The balance between occupancy and revenue, the role of data analytics, and how the sector is reacting to the Renters' Rights Bill

Sarah, Deenie and Dan are back for a new episode of Housed, they talk about the balance between occupancy and revenue, the role of data analytics, and how the sector is reacting to the Renters' Rights Bill
 
Here are some key takeaways from the conversation:
 
- Does 100% occupancy hide a multitude of sins?
- The importance of data in driving decisions.
- If buildings meet occupancy targets, do investors care how they were reached?
- How important are rebookers?
- How the Renters’ Rights Bill is shaking up the industry (or not)

We are excited to announce a new sponsor for this season, theEword - true experts in digital marketing specifically for the property sector.

We are also delighted that MyStudentHalls are continuing to sponsor the podcast, Mystudenthalls.com - Find your ideal student accommodation across the UK.

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_03: 0:00

Hello and welcome to the fourth episode in the brand new season of Housed, the Shared Living Podcast. I'm Dan Smith from Resi Consultancy.

SPEAKER_02: 0:07

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

SPEAKER_03: 0:13

First things first, a quick word from one of our sponsors.

SPEAKER_01: 0:16

This episode of Housed, the Shared Living Podcast, is brought to you by The E-Word. digital experts in driving leads and putting people in your places.

SPEAKER_03: 0:24

We're delighted to be welcoming the eWords to our housed family. Make sure you do drop them a line if you need to put your digital plan in safe hands. Obviously, it's all important, especially at the moment, Very big focus on cost per acquisition in particular. So do reach out to Marielle and the team and do check out the episode that Marielle was involved with relatively recently. We've also loved having Dan and the team at my student halls involved in housed. So they are also sponsoring this season. More from them a little bit later. Thanks very much to them for sticking with us. So this is the first time in a few weeks that we've actually been together with my honeymoon and Sarah's jury service. And it's certainly been a long month. It is still January And Christmas feels like absolutely ages ago. So Sarah Deeney, what's new for you guys?

SPEAKER_02: 1:10

Yeah, I agree. On the day that this goes out on Friday, it will finally be the last day of January. So well done, everyone. You made it. It does seem so long ago that it was Christmas. And for me, yeah, kind of went into the Christmas break and then straight into jury service. So it felt even longer. Yeah, I've been back in work a couple of weeks. It's been busy. The property marketing strategists, we've had lots of new inquiries for new business, really big variety of potential clients. as well. And kind of quite a big focus, I'd say, from developers and investors as well, kind of a lot of people kind of looking maybe to pivot to either self-management or hybrid management and looking for some marketing support. So yeah, we're keeping busy, you know, with lots of proposals as well. I don't know, Dan, you've obviously been out of the country for a little bit, and I'm sure you haven't been away from LinkedIn, because like, as if that would ever happen. But there is still the rumblings from the renters rights bill what that might mean so we are kind of experiencing a lot of kind of waiting and seeing but also people really really hungry for for content and guidance around that as well so so we're busy with some of our clients creating you know content and and support around that as well we've also been doing quite a lot of training as well at the start of the year which has been great and i think that's caused me to reflect a little bit on i guess a hope that there is more budget going into training and development in the sector. I kind of always, you know, I know that marketing is one that always gets forgotten as departments around training. So I think it's great that we are doing some sales training with a little bit of marketing in there. And I just hope that is kind of, I guess, growing across the board. I mean, I put a post out yesterday because I do a bit of work with the apprenticeships and the marketing apprenticeship standard. And it struck me that I don't think there's probably any marketing apprenticeships in this sector and there probably should be. So I guess my hope is that people are kind of looking at their budgets, thinking about training, thinking about all the things we talk about staff and developing skills and looking after their staff because they're the ones that deliver your product and hoping that is something that is shifting in the sector, I guess.

