Determining the right price to charge for senior living apartments and services has always been part art, part good market research and part “seat-of-the-pants” intuition.
The senior living industry has been slow to embrace new technologies and new methodologies. There are good reasons for this. Overall, doing it the same old way has worked pretty well. Communities are continuing to be built and filled up, and revenues are still exceeding costs, leaving free cash flow for owners.
Slowly but surely, a “pivot” is taking place.More and more communities have implemented technology that includes Wi-Fi, electronic resident record keeping and sophisticated computer-based emergency call systems.
The one technology arena that has been almost entirely ignored is the use of big data. The idea behind big data is that technology allows companies to collect massive amounts of information about what they are doing and what their competitors are doing. Then, applying sophisticated analytical techniques to gain new insights and guidance that lead to better business decisions. What makes this process so valuable is that you are able to learn things about your business, your competitors and your marketplace that you would never be able to learn by conventional means or looking at the data intuitively. These big data opportunities are just beginning to emerge in the senior living industry.
This is where Prorize comes in. Prorize has capitalized on their analytical success in other industries and developed a sophisticated rental pricing system specifically for the senior housing industry.
Determining the right price to charge for senior living apartments and services has always been part art, part good market research and part “seat-of-the-pants” intuition. If your price is too low, you will fill up your units but leave money on the table. If your price is too high, you will lose residents to your competitors and leave inventory unoccupied – a costly misstep.
Prorize has effectively used big data analyses coupled with proven pricing techniques to determine the optimal pricing schedule for each individual suite/unit for the senior living industry. While not a perfect comparison, you know that if you are going to a convention in Las Vegas, the rate you pay will go up or down based on current market conditions. It is possible that the exact same room you book for $100 per night could have a price of $200 per night a week later. The gaming resorts use companies like Prorize to establish exactly what those prices should be. (In fact, Prorize principals pioneered the pricing algorithms for the gaming industry. The majority of the hotels in Las Vegas currently use these algorithms to determine room rates). These same techniques are successfully used in many industries including multi-family housing, car rental, airline, and self-storage. While the swings in senior living are not nearly as large as in the some industries, having just the right price can make a significant financial difference.
Senior Living Pricing
Prorize has been working with a significant national senior living provider for more than three years to evaluate whether these techniques could be successfully applied. Prorize has demonstrated that they can. Prorize has specifically developed optimization software that has proven to enhance the senior living provider’s top-line revenue by 5 percent to 15 percent.
This means that the provider’s 80-unit community, with modest $3,000 per month rates, would see a $12,000 to $36,000 per month gain in top-line revenue. This profit represents a serious increase in cash flow that can be used to improve the quality of life for residents and/or the bottom line for owners. Over the coming months, we will be working with Prorize to talk about pricing strategies as a way to help our industry better understand how to use big data to improve the way they do business.
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