Part 2 - What Service Providers need to know from the 2021 Student Accommodation Costs Survey
In our last look at the 2021 Student Accommodation Costs Survey, we explored the first recommendation that the report outlines to increase sector unity.
If you haven't read that first post, then the 2021 Student Accommodation Costs Survey is run by Unipol and NUS every three years and covers various topics. This year 80 institutions (predominately universities) and 62 private and charitable accommodation providers submitted responses to the survey.
Addressing Affordability
The second recommendation arising from the report was to address affordability. The report states:
““Affordability and access are fundamental in maintaining a higher education system that encourages participation from across the full spectrum of backgrounds.””
Off-Street to Purpose Built
Over the last ten years, there has been a significant shift in student accommodation from off-street converted housing to purpose-built student accommodation (PBSA). This shift has been beneficial to local authorities who seem to have reduced their housing stock pressures by restricting the licencing of HMO's (House in Multiple Occupancy) and encouraging the construction of larger, purpose-built student dwellings.
This shift has, however, come at a cost to students.
Higher quality, purpose-built housing has become more expensive. For example, the report states that generally, "off-street rents in a shared student house are some 40 per cent cheaper than a PBSA let."
The Rise of the Middle Market
Fortunately, the rising accommodation costs mean we have witnessed the growth of a "middle market". A new section of the market of purpose-built accommodation that caters for several pricing points, not just the highest end.
To meet this emerging market and to increase affordability, there will be a need for private providers to reduce costs from their third party providers or make efficiency savings in other areas of their operations.
Close Collaboration
Reducing costs and increasing operational efficiencies is the dream for any organisation, and the only way to achieve it with third-party providers is through close collaboration.
A trusted and experienced third-party can aid accommodation providers in creating transparent processes and laying out clear expectations. That close work hopes to reduce the costs for the third-party provider and thus allow them to pass those savings on to the client.
Contract Lengths
One of the most practical areas for collaborative working is contract length. We've often found that private accommodation providers will enter into annual contracts with their service providers by default. And a yearly contract does have some merits, such as allowing annual tenders and coinciding with academic years. However, what is so often missed is that the unknown of rapid inflation of wages increases the risk to the accommodation provider.
As we saw in Q3 and Q4 of 2021, a sudden shortage of security staff meant that wages increased dramatically. Those accommodation companies in contract with a provider could pass that risk on to the provider. But, those companies that needed to retender suddenly saw their costs soar.
Our advice is always to enter into more extended contracts with proven third-party providers to ensure that the increased risk passes to the third party.
There is also a benefit to the third-party provider - longer contracts allow them to recruit better staff and make better long-term predictions on costings. The increased accuracy of forecasts for costs and budgets enable contractors to reduce costs and pass those savings on to the accommodation provider.
Operational Efficiencies
As much as contract lengths are a straightforward change to improve relationships, it's vital to analyse and iterate operational processes.
Accommodation providers should continuously consult with their providers to identify the efficiency increases they can obtain. This regular consultancy does require a trusted supplier, a flexible relationship and a good amount of experience, but we've regularly seen clients make significant savings and improve services.
In fact, in 2020, we rolled out a new technology solution to one university, which instantaneously increased operational efficiency and delivered a 20% cost saving.
Key Takeaways
Efficiencies need to be sought from operational costs if the PBSA intends to appeal to mid-market prices.
Longer contract lengths allow a better relationship between the accommodation provider and contractors.
Third-party and accommodation providers must maintain high-quality service levels in the highly competitive PBSA sector.
