Small Operators Can Compete With REITs
In today’s ever-evolving self-storage climate, smaller operators have to compete with larger, better capitalized companies. With the advantage of better capital comes a substantial marketing budget, more locations, and a sizable management staff. How do the smaller operators adjust to be able to compete in this market?
To understand the self storage market you must first understand your placement in it. The self storage industry is segregated into three primary categories — REITs or large publicly traded companies, large privately owned operators and small independent operators. REITs own 18% of the self storage industry in the U.S., with the top 100 large operators (excluding REITs) coming in at 8%, and 73% of facilities are owned by small operators. (Self-Storage Almanac, 2019). It may look like REITs dominate the market, but the small operators still boast the majority of the industry.
Let’s begin by defining an REIT and determine why it seems to be such a powerful competitor.
What is an REIT?
According to Inside Self Storage, REITs are owned by a number of shareholders who purchase company stock in anticipation of steady returns and, in many cases, cash flow for their personal investments. Examples of REITs are Public Storage, Extra Space Storage, and Life Storage. The small independent operators are all offering comparable services and competing with the REITs for the same customers. How can the little guys get into the game and play with the big kids? Read on to find out.
Six Ways for Small Self-Storage Operators to Compete with REITs
Suggestion 1. Be a Customer Service Rockstar
Potential customers will rent where they feel comfortable. Management and staff have to be friendly, knowledgeable and empathetic. Hire employees with agreeable personalities who have a natural instinct for what people need and want. They can be trained in the business later.
Offer customers bottles of cold water, fresh coffee, WiFi, and a conference room. Help with setting up reservations, explain the move-in/move-out process, offer a free truck on moving day, and the complimentary use of dollies and moving carts. Offer to order food for them on moving day, and, most importantly, be present with answers to questions and concerns. Make them feel like they are your most important customers.
Suggestion 2. Use the Curb Appeal Advantage
If you’ve ever purchased a home, you know the importance of curb appeal. Would you even look at a house that had trash all over the front lawn, dirty windows, and peeling paint? Would you want to store your belongings in a place that is not clean and well maintained? Keep your property presentable. Keep your facility clean and clutter free inside and out. Make sure that landscaping is done weekly, plant flowers in pots, keep paint and signage looking up-to-date and doors and windows spotless. Keep units damage free and clean. You don’t get a second chance to make a first impression.
Suggestion 3. Manage Your Revenue Effectively
REITs are experts at revenue management. They have the staff and the budgets to consistently monitor competition, pricing, and marketing strategies. Small operators may not have big money, but they have big advantages.
Small operators have the freedom to make decisions quickly because they’re making them at the local level and don’t have to contend with corporate bureaucracy.
- You can adjust rates and specials as needed, without approval.
- Don’t focus exclusively on revenue, you also need to look at expenses. Look for ways to reduce operational costs and increase profit margin by shopping around with local vendors and negotiating lower costs by agreeing to timely payments; many companies offer discounts if invoices are paid in 10 to 15 days.
- As a local company, you can build relationships within your community. Your customers typically have no idea, nor do they care, whether the company they deal with is a REIT or a mom and pop operation. Use this to your advantage with a community marketing program.
Suggestion 4. Have a Genius Marketing Plan
“We would all love to have a large marketing budget and be able to spend like the big players in the industry,” states Christina Alvino, CEO of FineView Marketing.
FineView Marketing helps the small operators on a single site marketing budget compete with and beat the big players. Sizeable budgets are terrific, but a solid marketing plan to build your brand is magic. You need:
- A compelling, user-friendly website
- Management software designed to fit your needs
- A powerful community marketing plan
- An authentic social media presence
To observe growth, small operators need to track results and calculate return on investment (ROI) for each campaign.
Suggestion 5: Study Your Local Competition
To sell units, you need to know your local competition, how you rank among them, and what makes your facility unique. Identify a three- to five-mile radius around your facility by doing a Google Maps search. Look at each property’s website, visit the facility, do a secret shop, and take a personal survey to learn the following information.
- Property Information: total square footage, number of units, unit types, security, access and office hours.
- Unit Rates: Online vs. street rates
- Special Units and Parking: Wine storage, RV, boat, and vehicle parking
- Moving: Truck rental and moving supplies
- Management: Onsite or offsite; most effective way to contact them
- Facility Construction Materials: Concrete, brick, metal, or wood
Knowing your competition allows you to focus on your unique attributes and adjust your pricing. Do you have more variety in units, better customer service and amenities, specialty and climate-controlled units, a designated staff member to help with move-in/move-out procedures and lead the customer through the process, a more sophisticated, technical security system? Think about these features when you’re considering a price change.
Suggestion 6: Be a Friend; not a Foe
REITs employ people just like you. They have families, love their country, and enjoy their friendships. Change your attitude from fighting the REITs to joining them. REITs cannot meet every customer’s need. A potential tenant may need RV or boat storage that they may not have available. Reach out and ask if they might consider adding you to a list of preferred competitors, sending you business that they can’t accommodate. You may be surprised.
Yes, at first glance, it seems that REITs have the advantage over small operators. But, with diligence, perseverance, and the right attitude, you can play on their field and win!