Uneven Senior Living Recovery Raises Doubts About Seasonal Occupancy Gains

Recent data showed senior living occupancy remained flat in the second quarter of 2021, prompting renewed doubts about the pace of Covid-19 recovery. With this as the backdrop, providers are hoping that Q3 2021 will result in a seasonal occupancy uptick, and then some — but that result is uncertain.

There is reason for some optimism. New inventory growth was the main culprit behind the lackluster Q2, but demand was “measurably up” in the second quarter, according to NIC Chief Economist Beth Mace and several providers who spoke with SHN for this story.

But while the demand is there now, seasonal trends are not guaranteed in the age of the pandemic. As Covid-19 cases and hospitalizations rise again in most U.S. states while the Delta variant takes hold, some industry leaders are wondering whether that could derail the ongoing senior living recovery. Furthermore, much of the work driving Q3 move-ins takes place in earlier quarters, so the story to some extent might already be written as to how much of an occupancy boost providers will gain before the fall.

But the best providers are pushing hard to make the most of Q3, and of the demand they’re seeing now given the uncertainty ahead, according to Bild & Company Founder and President Traci Bild.

“We’re telling people, ‘You need to net up … move-ins right now. This is your moment,’” Bild told Senior Housing News. “We don’t know about the fourth quarter but what we do know is the third quarter.”

Typical seasonal gains

There is a widely held notion in the senior living industry that the third quarter is a time of year when operators add occupancy. And data from the last decade shows there is truth to that, according to NIC’s Mace.

Over the last 10 years, senior living operators in the 99 primary and secondary markets tracked by NIC MAP Vision have added an average of about 20 basis points of occupancy in the third quarter.

“If I look at the actual change in the absorption from one quarter to the next, in the third quarter … there is an acceleration of activity,” Mace told SHN.

Multiple factors explain the trend, including warm weather and the fact that home sales — which older adults use to fund their move into senior housing — typically accelerate in the spring and summer. By contrast, move-ins usually slow down for senior living providers toward the end of the year in the fourth quarter amid the influenza season and the holidays.

For many providers, the ramp-up in leads and move-ins starts well before Q3, according to data from Sherpa, a St. Louis-based firm offering a sales enablement platform, providing methodology, CRM technology and sales analytics to the senior living industry.

In recent years, the company has seen an uptick of inquiries after the holidays in the first quarter of the year, with conversions seeming to rise in Q2 and leveling off in Q3 before slowing back down in Q4, according to Sherpa President and Co-Founder Alex Fisher.

“I found January to March to be very active months for sales,” Fisher told SHN. “And April to June [as] good for move-ins, but only slightly better than other quarters.”

Data from Sherpa

Data from Sherpa

Of course, historical patterns mean less during a pandemic that has altered just about every facet of normal life. In the third quarter of 2021, many senior living providers are seeing robust levels of demand — but with the added unpredictability of “spurts and lulls,” according to NIC Senior Principal Lana Peck.

“It’s been a little bit jagged and there hasn’t been a lot of consistency,” Peck told SHN. “We’re not completely back to normal.”

Recent data from senior living referral platform A Place For Mom (APFM) helps fill in the picture on the ground. Among providers that participated in APFM’s latest survey, 97% said they are now offering in-person tours and 93% said they had resumed full in-person dining. Nearly all (98%) are now also allowing visitors, a number that was just 54% during a similar survey last August.

A Place For Mom survey data

In terms of the number of leads flowing into A Place For Mom’s platform, CEO Larry Kutscher said 2021 has been a strong year. That is underscored by the fact that the third quarter is typically not when APFM sees the most sales activity in any given year.

“We’re seeing much more demand out there than we might expect,” Kutscher told SHN. “Not only are the number of leads up, but we’re seeing higher conversion rates.”

Operator view

That trend of leads accelerating in early 2021 to present day is also what many senior living providers have reported this year. For example, Avanti saw a 200% increase in sales in June compared to pre-Covid times — a company record — and may be on track to do even more sales in July. That is notable for Avanti, which usually sees slowdowns in the summer months as the travel season picks up, Co-Founder and COO Lori Alford told SHN.