SPEAKER_03: 3:18

I totally agree. And it was actually Zaf on the last episode, you know, thanks ever so much to Zaf for stepping in whilst I was on honeymoon, who was talking about hiring from within your resident pool. And I think that's something really relevant, something you go do a hell of a lot of as well. I think it's 40% of their staff are actually made up of residents so yeah there's a long way to go in terms of those apprenticeships and bringing people through into pbsa and getting them excited then focusing on that training and development piece to really get the best sort of possible possible caliber of people well it's good that you're busy yeah

SPEAKER_02: 3:53

I just wanted to say that there is a new apprenticeship standard out there that I personally helped to develop. So I know it delivers what marketing teams need now for entry level marketeers. So if you are looking at boosting your marketing department, do reach out to a training provider and go and utilise that apprenticeship because it's got all the things that I know a marketeer needs in it because I helped develop it. And if you do want to help me develop a marketing apprenticeship, please come and join my Trailblazer group. And Deanie, is that a degree level apprenticeship? Well, this is interesting. There is a degree level marketing apprenticeship available. But part of the trial browser group that I'm putting together is to review all those steps in marketing to get you to degree level based on where we've started with the entry level so it's kind of taking them for the modern world where you know what we've done with the multi-channel marketeer apprenticeship is that it's very much about marketing on all landscapes including digital instead of that separation between this is a digital marketeer and this is a marketeer because that doesn't exist you don't have a marketeer that doesn't do digital so it's kind of combining all those channels into one so that's what we want to do with the rest of them so I'm looking for marketeers or employers of marketeers to come and help me develop that apprenticeship so it meets the needs of employers across the country but if you are looking to boost your marketing team do go and check out the multi-channel marketeer because it should have all the skills that you need. No it's really interesting thank you for sharing that and I think you know I'm in the the throes of stepchildren doing GCSEs and A-levels so those kind of next step careers and options it's absolutely mind-blowing and there's lots of options out there but they're also like the government are also losing some at the same time so we're looking at some of the the courses and then by the time it's kind of ready to apply, yet they've gone. So yeah, and well, marketing, I think, is one that will be here to stay. People always need marketeers in their business. Yeah, there are T-levels now as well, which are kind of similar to an apprenticeship as well. So yeah, there is lots of different layers out there and different lots of options.

SPEAKER_03: 5:56

I promise you, I did get some time to rest and relax on my honeymoon. All of my LinkedIn posts were scheduled. And although I did secretly do some work, Em's not going to listen to this, so I don't have to worry too much about that but but yeah there were a couple of fairly early mornings where i was able to just nip outside and do a little bit of work i had a big pbsa tender process to close out that didn't quite complete just before i left and i wanted to stop thinking about that so made sure i got that done and informed all the operators of where that was up to but but yeah did manage to switch off so thank you very much for manning the fort in house in particular so i know we want to come on to occupancy in particular let's cover this as a relatively broad subject and I know Sarah's already planned a few things to chat about, but I do think we need to really focus on this. Firstly, the data is really difficult to get hold of, and there are some slight issues around sharing that data from a competition authority. That's why Unite will share their data in their reports and their quarterly reports in particular. but they won't share it with the likes of Stu Rents or anyone else who are sort of collecting some of that occupancy data. So there's a bit of a challenge there. A lot of the work that we do at Resi Consultancy with our market reports is to actually try and understand and ascertain exactly what the occupancy level is in certain cities. We don't typically focus like, well, your competitor is at this occupancy or whatever it is, but as a city, we can roughly understand where each sector is up to. But very few people are actually being truly honest about their occupancy. There's a bit of inflation of figures, etc. So, yeah, does 100% occupancy, you know, is that really true? Do we really believe that anymore? I think that that kind of covers a multitude of sins, to be honest. What are your thoughts, Sarah?

