Occupancy Decline: The Difference between 89% and 96% Occupancy

If you operate a senior care community, it’s likely that you’ve experienced (or will experience in the future) an occupancy decline.

While it’s the nature of the industry to see periodic dips, Senior Housing News reports that occupancy levels for skilled nursing have dropped to an average of 82.2%. And competition in the senior housing industry points toward future occupancy struggles.

Although stagnant or dipping occupancy is never welcome, it’s possible to become complacent. You may compare your numbers to the metrics of other communities and accept your average move-in rate.

Instead of looking at what’s normal for your industry, you need to look at what your mid-sized operation is capable of. It doesn’t matter if the average occupancy level for communities in your category is 89%.

There’s a far cry between 89% and 96% occupancy, and your loss is greater than you think.

If you’re not striving for zero lost revenue, you’re leaving huge amounts of profit on the table. Here are 4 ways an occupancy decline—even one that’s industry-wide—harms your communities and stunts their future growth.

#1 A monthly occupancy decline equals a yearly loss.

When it comes to an occupancy decline, each month you lose residents, you are losing long-term income. For instance, if you lose six residents this December, you haven’t just decreased your net operating income for this month, but for the fiscal year as a whole.

According to Genworth, the average monthly cost for a semi-private room at a skilled nursing facility is roughly $6,800. When you lose six residents, you haven’t just lost approximately $40,000 for the month. Until you gain sales traction to replace these residents, you will continue to forfeit that amount for the next year—an almost $500,000 loss.

#2 An occupancy decline demoralizes your staff.

Occupancy decline doesn’t only create a loss in revenue. It also causes a loss in morale. If your sales team already struggles to net up and grow, stagnant or dipping occupancy puts further pressure on them to perform. And this pressure can create a downward spiral.

If a team member fails to convince the adult daughter that your community is best for her aging mother, this failure can lead to further stress. When the next inquiry call comes through, your sales representative may be too focused on his or her performance instead of listening to the needs of the prospect.

One failure can lead to another, creating a vicious cycle that does nothing to remedy the lack of sales traction and closed leads.

#3 An occupancy decline puts pressure on your other operations.

Another way an occupancy decline negatively affects your mid-sized operation is that it puts a strain on your other operations. Let’s return to the example of losing six residents at one property.

If one community has created an annual revenue decline of $500,000, your other communities will need to compensate. Your other properties will need to maintain their current move-in rates. They will also need to boost their own closed lead rate to take a bite out of the loss. This places a heavy strain on the operations and sales departments of your other properties.

#4 An occupancy decline lowers your ability to reinvest.

When you leave money on the table by allowing stagnant or dropping occupancy, you’ll find you can’t adequately grow your properties. The difference between 89% and 96% occupancy is merely treading water versus reinvesting in your property for future revenue growth.

When you strive for a high move-in rate, you have more than enough to meet your bills. Once you go beyond budget, your expenses don’t increase much and the extra revenue goes to the bottom line.

One key to avoiding these pitfalls for your mid-sized operation is to empower your sales team. A poorly trained sales team makes it easy to fall into the negative occupancy cycles.

With sales training, your sales and operational departments will gain the tools they need to meet the needs of prospects so you drive closes and boost move-ins.

Let’s discuss how you can equip your sales team. Simply email tbild@bildandco.com or text 813-390-3349 with your name and number. We’ll find a strategy that helps your sales team members avoid an occupancy decline and boost net operating income.

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