Senior living providers sometimes use rent concessions to boost lease-ups or get a leg up on the shiny new community down the street — but they are by no means the only way to increase census or grow revenue in the long-term, and might not be the most effective approach.
While it can be tempting to knock a little bit off the top to snag a new resident — especially in times of financial strife — it’s usually not worth it in the end, according to Gale Morgan, senior vice president of sales for Mather LifeWays. As of July, Evanston, Illinois-based Mather LifeWays managed a life plan community in Evanston, a life plan community in Tucson, Arizona, and an independent living community in the Chicago suburb of Wilmette.
“When the economy tanks … all you want to do is concessions, but one of the most difficult lessons I’ve learned is to just say no,” Morgan said during a panel at the recent SMASH 2018 Senior Care Sales & Marketing Summit in Chicago. “As soon as you have the reputation for concessions, you teach your consumer that you will do concessions, and they will ask if price is negotiable.”
Even worse, cutting rents or move-in fees to quickly bolster occupancy can devalue your properties in the eye of the consumer, said panelist Nicole Bartecki, vice president of sales and marketing at Pathway to Living. Pathway’s portfolio spans 32 owned or managed properties with more than 2,900 units in Illinois, Michigan, Minnesota and Wisconsin.
“If you’re waiving your move-in fee, what does it say about that fee?” she said. “We have had consumers … call us and say, I put a deposit down, but this other community keeps calling me. What are you going to offer?”
Offering concessions also means that publicly advertised rents are not necessarily accurate. Including rental rates on a website is in fact a good idea, contrary to what some in the industry might think, according to Mandi Hogan, vice president of marketing for LTC Properties (NYSE: LTC). Currently, the Westlake Village, California-based real estate investment trust’s (REIT’s) portfolio includes more than 200 properties spread across 28 states and 30 operating partners.
“I almost feel like its a lost opportunity if you don’t have your rates online, because they might not call at all,” Hogan said. “If they can call three or four other communities that posted rates, they’re not going to waste their time by not knowing.”
Instead of offering an upfront rent concession, senior living providers could instead consider more creative, value-add perks. For example, instead of discounting the rent, senior living providers can offer to stage a resident’s former home to help it sell, pay to bring in a loved one from out of town to help with the move, or offer to send the new resident to a resort while the move-in is taking place.
“That’s the type of concession we do,” Morgan said. “We empower the sales team. They have a blank dollar amount they can spend when necessary, and it’s customized.”
Pathway to Living also offers some services as an alternative to rent concessions.
“If I lived in my house for 30 years and I’m struggling with downsizing … and you’re saying I’ll give you the first and third month free, that’s putting additional stress on me,” Bartecki said. “Why don’t we have someone instead come out and help them plan their move? It makes it easier on them and it comes to the same cost [as a rent concession], but you’re adding that value.”
Another solution that works well, especially with older properties, is to upgrade some or all of the community’s units instead of slashing rent. In the end, while the upgrades may well cost more than a simple rent discount, they’ll boost the overall value of the community.
“A lot of our partners are coming to us and saying, alright, we need to compete with the new shiny thing down the street, so how are you going to help us?” Hogan said. “We really try to help with that.”
For Mather LifeWays, some easy ways to boost the value of a unit include adding new design features and appliances, like quartz waterfall countertops, new door handles or even gas cooktops.
“We deal with the high-end, and so we’re doing anything that’s modern, anything that their 50-year-old daughter is excited about putting in her kitchen … and it is working,” Morgan said. “If they don’t come to you, where are they going? In my world, they’re going to an empty-nest luxury home.”
The facelifts even give Mather LifeWays the ability to raise rates to the level of some non-senior housing options, she added.
“I would look at the competition nearby in the single-family or the multi-family market and see what they’re able to charge, and perhaps replicate that,” Morgan explained.
Ancillary revenue opportunities
Another way to boost revenue while still offering competitive pricing is to offer a wide range of ancillary services. At Mather LifeWays, more residents are seeing the appeal of unbundled services — that is, services which are offered at an a la carte price outside of monthly rates.
“What we found out is, when we open, 95% of all new residents selected the 21-meals-a-month option, and within six months were to the 40-meals-a-month,” Morgan said. “So, our revenue went up significantly by giving them that option.”
Today, Mather LifeWays offers unbundled services for residents that include meal plans, spa services, extra housekeeping and even fine wines.
“In each of our communities, the wine is actually a huge revenue generator. It’s amazing,” Morgan said. “So, we’ve unbundled [services], but we’ve also tried to make them a unique experience that would justify a higher price.”
Similarly, Pathway to Living offers a range of unbundled amenities, including a spa where residents can pay extra for services and a bistro where residents and their families can order food.
Regardless of what providers decide to do with regard to unbundled services, they should coordinate with their sales and marketing teams for best effect.
“Selling extra housekeeping, for example, needs an in-house campaign, and it starts on the sales side,” Morgan said. “Don’t do it in a vacuum … and think about internal marketing. It will make a big revenue difference.”
Written by Tim Regan