Why I Avoid Self-Storage Revenue-Management Software

Editor’s note: Since this blog was written, Extra Space Storage has been sued by the New York City Department of Consumer and Worker Protection for “predatory pricing practices,” including bait-and-switch pricing. Read the news story here.

An industry colleague recently asked me why I don’t use a revenue-management software program to set rates for my self-storage facilities. His question unleashed a five-minute rant. When I finished, he said, “Man, you make some very good points, and the industry needs to hear them. Can you come speak at the upcoming convention?”

I tend to avoid the spotlight, so I politely declined. But then I thought maybe I should have agreed. I do hold strong opinions on the topic. So, here’s what I would say to a room of industry peers.

Why Revenue-Management Software Sabotages Your Success

Using revenue-management software for your self-storage or RV-storage property is a bad idea. Many industry people think you’re leaving money on the table if you aren’t using it. I would argue that you’re leaving money on the table when you do. Here’s why.

The system accelerates the race to the bottom for rates. Demand and supply go up and down in the self-storage industry. Developers add to the “supply” in good times when demand is high; then demand drops, and the market is oversupplied. Yes, revenue-management software might accelerate the race to the top for your rental rates at peak times, but it also paces down faster and often to rates that can be ridiculously low.

Remember: The value of your storage property goes up and down alongside those rates. If your loan is maturing and your revenue-management software drives down your value, it may limit your refinancing options or lower your sales price. That could potentially total something north of a million dollars in losses.

The national brands amplify this, undermining smaller operators. All national self-storage companies use this software, so if they’re your competitors, it further accentuates rate volatility. They move in tandem—all driving down or up at once—so the rate your software sets for you is based on their pricing. Independent operators don’t generally change their rates by the hour. The bigger brands generally don’t sell properties or finance them individually, so they aren’t concerned about driving their property values down for a time.

It could be illegal or expose you to lawsuits. The U.S. Department of Justice (DOJ) 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 it. One 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 Storage in 2019 for bait-and-switch. Their system set super-low rates for new tenants, then raised them 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 doesn’t make sense in the storage industry, which is much longer-term by nature and where property values are so directly tied to rates.

I would argue that it messes with prices in a way that’s bad for real estate of any type. It artificially inflates them 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, this means that during good times, customers overpay; and amid bad times, owners take a hit. Neither owners nor customers win in that system.

Changing prices every hour creates distrust. The landlord-tenant relationship is ongoing. It isn’t like one flight on an airline. Storage customers are trusting you with their belongings, sometimes indefinitely. Changing prices all the time isn’t the way to start the relationship or maintain a good one.

Revenue management isn’t just the price at move-in. Many self-storage companies change their rates every six months because it’s a month-to-month lease and they can. I don’t know of any that lower customer rates when pricing goes down. Let’s say a person pays $75 for a 5-by-10 unit, and then six months later, the software says it should be $150 and the company increases the rent. How would that make you feel? 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 self-storage company.

A Better Solution

In my self-storage and RV-storage portfolios, I proactively check the rates of the five closest competitors to each property twice a year and adjust market pricing 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’re letting software adjust their pricing for them unchecked, so we exclude that comp from our rate analysis.

We 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 won’t increase it again for at least a year. This steady and stable approach creates happier, long-term storage tenants while strengthening revenue and property values.

I fear all self-storage owners will begin using this software, especially now with most purveyors calling it “artificial-intelligence enhanced.” My hope is they’ll take a contrarian approach: When you use smart judgment to set fair rates, you’ll 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 facility operators and their customers.

Barry Raber is founder of Business Property Trust, which has acquired or developed 80 commercial properties. He has more than 30 years of experience in real estate, with knowledge of acquisitions and asset management. He’s also president of Bargain Storage and Carefree RV Storage, and was named an “Entrepreneur of the Year” by Entrepreneurs’ Organization in 2017. Barry shares his successful business secrets at Real Simple Business. To reach him, email [email protected].

About the Author

Barry Raber

Founder, Business Property Trust

See more from Barry Raber

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