How do you maximise the revenue of your facility?
Firstly, why does this matter? Aside from more money in your pocket, every additional dollar on your bottom line is capitalised toward an end valuation. In a regional market, where capitalisation rates can range from, say, 6.00% – 7.00%, $10,000 of additional income improves the overall value of your asset by ~$143,000 to ~$166,000.
Moving on toward the detail, we ought to understand the components of revenue calculation in a self storage business. We’ll set out jargon and definitions:
Gross Potential Rate (GPR) – this is the monthly rental rate advertised to customers seeking to rent a vacant unit.
Actual Occupied Unit Rate (AOUR) – this is the rental rate paid by existing customers for their respective unit(s).
Effective Occupied Unit Rate (EOUR) – this is the net rental rate after discounts / incentives have been factored in.
Why, and how, would you raise GPR?
- The other competitors in your market have raised their prices, which is indicative of high demand.
- You have only a few units available, which is indicative of high demand. This may be in all unit sizes, or one particular unit size.
- To raise GPR, you would adjust the advertised rates on your website, digital price list, or with the staff who answer the phone.
Why, and how, would you raise AOUR?
- Existing customers have been renting a unit for an extended period. Depending on your preference, an extended period may be 1 year, or it may be 5 years – we’ve seen both ends of the spectrum.
- To raise AOUR, you would issue a rental rate increase notice to your customer with the appropriate notice period included.
Why, and how, would you raise EOUR?
- Discounts / incentives expire that were offered to a customer at time of renting a unit (for example, 3 months 50% off).
- Subject to the occupancy and performance of your facility, you might not offer any discounts / incentives, and therefore your EOUR would match your would match your AOUR
Raising GPR increases the potential earnings of your facility. Raising AOUR and EOUR, through different methods, increases the actual earnings of your facility. All play a role in maximising the revenue of your self storage facility.
Every dollar on your bottom line can have a material impact on your valuation.
Reach out to Self Storage Advisory Australia today. We’re here to help you get the most out of your investment.