A GAPING HOLE IS WIDENING AND IS GOING TO FESTER, CREATING FINANCIAL CHAOS IN 3Q20 FOR SENIOR LIVING OPERATORS AND INVESTORS
Experts predict that seniors housing occupancy could drop by at least 100 to 200 basis points a month through the end of June; how will assisted living operators respond?
A PEEK INTO THE FUTURE OF SENIOR LIVING OPERATIONS
It’s August 1, 2020 and occupancy across your portfolio is at 80%, maybe 78% and your new developments are sitting at 25% to proforma expectations. Competitors are deeply discounting to incentivize prospective buyers to move in, and third-party referral sources are working overtime to beef up marketing efforts to capture what few leads there are.
Essentially, those new residents moving in are coming in at a loss or maybe break even.
Executive Directors are exhausted from the emotional and physical toll of Covid-19 and sales directors have lost all motivation to sell. The industry is sitting at record low occupancy and the value of portfolios has drastically declined. Buyers are stepping in and making offers that provide a glimpse of relief to weary owners- while getting them for pennies on the dollar. Tension between investors and operators is high and executives are asking, “how did it get so bad?” Some are thinking, “at least we are sitting in the same position as our competitors.”
An average assisted living community with 100 apartments has 20 vacant, resulting in close to $1,000,000 in annual lost revenue, per community. A portfolio with 20 independent and assisted living communities is looking at a $20,000,000 annual revenue loss.
SOME OPERATORS WILL THRIVE IN THESE CONDITIONS
Decisive action and strong leadership, despite the risk involved, lead these savvy executives to proactively get ahead of the occupancy crisis to come. Implementing Leadership Crisis Recovery Programs for Executive Directors and a new sales training program with supportive coaching and accountability measures for the salesforce restored confidence in the ability to sell. Those efforts resulted in salespeople who leaned into their database during Covid-19, connected frequently, dropped thoughtful food items, and sent note cards so seniors who inquired previously so they didn’t feel forgotten.
The Executive Directors and sales counselors partnered to support ten strategically identified referral sources, ensuring there was a direct line of communication for seniors needing help; whether it was food, toilet paper or a safe environment to live. They had the chef prepare meals to go and those referral partners would stop by each night on their way home from work so staff could drop a meal for the family in the trunk, taking a huge load off an already exhausted case worker or hospital executive.
These partnerships paid off big time as slowly, referrals began to increase. What was once three or four referrals a quarter became three to four a month and those families moved their loved ones in faster and did not expect or even ask for hefty discounts. The value was built as to how amazing the community was by the referral source before the family even called.
SOCIAL MARKETING PAYS DIVIDENDS
Residents, families, and employees were posting daily on their social feeds and hash-tagging the community name and to showcase support and to rally around caregivers, kitchen staff, maintenance and all other team members coming to work each day on their behalf. Social awareness took off and the phone began to ring a bit more each day.
Occupancy portfolio wide sits at 90% for these operators compared to 80% industry wide. With strong cash flow, these companies are operating successfully, eking out a decent margin for investors, and sleeping at night knowing that the risk taken and the choice to be decisive in learning to operate, market and sell in a Covid world paid off.
THE QUESTION TO ASK IS WHICH EXECUTIVE WILL YOU BE IN AUGUST 2020?
No one has a crystal ball and it is impossible to determine when Covid-19 will subside, when life will go back to a new-normal, and when we will allow tours and move ins with ease again. What we do know is that seniors housing will be one of the last sectors to open its doors to outside visitors and even then, there will be apprehension due to the damaging media coverage.
What I do know is that you must equip your employees with the skill sets needed to thrive in this new normal. While many operators will choose to tighten the belt, wait it out and hope their sales teams and Executive Directors will figure it out on their own, others; some your competitors- will make an investment and get the help needed to pivot fast. They will be proactive, set concrete expectations and not just tell people what to do- but how to do it; ensuring people can meet expectations.
RISK PAYS OFF FOR CEOS WHO WISH TO REAP REWARDS
I recall a similar time in my own business when I had to balance the risk of investing heavily in infrastructure against the possible reward of doing so. Bild & Co had experienced exponential growth and my company was operating on a very shaky foundation. We had more clients and employees than ever and were producing incredible results, leading to more and more referrals. Yet we didn’t have the operational structure needed to support this type of growth and we were a remote company working nationally. Instinctively I could feel it; we were going to crash.
I decided to hire a company that specialized in business growth strategies and began a year long process of executive coaching for myself and for my leadership team. We implemented a new system for communication to collect and store all our coaching notes, as we were coaching 300 communities per week at the time. That is a lot of information to store, share and protect.
Our employees had to begin saving all documents on SharePoint so they could be accessed by team members at any time and more importantly if an employee left, we would have all the info needed to continue with clients seamlessly. Prior to this change, we were left paralyzed and had to start over from scratch.
We began communicating via slack, refined our processes for research, sales and client presentations. We did a rebrand, built a new website, and installed new accounting systems. It was a total transformation.
When starting this engagement, I was extremely uncomfortable to say the least. I’m a small business owner yet poured $250,000 into getting the help needed to build out this infrastructure; without certainty that it would pay off. We did everything recommended and trusted this firm’s expertise.
The result? Let’s just say we doubled our return on that investment, scaled further with confidence and landed on Inc. Magazine’s Fastest Growing Company List in 2013! I’m a huge advocate of taking the short cut which means hiring someone to show me what I need to learn in half the time it would take to learn it on my own. Money is replaceable, time is not.
It could have turned out very differently. Had I not acted when I did, investing both time and money; Bild & Co could have seen client results slip, servers crash, data lost and a tarnished reputation. Instead, we ended up far exceeding our original goals and 95% of our business is referred.
WHAT TYPE OF LEADER WILL YOU BE?
Leaders today must be bold and decisive; they need to raise the bar for their leadership teams and be clear about expectations. At the same time, leaders must provide staff with the tools, training and resources needed to be successful. When those same individuals perform above expectation, leaders must reward them and challenge teams to push to the next level.
I may be wrong. My hope is that we will gain access to testing nationally, create a vaccine and a drug that saves people from Covid-19’s worst effects. Life may go back to normal and seniors may flock to our communities by year end. As I always say, “expect the best but prepare for the worst.”
The Bild & Co team works with executives daily to develop and execute strategy across portfolios to proactively protect revenue and net operating income. While all eyes are on operations, our eyes can be protecting your seniors housing investments by micromanaging your sales teams daily and ensuring a strong pipeline of new residents is built and nurtured. Click here to schedule time with myself and Jennifer Saxman and let’s see what’s possible. We can work with your entire portfolio, taking the pressure off operations or act as an owner’s rep for investors, ensuring everything possible is being done to advance and protect revenue during this taxing time.