Price Transparency: Your Competitive Advantage

More and more states have begun mandating price transparency in multifamily advertising. But all-in transparency isn’t just a matter of complying with the law.

It can also provide a competitive advantage. In a recent discussion at this year’s Apartment Innovation and Marketing (AIM) conference, five panelists shared how price transparency has paid off in terms of marketing and leasing success.

Led by moderator Greg Benson from Greystar, the conversation featured Stuart Richens from Apartments.com, Brandy Daniel from BH, Brent Steiner from Engrain, and Catriona Banks-Orosco from Yardi.

Backed by data, the panelists showed how their multifamily properties can benefit from embracing price transparency.

Renters expect it

Renters have a strong preference for seeing the total price listed, according to survey data from Apartments.com. In fact, 85 percent of renters would prefer to see the all-in total monthly price on a property listing, Apartments.com’s Stuart Richens said.

He noted that half of renters consider it a deal-breaker if surprise fees bring the total price higher than what was originally advertised.

The common industry practice of advertising a base price that’s lower than the total price “frankly ticks off about half of our prospects,” Richens said.

Data from Greystar also found overwhelming support for price transparency. After overhauling how prices were displayed, Greystar surveyed over 50,000 of its prospects and residents and found that:

• 95% said a community fee guide was helpful
• 98% found it helpful to know the total price before touring
• 98% considered cost calculators useful

“Our data shows that renters are happy,” said Greystar’s Greg Benson.

It helps properties’ online reputation

For Greystar, price transparency helps foster trust among prospective residents.

“Our efforts have deepened trust with renters,” Benson said, “and they’ve given them more confidence when they select their next apartment.”

This trust has translated to higher online ratings. After Greystar shifted its portfolio to total pricing a year ago, nearly 70 percent of Greystar communities have seen an increase in their reputation score, Benson said.

BH Management saw a similar trend after launching a total pricing pilot program called “Right Price Promise.”

Ratings on Google increased from 3.0 on average to 3.8 in 12 months, said BH’s Brandy Daniel.

“Prospects told us that they’re happy,” she said.

With happier residents, onsite staff have also reported greater job satisfaction, Daniel said.

Prospects are more engaged

Multifamily owners and operators often fear that price transparency will scare off prospective residents. But based on recent Yardi research, this fear is misguided.

“Your engagement rate is not going to drop,” Yardi’s Catriona Banks-Orosco said. “In fact, the opposite is true.”

Yardi recently conducted a seven-month test of 400 properties displaying the total rent compared to a control group of 171 properties advertising the base rent.

One of the key findings was that prospects’ engagement increased, especially with interactive tools like cost calculators.

“They’re not just looking at the price anymore,” Banks-Orosco said. “They’re engaging with it. They’re interacting with it. They’re figuring out, ‘Can I afford a carport? Do I need bike storage?’ They’re really getting to personalize the experience.”

Apartments.com and Greystar also reported that price transparency increased renter engagement.

Lead quality improves

When renters have a clear understanding of pricing, lead quality increases.

On Apartments.com, properties that display total pricing see 15 to 20 percent more leads than those showing the base rent, Apartments.com’s Stuart Richens said. These high-quality leads generate a 20 percent improvement in lead-to-lease conversion.

When BH Management implemented its price transparency pilot program, lead volume declined. However, lead quality improved, and the number of approved applications went up.

When prospects saw that the total price matched what they had originally been quoted, they responded positively.

“They were delighted,” BH’s Brandy Daniel said. “They filled out applications. Not only did they fill out applications, more of them were approved.”

Overall, BH Management saw a nearly 10 percent increase in approved applications as a result of its pilot program.

Net operating income goes up

A common reason for relying on base rents is that total costs will reduce renters’ interest in the community — and ultimately hurt revenue. But research from Greystar and BH Management has shown the opposite. Price transparency can in fact increase net operating income, or NOI.

“There are quantifiable financial benefits,” Greystar’s Greg Benson said.

Greystar saw an estimated $76,000 lift in NOI after it implemented total pricing.

At BH Management, the average monthly NOI increased by 7.8 precent.

“Debt went down, delinquency went down, NOI went up,” BH’s Brandy Daniel said.

What’s next in price transparency?

Price transparency has tangible benefits for apartment owners and operators today, the panelists agreed. They also highlighted opportunities to take price transparency even further.

First, properties should say goodbye to the base rent. This concept can be confusing for renters.

“The base rent is a lie,” said Engrain’s Brent Steiner. “You should not show it. Be brave and be the first one to not do it.”

Instead of calculating a “base rent” and then adding in mandatory costs as separate line items to calculate the total price, properties should eliminate those flat fees and adjust the rent accordingly, Yardi’s Catriona Banks-Orosco said.

“Is there an opportunity here to actually simplify what we’re presenting to renters?” she asked.

As part of this simplification process, she encouraged properties to overhaul their fee schedules. On average, properties have 26 fees, she said.

“Is all of this fragmentation actually necessary? Are we bringing clarity, or are we actually increasing confusion?”

By incorporating fees into the total cost and reducing the number of add-on fees, properties can simplify the rental process and build trust with renters that pays off.