SPEAKER_02: 7:46

I mean, I believe it, but what does it take to get there? You know, most operators will end up in the PBSA sector at 100% occupancy or, you know, between 95% and 100%, generally speaking, across the board. But, you know, so much happens in that season between starting marketing in November and kind of the end of September. So what it does hide is where there's been price reductions or where there's been incentives or how much marketing spend's gone into getting there. You know, all the blood, sweat, toil and tears from the staff to make that happen. As Dini said, we're doing sales and marketing training at the moment. And I guess a kind of sub-brand of ours is our mystery shopping service as well, which we use to inform how we facilitate sales and marketing training because it's bespoke to the client. And we're so grateful to the clients that make that investment into mystery shopping. and sales and marketing training, because they're acknowledging, okay, we might have got to 100%, but could we do it better? Could we do it more efficiently? Could we have better ROI on marketing spend? Yeah, so I think it's really telling that despite some operators getting to 100%, they still recognize that they could do it better, more efficient, better ROI, and develop those sales skills. We're not talking about customer service. I think we're comfortable as a sector with the service that our staff provide, but it's all about those hard sales skills, really. So, yeah, I think you're right, Dan. I think it does hide a multitude of sins. And, you know, everyone's so exhausted by the end of the season. Do they just get there and be like, oh, thank God for that, without kind of looking back at how the processes could be made better? Is that the sense that you get as well, Deanie?

UNKNOWN: 9:33

Yeah.

SPEAKER_02: 9:33

Well, I think there's, I think it comes down to what our, one of our big issues is in the sector is the lack of data and the lack of ability to track those sales from kind of first lead generation into a booking. So actually people aren't really understanding their ROI. And I think this is the thing, you know, how often do you go into client and they say, well, actually we're spending, you know, 500 pounds per lead and therefore we're we need to make sure we secure that lead or deal with that lead in the most appropriate way. But I think that people aren't seeing that as a monetary or a cost element. So therefore all they're thinking is, oh, it's occupied, it's occupied. It doesn't matter if it took that room, you know, 10 times loss of a lead that costs£500 to get that occupied. All they care about is, is it occupied? And I think that's where we need to just get a bit smarter. And we do need systems to do this for us. You know, it's a problem in BTR. It's a problem in PBSA. We need to be able to track this data because that makes us smarter. It makes us able to pivot. It makes us able to understand what's working and not working in a far more efficient and smart way. But yeah, I think that's the problem. People aren't, aren't looking at all the data sets because they have some of that data. They don't have all that data, but they're just looking at, is it occupied? Is it full? Well, that's okay.

SPEAKER_03: 10:50

Yeah, we've just, at Resley Consultancy, we've just started working with student crowd to really bring another depth of data and some more information on occupancy and discounting, et cetera. It's really difficult to get that occupancy. You can't get it on a property by property basis. And I don't necessarily think we should be pushing that out there too much. partly because of, yeah, there's been some real issues, especially in the US with the competition commission and effectively creating a cartel with hotels in particular, but also with some EBSA as well, you know, sharing their occupancy. It's there for driving up rents in some locations, of course, in some it will be pushing it down and that's absolutely fine. PPSA or BTR or anywhere else cannot operate like the hospitality sector can, I don't think, partly because these are sort of typical single annual purchases or six-monthly or three-monthly rather than the nightly purchases whereby there's much more fluctuation in price and that typical dynamic pricing so i think getting that data right is is really important on a city by city level you know students have been brilliant putting out there that coventry is an average of 70 percent occupied within pbsa that would definitely inform pricing for the entire rest of the market and i know student crowd are very focused on showcasing the discounting that's going on later on in the market as well to help people set their rents too so there's finding that balance between making sure that you understand the occupancy in each city and actually driving the wrong behaviors with investors then putting prices up or you know then being reliant on on those late discounting but there's so much of that in the market at the moment have you seen a lot of discounts we saw a lot of discounts you know later on in last market have you seen a lot of discounts or incentives now to make people sort of book in sort of front loads, the student booking market in particular?

