Are marketplaces collaborators or competitors? Utilising international connections and local vs national marketing strategies

Here's what the episode covers:
🟣 TONG's 10th anniversary party - Sarah was invited to attend this event to celebrate the achievements of TONG over the last decade. Hear how TONG adds value to the sector through helping to understand the Chinese market.
🟣 Utilising international connections - the importance of expanding your knowledge of international students through networking and talking with people working in the industry globally.
🟣 The importance for operators to have sustainable long term strategies with marketplaces, that aligns with the overall business strategy.
🟣Are marketplaces collaborators or competitors?
🟣 Local vs national marketing strategies

This episode of Housed is sponsored by Mystudenthalls.com - Search student accommodation across the UK
www.mystudenthalls.com

Each week, Sarah Canning, Deenie Lee of The Property Marketing Strategists and Daniel Smith of Student Housing Consultancy will be delving into a wide variety of subjects and asking the questions that aren't often asked. This podcast is for anyone who works in Student Accommodation, BTR, Co-living, Operational Real Estate or Shared Living.

Disclaimer: The views and opinions expressed in this podcast are the personal views of the individual hosts.

Transcript

SPEAKER_01: 0:00

Hello and welcome to the fifth episode of season two of How's the Shared Living podcast with me, Dan Smith from Student Housing Consultancy. I'm Sarah

SPEAKER_02: 0:08

Canning from the Property Marketing Strategists. And I'm Dini Lee from the Property Marketing Strategists.

SPEAKER_01: 0:13

And before we get started, let's hear from our sponsor, My Student Halls.

SPEAKER_00: 0:18

How's the Shared Living podcast is sponsored by mystudenthalls.com, student accommodation search. Let's find your place.

SPEAKER_01: 0:29

Thanks very much to Dan and the team at My Student Halls for sponsoring this series of How's the Shared Living podcast. And we're delighted you're joining us again. Thank you very much for listening. And to all of our new listeners who are still finding value in the huge archive of podcast episodes that we've got on Spotify, Apple, and wherever you would get your podcasts. Thank you very much for supporting us. So first of all, I know we've been very busy. Sarah and Dini, you went to the 10th anniversary party of Tong. And so, yeah, if you want to give us a bit of information on exactly what happened there. I know it wasn't all just drinks and canapes.

SPEAKER_02: 1:07

They were good though, so to be fair. And it was in a really great venue in London to celebrate Tong's 10th anniversary. And firstly, I just think, you know, as a business, that's a great achievement and it was absolutely the right thing to celebrate being 10 years in business, especially after the last few years we've had with COVID and Brexit and, you know, cost of livings So, you know, absolutely well done for them. It was quite funny because I kind of walked in thinking there was going to be like loads of our friends from the student accommodation world. And there were some there, but actually Tong work across all different industries. So it was there weren't as many, you know, it wasn't the usual kind of student accommodation kind of party. And it was really interesting talking to some of their other clients as well. And really lovely to hear their story and how they started and what their vision is for the future and really great hospitality. So yes, thank you to Tong for inviting us. And yeah, wish you the best for the next 10 years. And maybe, you know, we'll have a 10th anniversary

SPEAKER_01: 2:10

party in the house. Can you imagine that? I can. Well, this feels a bit like a party, even though we've had three brownies next door. But yeah, and thank you very much to Brum Radio and the team here. But yeah, really good to hear that Tong are going so well. Obviously, they do really good work with the Chinese market in particular. Lots of help understanding what's happening in China at the moment, because it's not just as simple as the Chinese market increasing year after year anymore. I think operators and investors in particular are going to have to work a lot harder to attract the Chinese market because in PBSA in particular there is a bit of attrition that we're seeing into BTR for Chinese students. I know that there's a lot of focus on marketplaces and which ones are really delivering but Tong and the likes of Viva City they do give an opportunity to really push direct into those markets as well so great that they're on board within the industry.

SPEAKER_02: 2:59

I think they're just a great resource to rely on along with with Viva on trends and marketing because like you said Dan it's this is the focus is on direct marketing and they can help with that but you need the experts you know that are on the ground that really really understand what young Chinese people are relating to what they're engaging with and you know you can't get that level of brand engagement and loyalty when you're just using marketplaces.