Aegis Living has seen both its leads and tour volume steadily increase since February — eclipsing even what the operator saw in 2019, which was a “banner year,” according to Senior Vice President of Sales Jennifer Alexy.

“Our infection control and safety protocols from the start kept cases down and helped us maintain the trust of current and prospective families so when the time was right, we were there,” Alexy told SHN. “We feel this is just the beginning of what will be a great 2021 and beyond.”

Wendy Simpson, CEO of real estate investment trust LTC Properties (NYSE: LTC), also sees a better outlook in the third quarter of 2021 compared to the second quarter, noting that earlier this year, she expected occupancy to return faster than it has so far.

Simpson believes that once children start to return to school and more adults return to more normal work-life patterns, occupancy will benefit. But, she still believes there is much more ground to make up before the industry is back to pre-pandemic conditions, and that it will be a slow march back to stabilized occupancy for many communities.

“We had two or three [communities] that were just getting into operation when Covid hit, and they’re seeing better admissions than we had at the end of last year or the beginning of this year,” Simpson said during a recent SHN+ TALKS appearance. “Those things are happening. It’s good news, but it’s not as good as everybody had hoped it would be.”

It’s an outlook shared by Stifel analysts who cover the senior housing sector.

“While we expect occupancy to increase near-term partly due to seasonality and partly from pent-up demand, we think the true test will be 4Q21 and 1Q22 (seasonally weak occupancy periods),” they wrote in a note released this week.

They believe a return to pre-pandemic occupancy levels could take three to five years, and a weak quarter three would almost surely dampen their expectations, given typical occupancy patterns.

“The industry has yet to prove that it can significantly increase occupancy through seasonally weak quarters that are typically challenged by flu and bad weather and the strong demographic demand ramp is still years away,” they wrote.

Strategies for Q3 growth

Despite a large number of new leads in the market, Bild thinks now is not the time for providers to rest on their laurels or think future demand is a sure bet. For one, those providers still must convert those leads into move-ins in Q3 and Q4.

“Everybody I’ve talked to, lead generation is not a problem at all,” Bild said. “It’s closing them to move in.”

Alford, whose company is a client of Bild & Co.’s, agrees that now is the time to “gain as much as you possibly can gain.”

“Number one, we don’t know what flu season is going to bring,” Alford said. “Now we may get another round of Covid — we don’t know, so it’s super important that every single lead be treated as though it’s gold.”

With that in mind, Avanti redefined its sales process — and typical sales role — earlier this year. The company hired a new national sales director and revamped the job description for its sales staff, and at the forefront of the move was a need for the company’s salespeople to stay nimble and motivated, even during setbacks.

“What we’re looking for is someone that says … ‘I can’t do a tour face-to-face because they are in another state, but here’s how I can do it and do it well — and not just through FaceTime,’” Alford said. “It’s adapting to your environment, it’s adapting to the situation, it’s adapting to the person, and that has become the salesperson that we are looking for.”

As Bild works with sales clients, she is recommending that they determine which of their leads are truly viable and work hard to get them through the door for quick wins.

“You need to start nurturing them and doing home visits and getting them back onsite, delivering some meals, whatever you have to do to reinvigorate those conversations,” Bild said.

One way to make that happen is by incentivizing sales staff to bring prospects to the community for tours, which Bild said is a good strategy for converting them to move-ins. Such an incentive could, for example, take the form of a small monetary bonus paid out to salespeople who secure a community tour.

“Let’s reward the salespeople, E.D. or whoever is doing the sales for the effort we know will lead to move-ins,” Bild said. “Those companies that right now, say, ‘Okay, our focus is getting people through the door’ … could land those move-ins in August and September and see a spike, especially if they put home visits into play.”

Bild also suggests that providers should consider launching a home care program — which is something some others are already exploring — as doing so can create a feeder for senior living communities over time.

The bottom line is that the senior living industry has an opportunity to seize now, and the future is still unwritten.

“Right now, to me, the strongest operators are really hungry,” Bild said. “Operators who produce financial results and focus on operations and sales and marketing, that’s the operator of tomorrow that all the investor groups we work with are looking for.”