We all have many decisions to make every day: what to eat, what to wear, what route to take to work, how to care for our children and provide for our families, among a plethora of other choices.
These personal choices not only dictate our daily lives but represent part of the decisions to meet the economic needs of society. Scarcity and choices therein, whether for consumers or industry professionals, are at the crosshairs for the trends in senior housing for 2015.
With plenty of positive economic news in the United States to give comfort for another 12 months of relatively sanguine winds for senior living, professionals and seniors seeking new housing have plenty of choice.
Good news abounds: the stock market is up, health care spending growth continues to slow, and home prices are recovering. Yet all this good news creates options for consumers and senior housing professionals.
Overall demand is intrinsically rising for senior housing options (a.k.a. “choices”) as seniors are finding it easier to sell their homes and make decisions, which cascades to industry participants.
There are choices to stay, choices to go, choices to retain key employees, choices to deploy capital for development of new communities or retrofitting of older ones — and yet sometimes choice creates confusion.
This plethora of choices presents both opportunities and challenges in the short-term as well as the medium- and long-term consequences that stem from those choices. Rational business decision-makers will evaluate the marginal benefits with the marginal costs when looking at trends to follow in 2015, including opportunity costs. New players with new ideas are certain to come in and make choices pursuing marginal business opportunities.
The right decisions have grander implications today versus a few years ago as the mindset changes from survival mode toward building foundations for long-term success. With an accelerating economy, opportunities remain abundant while time, energy and resources, all of which are finite in their own respects, become a critical part of the decision process that factor in to the top 10 trends in senior housing in 2015.
Here are the top 10 trends for senior housing in 2015:
#1) M&A Accelerates As Efficiencies Are Needed for Shareholder Returns
Is M&A the only route or are strategic partnerships good enough?
The course of frenzied mergers and acquisitions reached more than $16 billion in 2014 and will continue into 2015 as both not-for-profit and for-profit providers and service providers are driven to evaluate combinations by any number of factors including:
· Relative consensus that reimbursements will remain flat
· Continued rising pressure on operating and overhead costs
· Uncertainty of regulatory and audit processes
· Increasing compliance complexity with industry regulations
· Continued low cost of capital
Given these factors, the trend for more M&A is almost a certainty, but are there more complex opportunities that may yield greater long-term results yet are complicated from a systems, personnel and culture standpoint.
Regardless, M&A discussions and thoughts will be on the minds of almost every industry participant in 2015.
#2) Senior Housing Marketing Strategies Lose the Digital Moniker
Is there any further need to differentiate digital versus offline?
In a world becoming increasingly digital at a faster pace than ever, the differential between offline and online marketing and advertising in senior housing becomes almost indistinguishable as focus intensifies for increasing occupancy and brand messaging for communities.
As many communities leverage their relationships with prospects, adult children and the broader community, their digital channels become just another mechanism in the process of delivering a brand and marketing message. As time progresses, Internet lead generation done organically by communities and through outsourced relationships such as Caring.com, A Place For Mom and others, will increase in importance as the first point of contact.
Technology can no longer be a differentiator when it comes to senior housing, whether it’s being used to market communities or for use among residents and staff. Less quantifiable marketing and advertising strategies will fall by the wayside and providers will lean toward those that will deliver measurable results, most of which are increasingly digital-based. The future of senior living marketing depends on ideas and execution, not tinkering with technology. The quality of a community’s technology services, messaging and offerings will be the competitive advantage for marketing, not solely the availability thereof.
Creative ideas and messaging matter most; the delivery channel should be the transport mechanism and not the message itself.
#3) Employee Retention Rises to Top of Human Resource Challenges
Keeping Your Human Capital – A Season of Poaching
Recruitment for positions in senior living has typically been a challenge, especially at some of the more entry- to mid-level positions based upon experience and competitive wages. As providers are challenged with high turnover, they are seeking strategies to combat staff leaving for other opportunities.
This year will bring increased stress to the employment strategies in senior living as more employees look to other companies in the industry to trade up for better compensation and increased responsibilities. The choice that most employers will face is whether they can or will match opportunities that other employers can offer.
