By Barry Raber
Recently, a very well-connected person in the storage industry asked me why I don’t use revenue management software programs.
His question unleashed a five-minute rant from me. When I finished, he said, “Man, you make some very good points, and the industry needs to hear it. Can you come speak at the upcoming storage convention?”
I lean toward avoiding the spotlight, so I politely declined his offer, but then thought maybe I should still share my opinion based on my own experience. Read on for my personal insights.
Revenue Management Software May Sabotage Your Success
The industry has been a little slower to adopt the practice versus self-storage, which I think is good. Using revenue management software on your RV-storage property is a bad idea. The thinking is that you are leaving money on the table if you are not using the software. I would argue differently. Here’s why.
From the Owners’ Perspective
- The system accelerates the race to the bottom for rates. Demand and supply go up and down in the storage industry. Developers add to the storage “supply” in good times when demand is high; then demand drops, and the industry is oversupplied (like it is now). And, yes, revenue management software might accelerate the race to the top for your rental rates at peak times, but it also races it down faster and often to rates that can be ridiculously low.
Remember: The value of your property goes up and down alongside those rates. If your loan is maturing and your revenue management software drives down your property value, it may limit your refinancing options or lower your property’s sales price. That could potentially total something north of a million dollars in losses.
Nationals companies amplify this, undermining smaller operators. All national storage companies use the software, so if your competitors are national brands, it further accentuates rate volatility. The national brands move in tandem — all driving down at once or up at once — so the rate the software sets for you is based on their rates.
Mom-and-pops storage facilities do not generally change their rates by the hour. The nationals brands generally don’t sell properties or finance them individually, so they are not concerned about driving their property values down for a time. While the number of national companies in RV storage is small, it is growing.
- It could be illegal or expose you to lawsuits. The U.S. Department of Justice filed a price-fixing collusion suit against the largest revenue management software provider to the apartment industry in 2024, also naming in the suit many of the largest owners who used the software. One large landlord, Greystar, settled with the DOJ, paying a fine and agreeing to stop using the software. The violation was termed “algorithmic collusion.” In California, a class-action lawsuit was filed against Extra Space for bait-and-switch. Their system set super low rates for new customers; then, Extra’s system raised their rates substantially shortly after move-in, leading to claims of misleading the customer.
I think revenue management software can work well for airlines that need to keep their planes full (and frequent flyers are used to it). But it does not make sense in the storage industry, which is much longer-term by nature and property values are so directly tied to rates.
I would argue that revenue management software messes with prices in a way that is bad for real estate of any type. It artificially inflates rental rates too high at the top of the cycle and drops them too low at the bottom. Since real estate peaks and troughs can last for several years, it means that, during good times, customers overpay; and during bad times, owners take a hit. Neither owners nor customers win in this system.
From the Customers’ Perspective
- Changing prices every hour creates distrust, right off the bat. The landlord-tenant relationship is an ongoing relationship. It is not like one flight on an airline. Storage customers are trusting you with their belongings, oftentimes indefinitely; changing prices all the time is not the way to start the relationship … or maintain a good one, either.
- Revenue management is not just the price on move-in. Many storage companies change their rates every six months because it is a month-to-month lease, and they can. I don’t know of any company that lowers customer rates when rates go down — they only raise them.
Let’s say a person moved in when rates were driven down and pays $75 for a 5 x 10 unit, and then six months later, the software says it should be $150 a month, so the company increases the rent. How would that make you feel as a customer? Answer: ripped off and abused. Using revenue management software can provide tenants with a good deal at times, but eventually it leads to higher rates and overall dissatisfaction with your company.
In our self-storage and RV-storage portfolios, we proactively check the rates of the five closest competitors to each property twice a year and adjust market rates for new tenants based on that.
When we go through that exercise, sometimes we see a competitor with ridiculously high or low rents. We know they are letting software adjust their pricing for them unchecked, so we exclude that comp from our rate analysis as N/A. We see this a lot with CubeSmart. We will also consider rent adjustments for existing tenants during those times, but we do so in a thoughtful way: We commit that if we should raise the rent, the amount will be capped, and we will not raise the rent again for at least a year.
Conclusion
This steadier and more stable approach creates happier, long-term tenants while strengthening both revenue and property values.
I fear all owners will begin using this software — especially now with most purveyors calling it “AI” or “AI enhanced” — and industry leaders may tell operators they are leaving money on the table by not using it.
My hope is that owners will take a contrarian approach: When you use your smart judgment to set fair rates, you will best serve your customers, strengthen your reputation and maximize your property investment. I strongly believe that a more steady and stable approach is best for both storage industry owners and your customers.
Barry Raber is president of Carefree RV Storage and Bargain Storage, the founder of Business Property Trust and an EO Portland Entrepreneur of the Year. He shares his successful business secrets at Real Simple Business.
