Small self-storage owners and operators are working to prove that size really doesn’t matter.
Clearly, the REITs and larger branded self-storage companies represent formidable competition. Yet smaller operators are taking advantage of the many resources and tools available to step up their game as they strive to attract more customers, create greater efficiencies and generate higher revenue.
“Individual operators typically are not scared of the big companies, and I don’t think they are all thinking about selling because of the saber-rattling that big companies have done,” said Robert Chiti, president and CEO of OpenTech Alliance Inc. in Phoenix. The company specializes in automated self-service technology for the self-storage industry. “I think the economics of today’s marketplace related to it being a seller’s marketplace has a lot more to do with why people are selling than their concern that they can’t compete.”
Today’s self-storage operators are finding ways to succeed in a more competitive market.
“Revenue management, technology and effective use of your management team–those are three really important things that small business owners and operators can use to compete,” said Anne Mari DeCoster, executive director of the Arizona Self Storage Association.
Those are the same three things that the REITs have identified as reasons why they’re succeeding. By following that lead, independent operators that want to stay in business can succeed instead of running for the hills and selling to the highest bidder, DeCoster said.
The Role of Revenue Management
One area where smaller operators are learning from REITs is revenue management. REITs have aggressively pursued rate increases all the way through the weak economy. As a result, the renting public has come to expect it, according to DeCoster. For example, The Storage Facilitator has reported on Extra Space Storage Inc.’s 5-9-9-9 system, the REIT’s process of boosting rates after five months, followed by hikes every nine months thereafter.
Such rate increases add revenue straight to the bottom line, which is what every owner and operator needs. The key for small operators is employ their own methods of tracking and carrying rate increases at their properties, whether that’s through revenue management software or another system.
Another operational aspect that’s often overlooked is collecting on past due rent, as smaller operators oftentimes don’t have a systematic way of dealing with it. Operators might be reluctant to undertake approaches like lien sales. However, issuing a notice of a lien sale can be quote effective.
“More than 75 percent of the people that we mail certified letters or verified emails to regarding lien sales on delinquent payments pay before the date of the sale,” said Anne Ballard, president of marketing, training and developmental services at Universal Storage Group in Atlanta. The company owns and manages self-storage facilities.
But if operators don’t take the needed steps to process those delinquencies, they’re never going to collect the overdue rent, she said.
The Great Equalizer: Technology
Independent operators are looking for ways to compete against larger operators that often have more resources, such as bigger marketing budgets and national call centers. For some operators, technology can help level the playing field.
“The smaller operators can turn to technology companies in the space and find lots of solutions to help them be just as effective and efficient as the bigger guys,” Chiti said.
For example, one of the tools that OpenTech sells is a self-service kiosk that lets operators offer 24/7 service, including rentals, payments and access. Such tools allow independent operators to supplement existing staff and also extend their operating hours without forking over money for more employees.
By employing technology to help owners run the business when they or employees aren’t there, time can be spent on tasks like marketing and community engagement, Chiti said.
The Internet has changed the way consumers search, rent and pay for self-storage units. As such, tapping the Web to perform those functions—and get noticed—is key, experts said.
One of the big issues for smaller operators is that they can’t outbid the REITs for “pay per click,” or paying for top placement in Internet search results. Instead, operators must establish a robust website that comes up first in organic search results. The trick is to add fresh content all the time, such as photos, news and testimonials. For example, an operator can post photos of customers holding $50 checks for referring friends or relatives. “Those things have a great impact for a very low price,” Ballard said.
The REITs have trained the public to expect to be able to rent a space day or night, whether the office staff is there or not. Fortunately, an array of products and services are available for smaller owners and operators to do the same thing.
“The important thing to remember is that this technology does not replace the facility manager—it helps managers by serving customers better,” DeCoster said.
DeCoster encourages independent operators to check out the resources provided by the many state self-storage associations. “They are excellent sources of information and encouragement for those who want to protect their investment and stay in business instead of running for the hills and selling to this year’s highest bidder,” she said.
Top photo courtesy of admavericks.com; bottom photo courtesy of opentechalliance.com
