We can all agree that pricing has changed for many common products over the years. Without inflation on these products our economy could experience deflation- reduction of general prices in an economy. While this sounds like a great thing for consumers, it can actually be detrimental to businesses. That being said, many managers and owners in the self-storage industry wonder if they should increase their rates, when they should increase their rates, and by how much.
So, should you increase your rates? This question should be answered on a case by case basis. A few key questions to ask yourself include “when was the last time rates were increased?”, “how do my street rates compare to self-storage facilities around me?”, and “do I need to do a rate increase for all tenants or only a select few?” The answers to these question can help you determine what course of action will be the best for your business.
If it makes sense to increase your rates you should determine who the rate increase will affect. Do you have a few tenants who are well below the street rate? Is your whole facility much lower than the self-storage facilities surrounding you? These two questions are key components to determining who will be affected by a rate increase.
Once you have determined if all of your tenants- or only a few- will get a rate increase you should determine how much the change will be. Some self-storage facilities choose to do a percentage of what the current rate is and others choose a dollar amount for the increase. Whichever route you choose it is important to remember that you can only raise rates as far as your tenants will allow. This doesn’t mean you should be worried about losing a few tenants from a rate increase. However, taking the increase too far will drive away business, making you less profitable.
At the end of the day, the choices regarding increasing rates are up to the manager or owner of the self-storage facility in question. Rate increases can increase profitability and weed out some undesirable tenants, if they are done properly and in a way that supports the current business model. Good luck!