SPEAKER_02: 12:44

I haven't, to be honest. I think from, I guess, what we had access to at the beginning of the season, I think there was a lot of focus on rebookers and I've seen quite a lot of operators come out with quite impressive statistics about their rebooker levels, which is, you know, absolutely, you know, the right thing to do, you know, reward your loyal customers. I think as a kind of a health warning to that is you're returners give you diminishing rewards because they stop returning at some point. So you have to make sure that you can refill the bucket with first years or second years to give you enough. If you kind of exhaust your returners, you'll get to the third year in the cycle and then you'll have to start again. And we don't see people's marketing budgets be reflective of data like that. When we do marketing audits and we create budgets, we certainly do, but you need to work out how many new business you're going to have to spend money on versus returning business. And if you've got 30% of your building as returners, you've got to recruit 70% more people. But the next year, have a look at your data. can you mathematically get to 30% again of returners? You might not be able to. So that will fluctuate. So yeah, no, I haven't really seen massive discounts at this time of year, but is it because everybody's returners has done really well and actually next year, if that went really well, it's unlikely to go as well again next year potentially and we might see discounts at this time of year. I mean, I think people were a bit more conservative, I guess, with rates this year. which I think is probably, you know, it makes, you know, I'm a big advocate of get the rate right and then you shouldn't have to discount because you should have the value and the proposition and the rate right that it all makes sense. And you should have analysed that in a way that you're going to sell at the right rates you don't need to discount. So I'm hoping that that is where we're at. I mean, I get a sense that the market is still quite tough, but no, I haven't seen discounting yet. And I guess there is an argument that if you've got a conservative rate that, you know, you stick with that. And I guess there is some dynamic with quote marks attached to it, pricing plans planned for the future.

SPEAKER_03: 15:04

I've seen a bit of discounting already. I think we've been more realistic as a sector within PBSA in particular about setting our rates for this year. So great. Investors have taken heed of some pretty challenging markets out there. Some of them haven't dropped their prices by enough. And also, yes, you do want to be yielding your rents as and where you can as well. But I think I think where the markets have struggled last year, we have seen a more realistic recalibration of those rents. The difficulty that I think we've got as a sector is that the data that's out there, yes, student crowd, great data, you can pull that apart, no end, but we've got benchmarks in Unite and Empiric that release their occupancy data, and they have to because they're listed entities. is way ahead of where it thought it would be. But it's taking more and more nominations agreements each year. So it has less to do with direct let. It has less direct let beds to fill. They have a significant portion of their beds are then filled by agents. So they don't really have a huge amount of work to do. That's not saying that they're shooting fish in a barrel. They have to work hard and they've got a good team, but they have less beds to fill direct let. And that means that everyone comparing themselves to the 98% occupancy that Unite has, not forgetting that also they are jettisoning anything in a tier two, tier three kind of city or exposed to a tier two, tier three university, which a lot of other operators don't have that luxury. I just think that Unite and Empiric are quite unrealistic benchmarks for everybody else to follow in terms of occupancy in particular, because of the focus on nominations from Unite in particular. Yeah, that's certainly something to think about. But I think last year, in some cases, it was either revenue or occupancy that took a hit. And the best operators and investors, in my opinion, focused on that occupancy in some particularly challenging markets. But that was to the detriment of revenue. And I had a lot of investors reach out to me and the team last year and say, hang on a minute, what's happening? We're not getting the returns that we thought because the revenue is well down. But the occupancy is good. That for me was a sign of an operator sweating the asset as hard as they possibly could, focusing on the occupancy. There is no point in having an empty bed. I just don't understand anyone that is desperately trying to guard those rack rates, the overall rental figure, when you're then sitting on 80%, 70%, sometimes 35% in one particular instance occupancy. So yeah, I think there's... There's got to be some realism here that it takes a real fine balance to manage that revenue and occupancy. And sometimes, and in particular in challenging markets, you cannot have both. So make your call. Do you want the occupancy or revenue? I do think that occupancy is definitely going to be something that we're going to be focusing on quite heavily, but we are still very much struggling with the data. And I think we'll be focusing on it primarily because It's actually quite tough out there, I think. It's probably something to come on to after a short break. So, yeah, let's take a break and hear from our sponsor.

SPEAKER_00: 18:22

Season three of Housed, sponsored by mystudenthalls.com. Let's find your place.

SPEAKER_03: 18:31

Thanks very much again to Dan and the team at My Student Halls for supporting us for a second season. We're very glad that our listeners are actually listening. mentioning house when they're signing up with student halls. And we can't recommend them enough. We've all used them in previous jobs. And my student halls is certainly a company that I would recommend to work with when you are listing your properties. So yeah, thanks very much to the team at my student halls. But back to our chats. We've talked about occupancy. We're starting to think about whether or not it's actually a bit of a tough market out there. Sarah Dean, you're obviously doing a lot of work with operators. How are you seeing the market at the moment?