SPEAKER_01: 3:24

The Chinese market is dipping there's no doubt about it and the the needs are changing of Chinese students I think that That's why it's super important to understand by looking at social media in China exactly what they're speaking about. How are they reviewing properties? How are they booking their properties? What do they think about them when they're here? What are they looking for? That's really the crux of it. We're not just in the case of build it and they will come anymore. You can't just build studios and expect to fill it with Chinese students now. Newsflash to any PBSA developers, that's just not how it's going to work, especially moving forward. So be careful on all the pure play studio development. But yeah, great that Tong are around and really sort of pioneering the sector, giving lots of feedback. I always call Gabe at Tong if I need any insight into the Chinese market. Same with Sam at Viva City, WeChat Mini Programme. So yes, great that you had a good time there.

SPEAKER_03: 4:14

And I think that's the point, Dan, is that actually there isn't... I think for so long, the Chinese market has just been left to just come and get there and throw a bit of money at agents, do a bit of something else and hope it'll be there. And I think those days are gone. So I think the more that people... And it's what we said, I think, the other week in-house, that if you've got a product and you understand who you're trying to get targeting that product to, and you split that out, that it's going to be 20% Chinese, 80% domestic, whatever that split is, you then target your marketing accordingly. And I think for so long, the market hasn't done that. And as you say, I think newsflash, those times of neglecting it is over and you really need to be focused on who you're trying to get in your building and how you do it. And having relationships with the like of Viva City and Tong is exactly the way to go.

SPEAKER_01: 4:55

Yeah. But I do think we still can't neglect the importance of the likes of you homes and stew living fun living or homes there's numerous other Chinese marketplaces that are very very important but I know that operators are also very focused about their own brand their own image and some have their own offices etc in China or India or elsewhere but but yeah I think taking that dual prong approach where you're working with marketplaces to you know push into the Chinese market but also then carefully curating your brand and doing your research and really understanding understanding what they want via those guys. I think that's certainly something. It sounds like a bit of a plug, to be honest with you. But no, I just think that, you know, Tong adds such value to the sector. And of course, you know, you have to pay for their services. But I do see that that's what they're doing. They are adding value to the sector. So, you know, more of that, the better.

SPEAKER_02: 5:46

It was really great going to Tong. I also met a guy called Bhavesh Bhat from Arna Accountancy Services. And we worked together many, many moons ago, and we were just having a catch up. You know, and although I'm not in the market for accountancy services, and he's from India and I just used the opportunity to really kind of pick his brains about what the student sentiment is there because he comes from from the sector and he's also got a university-aged daughter and I just thought you know how great is it that we've got these connections from all over the world in the sector that we've got and we really should be picking up the phone meeting people talking to people and just expanding our knowledge really and the key takeaways that that I learned about kind of Indian students is the way that they they do their English exams for example and before coming over here he felt that they were very outdated and kind of hadn't changed since when he did them. And obviously, you know, I think we'll all agree that a lot of Indian students have got excellent language skills, but that might not actually translate in an exam. And also about what a difference taking away the kind of the three-year visa has done for Indian students because they want to come here and they want to settle and they want to make some of their money back that they've spent so much money on getting here. And because the economy is on the rise in India and there's so many global companies there now I do think that you know we do need to watch how many Indian students are going to come here because if they can't work here in meaningful you know high-end employment you know that's kind of reflects the degree that they've done I'm not talking about staying here and working in Costa Coffee but actually you know doing something that kind of supports their livelihoods really then India can probably offer really you know really great careers now in lots of different industries so yeah no it was interesting like I said it was a bit of a an international global week and I just think that we've got those connections we've got the technology let's keep talking to our international colleagues.

