A few things I learned at the Self Storage Association conference recently held in Las Vegas:
Operations
- Ask customers when they are at the counter how many stores they called or visited before they came to rent with you. According to Ken Nitzberg from Devon Self Storage, 53% of his customers don't shop around. It's a strong signal that the customer is not price sensitive.This allows you to "spot price", i.e. offer a higher price and/or give fewer concessions than you normally would.
- Dan Hobin at G5 Search Marketing has a very innovative approach to lowering your customer acquisition cost. He has put together a solution that not only gets you marketing online in a meaningful way with little hassle, but has a great way to track the effectiveness of your spending. I haven't tried it out yet, but he got lots of raves at the conference from some of the larger operators. We plan on giving his service a try with a number of our portfolio properties.
- Devon Storage Group is able to get an 89% penetration rate selling insurance to cover their tenant's stored goods. If I understood Ken's comments correctly, they achieve the high penetration because they require every tenant to purchase insurance or show proof that they have their own coverage. Sounds like it might be a bit difficult to execute if you are in a soft market. However, it's probably worth trying; by my estimate that is $400 - $800 to the bottom line each month because there is really no incremental cost to the add-on sale.
- Jefferson Shreve, president of Storage Express made me wonder why we don't at least attempt to rent the space over the phone. I mean actually close the deal. Most operators talk about trying to convert phone inquiries to store visits and store visits to signed rental agreements. Storage Express operates nearly 70 locations with no on-site staff. They close every deal over the phone or online.
Finance
- Conduit Lenders are starving (no surprise). However the conduits that are quoting deals are offering spreads of about 200 basis points over the ten-year treasury yield. That is a big spread, but the all-in rate is still less than 6.5%. Not as good as we were seeing 6 months ago, but still very low relative to historic rates.
- LIBOR typically trades within a quarter point of the Fed Funds Rate. The primary reason it is much more volatile is because there is no Federal Reserve intervening in Great Britain.
