Happy Monday! As summer begins to wind down, I figured an update on senior living marketing (rates, incentives, referrals, resident movement) was in order. The data I have comes primarily from NIC (National Investment Center) and Bild and Company (a senior living marketing firm) and it covers the first half of the year.
Occupancy gains have been steady across Independent and Assisted Living, with demand relatively strong and new unit inventory persistently low (high development cots). With new units not entering the market, existing unit absorption has been steady, pushing occupancies to pre-pandemic levels.
Strategically, the issue for providers in many cases, to bolster occupancy is the use of the incentives or concessions (rent reduction primarily). The ultimate question for communities that have relied on concessions is when does ROI (return) occur AND does the concession process beget a continued reliance to fill units (similar to incentives for new car sales).
Concession Trends
- Among the communities that waived or reduced the community fee, 36% offered discounts ranging from 45% to 75%. Meanwhile, 20% of the communities chose to waive the community fee entirely. Think of the community fee as a security deposit equivalent. This is not an entrance fee.
- Rent reductions typically lasted between one to three months, although some offered reductions for up to 12 to 24 months, with the most common reduction covering up to two months. The rent reductions could reach up to $3,000, with an average of $1,556 per month.
- Other concessions included veterans’ discounts averaging 25%, founders’ programs with an average monthly discount of $5,600, move-in fees reduced to $3,400, and discounts on second person fees averaging $5,759 for one to three months.
- The percentage of communities offering no discounts continues to increase. This suggests that occupancy trends have improved to the level where some communities, don’t feel the need to offer incentives to maintain or increase occupancy.
Move-Ins/Move-Outs
- In 2023, the predominant reason for move-outs, aside from death and unspecified reasons, was the necessity for a higher level of care.
- Death (48.8%)
- Needs Higher Level of Care (13.9%)
- Financials (13.3%)
- Returned Home (7.4%)
- Unknown (6.75%)
- Move-ins were largely attributed to professional referrals, APFM, and other compensated referral sources, accounting for 46.2% of all move-ins in the first quarter of 2024.
- The average residency duration in 2023 was 682 days, which declined to 547 days in the first quarter of 2024. Not sure yet, if this is a trend to watch. I suspect that increasing age at move-in plus increasing frailty at move-in will ultimately, shorten length of stay, particularly for providers that don’t have systems and care services in-place to assist with resident advancing needs.
- Move-In sources broken out by type continue to show that internet marketing and using paid and professional referrals produce the most results. Again, the trend to watch is how incentives and paid referrals work collectively in terms of producing a positive ROI and by what point (time). More data here: Q1-24 Move-In and Move-Out Analysis | Bild & Co. (bildandco.com)
Rate Trends
Before the COVID-19 pandemic, annual rent increases for senior housing usually varied between 2.5% and 3.7%, according to NIC data. This consistent growth was the norm for yearly industry adjustments. Nevertheless, the pandemic brought considerable instability, pushing rates up due to rising operational expenses and variable occupancy rates. As of the first quarter of 2024, the annual increase for senior housing is at 4.5%, which, while still higher than past averages, indicates a slowing trend. Beyond 3%: Unpacking Senior Housing’s Rate Increase Reality | NIC MAP Vision
- Less than 2% Increase: Nearly half of the properties in both the majority independent living and assisted living sectors saw increases of less than 2%. Many of these properties had reported similarly modest increases in the previous year.
- Minimal Middle Ground: Contrary to expectations, fewer than 8% of properties experienced the anticipated 2% to 4% increase range, which is considered the industry standard.
- More than 6% Increase: Approximately 30% of properties experienced rate increases of over 6%, and about 40% of these had also seen similar increases in the previous year.
Data from Bild & Co. provides a bit more specificity, certainly in terms of actual average rates. Q2-2024 Market Rates and Square Footage White Paper | Bild & Co. (bildandco.com)
- Independent living studio prices range between $3,360-$4,298, with an average size between 404-477 sq. ft.
- Assisted Living one-bedroom prices range between $5,716-$6,927, with an average size between 549-652 sq. ft.
- The average companion suite price in memory care ranges from $4,516-$6,810 and has an overall average of $5,663 per month. The average size of a companion suite is 459 sq. ft., ranging from 423-579 sq. ft.
- Independent Living, Assisted Living and Memory Care have increased on average 30% in pricing since 2022.
- As senior living pricing is very market or location driven, I always look at price comparisons by region vs. nationalized averages. Overall, the pricing is reflective of the generalized cost of living in these market areas.
Over the years, I have written a number of posts on senior living marketing, particularly how to use data and information to inform strategy. In April, I wrote a post on tying marketing strategy to the times we are living in, post pandemic and hyper-cultural sensitive. That post is available here: https://rhislop3.com/2024/04/02/marketing-to-fit-the-times/