Property Management Software and Service Industry Company

Topics: Free Essays

RealPage Inc. globally provides and operates software solutions and data analytics to the rental real estate industry (RealPage). They are classified as a player in the Property Management Software and Service Industry. Within the last decade, property management task completion has evolved to become more efficient and streamlined with the help of software. Property management software aims to provide high quality, easy-to-use, and easy-to-access business solutions and services. Such services include asset optimization, portfolio management, and general property management (RealPage). Barriers to entry in the software industry are virtually non-existent.

The industry is characterized by minimal government regulations, low customer switching costs, and the network effect (IBISWorld).

Industry Structure and Sources of Profitability

In the case of suppliers, software creators operate as the suppliers themselves. Property management companies are dependent on the software to make their jobs easier and retain low costs. On the other hand, renters rely on the software to make service requests easier and to make managing their timeline easier.

Certain software suppliers could potentially be rivals if competing property management companies are more efficient utilizing certain software compared to others. As property management software companies attempt to innovate and provide the most effective service possible, the threat losing consumers to competitors could increase. Renters and property management companies will look for whichever software most effectively automates tasks for the best price. Considering that switching costs are low, performance will be the defining factor in the final purchase. Buyers, seeing as there is a wide selection of management software, have high bargaining power.

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Buyers can easily cancel, renew, or find new subscriptions. The threat of substitutes is relatively low because of minimal alternatives. Other alternatives to the software could include managing properties internally. However, property management companies look to software companies to make their jobs easier with the ease of use the different software provides.

Sources of profitability primarily stem from monthly or yearly subscriptions. Property management software companies are going to be most profitable when they attract larger property management companies who oversee a larger number of units. Sources of profitability continue to evolve as the software provides more services. With additional services, software providers can charge users outside of their subscriptions. These additional services can be billed monthly or per item (Buildium).

Competitors

The intensity of competition is high. Rivalry has strengthened over the past decade, mainly due to low barriers to entry, which allow for an increase in equally-sized and like-minded competitors. As more property management companies and renters turn to technology to solve their problems efficiently, property management software companies must differentiate to provide sought-after innovation and stronger pricing models to meet demands (IBISWorld). Some companies have a diversified portfolio of market offerings, for example, RealPage has a variety of products which “include Software Application, Property Management, Sales & Marketing, Applicant Screening, Revenue Management, and Real Estate Asset Management” (RealPage). The market for the products supplied in this industry is highly fragmented and rapidly changing.

The basis of competition is high and the trend is increasing due to increased innovation and new market entrants. Many companies in the industry utilize discounted pricing and package bundling as a source to gain an edge over their competitors (CSIMarket). Additionally, companies heavily market their product offerings to attract new or retain old customers. Competitors in the industry consist of RealPage Inc., Yardi Inc., Entrata, HappyCo, ResMan, Tenant File, Nestio, Buildium, Record360, SafetyCulture, and Inspect check Mobile. (Owler).

Quantifying Average Profitability

Average profitability in the industry is low to medium. The industry is comprised of intense competition, a similar basis of products, low barriers to entry, and powerful buyers. An increase in the number of competitors and intensity of competition result in pricing pressures, reduced sales, and decreased margins. A similar basis of competition result in consistent innovation and perks, which decreases margins. Furthermore, the quality and novelty of their products and services contribute to a higher degree of competition and decrease the likelihood of a high profitability (IBISWorld) .

Evolution of Profitability and Competitive Dynamics

The Property Management Software and Services Industry exist within a rapidly evolving and lucrative technological market. Primary factors such as low barriers to entry, competitors with a similar basis, powerful consumers, and the threat of substitutes, pose as emerging risks to any individual business’s profitability. These primary factors, consequently, leverage companies within the industry to continuously release differentiated product offerings and updates for the current software. Despite rapid advancements in software technology, profitability and competitive dynamics for property management application are considerably hindered by the high price sensitivity of consumers.

Evolution of Customer Needs

Property management software offers a broad range of services that satisfy customer needs. Its services include sales and marketing, applicant screening, renters insurance, management of property, revenue utilities, etc. All of these services will remain relevant for customers over time, but some may become more important as a result of consumer’s increased reliance on innovative technology. Consumers constantly want the most innovative and state-of-the-art services. Therefore, companies must update all of their services with new technology and software to stay relevant and competitive (IBISWorld).

The integration of intelligent systems, machine learning, and artificial intelligence (AI) applications in software is expected to revolutionize the rental real estate industry (Forbes). Intelligence and AI applications will benefit consumers through the facilitated access and use of the company’s services and maintenance.

Consumer’s often prioritize the value, or “economic efficiency,” they receive from a product or service prior to purchasing. When considering their options, consumers perform a cost-benefit analysis and often patronize businesses that provide leading serviceability and features at the lowest price. Customer needs are changing as technology advances, and companies will need not only to keep up but be ahead of this technology to compete in this industry (Forbes).

Key Industry Problems and Opportunities

Industry conditions in the property management software industry generate problems and opportunities for companies in the future. The most lucrative opportunity is the potential growth within the industry and the unmet demand. Within the annual $525 billion rental real estate industry (US Census Bureau), RealPage estimates that there is an unaddressed market of about another $9.8 billion annually. The global vacation rental market, of which half are individually managed properties, totals $130 billion annually (SEC 10k filing). The unmet demand within the industry increases the size of the buyer segment, in turn decreasing the amount of buyer power. Another significant force that provides a positive outlook for companies in the industry is the lack of substitutes. RealPage, for example, offers a platform that is a one-stop location for revenue management, financial data, billing, and property management. The only substitute is gathering all of this information separately, on paper or electronically.

Multiple forces and factors negatively impact the industry. These factors include: data analytics platform does not require suppliers, the largest barrier to entry are employee costs, and the large amount of unmet demand offers a substantial opportunity for new entrants. Newfound competitors can result in reduced sales, pricing pressure, and increased costs for RealPage. Competition and rivalry will increase as well as more businesses penetrate the industry.

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Property Management Software and Service Industry Company. (2022, Jun 08). Retrieved from https://paperap.com/property-management-software-and-service-industry-company/

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