SPEAKER_01: 7:40

So the first topic that we really want to cover is a little bit on marketplaces and excuse me for getting on my soapbox a bit and Sarah Deeney feel free to jump in as and when I'm conscious that whenever I talk about marketplaces it's a massive monologue so apologies to any of our listeners and to you two already. It has been the most fascinating year that I can remember and fascinating from a bystander's perspective I don't have any clients that are marketplaces I have done previously, but it has been a real struggle. Previously, the last couple of years post-COVID, there was no availability. Operators were living the dream, shooting fish in a barrel, whatever you want to say about that. It's been reasonably easy for operators to fill beds. So there's been no availability late on when most of the marketplaces do their business. So this year, when actually the international numbers have dropped and it's been harder for the operators to fill, I think that's caught Some of the marketplace is short because there is actually plenty of availability. But what they've done is because of the availability crunch last year and the year before, they've locked up some nominations agreements with some operators. And that, firstly, as I said in the last episode, is a very risky game. There are millions of pounds at stake. And you don't want to have to have the capital that you've raised to go into supporting cash flow because you've nominated or you don't want to be liable for a huge amount of bets. And I think it's great that the operators have made the marketplaces put their money where their mouth is. But I just don't see that that has been particularly well used. I think that some operators are now going to hold marketplaces to those voids. And I think that will be detrimental to the relationships of those marketplaces. And I think it will be definitely detrimental to the finances of some of those marketplaces. So I would really be very cautious if I was a marketplace taking nominations agreements next year. year and also the operators as well I think they need to watch that a little bit I know that the cancellation rates people have talked to me they've asked like what's going on with the cancellation rates and these the fraudulent bookings I don't see that there's a huge amount of fraudulent bookings at the moment I don't know if you guys are seeing anything different in any clients that you're speaking to

SPEAKER_02: 9:51

I wouldn't say fraudulent bookings I think there's some concern with I guess the flip-flopping of booking and then cancelling quite quickly afterwards and I think it might just be a reflection of where we are that there is more choice So they kind of maybe start an application with one operator and then their heads are turned by another operator who's maybe either incentivising the student or incentivising the marketplace. So I don't think there's nothing fraudulent about that. If they're not contracted at the stage that they start the application, then there's nothing stopping them, stopping that application and going to another operator. That's kind of what I'm seeing.

SPEAKER_01: 10:28

It's been less fraudulent activity and less sort of price gouging by students or market places there's definitely some availability holdings some of them are sort of holding back and you know there's a there's a few marketplaces here and there that will hold bookings with a fake name as it were but it's definitely on less of a scale than it was this time last year i do think we've nipped that in the bud a bit by being very open about it but the conversion rates for marketplaces are much lower than they have been previously and by much lower i mean i think most of the indian marketplaces are around the sort of 50 conversion rate from sort of inquiry through to, or I say from booking effectively, so that the student has confirmed with the marketplace that they've booked a place right the way through to actual check-in. So there does seem to be quite a heavy drop-off for the Indian students and the Indian marketplace at marketplaces. But also, I think from the Chinese side of things as well, I think some of those marketplaces are down in terms of their conversion rates too. So it's getting trickier to say that you are working with a marketplace and it's they're not just a lead generator. And I think that tipping point is 50%, in my opinion, in terms of what that's going to look like to generate the bookings needed. So yeah, I'm a bit concerned that marketplaces are becoming lead generators, and that's something definitely that we are going to need to watch. All operators are very, very hot on that, this year especially. And there's been such a focus on those domestic students, because this is not relevant for China. The Chinese marketplaces are not sending domestic students. They're sending some other students from elsewhere, from India, from other locations too, but they just are not sending those domestic students. The Indian marketplaces in particular are sending domestic students. A lot of that is because they've taken investment, they want to grow, they want to scale, and that's not necessarily popular with operators in the UK who see that as fishing in their pond. I've talked about this at length on previous episodes.

SPEAKER_02: 12:27

Is it also the case, Dan, that obviously kind of Chinese social media, Chinese internet is is cut off from the rest of the world. So we can't kind of influence their marketing and their PPC. But for Indian people, they can access Google the same as everyone else. So if an Indian marketplace is putting money behind PPC, it's a free-for-all. Anyone can see it. Obviously, you can weight it and you can target people in India and they're clearly not only targeting that audience in India. But isn't it just a free-for-all?

