With residents willing to pay a premium for convenience and a higher standard of living, savvy student housing owners and operators can cash in with the right program, amenity or service partnership. Owners are searching for new revenue streams through the addition of amenities like food markets, the offering of upgraded units and partnerships with service providers that make students lives easier and more convenient, like on-site bicycle rentals and laundry pick-up. While opportunities are boundless, choosing the right program for your property requires careful evaluation, as residents might be displeased by a charge they feel doesn’t add value to their life.
Student Housing Business recently interviewed several owners, managers and developers to determine ways in which they are successfully gaining ancillary income at their communities across the country.
SHB spoke with Scott Casey, managing director of global innovations at Greystar; Jake Jarman, COO of Redstone Residential; Leah Orsbon, national marketing and leashing director of BMOC, and Scott Duckett, executive vice president at Campus Advantage.
SHB: Do you try to grow ancillary income at your communities? How do you determine what would be a good fit for the students at your property?
Scott Casey: Generating additional revenue in our business has become increasingly popular. With college students spending over $150 billion worth of disposal income each year, the focus should be on ideas that will entice the residents to spend some of that money.
Jake Jarman: At Redstone, we have a formula for deciding if one of our wild ideas is going to be the next big thing. Ancillary income generators need to satisfy all three elements of the formula: they need to be good for our owner client, good for the resident and good for the staff. If the staff sees the program as helpful to them, they will embrace it. A proposed program will only be successful if the client is happy with the results, the residents find value in the service and the staff can get behind the idea. In the end, student housing is all about providing a service to our clients and residents. Satisfying all three needs will ensure that the new program or idea is a success.
SHB: Specifically, what programs have you had success in generating ancillary income with?
Leah Orsbon: We offer premium units at some of our communities at an increased monthly rental rate. These units can feature upgrades such as granite countertops, Bluetooth shower heads, 60- to 70-inch smart televisions, an Amazon Echo, a Nest thermostat, memory foam mattress, faux hardwood flooring, ceiling fans or accent walls. Depending on the market and the cost, usually you can have a one- to two-year payback for the upgrades and continue earning the increased rental rate moving forward. Offering summer housing to college interns for a premium short-term rate is another great way to gain ancillary income. This also allows you to offer academic term leases with a premium on that end, as well.
Casey: Resident insurance has become a standard that — if done right — generates a great return for the owner.
SHB: Do you work with any outside vendors to create ancillary income? Can you provide us with some examples?
Self-service mini-markets with various snacks, drinks and school supplies have been successfully utilized by BMOC.
Leah Orsbon: Yes, we have worked with local bicycle rental stations and have implemented programs where they place stations on our property and participate in sharing revenue from the rentals. We’ve also placed self-service mini-markets with various snacks, drinks and school supplies and offered bundled laundry services to residents where they are able to drop off laundry bags in the lobby each week and pay per-pound to have them washed.
Casey: Our residents like convenience, so finding unique ways to address deliveries of food and beverages to them at their convenience will be a home run. If done right, it will generate some additional revenue for the property. I’m seeing more vendors open to marketing their products to our masses and they are willing to pay a fee to do so.”
SHB: What problems should owners and operators be on the lookout for when attempting to implement an ancillary income generating strategy?
Scott Duckett: Ancillary income opportunities are becoming more common in student housing, particularly as we experience the explosion of new technology and services. One problem faced by operators is sifting through the multitude of options available. The level of competition is increasing among vendors and service providers. A detailed vetting process is required to evaluate and select new platforms prior to implementation. We look for opportunities that provide benefits to our residents and property owners, while also helping with operating efficiencies — that is a triple-win scenario for us.
Jarman: Ancillary income is the magical unicorn that everyone wants, yet finding and implementing programs that work is easier said than done. You can run into a variety of issues. Sometimes the idea is so expensive to implement that the client will not approve it, or it could also be such a unique idea that the client does not see value in it. Maybe the ancillary income is so small that the idea gets vetoed altogether. A sure-fire way to get negative reviews and fewer renewals is implementing a program with required fees that the resident does not see as fair or has zero perceived value for. It’s also important that the staff sees value in the idea. If the new program makes their work day more stressful or adds to their duties, they will be less likely to push the agenda.
— Compiled by Katie Sloan. This article originally ran in the March/April 2019 issue of Student Housing Business magazine.