By Steve Moran
This may be my single biggest pet peeve in senior living right now. I hear it in earnings reports and I hear it from experts at almost every single conference. I would caution you to not believe it, to not count on it.
We Can’t Possibly Build Enough Memory Care Communities . . .
Five or six years ago, this was the big theme coming out of the fall NIC conference. I was too new in the industry to get a press pass and so didn’t attend, but talked to a couple dozen leaders who, with maybe one or two exceptions, were sure this was true.
We now know, of course, that it is possible to build too many memory care communities. We have seen a number of memory care companies disappear and others struggle. We have also seen a number of senior living operators whose portfolio included memory care communities, lose those communities to other operators.
The Increased Market Size is Real
There is no question that there is an age wave coming which will substantially increase the pool of potential residents. It is still 5-8 years away which is a long time to hold on to a partially full community. I even believe we will see more people move into senior living communities, it will just not be the magnitude the industry is praying for and counting on.
Why It’s BS
There are 9 reasons why we are headed for the great disappointment:
- New communities continue to be built. As of the time this article is being written, it is clear there is a slowdown in new development, but it has not stopped. With even a slight uptick in demand and occupancy, development will rise and there will be a lot of projects that are ready or near ready to go.
- We continue to squeeze the size of the market because we can’t seem to resist building bigger, more expensive communities. So, as the potential market is growing we are in effect squeezing it back down.
Consumers will demand more for their money. If I am a consumer who is paying you six, eight, ten, or more thousands of dollars a month, I am going to be demanding better and more personal services. If we are willing to be brutally honest, too often we only get a C grade for quality of services being charged for.
If you went to a hotel that promised 5-star service and received great 3-star service that would not be good enough, even though it was great 3-star service. You would say no to that, and yet too often that is what happens. And I hear it all too often from senior living insiders who become consumers.
- We can’t seem to get it together to tell the great stories we have about the benefits of senior living to residents and society. I have offered to host a roundtable with all of the industry interest groups and it has generated near-zero interest. This is probably the single most important thing the industry could do to counteract negative publicity.
- Costs are going up faster than incomes, which means the market will continue to shrink.
- Government payors know well that home care is much less expensive than senior living and so they have very little incentive to pay for senior living. And it gives people a largely false narrative that home is better than senior living.
- People are continuing to live healthier longer and it may well be that because of this, demand will decrease.
- We are an inventive society and we will see more and more inventions and devices that make it easier to stay home. Imagine what would happen if we had self-driving cars. How many of your residents first moved in because they could no longer drive?
- Residential senior living is just now coming into its own. It feels a lot more like an older person’s home and is often more cost-effective. I expect it to become a more significant part of the ecosystem. Enterprise senior living will need to decide if they want to figure this offering out or see their market share shrink.