By Steve Moran

The Real Truth About Underperforming Senior Living Communities

I have been thinking about writing this article all week, wondering if I should or shouldn’t because it will appear that I am taking shots at certain organizations and perhaps even leaders. That is not my intent, but this is something that needs to be talked about.

The Set-Up

Over the last few months . . . there have been a number of statements by capital providers and operators that financial underperformance is the result of two things:

    1. Overbuilding
    2. Discounting by competitors 

I believe this is too simple an explanation. There is no doubt that things are much better today than they were when we came out of the recession and there was a huge amount of pent up demand. That pent up demand created two false impressions:

    • That it would be nearly impossible to build too many new senior living organizations
    • It would make every senior living operator look like they were brilliant operators and had brilliant marketing and sales organizations

We know today that we can have excess inventory and that some senior living organizations are a lot better at operations and sales than others.

Too Simple

There is no doubt that discounting makes it tough for everyone in the market and it is so so tempting to chase those communities to keep up. It is also true that the reason communities are discounting is because market conditions have changed. The number of people who are ready and willing to move into senior living communities in those markets is a smaller number than the number of available units.

The problem is, I promise you, that without exception in every single one of those markets where discounting is taking place and local leaders lives in fear of being fired each month, there are one or two communities that are crushing it, that are defying the odds, that simply seem not to know there is a problem.

The Hard But Hopeful Reality

The real truth is that in every single market (okay, I get you may be able to find an isolated exception to this), there are enough older people who have the financial capacity to pay for senior living and whose lives would be substantially enriched by residing in senior living. And they are saying no to all senior living or saying no to the struggling senior living communities.


You Can Be One of Those High Occupancy High NOI Winners

First, chasing discounts is a disaster in the making for everyone and for senior living as a sector. Every time a senior living organization chases rates down, they are saying to the market, to the world, to their prospects, and to their residents, “WE ARE NOT ANY BETTER THAN ANYONE ELSE”. If you see yourself that way it is going to be so hard to attract and retain residents.

The right thing to do when discounting occurs is to raise rates, tell the world that you are way better than the competition, that you are worth every extra dollar you are charging. 

If you are in pain with occupancy do these two things . . .

    1. Fix your operations so that your team loves coming to work every day. The specifics of what you need to do, what you need to work on, will vary a lot from organization to organization, from community to community. Some of you need to get rid of frustrating policies and procedures. Some of you have mean, ineffective leaders you need to get rid of. Some of you have ordinary leaders that need to be taught how to be extraordinary leaders.
    2. Take a look at your sales and marketing processes. Make sure you are telling a unique story. Do you and your team know what it is that you do that makes your community the best place for residents to live? Do you know how to communicate that message? Are your team members making it easy to get information and to move in?

I get that the implementation is not easy, in fact hard, but the benefits are huge. Get some outside help if you need it. I would be glad to make some recommendations in this area, just call me or shoot me an email.