With ever-increasing competition, companies will need to review not only their recruitment strategies but as importantly, if not slightly more, their retention strategies.
Corporate culture and soft benefits (staff rewards, flex-time, regular performance reviews) will be evaluated by your current employees and your future ones just as much as core compensation metrics.
The costs to match compensation for retention purposes are likely worth the expense, yet it is not enough to balance an organization’s cultural and strategic direction deficiencies.
#4) International Senior Housing Grows Further, Faster
Concentrated Growth and Diversification Opportunities Garner Strong Interest and Capital
The last twelve months have seen major activity in mergers and acquisitions and financing for big players in the senior housing industry in Canada and the United Kingdom. Deals such as “Health Care REIT Making $2 Billion Bet on the United Kingdom” and “HCP Back $630 Million Investment in UK Senior Housing Portfolio” show that the UK market is an attractive place for investment, based upon the concentration of property, stable economy and a strong ability to sustain private pay senior housing. Property in Canada continued to be attractive to major players such as Ventas (“Holiday Retirement Sells Canadian Portfolio to Ventas for $900 Million”) and will continue for 2015. Private pay options as alternatives to national health service options shall make investments in properties located in countries with stable economies and wealth attractive for major REITs and other investors in the coming years.
With some players opening UK offices in 2014 (“Robust UK Pipeline Pushes HCP to Open London Office“), the UK might be the launchpad for further investments in mainland Europe, China or India. While sizable investments are being made in China and India for the long term, the softness in the European economy may provide a more immediate opportunity for REITs and operator partners to find bargains and deploy their capital for slightly higher returns and portfolio diversification. Nevertheless, look for more international senior housing activity in 2015.
#5) Senior Housing Tech: A Reality Check for Startups Comes This Year
Which Technology Startups Will Last – Real Businesses or Hobbies and Wantrepreneurs?
If 2014 was the year of technology incubators and television shows like Shark Tank extolling the benefits of being an entrepreneur, 2015 will be the year of technological reality in senior housing. There has been an increased interest in technology development during 2014 fueled by health care technology incubators including Blueprint Health, Rock Health and Aging 2.0. As an experienced entrepreneur with an exit or two, developing a product or service can be an amazing endeavor driven by passion and spirit.
The euphoria of this spirit garners press and partnership opportunities galore, but the technology offerings from last year and those yet to rise in 2015 have a feeling of a “wantrepreneur” providing us another Web chat, mobile app, directory service, fall prevention device or wearable monitor. An idea or vision and a press release do not constitute a startup business.
Firms and entrepreneurs need to focus more on real business topics and cases such as paying customers, capital raises, burn rates, contracts, recurring revenue streams and cash flow and less about the billion-/trillion-dollar business opportunity. This will be the year of the reality check and hobbies making way for sustainable technology businesses.
#6) CCRCs Without Walls Need Proximity
Concentrated Care Locations versus Continuing Care and Human Inertia
Continuing Care Retirement Communities (CCRCs) continue to garner attention and interest from both providers and consumers searching for senior housing options. Some industry professionals love CCRCs, while others are less enthusiastic.
CCRCs provide a compelling range of options for living and services associated with the aging process in a centralized location. CCRCs without walls have attracted significant attention as providers look to connect various parts of the continuum based upon demand from providers and consumers as well as state regulatory models.
The dream of CCRCs without walls is still a work in process; the moniker “Continuing Care Retirement Community” might be better phrased “Concentrated Care Retirement Community” as services still need to be located within a reasonable distance to make a CCRC without walls a viable alternative, no matter how sophisticated the technology component is to the service delivery.
This concentration of service and product will become more important as the costs for individual transportation will continue to rise at varying levels and the need for assistance in providing care becomes more expensive. These cost considerations present long-term challenges to the CCRC without walls concept, which puts a premium on provider proximity to these area services. Developers and operators that can create these communities (CCRC or locally, geographically concentrated) will be setting themselves up for opportunities for long-term occupancy success.
