The intricacies of sustaining successful operations at student housing communities provide unique challenges that often require a third-party perspective if investors are dissatisfied with performance. Campus Advantage’s student housing consulting division has conducted more than 275 professional studies (view our case studies here) focused on student housing feasibility, market analysis, acquisitions due diligence, and operational assessments, that have unveiled a plethora of complexities when it comes to managing an asset. When a community finds itself achieving lower than expected occupancy, higher than expected expenses, negative online reviews, low resident retention, high employee turnover, or has concerns about best practices, there is certainly an underlying issue below the surface. Campus Advantage’s operational assessments are recommended to such clients with underperforming assets or assets in markets with changes in enrollment or supply/demand fundamentals. The following are six red flags that could indicate it is time to consider an operational assessment.
1. Lower Occupancy
Declines in occupancy could be one of the most glaring indicators that an operational assessment is needed. Occupancy can point to a property’s success, or lack thereof, in any variety of areas, from marketing and leasing, to renewal efforts, to customer service, to maintenance response, to property upkeep. Occupancy should be closely monitored and compared to the market on a weekly basis. If a property has fallen behind its historical occupancy, or has fallen behind the market’s average occupancy, this could be the result of operational inefficiencies that should be further vetted.
In addition, if supply/demand fundamentals change within a market due to enrollment decreases, a surge in new supply, or shifts in students seeking off-campus housing, occupancy will likely be impacted across the market. An early strategic deep dive into marketing efforts, rates, and offerings can help combat the foreseeable decrease in occupancy and position the property to withstand the market downturn.
2. Negative Online Reviews
Negative online reviews on Google, Facebook, Yelp, or other rating websites can be a sign that a property is struggling with customer service or property upkeep. Findings from a national research study conducted by J Turner Research found that 86% of students use online reviews in their apartment search process, and 47% of students said that online reviews had total influence over their decision of where to live while attending college.
When students search for housing online, not only will reviews appear on the search engine results pages, but Google also ranks the displayed results partly based on ratings and reviews metrics. Prospects are less likely to visit a property’s website, much less the property itself, if the community is affiliated with poor online reviews.
3. Low Resident Retention
In Campus Advantage’s experience, an average resident retention rate for a successful property is 30%-40%; however, depending on the market, properties can often exceed this. If a property has consistently maintained a lower retention rate or has begun to see declines in residents choosing to renew, this is likely due to contributing factors such as market shifts or customer service initiatives, which need to be further evaluated.
4. Employee Turnover
A strong team is imperative to the successful operation of a property. If staff turnover becomes prevalent and key employees cannot be retained, this is often a signifier that operational changes need to be made in order to foster an environment in which employees feel valued and can grow in their role. Continued employee turnover can significantly impact a property’s ability to maintain occupancy and operational standards.
5. High Operating Expenses
When a property is not on track to achieve revenue goals or is experiencing higher than expected operating expenses, it deserves further assessment. An efficient method of analyzing a property’s expenses and revenue is to compare them to industry and regional standards and per-bed benchmarks. In addition, ensuring best practices are being followed can result in the reduction of operating expenses.
6. Concerns with Best Practices
In an industry that is ever evolving, it is essential for key stakeholders and on-site teams to have a forward-thinking approach. Student housing is constantly maturing with new marketing and leasing tools as well as property management processes. Determining if a property is up-to-date with the industry’s best practices and procedures, including marketing trends and amenity offerings, can help ensure that it will continue to be successful.
The operational assessment is designed to shed light on operational inconsistencies and help identify the sources of any of the aforementioned issues. It also helps lay the groundwork on how to reform those issues, and how to sustain recommended changes for the short- and long-term. As part of the operational assessment, Campus Advantage identifies areas of under-performance, and also provides corresponding recommendations, ranked by priority. An unbiased, extensive student housing market study, encompassing a deep dive into each comparable property within the market, is completed to determine how the asset can remain competitive within the market. Rental rates, concessions, and rent growth projections are also assessed, alongside alternative strategies, to improve performance. Revenue and operating expenses are analyzed and compared to the 60+ properties within Campus Advantage’s portfolio to determine potential cost savings. Completing an operational assessment for a property that is struggling, or beginning to face challenges, provides key stakeholders with a roadmap of how to reposition an asset to ensure continued success within a market.