The student accommodation industry is experiencing consolidation through mergers and acquisitions. However, the legacy of a fragmented operational model lingers on. To streamline operations, boost revenue growth and to ensure that set targets are met, property managers and owners must keep an eye on the following KPIs:
1. Student occupancy rates
Occupancy rates for student accommodation are one the key metrics for assessing the operational efficiency and performance of any site or property. Some of the key factors that impact student accommodation occupancy rates are the location of the site, travel facilities, standard of the housing, efficiency of sales & marketing functions, and rental rates (high or low).
The data of year on year growth or decline in the percentage of occupancy can be a powerful tool for measuring the expected cash flows for the near future and for discovering opportunities of growth through development or acquisition of new sites in specific locations.
2. Cost of turnover
The average contract for private student living in the UK is 44-45 weeks. Apart from the vacancy losses, preparing the vacated property includes the cost of apartment preparation, marketing & advertising, utilities and more. One of the best ways to reduce average-days-to-lease is to win renewals of contract from the students; another effective approach is winning new tenants for a short or medium term summer accommodation.
3. Cost of repair and maintenance
Student tenants have a reputation of being harder on apartments than other tenants. Over the course of a year, the need for all kinds of repairs and maintenance will arise. Finding out the exact spending on this line item can be instrumental in uncovering avoidable expenses.
For example, if you manage a large portfolio of properties, but the repair and maintenance is contracted or subcontracted to local firms, a comparative analysis can help you identify spending that is way above the average. Based on the insights you glean from the data, you could decide to try a different maintenance company for a specific location, or contract the work for all the locations to the one maintenance provider that has proven trustworthy and cost-effective.
4. Student satisfaction
The student housing sector caters to a community of young people, typically aged 18-25 (with some older students in post-graduation and research). They are often connected to each other, are tech savvy, prefer mobiles to desktops, wary of advertising, and experts at comparison shopping. Word-of-mouth and social media will play a large role in how a particular student accommodation property or company is viewed.
So, it is essential that your student tenants are satisfied with your services. Periodic student satisfaction surveys via social media, online channels and physical surveys are necessary to gauge the student sentiment. Highlight positive feedback and weave it with the marketing message and take action on negative feedback.
5. Properties lost vs properties won
The student housing sector has shown remarkable dynamism in the past few years. As this sector continues to consolidate through mergers and acquisitions, property management companies are likely to win and lose properties. In order to reduce the churn, property management companies must identify the reasons for losing any properties and strive to convert their weaknesses into strength. At the same time, property managers must understand the factors that allowed them to win a new property and build upon their strengths.
6. Average income per location, per site, per bed, per property manager
For companies that own or manage a large number of student accommodation across locations, detailed reports on the average income generate per bed, categorised by location, facilities, standard of living and property manager can be instrumental in measuring, understanding and improving the performance of the entire portfolio.
For instance, using such reports it is possible to discover what each property manager is doing well. The information around the best practices followed by one manager can be shared within the entire organisation, helping raise the overall performance. Of course, in order to arrive at a reliable and realistic figure, you must compare apples to apples!
7. Property management charges
Property management firms specialising in the sector are often the natural choice for owners of student accommodation portfolios. However, it is imperative for the investors to keep an eye on the fees charged on monthly/annual revenue. Is the charge similar to the market-norm, or is it significantly higher than the average – considering the services provided?
Similarly, property managers must also check competition and the market average to ensure that they are charging enough for their services. The percentage of fees charged can change when the level and quality of the service improves or declines.
8. Total revenues and revenue growth
Year on year revenue growth is a powerful indicator of the overall performance of a student accommodation portfolio. By analysing the in-depth data on the growth or decline in the revenue, it is possible to identify the key contributors to the growth. For instance, the revenue may have increased due to the fall in the repair and maintenance costs, while the rents have increased. Or it could be the rise in rents has not kept pace with inflation, which has led to a decline in revenue growth.
Also, student accommodation management companies tend to focus on the revenue generated through leases as it helps to get a whole picture which includes revenues from other sources, e.g. rent for using facilities, food, utilities, parking, etc. Again, by comparing the revenue growth across sites, it is possible to recognise fresh revenue generation opportunities.
Consolidated reporting is the key to success
As demonstrated in the above points, analysing the key KPIs on a periodic basis can help student accommodation owners, investors and managers make tactical course corrections and take wide-reaching strategic decisions to secure future growth. For this to become possible, it is necessary to have accurate and timely financial reports.
But that is easier said than done in a market that is witnessing rapid growth through mergers and acquisitions. As a specialist student accommodation accounting services provider we have seen that, in many cases, property managers across sites use diverging accounting and reporting processes - this is especially true when it comes to recently merged businesses. How can this situation be remedied? Read a real-life story of how one of the leading student accommodation providers managed to consolidate accounting and reporting for a large and diverse portfolio.