By Steve Moran

It is time to completely rethink senior living pricing. With a few exceptions, the industry has it completely wrong.

Most of you need to immediately increase your prices by 30-50%. 

You think I am nuts, right? Hear me out.

The Flight Instructor Who Changed Everything

I used to teach flying. In order to keep my instructor certificate current, I had to attend a weekend refresher course every other year. At one of these courses, the presenter teased us with how the last presentation would teach us how to make 400% more money than we were currently making. An intriguing but ridiculous proposition. Every single one of us stayed until the end.

Here is what a handful of instructors were doing: They were creating a boutique experience for their students, who were all high-income individuals who wanted the best and could afford to pay for it. These were people who were driving Porsches and Lamborghinis, and many owned their own planes.

For them, paying 3 or 5 times the going rate for flight instruction and getting an 11-star experience was worth every dollar.

I didn’t have the moxie to do it, but even today I wish I had.

Your Communities Could Be Better (And You Know It)

Most senior living is simply not as good as it could be because the owners and operators are spending a lot of time and effort working to keep it as affordable as possible. (I am not arguing against an affordable model, but that still represents a small percentage of all senior living.)

I think because we have this “have to make senior living as affordable as possible” mindset, we are cheating residents and cheating ourselves.

Today’s Broken Pricing Strategy

Today’s pricing strategy goes something like this:

It starts with real estate. What does it cost to build or purchase the building, then what does it cost to operate that building — insurance, property taxes, maintenance, utilities? That gives us a number.

Then we figure out what it costs to actually operate the community: food, supplies, transportation, and of course the biggest cost, which is labor. The labor equation is roughly based on the idea that we need a minimum staffing level (with some margin) to provide the promised resident experience.

Finally, there is a target ROI number, and that gets added to the equation.

All of that is used to come up with a monthly fee schedule, care levels, entrance fees, and extra charges.

The Resident Experience (As It Exists Today)

Residents move in, mostly have a pretty good experience, their families have a pretty good experience, and they believe that is what senior living looks like, what it should look like — that it is the best it can be.

It Could Be a LOT Better

In truth, if you were not trying to keep the fees as reasonable as possible, it could be a lot better. Imagine that you could increase your food service staffing by 30-40% and train them better. How much better would the experience be?

Imagine that you could double the number of resident care aides. How much better would the experience be?

Imagine that you could hire triple the number of life enrichment experts to really create an outstanding experience for your residents.

Will People Actually Pay for It?

The short answer is YES. Not everyone, of course. Some won’t because they can’t, and others won’t because they don’t see the value, but more will than you think. The hardest part of this is operators having the courage to ask for big dollars and training their sales staff to ask for that kind of money without flinching.

My Personal Story (And Why I Didn’t Blink at $11,500/Month)

I recently moved my stepfather from a $7,500-a-month residential assisted living community to an $11,500-a-month community. I didn’t even hesitate when the room became available. And if it had been $13,500 a month, I would have been happy to spend that kind of money (yes, he can easily afford those prices).

I recently had coffee with the owner of the community and told him I thought he should raise his prices even though he is at the tip-top of the market for residential senior living. He has developed a great reputation in the local market, and he has a 5-month waitlist.

The Real Problem: Senior Living’s Reputation Struggle

The single biggest problem senior living faces is that it continues to be the choice of last resort for 90% of the population. The reason is that in an honest, even noble attempt to keep senior living as affordable as possible, we have created a minimal experience rather than an amazing experience.

When you dazzle your residents, when you dazzle families, and when you dazzle team members, people will fall in love with senior living and the best way to live out those last months, those last years.