SPEAKER_03: 12:57

I was just going to say, is there room for more collaboration between marketplaces and operators? Back to what Sarah was saying about speaking to her connections around kind of Indian students and the feelings in the market there around not wanting to come because of the visa changes that actually it feels that there's an opportunity for people to come together and say actually what's going on how many students do you think is going to come how many do you think I'm going to get in this building and therefore have a pre-planned strategy to say this is our target this is what we want to reach and we're going to work together to do that I don't often get a sense that those conversations are really happening it's more kind of you just send me some students and we'll see where we get to I

SPEAKER_01: 13:32

hear both sides of this so I hear the marketplace is saying to me how do we open up the doors with the operators how do we stop them shutting down the domestic students and make them give us availability across the whole portfolio and not you know turn the taps off as and when they think they're going to fill basically how to create a long-term sustainable position for the marketplaces within PBSA and the booking cycle I also have the PBSA operators saying marketplaces in some circumstances are taking the piss to be completely honest with you and a lot of that is around bidding on key search terms and that might be brand search terms or property search terms or not taking property listings down where they can't work with them. It's also there is such a frustration from operators that Indian marketplaces in particular and I'm not going to tar all marketplaces with the same brush but I do feel that Indian marketplaces in particular are being very aggressive about how they scale and where they see their position. Operators in my opinion see the marketplaces as a reach into an internal market. Not necessarily as a free-for-all, whereby you can take a student from absolutely everywhere, because there are certain markets, the UK, India, etc., that have very different access requirements. So it's very difficult for a UK operator to access China or India, therefore you need help. And that's where the marketplaces have stepped in, they consolidate all of the options, they help the student, they help the operator, brilliant. But when they get investment on board, or they're looking to scale at all costs for whatever reason, that model changes completely. And it means that the marketplaces are now focused on, I don't care where the student's from, I'm just going to give that operator a student and book them into a bed. Some operators like that. I think the majority of operators don't. But in this year, towards the end of this year, in certain markets in particular, I have seen commission rise to 22%. That's the highest commission that I've seen. It's the highest commission I've ever seen. and it's the usual suspects it's your Coventry it's your Sheffield but it's also now Nottingham it's going to be Bristol it's going to be Glasgow there's going to be so many other places where it is just going to become more of a struggle to fill there's a lot of locations that are now in the teens with that commission and I think that you know I represent investors in their joint ventures or overseeing third party operators in lots of different locations about 22 different UK cities and And we've been working with the investors to say, look, we know how to generate bookings through the marketplaces, but we know that the taps can't get turned on because the operator in question doesn't have a good relationship with the marketplaces or this particular marketplace, even though we know they could fill beds for them right now. And that's because across their portfolio, they may have a policy of not paying commission on domestic students, or they may have slower payment terms, or they may be generally not working hand in glove with... that marketplace and that is a real struggle for me asset managing those properties knowing how the operators work and the marketplaces work when I understand what the operator is trying to do but for that property in that city the right thing to do is just to take all comers it just doesn't matter so it is a real balancing act this year with more availability at the end of the market. Marketplaces have absolutely cleaned up, but I don't actually think that there were that many students in that marketplace pool to really make a big difference.

SPEAKER_02: 17:06

I mean, through all my years of being a sales and marketing director and having what I would consider to be really great relationships with a lot of the marketplaces, the understanding of the cycle and the processes was that they're spending a huge amount of money on marketing. That's how they generate leads into the buildings. So they need a bit of certainty about their commission because they need to know how much money they've got to spend on advertising. So I'm not sure how much of an impact throwing 22% at them in September is going to make because that's not money that they've cashed. That's a promise. It doesn't solidify until that student's moved in. And surely they can't then suddenly massively uplift marketing based on that. And I saw Sir Abarora from University Living say, make a post about him looking for more transparency and more standardisation. And actually, is it better if you've got the money and you've got the budget that you just start at 10% or 12% commission And you don't change it. And you don't put limits on it. You don't restrict buildings or cities. And they know exactly where they are. And surely that's a better way to create a relationship and create some predictability and allow the marketplace to plan.

