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Incremental and Ancillary Revenue Strategies

Incremental and Ancillary Revenue Strategies . Driving Revenue, Returns and Value. Mark P. Vernon. Vice President. Ancillary Income: Driving revenue, returns and value. Compete with others to drive revenue Transform the landscape to create value Seek out the opportunities

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Incremental and Ancillary Revenue Strategies

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  1. Incremental and Ancillary Revenue Strategies Driving Revenue, Returns and Value Mark P. Vernon Vice President

  2. Ancillary Income: Driving revenue, returns and value • Compete with others to drive revenue • Transform the landscape to create value • Seek out the opportunities • Project the returns (ROI) • Track the income • Watch for the tipping point

  3. Ancillary Income: Who are our competitors? “Relax, Roger, everybody's doing it…” Bud Fox, Wall Street • Multi-family Owners • Multi-family Property Managers • Multi-family Developers • Self Storage • Big Box Retailers • Hotels • Airlines

  4. Ancillary Income: Transform the landscape • Utilize the economies of scale to leverage • income opportunities • Increase property portfolio income through • multi-stream revenue sources • Monetize resident service demands • Impact property valuation at sale or refi • Boost property bottom-line value

  5. Ancillary Income Opportunity: Gumball machines

  6. Results: Gumball machine usage increases resident tooth decay at the community

  7. Ancillary Income Opportunity: Community Rickshaw Service

  8. Results: Increase in the number of beer cans, cigarette butts and volume of emesis to clean up

  9. Results: Corresponding increase in the number of internal transfers

  10. Ancillary Income: Seek out opportunities • Income generating measures • Services • Cable and wireless (must have ample bandwidth) • Laundry (in unit and internet based laundry facilities) • Rooftop antennas for wireless transmission • Vending (traditional versus healthy vending) • Renters insurance (standard versus self administered) • Furniture rental • Coffee services • After hours concierge services • Alarm monitoring • Parking space rental • Pet washing stations • Carwash income • Language interpretation services (dial-in)

  11. Ancillary Income: Seek out opportunities (cont’d) • Utilities • Resident utility pass through • Deregulated markets – electricity and gas related • Mineral and gas rights • Rate increases through applicable regulatory authorities • Rate negotiations – flat rate versus spot rates • Tax incentives, energy conservation and utility audits • Vacant utility recovery • Recycling /waste reduction • Valet Waste • In-house utility billing

  12. Ancillary Income: Seek out opportunities (cont’d) • Property fees • Pet fees • Pet DNA fees • Amenity fees • Transfer fees • Lease break fees • Late fees • Charging station fees • Bicycle rack fees

  13. Ancillary Income: Define the risks (return on investment – simple case study)

  14. Ancillary Income: Define the risks (return on investment – simple case study)

  15. Ancillary Income: Track Performance • Identify income opportunity • Negotiate the terms • Track income and performance • Drive ancillary income strategy through reporting • Renegotiate the terms

  16. Ancillary Income: The tipping point “Are we simply trading rent increases for ancillary revenue.” “This property nickels and dimes us to death.”

  17. Thank you! Mark Vernon, Vice President Purchasing Bell Partners Inc. 336.232.1900 mvernon@bellpartnersinc.com Photos uploaded via internet Google search

  18. Incremental and Ancillary Revenue Strategies Driving Revenue, Returns and Value Kevin Huss Director of Revenue Management

  19. Maximizing Revenue is about Balance

  20. Ancillary Revenue

  21. Ancillary Revenue cont.

  22. Understanding your property is key?

  23. How do you sell your monthly ancillary fees? Not include in the rent? Rent $600 Door to Door Trash $25 Parking fee $10 Payment from resident $635 Include in the rent? Rent $635 Payment from resident $635 ($25 door to door trash pick up and $10 parking fee included) On the surface this looks no different, but when you market your property there could be a calculated difference….

  24. How will a buyer underwrite your property? Include in the rent? Rent $650 Door to Door Trash $0 Parking Fee $0 Total Revenue Per Unit $650 Not include in the rent? Rent $650 Door to Door Trash $25 Parking fee $10 Total Revenue Per Unit $685 • The next buyer will underwrite a targeted rent value • Existing ancillary accounts will be included $685 vs. $650 = $35/unit of additional revenue $35 x 12 months x 300 units = $126,000 $126,000 at a 7% cap rate = $1.8 million of value

  25. Kevin Huss Director of Revenue Management Harbor Group Management Co. khuss@harborg.com 212.644.0513

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