Providers Slam Discounting, Embrace Other Pricing Approaches

As competition heats up within the senior housing industry, some companies are doing their best to cool down one common practice—discounting their prices.

Discounting rents or offering similar financial incentives has become commonplace to persuade prospective residents into moving into a senior living community. The practice was particularly prevalent in the years immediately following the recession, as providers needed to boost occupancy during a time when the state of the housing market may have prevented some seniors from selling their home and moving into a senior living community. But the reality is that the impact of discounting can be far-reaching and may undermine the value of senior housing.

“Discounting can send the wrong message and create doubt,” William Nowell, founder of Peak Performance MS, a provider of mystery shopping, marketing improvement and sales performance improvement programs, said during a recent webinar on the topic. “Customers that buy our product for the wrong reasons tend to be harder to satisfy and more dissatisfied as time goes on.”

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Not only can discounting actually be a turn off to prospective residents by signaling the product isn’t worth its value, but the pricing differences can also have a significant impact on a provider’s bottom line.

The Power of Pricing 

When to talk price in the sales process has been long debated in the industry, with individual businesses taking their own approach. However, price does become a dominating factor in terms of skewing the value of senior living. This may largely be because few people have come into contact with senior living before a need arises. For a family member, this may mean that the value of a community is lost when price becomes an issue.

“When we let price creep into the conversation, it takes away the value of everything else,” Nowell explained. “It dominates the conversation. When we focus on feelings, we’re hitting at the heart and soul of what someone wants. …We want to do our best to have price not come up or be a part of the sales conversation early.”

At the same time, some senior living providers are willing to work with families and prospective residents to find the best option for their needs and budget. For example, Belmont Village, a Houston-based operator with more than two dozen communities across the country, offers multiple options for residents when it comes to their living options, with studio, one-bedroom units and more with a variety of price ranges.

“Not one price fits all,” Carlene Motto, executive vice president of sales with Belmont, told SHN. “Those discussions are very personal with family members and consumers.”

However, discounting prices for prospective residents can have a longer impact on the ability of the provider to continue offering quality care, especially as acuity levels continue to rise and care needs increase.

“One of the challenges that the industry is facing is that the cost of doing business continues to increase due to higher acuity of our residents,” Motto says. “There are some staffing issues and wage pressures in some markets. When the industry and some competitors try to cut rent or give away care, it impacts the long-term and short-term pressures on the businesses to deliver high quality care.”

However, prices vary between acuity settings, and there may be more wiggle room for move-in incentives outside of assisted living and memory care units, where the cost structure in independent living may allow for more flexibility. Yet providers shouldn’t give way in independent living in case residents need higher levels of care later, and may end up having to move.

Another major senior living operator, Holiday Retirement, which operates more than 300 communities across the country—primarily independent living—agrees that discounting can have a negative impact on future investments, including the ability to keep up with care needs and improve labor.

“If you’re selling your product for less than it’s worth, you won’t end up having the revenue to spend to continue to improve the community, capital improvement or labor improvement,” Sheila Donahoe, CIO of Holiday, told SHN. “You’re not able to provide the right services or products to the residents.”

In addition to the financial impact, Motto also agrees with Nowell that discounting can actually send the wrong message to prospective residents and their family members. Providers should stand by their product and offer pricing that is competitive and makes sense with the marketplace and services offered.

“At times, when you jump to price too quickly it shows a lack of confidence in your product and can devalue your product,” Motto said. “It sets expectations that discounts will be available.”

Instead of offering discounts on a unit’s price, Belmont may try to offer other helpful incentives for prospective residents to move in, such as help with moving.

Another reason Belmont steers away from discounts at the door is the fact that long-term residents may feel they should be cut a deal, too. The provider is therefore more likely to offer concessions for residents who have lived in the community for many years, according to Motto.

“As they age in place, as care needs change, I would rather see communities give the concessions to residents who have lived there a longer time,” Motto says.

Transparency Talk

Unlike other hospitality industries such as hotels and airlines, senior living doesn’t have price transparency across the board. As consumers continue to do more research online and expect to find that information, pricing transparency may soon be a reality. And there are some options out there for those seeking a senior living option for themselves or a loved one.

The struggle with pricing transparency is that price availability upfront may not tell the whole story when it comes to value, providers say.

“I think pricing transparency is the way we are going,” Motto says. “I think consumers like that, it helps them plan for the cost of care and their expectations. The reason it’s somewhat conflicting is that there is still a huge amount of consumers who have never touched senior living, and when they see the price they don’t necessarily understand the components of the price. They may be turned off by seeing [the price], but it’s the direction the industry will be moving.”

However, one company that provides pricing transparency says it also includes information on senior living options that may help paint a better picture of specific offerings.

Chicago-based LivingPath is an online search tool that provides transparent pricing for all the senior living communities in the Windy City area. LivingPath calls senior living providers to find out their pricing, which gives consumers a starting point.

The service is largely received favorably by providers and consumers, co-founder Jonathan Woodrow told SHN.

“There has been little, if any, pushback from providers on bringing pricing transparency to the industry,” Woodrow said. “Because we not only display pricing but also consistently define what it includes, providers are supportive. Over time, improved transparency and a more informed consumer base will raise the bar for the whole industry with top providers increasingly outperforming.”

While Woodrow agrees that senior living pricing can seem complicated, consumers are less likely to experience sticker shock if they see the prices upfront, he says. LivingPath calls senior living providers to find out their pricing, which gives consumers a starting point.

Other providers have leveraged transparency by similarly utilizing more information and data to back up their rates. In an effort to avoid discounting, Holiday has implemented a dynamic pricing solution that offers specific reasoning behind its pricing decisions. The transparency gives prospective residents and families an understanding of what they are getting for their money. Holiday began rolling out its dynamic pricing model with just four communities at first to ease consumers into the structure.

“We have been on our touch-rate system, which does our automated, dynamic set pricing based on historic leasing, prices we’ve leased at, and market conditions,” Donahoe told SHN. “We feel that it works really well for us and is much more data driven than someone deciding what the rate should be. It allows us to do value selling when talking to our prospectives.”

Despite having a more transparent pricing system, Holiday is not able to stay away from discounting altogether, according to Donahoe. In some instances, Holiday will offer a discount to a new resident as a result of competition in the area.

“For the industry as a whole, it brings down the value of we have to offer,” Donahoe said. “And, in the end, we have a really great offering. I think we need to keep our pricing accordingly.”

Written by Amy Baxter

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