Background:

A large Canadian Real Estate Investment Trust (R.E.I.T) wanted to update their existing pricing and revenue management system with a more optimized approach. With a rapidly changing external environment, the need to standardize and increase the efficiency of pricing units was increasing dramatically.

Challenge:

1. To introduce a scientific based pricing model to take advantage of the latest in analytic capabilities in order to give a dynamically updated recommended price for each individual unit with the goals of:

  - Decrease vacancy costs: by decreasing the amount of time that each unit is spent vacant

  - Improve process for pricing units, decreasing time spent on data entry and decreasing data errors

  - Increase turnover rent prices and improve retention rates.

2. Ensure a seamless transition in the process, working with over 5 stakeholder groups.

3. Educate and gain the confidence of the leasing agents who are the end-users of the system.

The Approach:

AAARL introduced our innovative pricing system into a few of the R.E.I.T’s buildings as a Pilot project. This system was based on years of academic and operation research and was created to dynamically optimize pricing based on competitive factors of locations, building age, neighborhood vacancies, unit size, amenities, known pipeline of tenants and more that directly drive the desirability (and competition) of the individual unit.

Specifically, the technology includes a three-layered computational model including automation, prediction, and optimization as outline in the graphic below.

Beyond the implementation of this pricing system, AAARL worked with the key stakeholders at the R.E.I.T to educate them on how to use and understand the system in order to increase the overall efficiency of their operation. Further, AAARL worked with the team on an on-going basis in order to provide them with weekly and monthly strategic recommendations for each individual property.

Results:

Through the Pilot, the R.E.I.T has seen an increase in rent prices and decrease in vacancy costs across the board. Anecdotally, we have heard very positive results from the client, as seen in the testimonial below:

“Since April 2021, the AAARL and [team] have developed a strong working relationship. The teams have been in contact with each other on a weekly basis to review and discuss pricing recommendations from AAARL for [Buildings]. The [team] has been extremely impressed in working with AAARL and their ability to listen and respond to the client’s needs immediately. [Team] also appreciates the level of communication both sides are committed to maintaining as we further develop this process.”