Senior living is an industry that knows the value of scale. But contrary to popular belief, smaller organizations have an advantage — now more than ever — over the mammoth hundred-community providers that seem to dominate the market and the media, industry experts say.
More than 60% of the market comprises providers that operate fewer than 10 communities, says Deborah Howard, CEO of Senior Living SMART, a Web-based resource focused on independent owners and operators.
Despite this, the top-20 providers garner most of the attention, announcing mega mergers, rolling out national ad campaigns and partnering with real estate investment trusts (REITs) to gain access to operating and growth capital.
Scale undoubtedly provides a number of benefits for owners, operators and shareholders. Namely, more resources, cost savings and investment opportunities. However, “going big” also comes with its fair share of challenges.
In July 2014, Brookdale Senior Living (NYSE: BKD) completed its $2.8 billion merger with Emeritus Senior Living, creating a combined company that now operates more than 1,100 communities in 46 states, covering roughly 80% of the U.S. population.
However, in its third-quarter earnings call last year, Brookdale acknowledged the integration of Emeritus communities has created significant challenges for the provider, which have led to a disruption in sales activities, lead conversion and occupancy levels. And as part of the integration, 500 employees took on new responsibilities and new reporting relationships, which also generated disruption, said CEO Andy Smith at the time.
So as Brookdale — and other big players — struggle to control scale, a window of opportunity is open for smaller providers, who bring their own unique benefits to the table.
“With the consolidation going on in the industry, it creates a terrific opportunity for smaller providers,” says Jack West, founder and CEO of Country Place Living, which operates 20 communities in Kansas, Texas and Alabama. “Personalization can become a very, very significant competitive advantage in the marketplace.”
Authenticity and Accessibility
Senior living is a people business, which means providers must value and respect their residents and employees, and senior management must be available to help them grow.
For Country Place Living, whose assisted living communities range from 18 to 24 suites, success is measured by the people behind the organization, West says.
“In the markets where we’re located, authenticity is critical, meaning that you must be who you say you are and you must do what you say you’re going to do,” he says. “And by being authentic, you’re gaining the trust of the market and of the community.”
Authenticity starts with the leadership team and then translates into the culture of the organization. For independent operators, demonstrating authenticity comes easier, as the management team is often out in the local community, interacting with prospects and residents’ families every day, West says.
This accessibility creates another advantage for the smaller providers, whose leaders are just a call away.
For Regency Senior Living, which has 10 communities located in the Eastern United States, this is especially true. While bigger providers may list an 800-number on their corporate website, Regency lists President Randy Holcombe’s cellphone number in an effort to maintain accessibility — both to residents and families, as well as employees.
“We can make one phone call and within 24 hours we can give a family member, resident or executive director an answer — and that’s what separates us from the larger corporations,” says Jeff Clay, vice president of business development at Regency, which operates independent, assisted living and memory care communities, as well as one continuum of care campus.
Sonata Senior Living shares a similar philosophy. The organization, based in Orlando, Fla., operates three memory care communities and one continuing care retirement community (CCRC).
“Our philosophy is to own and operate communities within a two-hour driving radius,” says Shelley Esden, senior vice president of operations. “There’s a direct benefit of having a smaller organization whose core management team is accessible and local. And those benefits are not only to the operating company itself and the owners, but also to the community.”
Both Clay and Esden say their organizations’ flat hierarchies contribute to a more accessible management team, which can react to the market and make decisions quickly.
“Any time you have a flat hierarchy you can adapt more quickly and that transcends into benefits for the community,” says Esden, who has previously been part of national corporations and managed 15-plus communities. “When the market does throw you a curve ball, you can react and you’re not reacting with the ‘D’ team or the ‘B’ team. We’ve got our [‘A’] folks right here.”
Mission Versus Margin
In larger corporations, there can be a tension between the mission of the organization and its margins, industry participants say.
“The investor expectations increase significantly the larger the organization is,” West says. “And when that happens, the mission suffers. So one of the key advantages of being small and privately owned is that, yes we must have a good margin and meet the expectations of our investors, but we seem to be more in control of the fulfillment of our mission.”
Country Place’s mission is not only to provide services that meet the needs and desires of its residents, but also to provide opportunities for employees to fulfill their own purposes in life, he says.
While this may also be true at large organizations, smaller providers often have the ability to focus more on individual employees because of their scale. By focusing on their talent, Esden says, independent operators can more easily attract talent and decrease turnover.
“I’m able to attract higher talent, because after a while some folks get lost in the huge organizations and prefer a smaller environment where they feel like they have a greater voice and the ability to effect change versus executing someone else’s vision,” she says.
The same is true for Regency Senior Living, which has 800 employees.
“We’re a family caring for families,” Clay says. “When you’re larger, it’s not as personal and it’s more numbers-driven.”
Branding Yourself as a Small Provider
The advantages of being a smaller provider are clear, but marketing that message can be difficult without having the budget and resources that a large provider has.
“They may not be able to spend as much on their marketing efforts but what they’re saying can be even more powerful, because there’s a lot of truth in what they can offer,” says Jennifer Ruyle, chief branding officer at Bild & Company, which provides full service marketing and sales consulting in the senior housing industry.
While Bild & Co. works with providers of all sizes, Ruyle is currently working with some smaller clients who are creating marketing campaigns centered around their independence and family ownership.
“We’re helping those smaller providers discover and understand their unique positioning in the marketplace,” she says. “We help them uncover their core story and that’s the platform that helps us create all of their marketing.”
In one example, Ruyle worked with a client who was born and raised in the Midwest and started a family owned senior housing business. To highlight the smaller provider’s attributes, she helped come up with the tagline, “Where You Belong,” to compete with some of the larger providers that were expanding into the state.
Playing up the strengths of being a small provider — whether it is local ownership, high staff retention or individualization — can help operators stand out as big providers continue creeping into their markets.
And now is the time to market these messages.
“Smaller providers can really make a difference if they make a little investment in their image and their brand, because it will pay off in the long run,” Ruyle says.
Written by Emily Study