Attention assisted living executives, this will be the single most important blog you read (or listen to) this year. This is the most vulnerable your senior living portfolio has ever been – sort of like the very people you take care of.
The actions you decide to take or not take right now, as we get ready to head into third quarter, will determine your future viability. Here is why:
Take a moment and read through that list again because it is your wake-up call and road map to creating a path forward that is focused on top line revenue growth, increased net operating income, and raving fan employees, residents, and family members. It is going to be the difference between you laying your head on the pillow at night and falling asleep or lying awake, trying to figure out why you can’t gain traction. I repeat, this is no time to be complacent, it’s time to get in the driver’s seat and lead.
My favorite writer in the seniors housing and care space is Steve Monroe with the Senior Care Investor. If you have not yet subscribed to this incredible publication, do it now. The most recent May issue was incredible and laid out the past, present, and future trends of assisted living. In fact, I bought a giant whiteboard for my office to map out my company’s next decade because of this article; it was that powerful (thanks, Steve).
In short, third quarter is your single moment to drive occupancy and see growth. After that, it’s most likely you will see declines and with occupancy already at a historic low of 78.8%, operators and owners can’t afford to just coast by right now. “Assisted living has never seen a sequential rise in occupancy in the first quarter of any year during the past ten years. Worse, assisted living has never seen a rise in occupancy in the first HALF of any year during the past eight years. The only quarter that showed a consistent sequential increase was the third quarter, and the fourth quarter.” Meaning, if you are sitting at 75% occupancy right now and by year-end your assisted living portfolio is at 79% and you are barely paying the bills or feeding in cash, by end of 1Q22, you will most likely be back at 75% occupancy.
Nothing tastes better than a bowl of steaming hot potatoes smothered in gravy; yet we can’t live on gravy alone. That occupancy uptick we are seeing right now is the result of timing and luck. There’s a sector of people who like me, who cared for their loved ones throughout the pandemic and who realized that isolation was far worse than any health condition to the decline of their loved ones. Once it was deemed safe, we acted and moved our loved ones to senior living communities, whether assisted living, independent, or life plan. Timing was on your side as an operator because it was a long year for many.
It’s luck that resulted in families choosing your communities. For many adult children like me that rolled the dice; meaning we searched online, asked our friends for referrals, and called our short list of communities and were lucky if we could reach someone who could help us. Instead, we left messages, played phone tag, were completely ignored, and ultimately called third party paid referral agencies who responded with urgency and got us answers. Yep, I said it. If you’re upset, then do your research and step into your customer’s shoes for a day. Call your communities as if you were looking to make a move and you will see exactly what I mean; the buyer experience is a disaster and operators are doing little to improve it.
Those few move ins you are seeing, the net one or two, maybe three per month? It’s pure timing and luck that is soon to run out. Soon you will need to earn new residents; meaning create a buyer experience that’s responsive and proactive, pursues prospective buyers, makes them feel
important and demonstrates the value in a move today rather than tomorrow. If you learn to do that, you will see continued and consistent occupancy growth. If you don’t well, prepare yourself for a rough ride.
If you thought it was bad during the seniors housing development boom, get ready. Not only will you be forced to compete with those communities that opened in the past one to two years, who are still in lease-up and recovery mode, but at-home services are hot on your trail too.
President Joe Biden has proposed a dramatic increase in federal support for home- and community- based services. Those are supports and services for elderly and disabled people who need help with daily living to stay out of nursing homes or other types of congregant care settings. In practical terms, that means everything from personal attendants who help seniors with bathing to counselors who help people with intellectual impairments find jobs so they can live on their own. Most experts think the actual unmet demand for home- and community-based services is closer to 1.5 million. The dollar amount proposed, $400 billion over the 10-year-budget window, will likely represent the single largest investment in home- and community-based services for disabled and older people in American history.