SPEAKER_01: 18:23

I think this year has really surprised a lot of people in terms of the drop in international demand. And I think we're about 15% down on international students overall. India taking the biggest hit, China slightly less so. But it's not been particularly pretty in particular for postgrads who are very prone to using marketplaces because they don't have any availability or accommodation in HMOs or with universities directly. You need to have a sustainable long-term strategy with marketplaces. And whilst I appreciate that there are a lot of operators out there saying this is totally unsustainable, the way we're working and how much we're paying, I completely agree with that. But this year, Operators have needed the marketplaces, especially later on in the market, and that's been a real struggle for them to swallow their pride almost and say, OK, we're just going to pay all this massive commission. Well, no, what you could do is make sure that you keep the taps on throughout the year at a lower commission rate. And let me be really clear, anything in the teens is totally unsustainable. If your commission is 10% or more for a marketplace, it's not going to be sustainable. I mean, obviously, your market is oversupplied and or you have totally got your pricing wrong. And I think that you can see it in those locations where it's a struggle. They are where the commission is highest. Of course, they are the most supplied markets, the most mature markets. But I do think that operators need to take a bit of a step back and have a look at how they're working with those marketplaces to create a long term sustainable sector. They don't own marketplaces anything, though. Let me be really clear. Marketplaces are have come in from about 2015 onwards, tried to carve out a niche for themselves, and they've taken bookings as and where they could get them. So it's gone from being a reach into an international market to being, we'll just send you any bookings, we're going to get really good at Google. And that's the difference. They've started to say, in the last five years, for example, just pre-COVID, we're going to get absolutely amazing at SEO and PPC, and we're going to nail that side of things. We're going to own the digital real estate for PBSA. If you search student accommodation Sheffield, you will definitely pick up all of the big marketplaces. And I just think that is definitely a race to the bottom. I've seen million dollar a month PPC spend. No one wins there but Google. And the operators are at the minute trying to work out how marketplaces fit in, how they add value, but also marketplaces are doing that too. I am totally caught in the middle. At Student Housing Consultancy, we have worked with marketplaces before. We work a lot with operators on their marketplace strategy, but I see both sides of the argument there I don't like a huge proportion of marketplaces cohort being domestic students. I don't like the reliance on PPC or Google. I hate the aggressive nature of some of these marketplaces towards bidding on brand search terms and property keywords, etc. Because I think you're there to add value. And that's what your service should be doing. You shouldn't be rubbing people up the wrong way. And whenever you mention certain marketplaces, it's like nails down a blackboard to some operators. And that is Something that has to change. But how do you do that when marketplaces are really driving that success story to their investors saying, right, we're going to absolutely nail growth in new markets? And I'm telling you now that new growth into new markets for a lot of marketplaces is not going to come because... US, which is seen as one of the holy grails, very difficult to get into. I've tried my best before, but yeah, I mean, COVID kind of paid to some of the work that was done there, but it's incredibly difficult to crack. HMO market, incredibly difficult to crack. Europe, every single country is totally different. So what are you left with? UK being the cash cow, little bit of Australia here and there, maybe 15% of your bookings might be Australia, maybe 2% to 5% is Europe. It is just going to be a real struggle for a marketplace to just to their investors are actually we have to double down on domestic student numbers in the UK because we can't get more Indian students coming and we can't launch into new markets so it's a real quandary for marketplaces but also how operators can sort of work with them to help drive them on a more sustainable long-term path to really add value. So I'm trying to position myself there as well, but it's tricky.

SPEAKER_02: 22:58

What we always say is your domestic market is your bread and butter. There will always be domestic students, but unfortunately... you know you're in a chicken and egg situation a vicious cycle because the prices are too high for a lot of domestic students so people are relying on international students with the myth that the international students can afford it but you're paying so much to generate those bookings and you know I've been there I've had this debate myself many times being a sales and marketing director in the past that I can't rely on the international market because they come in so much later so I've still got to have a domestic first strategy and a lot of that means that the is committed up front. So you're double paying really for bookings. And what we would like to see, I guess, is more product and more marketing dedicated to the domestic market. And then you can fill the gaps with international students. But I think it's a very, very risky strategy to rely, as we have seen in the last year, on international students to fill your buildings. Because It's too much of a risk. The economy can change at any point. You can have an international disaster. and everything's changed but your domestic student will will always be there if you get the product and the price right

