PBSA companies start setting their rates for the next student academic year in June. If you aren’t quite ready yet, this PBSA rate setting blog is for you!
PBSA companies start setting their rates for the next student academic year in June. If you aren’t quite ready yet, today’s blog about PBSA rate setting is for you!
We’ll take a quick look at the market, the key things you need to consider and how to start your revenue management process.
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Let’s dive in.
The PBSA market is constantly changing, and in recent years there has been a general trend for rising prices and demand, but there’s also a cost of living crisis which affects our students.
What does all this mean for you?
The PBSA market is set to increase to a value of £4.5 billion by 2025, according to Stripe Property Group, interviewed in a recent Property Notify article. This comes at a time when the Pandemic forced many smaller landlords to close their rooms, shortening supply and increasing rental rates through tougher competition for student spots.
University and college expansion still continues, and PBSA landlords are being pushed by the government to build in key investment zones.
The problem is that we’ve also seen unprecedented rises in inflation and energy prices, which have hindered building projects and made some students rethink living away from home. The result of this means more students are now looking for fixed-rate packages with PBSAs with options for various amenities as a way to solve their living-at-home problem.
Locational growth is also a changing landscape. Now we are seeing larger, growing student populations with the biggest financial gains, whereas locations with large stock portfolios have seen a more modest growth pattern.
All in all, it feels like we have a lot to consider in how we set rates and where we look for increases.
Most high-end PBSA operators set an all-inclusive model with higher-finished buildings and facilities as standard. In this area it’s likely that most will work on a 3-5% uplift in the previous year's rents.
Given what’s happening in the market, we believe you should also consider:
All of this can significantly affect your uplift increase for each room type, building and portfolio average.
To make sure that profit is your real focus this year we have some financial tips to help you really dig in deep into making your stock work smarter.
Consider changing all studio rooms to 51 or 52-week contracts in locations where summer rentals are not lucrative. These tend to be more expensive units, so locking them at a higher rate would increase your total revenue.
If you have stock in locations where the summer drives prime traffic, then reduce contracts to allow for short lease or hotelling.
Edinburgh is a great example of this, where the fringe festival lasts for three weeks every August. In 2022 roughly 2.2 million tickets were sold, and the biggest festival complaint was the price and number of accommodation options. What if you could cash in on this with competitive summer hotelling?
Clients are often sold on higher end stock if they perceive it to have a higher value proposition.
Use something like a bronze, silver and gold grading system to segment your rooms in a way that highlights value over price. At the same time raise retail prices to signal where the value is, alongside marketing the benefits of those your more expensive units.
Scarcity is a great tool to help sales, so consider what stock you will release and when to ramp up sales across the unit and pricing levels.
Make sure to dig into your records to check for the velocity of booking patterns. If you are selling out too early, it could mean you are setting prices too low. If you are selling more at a discounted rate, then maybe it is time to reconsider pricing or your markdown strategy.
20% to 30% is the normal range for rebooking and students often get a preferential rate, so make sure you target rebookings early and cap your limit for availability.
Agent commissions can soon add up, especially if you are operating in a location where intakes see a higher rate of international students. Take a look at your referral and velocity in direct unit sales – are you paying for commissions unnecessarily?
Do you factor in void calculations for empty rooms and no shows to your pricing? A good rule of thumb for voids is 5%.
This void amount should be factored into your existing total revenue target figure.
If you take credit card payments for online bookings of shorter stays, the transaction fees must be taken into consideration when figuring out your profit. Typically, these charges are 2-3%, which can't be charged to the customer but should be incorporated into the room rate.
When you sign with a university you guarantee your rooms to their students at the current market price. While this is great for the comfort of future income it may leave your revenue growth opportunity short.
Make sure when you set those agreements that you consider negotiations carefully.
When all your considerations are hammered out, it’s time to sit down to your rent setting plan. After all, you need investors to sign off on your new pricing structure before you can set it in motion across your booking software, website and partner sites.
Here are our steps to ensure you have a water-tight rate setting proposal.
Remember, if you are a Cloudfox bookkeeping customer, we can help you get these figures together.
If you aren’t a customer yet, then give us a call… we don’t like seeing anyone in the dark when it comes to PBSA rate setting!
A PBSA nightmare is empty units in the summer. To stop you breaking into a cold sweat we want to talk about the option of “Hotelling” your PBSA rooms.
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