On a call with reporters in August, Stephen Weissman, an antitrust attorney for Gibson Dunn who represents RealPage, downplayed concerns about customers leaving the Richardson, Texas-based data and software company due to lawsuits from renters and the Department of Justice.
Many industry insiders agree with that sentiment, saying although there is some concern now, they think it will be business as usual after the cases are settled. Nevertheless, there could be an opening for upstart firms to nab a share of the revenue management business.
Remen Okoruwa, co-founder and CEO of Propexo, a Boston-based provider of a unified API solution that integrates with leading property management systems, believes a lot of RealPage customers feel pressure to make a decision about the revenue management product, as the current litigation means ongoing use of the tool could expose them to additional risk. Some of the firm’s customers have been listed in lawsuits.
“Based on recent conversations, I believe there is some truth to claims that certain groups are either trying to not actively use the product, or taking advantage of a recent feature RealPage announced allowing you to opt out of the nonpublic data when you receive your pricing recommendations,” he told Multifamily Dive. “That nonpublic data is the source of a lot of the controversy, so they are simply using the amended version.”
Donald Davidoff, co-founder and CEO of Littleton, Colorado-based Real Estate Business Analytics Inc., a data analytics platform offering business intelligence, budget and pricing and revenue management solutions, noted RealPage clients may be scared off by the lawsuits and criminal investigation, but it shouldn’t make them eschew apartment pricing systems.
“If the customers are named in the lawsuit, they are spending money, even if it turns out they are not liable for anything,” he told Multifamily Dive. “There are options out there in the market that clearly don’t even come near the same state of using nonpublic information so anyone who is thinking of going to manual pricing, why would they do that? I don’t think any RealPage customer is going to abandon revenue management, whether with them or another option.”
While the DOJ has raised concerns about RealPage’s utilization of nonpublic data, this practice is legal as long as the data is managed appropriately, said Michelle Lowery, an antitrust and competition law partner at the Chicago-based firm McDermott Will & Emery, adding that it wouldn’t be surprising if a majority of its current customers stay.
“Certainly, this is a wakeup call that reflects new thinking about how companies should benchmark and use data,” she told Multifamily Dive. “One thing that can be done is document all decisions on pricing from one’s own unilateral perspective and what underlies that decision rather than a blind relying on data from one company.”
Real Page did not respond to Multifamily Dive’s request for comment for this story, although it said in a news release last month that customers now have the ability to receive rent recommendations calculated without nonpublic information. The firm also said that its use of nonpublic data is “highly aggregated, anonymized and blended” in a way that leads to more competitive pricing.
On the August call with reporters, Weissman said that nonpublic data “yields lower advertised rents.”
The endgame
Blerim Z. Zeqiri, CEO and co-founder of Scottsdale, Arizona-based Radix, a multifamily analytics company aiming to provide transparency in pricing for consumers, said that the facts around whether consumers were harmed by elevated rents due to the software’s algorithms will be litigated and details will come out in the months and years to come. However, the catalyst for this intervention is the perceived assumption that consumers do not have access to the same data that operators/owners do. This is true, but not by design or malintent, he said.
“To prevent similar situations in the housing market, it’s essential to enhance transparency by providing accurate and comprehensive data accessible to both consumers and operators, including detailed information on pricing, concessions, fees and deposits,” he told Multifamily Dive.
Okoruwa said he feels it’s likely the DOJ and RealPage will eventually settle out of court, RealPage will make some adjustments and then continue business as usual. But that’s not a certainty, so that leaves its customers with lots of questions about what’s ahead.
“Until there is such a settlement, there will be concern by RealPage customers and others in the industry about how far this goes and what the impact to the company will be,” he said.
Regardless of what happens with RealPage, Jerrold Bregman, a partner at Greenwood Village, Colorado-based BG Law who specializes in commercial real estate, sees a “brave new world of technology” and now that the genie is out of the bottle, he doesn’t see it getting stuffed back in and customers will continue doing what they can to get the best price.
“We see dynamic pricing, machine learning and guidance for price point and price setting happen all over the economy,” he told Multifamily Dive. “It happens with airline purchases, with hotel purchases and even retail purchases. The technology exists and will continue to be deployed unless stopped by the government.”
One other result of the revenue management controversy is that there could be a slight opening to penetrate the apartment business. Zeqiri said that legal entanglements create the risk of losing market share and customers — paving the way for other firms to move in.
“Innovative firms can provide solutions that address the shortcomings of legacy systems, positioning themselves as open and accessible alternatives,” Zeqiri said. “By building trust and creating open marketplaces that level the playing field for all stakeholders, these companies can capitalize on the opportunity to reshape the industry.”
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