Why You’re Looking at Unit Amenity Pricing the Wrong Way

It happens, from time to time, that we spend a lot of time trying to solve a problem, only to find that we have been looking at it the wrong way. Victorian London provides one of the starkest examples. Under conditions of a persistent cholera epidemic, it emerged that the disease was water-borne, not airborne, as the wisdom of the day had held. The solution was a massive project to build more than 100 miles of sewers under the city. Life was immeasurably improved for all of the generations that followed.
We can see parallels in many walks of life. When people and industries misunderstand cause and effect relationships, they waste resources on solving the wrong problems. It is becoming increasingly clear that multifamily is falling into this trap in the way that it approaches unit amenities and, in particular, how companies price them.
An as-yet unsolved problem
Let’s start with the basics. Unit amenities are a hugely important part of any community’s sales, marketing and revenue management strategy. When you add the right amenities at the right price, you attract more demand for your units, increasing rent and, ultimately, valuations. They are often expensive, which means that operators must secure the revenue uplift that justified the amenities in the first place.
The trouble is that amenities – including square footage premiums – are not always part of the unit’s base rent, which means they are not part of the revenue management system (RMS) process. For the almost 20 years that RMSs have……