand for this, citing normal wear and tear. Bring the owner to site without telling him the reason for the meeting and show him the state of disrepair. He will have to fix the property up for the next tenant if you leave, so there is very little disincentive for him to help. You can show willing by offering to contribute 20% of the repair cost if you meet resistance.
Re-examine your business model
Fact: Change is the only constant.
Your business has worked thus far so you have not questioned whether there was a better way to make money. But when the climate changes we need to adapt. Here are a couple options Apartmentsapart is looking at now.
Have you considered long term customers? It can be viable at lower rates than you think. Without the cleaning cost, empty nights and the cost of checking customers in and out you only need 30% on top of your rent and and utilities to make it worthwhile. Long term rental is often also free of sales taxes (VAT). Customers wanting to stay a few months will jump at the chance not to have to pay agents fees and deposits. Just be sure you can earn 30% clear of all costs including the cost of finding the customer.
The best properties sell the best and earn the best occupancy. If your own properties are experiencing poor occupancy perhaps it’s time to consider working with other people’s on commission? If you provide cleaning and check in services and you source the customers you can charge between 30-40% of the sale, and you will bear none of the downside risk.
Where do you advertise? We spent years ignoring certain types of advertisers, and now we are taking another look. We are trying out display ads and tracking the sales conversions. When the market is hyper-competitive you’ll need to step up your game too.
These are just some ideas we have considered. Usually we close the comments section but I will leave it open on this post in case some of you have some great ideas you’d like to share.