Unidentified Analyst: Perfect. I appreciate the time. Thanks.
Joe Margolis: Sure. Thank you.
Operator: Thank you. Our next question comes from Keegan Carl with Wolfe Research. Your line is open.
Keegan Carl: Yes. Thanks for the time guys. Maybe first just on LSI. I’d love to hear how the performance of the portfolio is trending relative to your expectations at the start of the year? And do you think you fully realize revenue synergies in this yet?
Joe Margolis: So I think LSI performance in the first quarter was as expected on target so we’re happy with that. And we still have as of today a 90 basis point occupancy gap. And depending on what metric you look at, what pool of stores you look at anywhere from 8% to 12% rate gap. So we still have wood to chop. I think the good news is the tools we need, the infrastructure we need in place to close those gaps is largely there, right? So the LSI store manager is now performing close to or at the level of an extra space store manager in terms of conversion rates and all the metrics we use, right? And that took some time to get there. We’ve largely caught up on R&M and capital and the stores look like an Extra Space store now in terms of cleanliness and repair, things like that.
The LSI website is actually now faster than the Extra Space website. It was much slower when we bought it. So a lot of the customer acquisition metrics are improving. I’d say, they’re not all the way there yet for LSI, but improving. So we’ve made a lot of progress. We still have some wood to chop, and we still have some opportunity to capture.
Keegan Carl: Got it. That’s really helpful. Thanks for the color Joe. And then I guess just shifting gears here a little bit. I know you guys don’t necessarily break it out, but it would be helpful to maybe just understand how you expect your year-over-year occupancy delta to trend throughout the rest of this year if anything might have changed from a few months ago?
Scott Stubbs : Yes. So we don’t expect a significant occupancy delta for the entire year. We obviously, it’s a component of your revenue, but we would expect it to be flat for most of the year, although we have been ahead some in the first quarter.
Keegan Carl: Great. Thanks guys. Really appreciate it.
Scott Stubbs : Sure. Thank you.
Operator: Thank you. Our next question comes from Spenser Allaway with Green Street. Your line is open.
Spenser Allaway: Thank you. You guys have been successful with your revenue management strategy. But just thinking about how you had to cut moving rents fairly aggressively like peers. I’m just curious if you have a sense of how long on average based on the current cadence and magnitude of ECRIs it would take you to get your new customer rent up to market level rents?
Joe Margolis: Yes. So I think there’s a little bit of a misunderstanding baked into that question that we’ve cut more aggressively than our peers. And I think that comes from the web scraping data that is published and people see. When you look at that data, that’s not adjusted for promotions. And our — we offer promotions, it’s under 10% of our web customers get a first month free or a promotion like that, where at our peers, it’s the vast majority of their customers. So to compare our web rates to our peers’ web rates, you have to adjust for promotions. And I think once you do that, you’ll see we have not cut rates significantly more than our competitors. It’s just not — it’s just not true. And our goal is, once someone comes in at a discounted rate to get them to street rate within a reasonable period of time. And that may vary based on different factors, but within a reasonable period of time, they need to get the street rate.
Spenser Allaway: Perfect. And then you spoke about the progress you’ve made in closing the occupancy gap on the legacy LSI assets, but based on your growing knowledge of the LSI market. I’m just curious what you think is a sustainable long-term occupancy level for that portion of the portfolio?
Joe Margolis: Yes. So we had an 80% market overlap with LSI and Extra Space stores. So for 80% of the portfolio, it’s the same. And we don’t really target an occupancy level. Again, as we said earlier, it’s is just one factor that goes into the algorithm that is trying to maximize revenue. And it may be different in different types of markets based on customer behavior.
Spenser Allaway: Okay. Thank you.
Joe Margolis: Thank you, Spenser.
Operator: Thank you. Our next question comes from Caitlin Burrows with Goldman Sachs.
Caitlin Burrows: Hi, everyone. I don’t think this has been talked about yet. I just wanted to touch on the marketing spend. So can you talk about how you measure maybe the return on marketing spend and how long you expect this kind of level to sustain for?
Scott Stubbs: Yeah. Yeah, the first thing to look at here is really a marketing spend as a percentage of your revenues. If you look at our marketing spend as a percentage of revenues, we’re still about 2%, which is still a very small component. On a year-over-year perspective, we get at the 23% looks like a big number. But there’s still a very positive yield. We look at the return on that spend in several different ways. It depends on where you’re spending money, whether it’s pay-per-click, whether it’s search engine optimization or other areas. But we continue to have a very high return on that marketing spend, and it’s a very small component of our expenses.
Caitlin Burrows: Okay. And then maybe just thinking, I know you guys maximize revenue through both rate and occupancy. But as you think about maybe absolute rental rates, how much they’ve grown over the past few years? I guess, what kind of gives you confidence that there does continue to be upside to that rent per square foot number?
Scott Stubbs: So, I think that what gives you confidence? I think the question was asked earlier, your guide versus your tone and where you are. I think we’ve seen positive things early in this year in terms of month-over-month rate increases. Now, that’s a positive. The negative is we’re still negative to last year. So, we are moving in the right direction. I think the leasing season will kind of be the real catalyst to say it was a great year or a good year or, hey, maybe it’s still a little bit slow. So I think that it’s really that June, July time frame when we’re going to get a feel for that. But so far, occupancies held up sequentially, rate has improved, but it’s still probably too early to really say, yes, it’s been a good year so far.
Caitlin Burrows: Got it. Okay. Thanks.
Scott Stubbs: Thanks, Caitlin.
Operator: Thank you. Our next question comes from Ronald Kamdem with Morgan Stanley. Your line is open.
Ronald Kamdem: Hey. Just the first one is just on housing. Can you sort of remind us what percent of your customers are coming in because of sort of home sales of the home activity and how you’re thinking of demand is changing as rates have moved up?
