On first glance, the two core industries served by Rainmaker Group —apartments and casinos — seem as different as oil and water. But there’s a common ground where the software and services firm caters to both: making the job of filling rooms less of a gamble. Rainmaker helps apartment owners gauge up-to-the-minute, optimal prices for apartment units, removing inaccurate gut-level pricing decisions from the equation. On the casino side, Rainmaker helps casino hotels in rewarding their most profitable guests and securing their return. The strategy is working. Since its 1998 founding, Rainmaker has corralled such high-profile multi-family housing firms as Archstone-Smith, Equity Residential, Post Properties and Simpson Housing. The firm has also netted a bevy of leading casino hoteliers including MGM Mirage, Boyd Gaming, Harrah's and Trump Entertainment Resorts. Between both industries, Atlanta-based Rainmaker provides revenue management for more than 500,000 units.
NREI: Tell us about your profit-optimization products for apartment operators. What do they do?
Farley: They let multi-family housing operators maximize revenue from apartment leases. The software has an optimizer that looks at data and accounts for seasonal and recent demand and how much traffic they’re getting. It gives a clear picture of who is renting. It also takes into account different types of leases, those that [originate] at the beginning and end of month, plus it factors in vacancy costs, new demand versus renewal demand and lead times for lease applications.
We also provide up-to-date pricing comps from competitors. At the end of the day, the program goes through 200 points and spits out optimal rental rates and rental terms.NREI: In a broader sense, how does this technology benefit REITs and other apartment owners and operators?
Farley: It gives them greater responsiveness and instant access to cutting-edge market dynamics. Executives always want the most current market information. This allows them to change prices immediately and get an early indication of when markets are changing from good to soft or vice-versa. A COO can view the portfolio’s performance, look at traffic and pricing over a set period and get a more accurate picture of their company and the industry. It also provides accountability. Stock analysts are starting to ask REITs if they’re using revenue-management solutions.
NREI: How do you measure the effectiveness of these products?
Farley: We measure [additional] revenue per unit on a monthly basis. The minimum revenue lift been has been 3% and the top is 5% with an average [revenue increase] of 3.8%. Results are confirmed with third-party validations from independent accounting firms.
NREI: Your typical customers are apartment REITs. Can this system benefit smaller owners as well?
Farley: The larger REITs such as Archstone and Simpson Housing were our earlier customers, but we have worked hard to scale the application up and down. Our smallest apartment customer has 4,000 units.
NREI: You also have a product for casino hotels that helps them determine the minimum monetary “value” of each guest. How does this work?
Farley: These determinations allow casino hotels to increase profitability. They’re done by factoring in property demand, guest gaming tendencies and other variables to set room rates and availability of comps for them. Casino companies already have rich databases. For example, with Harrah’s Total Reward program, a guest will get a number based on who they are, what they’re spending and what their value to the company is — a value that can also come from food and beverage and spa use or even golf use. From that information, we can essentially tell them, “Here is a minimum value someone needs to pay to get a room night.” We do these forecasts every day.
NREI: You also say you can help casino hoteliers gauge their “marginalized revenue.”
Farley: Yes. For example, if you play and lose $100, the casino’s margin on that isn’t a full $100. There’s labor and other costs to consider. On the hotel side, there are costs for housekeeping and so on. And when they’re pulling in non-room revenue sources, such as on-premises restaurants that they don’t own, they’re getting a marginalized percent.
NREI: How do you distribute your technology?
Farley: Most multifamily clients use a hosted model run by Rainmaker. But casino clients buy their own software because of gaming regulations. However, some of the smaller Indian-run casinos are starting to use the hosted model.
It’s also important to note that the technique itself is not a silver bullet. There is training from the top down that’s needed for these [programs] to work optimally. It’s more than software. It’s a way of doing business.NREI: What are the costs for the two products?
Farley: For multifamily, costs range from $1.75 to $3.50 per unit per month. Casino costs are tiered based on the number of room units.