SPEAKER_03: 24:15

but there's so many different variables and i think this is why strategy is so important and taking doing that research up front say actually in this property in this location we're seeing this happening and and we've said this before there isn't enough forward thinking in this sector it's always backward thinking it's always well this is what happened last year so that's what's going to happen again and i think the last two or three years has proved the point that no that isn't going to happen again and actually you need to be taking as much information from all your different contacts and colleagues as possible to actually you know be a futurist and be a bit kind of predicting that actually we think it might swing this way and it enables you to pivot and really you should as you say Sarah be going in and saying well my early bookings I'm going to go for domestic and this is how I'm going to get a domestic but I know that I've probably got X amount coming in from agents from an international market later on in the year so therefore I know that but you've done that with a conversation with those agents not just assuming that's going to happen and I think for far too much we are not doing that work and also it's about as you say Dan I think it's about there's a national level marketing and then there's a local level marketing and I think far too often everyone looks at the national and goes well this is how we market nationally and actually that's where you really need your site teams and your people across the business to really say well actually this is what the nuances are happening in this site so we need something yes that's great what you're doing nationally but we need to pivot this way a little bit in this location because of what's happening and we're still so slow to react in those things and I think you know we talk about all the time with our clients and with our training and all the work we do. But there is more that can be done in that collaboration and understanding and that actually having a devised strategy at the start of the season.

SPEAKER_01: 25:55

Oh, for sure. I think we've just got a bit lazy, if I'm being honest, and a bit overly reliant on certain marketplaces. Don't get me wrong. I think some of them are doing a fantastic job. Like there are, U-Homes, for example, are the dominant marketplace in China, you know, bringing in tens of thousands of students into the UK, primarily for And that is definitely seen as a value add. You could put all of the other Chinese marketplaces in the same bucket because they're in a very different situation. I just think that we need to do more crystal ball gazing as an industry. We need to understand marketplaces better. I do think that this is going to sound really arrogant, but marketplaces do need to know their place. They need to know that they're there to add value, not carve out an entire niche for themselves. And that has to be by working hand in glove. So the moment that a marketplace is seen as a huge competitor, which a lot of the marketplaces are, especially if those marketplaces are advertising on Google or being really aggressive on brand search terms. And then if that marketplace is like, well, great, well, let's drive the commission. We think that 22% will work for you in Coventry or Sheffield later on in the market. That for me, it's market driven to a certain extent. And I've got clients who are happy to pay that at the Moana I say happy they're definitely not happy to pay that which is one part of the problem but I just think that marketplaces just need to be really careful take stock after this year as to how many bookings we're actually bringing through and what the conversion rate is looking like are you a lead generator where are you actually adding value to the system what's your reputation like because I get a lot of marketplaces contact me and say could you just help me with this potential client or this current client because they're not playing ball and we want them to or vice The operators are saying to me, what's going on with this marketplace? Because the conversion rates are crap or they're being really difficult or they're really driving commission. Just something that we're, I think, again, I keep saying recalibration, but the great news is I hear other people using that word a lot at the moment with pricing. I think that this all comes back to pricing. We overshot the pricing this year in a lot of locations in PBSA. You know, operators and investors made hay while the sun shone over the last two years. It was a great party. We're sobering up a little bit this year because the availability is still there in some places, or it's been a lot more difficult to fill, and that has brought down the revenue assumptions. For even some of the better, bigger operators, premium sector, affordable sector, it's become more tricky to fill at the right revenue levels. And I think that that has played into marketplaces' hands to a certain extent But because I think there is a bit of a focus on later in the market, rather than drop your prices, well, just go to a marketplace, offer them more commission. No, I think this year was the year where if you needed to get some traction, you needed to do it in March, May, you know, between March and May to actually drop your prices to get ready for later on in the year. I think a lot of operators and investors were very slow to react. And that then meant that later on, it was like a fire sale, flash sales left, right and center, loads of commission for marketplaces. And that was a really interesting thing to see, very difficult to be part of and try to really steer the ship for some of those investors. But it is definitely all linked to affordability. We pushed the prices very high over the last year, well, three years realistically, post-COVID. And this was the first year of a bit of a recalibration. So I do see that that is going to play into next year. I would like to see... earlier focus on the domestic market that's why I keep saying to people get your prices out early because you are going to need to focus on the domestic market and I would be I think that would be a bit of a pick up from Australia pretty much closing down to a lot of international students but I would say that's marginal gains I think the Indian market will recover a little bit China will probably continue the plateau or the slight downturn 2, 3, 4 percent maybe 5 and So we do need to be careful of the fact that some of these numbers may drop on the international side, but we have to be a bit more agile and not just focused on, right, well, we know that you homes will fill this amount or Amber or University Living or Uniaco or whoever else are going to fill a certain amount. I think you've got to do some crystal ball gazing, but you've got to be very realistic on your pricing. Otherwise, you will be left with a fire sale later on, massive incentives, big marketplace commissions. And that's when I get the call saying, what the hell's going on? Why are we at 22% in... whatever and why is it 15% in Southampton or you know it's been the most challenging year I think between marketplaces and operators