#7) Discretionary Spending in Revenue Models Will Help Drive Growth
With various revenue models for managed care through Medicare and Medicaid, accountable care organizations (ACOs) and others associated with cost containment and risk management, the real opportunity for revenue growth is through increased discretionary spending by residents for premium products and personal services such as non-critical medicine, health, wellness and travel outside the core care continuum.
Revenue models are some of the more complicated parts of senior housing when it comes to delivering housing and care and the tentacles of the business strategy of owning and operating communities. However, providers will be under more pressure to deliver and defend their practices in the eyes of all their constituents: owners, regulators, auditors and seniors and their families. Hence, the ability to grow revenues will be left to operators and owners to create opportunities in their communities to add products and services.
With the U.S. stock market seeing gains over the last few years, there may be an ebullient feeling that providers can capitalize on adding incremental revenue to their models as consumers feel a bit wealthier than they have.
#8) Home Health Care Strategy is a Critical Part of Any Plan
What’s Your Organization’s Home Heath Care Strategy?
Google home health care and this is what you get courtesy of medicare.gov:
Home health care is a wide range of health care services that can be given in your home for an illness or injury. Home health care is usually less expensive, more convenient, and just as effective as care you get in a hospital or skilled nursing facility (SNF).
Sounds a bit Pollyanna, but nevertheless, the trend for senior housing communities to have a defined home health care strategy and business plan has never been more important.
Regardless of challenges associated with staffing and labor, budget cuts or concerns over fraud, the choice associated with a home health care strategy is not if, but how to go about addressing it. Choosing the right mix of services, limiting capital expenditures on segments and development and picking the right partners to work with or collaborate are key to defining a home health care strategy.
Whether partnering with an existing agency or developing a subsidiary to handle these requests, senior housing communities need to foster this channel for many reasons, the most important of which is to provide another means to develop relationships to fill their communities and ensure more prospects.
For more information on home health care, visit and subscribe to Home Health Care News, a sister publication of SHN.
#9) Developers Need Solid Foundations to Achieve Success in Challenging Locations
New developers continue to enter the senior housing industry with each passing day, driving the competition for properties and projects throughout the United States. Some of these developers who lack experience are causing pain for both existing developers and for local communities as their exuberance blinds them from the political and financial challenges in some cases to successfully developing a project in areas that seemingly need senior housing.
It is possible to develop a community in an open field in a relatively open area, but then it’s another thing to open one in a high-density, affluent area (urban or suburban). Developing high-value properties in challenging locations in high-density urban areas, suburban locations in high property value markets and those with long histories of not in my back yard (NIMBY) will get increasingly difficult in 2015 unless there is substantive support from the developer.
These difficulties can range from challenging historical context with the development of senior housing, local politics, angry neighbors and competition. Financial commitment and liquidity that projects and developers need for these challenging locations will be increasingly important during 2015.
10) Aging in Place As A For-Profit Solution via Renovation and Repairs
Didn’t we learn our lessons?
Baby boomers continue to express their desires to remain in their homes and age in place and a survey from the Demand Institute in 2014 that shows 63% of boomers plan to stay right where they are, and many have decided to stay by choice (85%).
This desire and the current state of their homes will lead to more boomers, 39% according to the study, looking to renovate their current homes in the next 12 to 18 month and 78% cite the top reason to renovate is to increase home value and make repairs. Yet this appreciation for home improvement is for monetary reasons and not specifically to age in place. This desire to renovate helps support research from Fannie Mae that shows that there has been little sign that boomers are preemptively downsizing.
If boomers are using home equity or savings to perform these repairs and upgrades, these expenditures may not be wise decisions as Harvard’s Joint Center for Housing Studies and AARPs latest report, “Housing America’s Older Adults – Meeting the Needs of An Aging Population,” states that one in three Americans over 50 bears a severe or moderate housing cost burden in 2012.
While there may be some proactive seniors and some savvy media companies that say boomers are downsizing in massive numbers, companies will have to work harder and longer to plant the seeds with those who wish to remain in their homes as long as humanly possible.
The trend for downsizing and relocating shall remain somewhat mythical other than for those who have immediate needs that force a decision on leaving their homes. America still loves a good home renovation, especially when they think there is a profit associated with such work.
Written by George Yedinak
