What Senior Living Can Learn From Airlines About Unbundled Pricing

Traci Bild had an epiphany while recently booking a trip to Israel.

The flight’s cost — at around $1,600 per person — did not include assigned seats. Those would have cost an extra $625 per person, for her husband and herself.

The Bilds’ trip to Israel is an example of the unbundled pricing trend being embraced by airlines and a range of industries, from hotels and cable television/internet providers to fast food chains and automobile makers. It’s possible that the practice could work in senior living as well, Bild and other industry professionals believe.


It’s like nobody wants to tackle the beast.

Bild & Company founder and CEO Traci Bild

Unbundling pricing — the practice of separating a package offer into a base offer and a series of add-ons — is beginning to take hold in independent living and active adult. Bild, a senior living marketing consultant, believes the concept can be applied to assisted living to serve the dual purposes of opening new revenue streams for providers, as well as reducing consumer price points to meet the growing demand for middle-market senior housing. But unbundling is not strictly a middle-market play, either, with Watermark Retirement being one provider introducing an a la carte pricing model at more high-end communities.

Despite its promise, there are obstacles to carrying over unbundled pricing to assisted living, such as licensure issues and the possibility of staffing imbalances that can inadvertently increase costs to providers and residents.


A la carte services

With the experience of her Israel flight as a launching pad, Bild — founder and CEO of Bild & Company, a Tampa, Florida-based senior housing sales and marketing consultancy — researched how unbundling unlocked revenues within the passenger airline industry.

Budget airlines pioneered the concept in response to rising oil prices in the early 2000s, separating ancillary services such as baggage check, Wi-Fi services, meals, seat assignments and early check-ins into separate revenue streams. The practice is now embraced across the airline industry. Last year, United Airlines announced it would charge more for economy seats near the front of its airplanes.

The unbundling craze, coupled with lower oil prices and a slight increase in passenger totals, resulted in a 10-year run of increased profits. Net profits in the passenger airline industry reached $32.3 billion last year, and are projected to exceed $35 billion in 2019.

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The reason why senior housing has always been on bundled packages is because it guarantees the need for a certain level of staff. You have consistency in what demand there is for those services because it’s required.

Watermark Retirement Communities Director of Strategic Investments Bryan Schachter

Bild believes that unbundling care services in assisted living based on need will open the space to the middle-market demand the industry is struggling to meet. All residents would pay the same base rents and health care rates, but ancillary services such as meals, personal care such as massages and spas, transportation, housekeeping and pet care can be added by residents as needed. This would create pricing structures that will allow residents to extend their nest eggs, allow providers to reach a wider referral pool, and improve their bottom lines.

“The acuity of [assisted living] residents is killing their profit margins,” Bild said.

Assisted living care costs increased 6.67% in 2018, according to the Cost of Care Survey from insurer Genworth Financial (NYSE: GNW). The national median cost for a one-bedroom unit in a private-pay assisted living community is now $4,000 per month, or $48,000 per year, according to the survey.

Cutting operating costs is on the minds of providers across the country. A report by the National Investment Center for Seniors Housing and Care (NIC), NORC at the University of Chicago, Harvard Medical School and the University of Maryland School of Medicine revealed that trimming rates by $10,000 to $15,000 per resident per year, an additional 5.9 million older adults would be able to afford private-pay providers. By allowing seniors to pay for only the services they want, unbundling can be a solution to the middle-market question, Bild told SHN.

“If people can’t afford $60,000 but can afford $50,000, by unbundling pricing for people who need the apartment and just one level of care, we can allow a lot more people in,” she said.

Providers recognize the need to reassess their pricing structures. Industry leaders such as HumanGood CEO John Cochrane and Greystone Communities co-CEO John Spooner expect continuing care retirement communities (CCRC) to embrace unbundled pricing models where fees vary based on need, care or life phase.

The Watermark experiment

Hacienda at the Canyon clubhouse rendering

Last year, Tucson, Arizona-based Watermark Retirement Communities announced plans to roll out a new pricing model with principles of unbundling in mind, to maximize residents’ ability to tap into the particular amenities and services they want without being locked into particular packages. At The Hacienda at the Canyon, a new Watermark community in Tucson offering independent living, assisted living and memory care, residents will have a point-of-service (POS) card loaded with $500 each month, drawn from the monthly rate that each person is charged.

They can spend that money any way they choose, whether it’s on food in the multiple dining venues, bottles of wine, personal training, or spa services. The POS card program will be expanded to Watermark communities currently under construction in New York City and Napa Valley, and 15-20 communities will eventually use the POS model, Watermark Director of Strategic Investments Bryan Schachter told SHN.

Watermark is exploring ways to unbundle pricing for assisted living, but may be limited in what it can do due to licensing and regulations. The Hacienda at the Canyon’s assisted living residents will be on a dining plan due to regulations, but there will not be a dedicated AL dining room. Instead, these residents will be free to choose among the community’s many dining options.

Schachter identified housekeeping as another opportunity to offer unbundled pricing. The challenge to a breakthrough may lie in staffing ratios.

“The reason why senior housing has always been on bundled packages is because it guarantees the need for a certain level of staff. You have consistency in what demand there is for those services because it’s required,” Schachter said.

Watermark is committed to the idea of choice and is tweaking its services incrementally so that the provider can still create enough demand for the services it provides and maintain profitability.

More self-analysis is needed

The biggest obstacle between assisted living embracing unbundled pricing is honest self-examination, Bild told SHN. That means focusing less on how a provider’s rates compare to the competition and more on what care needs are being met internally.

“If we look at that, more than occupancy growth, if we can get actual rate for what we provide in care,” she said.

Bild & Company is working with a Florida provider to create three separate rate packages with different unbundled service items. This provider had previously worked with two other consultants but did not look at unbundling as a means of improving rate growth.

Bild believes if executive directors can become more comfortable reviewing their operating expenses, unbundling can take hold in assisted living.

“It’s like nobody wants to tackle the beast,” she said.

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