Like it or not, this cuts into your market share. Want people to choose assisted living over home health care? Adapt a new culture that courts prospective buyers and demonstrates the value of making a move into a congregate setting compared to at home services. Better yet, add a new suite of services to your offerings that starts in the home and ultimately feeds new residents into the community. As they say, if you can’t beat them, join them! To earn the business needed to net up and grow, ultimately recovering the financial losses sustained during the pandemic, you need a total sales transformation where training and education are front and center. Focus must be on relationship selling where people are trained to connect with prospective buyers, demonstrate empathy, advise, and provide solid solutions to incredibly complex problems.
Jennifer Saxman, Bild & Co COO, and I were on the phone last week with one of our favorite clients who operates a publicly-traded REIT. For a decade we’ve been having the same discussion, scratching our heads, trying to figure out where the disconnect is with operators. This week, finally, after ten years, I figured it out!
Every day we hear about the need to drive top line revenue, to grow occupancy, and dig out of the financial nightmare operators find themselves in. Yes, it’s important and I believe every single CEO in the seniors housing and care space, especially assisted living, desires this pivot; yet in truth, they don’t understand how to do it.
What I mean is “sales” has always been a bad word in seniors housing. No one really wants to deal with it and most people responsible for sales are given little respect. Pay is okay, training is non-existent, and whether it’s a director of sales and marketing at the site-level, a regional sales director, or a vice-president of sales and marketing; they are always trumped by operations. In short, they have no voice. As I was on this telephone call it hit me, “everything starts at the top.” This mindset, or culture, stems from that of its leader, the CEO.
That then led me to the solution; educate CEOs properly. Meaning don’t teach them how to sell but how to drive sales. Help assisted living executives fully understand the importance of building a salesforce that consists of the ‘right hires,’ train them properly sell and market assisted living, and hold them accountable to performance results. Correlate the importance of executive directors owning sales at the site level rather than farming it off to someone in another state who drops in once a month or quarter. Teach CEOs how to systematically navigate top line revenue growth and turn their ops passion into sales and marketing passion too!
The past success of assisted living has been built on a strong operational foundation. Future success is dependent on your ability to produce results both operationally and financially. Set ego, fear of change, and uncertainty aside and allow knowledge, education, and success to step in- I promise it will be an exhilarating ride and result in a future better than you can possibly imagine.
The biggest head scratcher I consistently have is this: why don’t assisted living operators make a better effort to improve sales performance and in turn, net operating income? Every owner or investor group we work with is looking for strong operators who can produce financial results as well as operational. Most operators have ops down, yet are lost when it comes to producing sales results. Despite owners offering to pay for training and education, mystery shops to gauge the buyer experience, or covering the expense of a 90-day micro-coaching focus on an asset that is underperforming, operators refuse.
If someone came to me as the CEO of Bild & Co and showed me a hole in my business, a big performance gap I was missing that was dramatically impacting my ability to hit my financial goals, pay for the fix, and then upon seeing results give me more business, I would jump at it. Yet day after day we see operators who refuse to even consider investor assistance of this sort. It’s so strange! Additionally, what I don’t get is that when a seniors housing operator improves performance and hits investor goals and proformas, it’s a win-win. Investors pay distributions to their stakeholders and operators bill more revenue because 5% of $10M is much better than 5% of $7M, or am I wrong?
Even better, owners need strong operating partners to manage their assets. That means if you can produce both operational and financial results, you will see unprecedented growth; because there are very few operators in our industry who have this capability. Those CEOs who understand the opportunity I’m sharing can grow in the next five years from a portfolio of five or six to fifty or sixty and we are already seeing this with clients who have taken this message seriously.
Moral of the story? The tone and culture of an organization starts at the top. If curating a five-star buyer experience is important to the CEO, it will be important to the site level executive director and sales team. If it’s not, well, it simply won’t be. Education is power. The better you understand something and its impact on results, the more fired up you get to fuel that knowledge and spread it throughout your organization.