A returners' discount is paid to everyone who rebooks, and most of them would have rebooked at full rent.
A rebooking discount pays when the extra residents it persuades to stay save more in letting costs and void risk than the discount gives away to everyone who rebooks, including those who would have stayed anyway. On an illustrative 520-bed scheme, £6 a week off for returners lifts rebooking from 20 to 32 per cent of eligible residents and nets £5,252 a year, but it only breaks even above a 28.8 per cent rebooking rate, and 62.5 per cent of its cost goes to residents who needed no incentive.
Worked in full in Student Housing Real Estate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Every September a student housing scheme re-sells most of its rent roll from nothing. A resident who rebooks in January is a bed that does not need a portal listing, an agent's commission, a viewing, an end-of-tenancy turn or a late-summer price cut. That is why operators offer returners a discount. The question is whether it is priced on the right base.
| Input | Value |
|---|---|
| Beds | 520 |
| Average rent per bed, per week | £185.00 |
| Tenancy length, weeks | 51 |
| Residents eligible to rebook (continuing their course in the city) | 45%, 234 |
| Rebooking rate without an offer | 20% |
| Rebooking rate with the offer | 32% |
| Rebooking discount, per week | £6.00 |
| Cost of letting a bed to a new resident: commission and marketing | £600 |
| End-of-tenancy turn avoided: cleaning, inventory, minor repairs | £120 |
| Probability a bed released to the open market ends the year unlet | 3.0% |
Final-year students, those leaving the city and those moving in with friends cannot be retained at any price, so the rates apply to the 234 eligible residents, not to all 520 beds. Mixing the two bases is the fastest way to overstate any retention programme.
Benefit = letting cost avoided + turn cost avoided + probability of a void × annual rent
Annual rent = £185.00 × 51 = £9,435. Void value = 3.0% × £9,435 = £283. Benefit = £600 + £120 + £283 = £1,003.
Discount per rebooker = £6.00 × 51 = £306
Rebookers with the offer = 32% × 234 = 74.9. Total cost = 74.9 × £306 = £22,913.
Without the offer, 20% × 234 = 46.8 would have rebooked. Incremental rebookers = 74.9 − 46.8 = 28.1. Gain = 28.1 × £1,003 = £28,166.
Net = £28,166 − £22,913 = £5,252 a year.
Rebookers needed = base rebookers × benefit / (benefit − discount per rebooker) = 46.8 × 1,003 / (1,003 − 306) = 67.3, which is 28.8 per cent of the eligible residents.
Excel, with base rebookers in B1, benefit in B2 and discount per rebooker in B3: =B1*B2/(B2-B3)
The offer works, narrowly. It needs to lift the rebooking rate by 8.8 points just to pay for itself, and the assumed 12-point lift leaves £5,252, about 0.11 per cent of a £4,759,014 rent roll. Of the £22,913 handed out, £14,321, or 62.5 per cent, goes to the 46.8 residents who would have rebooked at full rent. That deadweight is the cost of the programme, and it grows with every point of loyalty the scheme already enjoys: the better a building is at keeping residents, the less a blanket discount is worth.
The discount also lowers achieved rent on the rebooked beds, so it shows up in RevPAB. A scheme reporting its rate card while giving 0.48 per cent of the rent roll back to returners is overstating what a bed earns, the same gap discussed in how to calculate RevPAB for student housing.
| Rebooking rate with offer | Rebookers | Incremental | Discount cost, £ | Gain, £ | Net, £ |
|---|---|---|---|---|---|
| 24% | 56.2 | 9.4 | 17,185 | 9,389 | -7,796 |
| 28% | 65.5 | 18.7 | 20,049 | 18,777 | -1,272 |
| 32% | 74.9 | 28.1 | 22,913 | 28,166 | 5,252 |
| 36% | 84.2 | 37.4 | 25,777 | 37,554 | 11,777 |
| 40% | 93.6 | 46.8 | 28,642 | 46,943 | 18,301 |
| Discount per week, £ | Per rebooker, £ | Cost, £ | Net at 32%, £ | Break-even rebooking rate |
|---|---|---|---|---|
| 3.00 | 153 | 11,457 | 16,709 | 23.6% |
| 6.00 | 306 | 22,913 | 5,252 | 28.8% |
| 10.00 | 510 | 38,189 | -10,023 | 40.7% |
| 15.00 | 765 | 57,283 | -29,118 | 84.3% |
The break-even rate climbs steeply with the discount, because every extra pound goes to every rebooker while the benefit per incremental resident stays at £1,003. A weekly discount is a pound-for-pound rent cut; at £15.00 a week the scheme would need 84.3 per cent of eligible residents to stay. A one-off £200 cashback paid on signing does better if it produces the same lift: it costs £14,976, nets £13,190 at a 32 per cent rebooking rate and breaks even at 25.0 per cent, because it is capped per resident rather than running for 51 weeks.
The lift is the unknown. Nothing in the arithmetic says the offer will move the rate from 20 to 32 per cent. Test it: offer it in one block or one room type, compare rebooking against the rest of the building, and set the discount from the measured lift.
Comparing the discount per rebooker with the saving per booking. £306 against £1,003 looks like an easy win, at 30.5 per cent of the benefit. But the discount is paid to all 74.9 rebookers and the saving is earned on only 28.1 of them, so the true cost per incremental resident is £816, much closer to £1,003 than the headline suggests. The same deadweight logic applies to any rent cut aimed at filling beds, as worked in should a student housing scheme cut rent to fill beds.
Price a rebooking offer on incremental residents, not on all rebookers, and solve for the rebooking rate it must reach. Here £6 a week needs 28.8 per cent and nets £5,252 at 32, while a capped one-off incentive does more than twice as well, provided it moves residents as much as the weekly discount does. The rent roll, the letting campaign and achieved rent by room type are modelled in the free workbook for this case.
Measure it on eligible residents, those continuing their course in the city, not on all beds. In the illustration, 20 per cent of 234 eligible residents rebook without an offer, which is only 9.0 per cent of 520 beds. A discount of £6.00 a week has to lift the eligible rate to 28.8 per cent to break even, so the base rate decides how much room any offer has.
Often, because it is capped per resident. On the illustrative scheme, a £6.00 weekly discount costs £306 per rebooker over 51 weeks and nets £5,252 at a 32 per cent rebooking rate, while a one-off £200 cashback that achieved the same lift would cost £14,976 in total, net £13,190 and break even at 25.0 per cent. Either way, the cost falls on every rebooker, not only the extra ones.
It depends on channel and city, but the components are commission or portal fees, marketing, the end-of-tenancy turn and the risk the bed ends the year unlet. With illustrative figures of £600 to let, £120 to turn and a 3.0 per cent chance of a void on £9,435 of annual rent, a new letting costs £1,003, which is what each extra rebooker saves.
This article is one calculation from Student Housing Real Estate. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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