Apartments’ Online Reputation Increasingly Impacts Asset Value

Screen with reviews shutterstock_638893906New research shows that apartment communities’ online reputation is having an even greater impact on properties’ revenue, particularly in comparison to their market’s average performance.

Apartment owners and managers are facing more uncertainty and uncontrollable factors when planning, executing and operating their communities. Unstable materials costs; troubling overall economic conditions related to employment and inflation; and disruptive health issues are among things that are out of their hands.

One thing that they can control is their reputation—and by focusing on providing excellent resident experiences and supporting their staff, that reputation (and revenue) will likely improve.

The impact of online reputation was discussed at the J Turner Research Summit in Scottsdale, Ariz., with RealPage’s Senior Vice President of Data Science, Rich Hughes, taking a deep dive into the role J Turner Research’s ORA scores have on revenue, occupancy, rents and renewals.

He said that for conventional properties, a one point ORA score increase (on a 100-point scale) can yield 3.45 bps premium to market returns. 

Reputation Scores Reflect a Reward and a Promise

Each month, J Turner Research monitors the online ratings of more than 128,000 properties nationwide. Using a statistical model, these ORA scores serve as benchmarks to compare a company’s individual properties and portfolios nationally, regionally, and against the competition.

The ORA score is an aggregate compilation of a property’s ratings across various review sites and ILSs. J Turner Research’s “The Cost of Losing Connection” report released this week represents data from 5,695 properties nationally, representing more than 1 million units and $30 billion in rent roll collections each month.

“The ORA score represents a reward to how the community is currently operating in the minds of its residents and serves as a ‘promise’ of how it will perform going forward,” Hughes said.

Given the depth of the survey reporting that took place, Hughes said the averages “are statistically robust and not based on luck or chance.”

How Reputation Affects Renewals

Macro trends found in the reporting included that higher ORA scores equate to greater renewal rates, the greater percentage of residents who participate in the review process tends to produce higher ORA scores.

More granular results showed that Class A properties and high-rise buildings as a whole tend to have higher ORA scores; resident activities have a delayed impact on ORA scores; and in student housing, reviews on Snapchat carry more impact than those postings on Instagram.

Hughes found it perplexing that more apartment communities aren’t tracking resident leads and leases (the survey question “How did you hear about us?”) based on online reviews despite their carrying such weight in the decision-making. “Pretty soon, I suspect they will,” he said.

Critical drivers of asset value for apartment owners include market, age, stability, bedroom mix, unit sizes, number of units, asset class and property size, and yet, once the building is leased, those are all fixed factors.

“The only thing that is variable is the property’s ORA score [giving it great importance on how a property will perform financially],” he said.

J Turner announced it will soon add artificial intelligence to its community performance measurements.

Source: Globe St.