SPEAKER_02: 19:10

I think the ones we're speaking to are saying it's a tough market and it fails across the board, really, not in particular locations. It is just a tough market out there. I think, you know, as we've said in many episodes, the demographics are changing, which means the customer's changing. And I'm not sure that we have, we're adjusting and pivoting enough really to adjust for those changing marketplaces. And that makes it tough. And part of that is product led. I mean, I know student crowd is, latest report that they released just before Christmas said that actually international students for the first time actually their preference is an en suite room which says something when actually largely we've built studios for international students and that's what the markets are kind of awash with so it is going to be a challenge I think and it is going to be a challenging market because as we always say you know it it starts with getting the product right. If you don't get the product right for your customer, then it's going to be a hard sell. I was going to say, I don't, you know, we've talked quite a lot about it, about sort of changing course lengths and different kind of demands. I haven't seen that flexibility in the market yet. And I still feel like semester lets, et cetera, are a plan B. And it's only when you've exhausted all options on your kind of longer contracts that people pivot to it. And you can't market them properly. You can't kind of position yourselves with, you know, course providers if you're only deciding to suddenly in September launch a semester let. and the systems aren't geared up for it and the marketing's not geared up for it, there's never a budget left at the end to then market semesterlets. So I'm still not seeing that as like a sort of, I guess, a strategic plan. I still feel, you know, and I don't know if that's just because actually we're not there yet as a society of this kind of, you know, different course lengths and different types of learning. But, you know, you just talked about apprenticeships, Deanie, but as we've discussed before, you know, apprentices are not counted as full-time students therefore by planning permission they are not allowed to live in pbsa you know so that's one area that needs improvement okay operators can't deal with that directly themselves but yeah i still yeah i think whilst the market is tough this is the time to look at different models i think the other thing that's happening here and i Again, I just, it worries me that I'm not really seeing the PBSA sector in particular react is around the renter's rights. And actually that's going to give a degree of flexibility to students that decide not to go in PBSA. And yet I haven't seen anyone adjust their marketing, adjust their product, adjust their model yet to counteract that, which is coming in this season. So it just, it's that kind of that gut kind of, feeling that I get that I'm like, oh, are we really going to be that slow to react again? That we can't adjust, we can't be brave to just go, right, try something new.

SPEAKER_03: 22:09

We definitely are. I mean, I started the year saying we're moving into an era of flexibility and that is it's very slow to play out and it's like a large resort you're right sarah it's like a plan b everyone will suddenly say in september or august actually we should we should do some uh some semesters and try and pick up some january bookings maybe maybe we'll get a few full semester bookings each of the clients that i do that with i try and do it as in in advance as much in advance as possible and it does very well I'm talking about backfilling, so your fall semester, your January semester. January numbers are up pretty significantly, between 30% to 40% up in places. That's data coming from UniQuest and Enroli in particular, who are dealing with a lot of the January market applications for universities. The numbers are looking much better. I mean, they were so bad last year because the government had decimated them with canning the student dependence visas. But really good to see that there is a significant recovery. So hopefully a lot of people are making hay while the sun shines with those January bookings this current year. Not every market is going to be okay with that. But I think that we need to really be focusing on that flexibility. It is what students want. You know, they do want to be able to leave as and when they can effectively or have shorter tenancy lengths. There is no doubt about it. We've also seen what happens when operators and investors decide to mandate 51 week contracts with no option of flexibility in Ireland, where the government had to step in and actually say you cannot offer 51 week tenancies. They have to be maximum 40 week tenancies and then the student can extend if they really want to. And that, I think, could potentially come down the line in the uk if that is the way we go where we mandate those 50 week 51 week contracts then you throw into that the renters rights act it's going to be a really messy year it feels really volatile again last year was pretty volatile but it was only really discovered between july and september quite how volatile that was and that the international students weren't actually turning up in the numbers that we were hoping that they would in particular the the chinese indian and nigerian students and i'm talking undergrads and post-grads and the data is all over the place we know that but you know i'm dealing with clients that have you know previously had full 100 buildings and they've been able to rely on the chinese market in particular and they know that they can't do that anymore so they're having to pivot but where do they go to and how do they do that do they look at flexibility do they look at more affordability what does that do to their returns long term short term how's the revenue going to stack up against the occupancy therefore And then you combine that with universities and some cities really struggling with the university quality and the rankings. And again, it feels like it's going to be a really choppy year. We're hearing from certain marketplaces in China and India that numbers are not looking good. And that really varies depending on who you talk to. And they're not looking good in terms of the numbers of students that are applying to university or applying to book their accommodation. And they're not looking good in terms of the amount of money that those students then have to spend while they're here, in particular on accommodation. So it is going to be a very interesting year. I'm not expecting any dramatic uptakes past January. And I think that we do need to batten down the hatches a little bit and just make sure you're really focused on driving bookings as early in the cycle as possible. But these students now all know that, yeah, there's going to be discounting later in the market in a lot of different locations. So not everyone has the luxury like Unite of having so many nominations agreements and huge agent relationships because they've got the scale, et cetera. But yeah, I would say it's going to need to be quite a defensive approach from pbsa operators and investors in certain locations and