SPEAKER_03: 30:40

and I think that's why you optimise your rate not maximise your rate and I think for far too long we've gone for the maximise rate and it's what would be what is the best possible price I can give for this product for the customer that I'm targeting and that is the golden triangle

SPEAKER_01: 30:54

Deanie that's the tagline for the podcast surely optimise your rate do not maximise your rate and now there'll be some investors that are of slightly concerned by by saying that but i ultimately think investors want full buildings not just because it's better for their returns but better for the community better for the students i think there are some locations that are totally out of kilter at the minute it's being one of them nottingham is another one sheffield obviously coventry bristol's about to be there's lots of pipeline coming on board need to be really careful with that underwriting i can already see a few people that are overexposed and i am a bit concerned for next year for them in certain location. So just something to watch.

SPEAKER_03: 31:34

Just on that there as well, it's not only that. If you've got a rate that is slightly out of kilter with the product and the target market, you've got to work an awful lot harder for marketing because you're spending more money on marketing. So actually, are you really gaining anything at the end of it when it comes down to what your profits are and your revenue is at the end? Probably not. And that's what doesn't get taken into account.

SPEAKER_01: 31:51

Everyone's so scared of dropping their rates because of the impact on value. And there's a lot of developers or investors that are at a bit of a critical stage with their assets. And if they drop those rates, significantly then you know that's going to really impact the value so it is a it's a quandary it's an exciting balance to try and get right between you know obviously the whole supply and demand balance is age old in PBSA but it's never been more exposed than by this year and the drop in international students and Chinese students and also the fact that you know I'm not going to labour this point on BTR but the fact that a lot of Chinese students in particular are going into BTR and for good reason. Totally understand that. So underwriting has to be right. I do a lot of work with some of the agents who are selling these developments or doing some of the feasibility studies and we do them ourselves as well. We just paint a bit of a picture of what's going on in that city because I still don't think we're talking properly about the data and about the student to bed ratios and I'm banging that drum on LinkedIn and on this podcast all the time that we have to be talking in more accurate terms and more detail about the student to bed ratios and I understand that sales agents are going to paint a positive picture of the PBSA investment and development landscape because they are incentivized to do so they get paid when the whole system works and we're not this isn't a bubble i'm not saying that the bubble's about to burst or anything like that and i'm i'm not being a naysayer or a prophet of doom or i just think we need to be much more realistic when we take into account some of these figures when doing those that underwriting if we can do that we'll have more affordable stock yes it will be more difficult to build yes we will potentially even build less but we need to make sure that we're much better at underwriting and taking the data on board and also then painting the picture around it most of the feasibility study work that we do is effectively taking the data painting a picture of what's happening in that market by speaking to the universities the marketplaces the students themselves and really trying to understand what's going on in that location but yeah there is still a fundamental disconnect I think between you know what a feasibility study may say from a sales agent and the actual picture of what's going on in the market and that saying that I am conscious that that's not going to make me particularly popular or with sales agents, but I do think that it's something that we just need to be a bit mindful of, the fact that there is normally another side to the story there. Crikey, that really escalated. But yeah, thank you ever so much for listening. Thank you once again to our sponsor, My Student Halls, for sponsoring this series. If you do need any further marketing, do get in touch with Dan and the team. Well worth thinking about that for this coming year. They do a great job of bringing those leads into your property. We will be back next week for some more news and insight. Please do subscribe and share.