Data Sharing: The Debate Continues

Why are multifamily operators so reluctant to adopt this hotel industry best practice?

At no point in its history has the multifamily industry been particularly big on sharing data. Numbers have been held close to the vest to prevent rivals from getting too precise a read on figures regarded as proprietary. However, the historic aversion to sharing data is eroding. Increasingly effective resident screening has been enabled by the swift growth of Experian RentBureau, which has shown the multifamily industry that data sharing can be a win-win for both apartment owner-operators and residents.

Using shared data to bring greater accuracy to performance benchmarking is an opportunity the hotel industry has leveraged for decades. Data sharing for resident screening begins with the daily collection of data from the property managers, said Emily Christiansen, director of Costa Mesa, Calif.-based Experian RentBureau.

“They use their accounting software or property management software, and our software interfaces with that to collect the data,” she said. “That’s the reporting piece of the equation. On the other side, we return the data to the property management industry, providing it to resident screening providers that service the property management companies, to use in their screening services.”

By reporting data, property managers are able to improve their bad debt recovery, reduce skips from their portfolios of residents and offer residents the benefit of building credit histories by paying rent on time.

On the flip side, the service enables property managers to welcome better-qualified applicants to their properties. They can reference the rental payment history in conjunction with the credit history to gain the best-qualified applicants, Christiansen said. Credit data is very helpful when looking at an applicant, she reports, but there are instances in which those with excellent credit histories have poor track records of paying their rents, and vice versa.

Experian RentBureau has been in existence for five years and over that time the subscribers have almost doubled from 7 million to 13 million. The reason?

“It’s really a domino effect,” Christiansen said. “More and more property managers are seeing benefits of both reporting data and using it in screening. The quality Experian is able to offer is adding the positive rental data to credit reports of consumers. That’s why renters are asking for it.”

How property manager customers respond depends on what’s most important to each. “We’re hearing they are getting calls from residents who have skipped out on their rent payments and now have to reconcile that debt before they can line up another apartment,” said Christiansen.

“We also hear from property managers who say they are able to accept significantly more applicants because they’re able to access the rent histories as well as the credit histories, giving them more holistic views of applicants. We are hearing from property managers who really like the idea of adding positive credit histories on their residents to the database, as a way of acknowledging good renting behavior. That’s important in a young renter demographic.”

At Logan, Utah-based Wasatch Property Management, a customer of Experian RentBureau, the ultimate goal in data sharing is gaining a competitive advantage in the industry, said Scott Stettler, the company’s chief financial officer. Wasatch is an owner, operator and developer with approximately 18,000 apartment units across 75 communities in the western United States.

“Being able to offer our rent payment reporting gives us a big advantage over other companies, and our residents were very excited about the opportunity to improve their credit, without having to buy a home or get into debt,” he said.

“The other aspect of the sharing is that we have a lot of properties that are very consolidated within regions, and we found we had residents moving from one of our properties to another. It allowed us to have clear data to [decide if to] move a resident in who had been evicted from one of our other sites. It gave us more clarity, allowed us to be better informed and improved our tenant base…We find that residents stay longer with us who are actually allowing the reporting of their payment histories to the credit bureaus, about 60 days longer.”

Stettler reports his company has seen residents gain lower interest rates on home loans after deciding to buy a home, as a result of their improved credit scores. That has saved them thousands of dollars over the terms of their loans. Some residents have also received lower rates on auto loans, or been able to obtain auto loans they were previously unable to secure.

Data for property benchmarking

Data sharing is also critical in property benchmarking. Pittsburgh-based Multifamily Data Exchange (MDX) was founded to gather data directly from property management systems, and place it into a single database. There, it is used by customers to benchmark their properties’ performance in specific submarkets, explains MDX general manager Dom Beveridge.

“There is a fundamental problem in the property management industry, which is there is no way to benchmark revenue performance today,” he said.

“So when operators, owners and investors want to get a read on their revenue performance, they tend to reach for a lot of data sources to get an indication of how they’re performing now. It’s very common for companies to buy multiple sources of data, much of them gathered through interview processes.

“By definition, if you’re having to buy multiple sources telling you the same thing, that tells you no one in the industry regards them as accurate. If they were accurate, you wouldn’t have to buy multiple sources of data.”

MDX is modeled on a much more effective platform that has existed for 30 years in the hotel industry. That is a data sharing platform called Smith Travel Research, or STR, as the company now brands itself.

The notion of an STR-equivalent serving the multifamily industry has long intrigued multifamily movers and shakers. They know there are no companies surveying hotels about their performance, and no one in the hotel industry needs to buy multiple sources of data. That’s because the data exchange provides a point of truth on performance, eliminating the need to acquire multiple data sources.

“When you have a data exchange like the hotel industry, you know exactly how your property performs relative to its comps,” Beveridge said. “You don’t have to guess. You can align incentives with performance relative to market rather than performance relative to budget. Without a way to benchmark revenue, you don’t have a way to gauge revenue management performance.”

The biggest benefit comes on the acquisition and disposition side of the industry, for companies buying and selling properties. There, ability to make due diligence property management assessments based on actual revenue data rather than asking rent data is a huge advantage. “It’s a much more efficient way to perform that function,” Beveridge said.

MDX passed the first-100 subscriber mark months ago. The company decided to change its model to a “freemium” pricing model not unlike the LinkedIn or Adobe pricing platforms. The freemium model was launched to help surmount what Beveridge believes is the chief barrier to adoption. “The industry is not used to sharing data,” he said. “Lots of people are really cautious about what data they share.”

MDX relaunched its entire platform in February when the freemium model was unveiled. “People start to look at revenue as a trend, rather than asking rents as a trend,” Beveridge said. “People realize that tracking achieved revenue on a per-unit basis tells you different information than the ones you’re used to looking at. It’s holistic in a way that other metrics aren’t. People see, for instance, the contribution of renewals to their revenues.”

David Schwartz, co-founder and CEO of Waterton Associates, reports competitor benchmarking is critical to his company’s ability to boost operating performance. But, he says, today’s multifamily benchmarking methods are inaccurate and outdated.

“At Waterton, our hotel assets have access to a better solution, where competitors share achieved revenue data through an industry data exchange, STR,” he said. “If multifamily had an STR equivalent, we’d be able to compare achieved revenues of our apartment communities to others in the same submarket on an apples-to-apples basis. We support the Multifamily Data Exchange initiative because it’s time we had this capability in multifamily.”