How to Achieve Success in a Mature Market

If predictions turn out to be correct then we will have seen an extra 29,000 PBSA beds added to the current UK stock by the end of 2019. Although this is great news for the sector as a whole, the process of a market consolidating and maturing poses a new set of challenges for property managers on the ground. So how do you stand out on a busy street?

Growing Pains

If predictions turn out to be correct then we should see an extra 29,000 beds added to the current UK stock by the end of this year ( 2019), increasing the sector’s market value to £53bn. In a Knight Frank report , James Pullen, one of their leading analysts, also highlights the important influx of international investment, from the US, Hong Kong and Singapore in particular, holding the acquisition of Unite’s Mayflower portfolio by Singapore Press Holdings as a prime example. 

Despite Brexit and increased global competition, investors still favour the UK due to the reliability and maturity of the market. According to Pullen, this strength is “fundamentally underpinned by the UK’s world renowned higher education system.”

“Despite Brexit, global investors continue to acquire PBSA assets in the UK, fundamentally underpinned by the UK’s world renowned higher education system”

James Pullen – Analyst at Knight Frank

And of course the recent welcome news from the Home Office lifting graduate visa restrictions is only going to strengthen our international standing and performance, ultimately delivering stronger numbers from international markets.

 Although this is all great news for the sector as a whole, the process of a market consolidating and maturing poses a new set of challenges for property managers on the ground. As supply begins to match demand no longer is the “build it and they will come” approach applicable. This is especially true in the key cities where growth was first most viable – in particular those cities with young and rapidly expanding universities, along with cities with multiple colleges.

In these highly competitive locations in particular, differentiation and standout has become a key and urgent goal for the PBSA provider. So how does a PBSA owner or manager differentiate in this crowded market?

Great(er) Expectations

Initially stand out was a relatively simple affair revolving around choice and quality. Entering into a geography of tired university stock and often questionable HMO provision, the early PBSAs were able to offer the rapidly growing student populace better infrastructure, improved service and greater reliability.

However with new cohorts of students come new and growing expectations of quality and service from all aspects of their university life, accommodation very much included. So if relative luxury in it’s ubiquity is no longer the ground zero of accommodation differentiation today, what is?

We’ve identified four key strategies that successful providers are using to put clear water between themselves and their competitors in the busy towns and cities of the UK.

Affordability

“Affordability is key in any market, but has become more of an issue in the past couple of years in the student sector as competition increases and more beds are developed. Generally speaking, schemes that have performed better from a lettings’ perspective have a good mix of more affordable en suite rooms as well as studio accommodation”

Sky Mapson – Lead PBSA and Residential Originator at Maslow Capital

The 2019 National Student Money Survey –  conducted by Save The Student – revealed that it is more expensive than ever before to go to university – not because of tuition fees but because the cost of living has increased so much across the UK. Students now spend an average of £806.62 each month. That’s £37 more than in 2018. Rent accounts for 70% of this year on year increase.

Some students looking to improve their lifestyles are going to be seeking out value over premium specification or architectural novelties. Given Brexit uncertainties and the prudence of the current Gen Z cohort (being children of a recession) this value for money approach will be more true of UK students. Of course, international students may find their home currencies provide more spending power against a weakened pound – meaning premium properties will still be in demand for some of the (hopefully growing) overseas cohort. So as Mapson suggests, maximum success lies in a mixed and flexible portfolio.

Micro-locality 

“…micro location is one of, if not the biggest, differentiators in terms of whether a scheme will ultimately be successful or not versus competition. I have seen well-located schemes with an average specification, or no amenities, outperform higher-specification schemes that are in comparatively worse locations.”

Sky Mapson – Lead PBSA and Residential Originator at Maslow Capital

The proliferation of interactive maps on provider and 3rd party, listings and agent sites attest to the importance of location and orientation to the student.

Our own experience from our consumer brand Hallbookers is that proximity is especially important to international students whose concerns over security and confidence in transport systems are understandably more pointed than that of UK born students.

This doesn’t just boil down to proximity to college campuses (although its clearly important), but also being in a good area with facilities and amenities that appeal to young people is a powerful factor

Whatever the nuances within the cohort a quick glance at the the final chart in this article will leave no doubt as to its overall importance in the mix.

Socialisation

With the number of students presenting with anxiety issues doubling over the last 2 years and a recent BBC report showing that 25% of students feel lonely,  it is no wonder that PBSAs who take their ‘duty of care’ to their customers mental and social well being to the next level are likely to prosper.

It pays to remember that we are in an era of immediate feedback and heightened sensitivity to these issues among parents and students. So positive messages from current residents regarding social life and provision will no doubt have a major impact on sales.

Some providers are taking this very seriously and socialisation strategies range from your standard ice breaker party to computer gaming tournaments or even dog stroking events.

Getting this element right will drive positive ratings and reviews, improve 2nd and 3rd year re-booking and will provide excellent material for positive marketing content.

Branding

Branding is a tough nut to crack in the PBSA market and as such the costs to benefits have to be carefully weighed. Unlike an FMCG brand where spend tomorrow could and should have a lifetime value with the consumer, for a PBSA brand – that may well have only one significant relationship with the customer in a lifetime – heavy investment in the brand could seem questionable.

Also, no matter how good, shiny or enticing a provider’s brand image, it is unlikely to affect the customers choice of university. So unless you’re in the big few that have a presence in every student city then the brand is always a prisoner of geography to some degree.

So how important is branding given the two cautionary and restrictive points above?

The answer: In this mature, crowded market, more important than ever. Where competition on the streets is increasing you’ve got to get your message out there somehow.

It’s no good ticking the differentiator boxes of price point, socialisation and location if your voice is being drowned out by an inferior product that is shouting louder – or perhaps has a more attractive and shiny brand image.

Of course platforms, spend and media mix come into play in this equation but the fact remains that when you spend money communicating your message you need to dress it in clothes that your audience would want to wear.

John Philip Jones, a famous adman from the 1980s, spoke of all forms of advertising as:

“Rational arguments in emotional envelopes’ . 

This seems particularly pertinent for the PBSA sector. Accommodation is a set of rational choices. Where is it? How much? What security? Etc – But it is also the backdrop for the start of a massive adventure, a new life, an emotional journey.

The providers that will really prosper on the crowded streets of Britain’s university towns will be those that can deliver those rational differentiator messages wrapped in the emotional envelope that captures that sense of excitement and potential.

Of course you’ve got to find ways to post your envelope but that’s another story.

Differentiator Keywords

The customer’s viewpoint

Through our consumer brand Hallbookers we have access to a strong searchable data asset of direct PBSA customer feedback and opinion. To make this infographic we took a sample from a database of 3,500 recent reviews to gauge the relative importance to the student customer of some of the factors discussed. The figures and circle sizes indicate the volume of customer reviews where the keyword appears.