Setting Optimal Rents for Apartment Firms

Everyday apartment operators have to set rental rates for apartment units. How the rents are determined will have a significant impact on an apartment firm’s value, revenue and profits. In this chapter, we introduce an approach to setting the optimal rents based on the theory of Revenue Management. The chapter is organized as follows. We start with an introduction of basic concepts in the apartment industry, followed by a description of a methodology by which the optimal rents can be derived. We then outline the procedure for setting optimal rents, followed by an illustration of a case study. Finally, we conclude this chapter with the implication of this procedure in the practical application of Revenue Management for apartment operators.