SPEAKER_02: 26:15

i can't urge enough that pbsa can't sit there and go renters rights doesn't impact us because everything stays the same your customer landscape has changed which has an impact on you and i just we said it before christmas and i'll keep saying it and hopefully something might shift

SPEAKER_03: 26:32

yeah and i think in terms of the renters rights act the way i see it is that Yeah, PBSA is allegedly exempt. We still wait to see exactly what that means in terms of what those exemptions really fully do cover. We're waiting for guidance. You said it at the start, Sarah, actually, you know, it's commentary and guidance that we're looking for. I think it's primarily guidance. It's clear as mud as to what's going on for student HMO land rules and for PBSA operators, investors and developers. Everybody is just waiting to see what the latest thing is. And I actually, I'll be honest with you, I don't really trust the government at the moment to to not forget something really quite big in all of this in terms of pbsa exemptions and what that might look like and i i think that we do need to be quite mindful of the fact that there could be something really challenging coming down the line for pbsa if pbsa is completely exempt it will decimate the renters rights act will decimate the student hmo market there's no two ways about it there's massive attrition already in terms of student hmo landlords selling up there's minimal institutional investor appetite for that stock at the moment. I would like to see that improve and professionalize. But I think the knock-on effect of that would be that a lot of affordable student HMO stock leaves the market, at which point some of these locations that haven't built enough PBSA will have zero affordable stock. And PBSA will be back in that situation of making hay while the sun shines, setting rents, raising rents as much as they particularly want, double digit rent rises each year if your student HMO stock goes back. Now that's great for the councils in terms of they'll get back social housing, all those student HMOs, they'll turn into social housing or they'll be back into the market. Terrible for the student. Student has less choice, student has less affordable options, and the supply, it's so difficult to get that, to get spades in the ground at the moment, that I can't see the supply increasing enough to cope with the attrition from the student HMO market that we're going to see. So whilst it may seem like it's great for councils long-term, I don't think it's great for students unless we fully open the floodgates to PBSA and BTR and co-living developers to ensure that students have so many options that that occupancy drops and therefore that you can then have affordable options as operators have to become more competitive with more supply in the market that's the long-term plan it's going to take 10 years to play out and with that and on that bombshell i would just like to wrap up the episode and say thank you very much to the e-word for being our headline sponsor for the season your support is hugely appreciated do go and check out their report it's well worth reading in terms of what students want in 2025 of course thanks to dan and the team at my student halls for joining us as a sponsor once again for this season please do subscribe to housed go and listen wherever you can on whatever platforms and do please rate us it definitely does help we do see ourselves zoom up the rankings as and when more ratings come in so please do go and do that and yeah thank you very much for listening we will see you again next week