One of the largest national senior living providers in the U.S. stopped offering discounts and other move-in incentives on Jan. 1. And yet, overall demand for its communities ticked up this year and shows no sign of stopping.
That’s according to Larry Cohen, CEO of Dallas-based Capital Senior Living (NYSE: CSU). He outlined the company’s recent moves Tuesday in an earnings call with analysts.
“Our demand is strengthening even though we stopped all our discounts and pricing incentives on January 1st,” he said.
The company previously offered three months of $500, $1,000, and $1,500 move-in discounts for its independent living, assisted living, and memory care units, respectively, during slow periods for occupancy.
Despite phasing out these price breaks, demand for units is moving in the right direction, Cohen emphasized. The company has seen net gains in occupancy in 8 of the 10 past weeks, above-average deposit-taking in the last 11 weeks, and saw a record number of monthly deposits and move-ins in March.
Other senior living providers on the fence about offering discounts or move-in incentives might look to Capital Senior Living as an example that the deal-sweeteners aren’t all they’re hyped up to be. Some in the industry have said that knocking money off the rent sends the wrong message and creates doubt among potential customers.
Still, the temptation to undercut competitors, especially in hot markets, is always prevalent, and lowering your initial pricing is an easy way to do that.
Slow start but more growth ahead
Overall, the company took a $21.8 million net loss for the first quarter of 2017. Capital Senior Living grew its quarterly revenue to $116 million, a roughly 6.2% increase from its revenue in the first quarter of 2016.
Difficulties with weather and the flu season hit the company especially hard, contributing to the net loss. Occupancy for Capital Senior Living’s consolidated communities was at 87.6% in the first quarter of this year, a decrease of about 90 basis points from the fourth quarter of 2016 and a decrease of 100 basis points from this time last year.
Though the first quarter of the year is generally not strong for the company’s bottom line, Cohen said he is heartened by the strong indicators over the past several weeks and believes things should continue in a positive direction in the second and third quarter. Overall, the company believes occupancy should increase 80 to 100 basis points through the remainder of the year.
The company in January also purchased four of its previously leased communities that should help bolster its bottom line next quarter, and it notes that its communities are insulated from new senior housing supply and wage pressures in most of its markets.
Shares were down 1.42% in after-hours trading early Tuesday evening following the earnings call.
Written by Tim Regan