Vitality Living CEO: Pandemic ‘Woke Up’ Senior Living Providers to Urgency of Workforce Issues

In the past, too many senior living providers put off addressing workforce challenges while preoccupied by the quest to achieve stabilized occupancy.

That’s according to Vitality Living CEO Chris Guay, who believes that providers now have no choice but to work on both issues simultaneously, given the labor crisis occurring while companies need to recover occupancy lost during the pandemic.

“I think what the pandemic has taught us is, we can’t afford to wait for occupancy to show up to start fixing the people piece,” Guay said during a recent SHN+ TALKS appearance.


After holding leadership positions at Emeritus and Brookdale Senior Living (NYSE: BKD), Guay launched Vitality in 2016. Now, the Brentwood, Tennessee-based company operates about 30 communities, mostly in the Southeast.

We are pleased to share the recording and this transcript of the SHN+ TALKS conversation with SHN+ members. Read on to learn about:

— Vitality’s efforts to drive occupancy and meet labor challenges


— Innovative development projects such as a hotel-to-active adult conversion

— How Vitality is adjusting to margin compression

— Guay’s outlook on 2022, as a year when “adaptation starts to happen”

The following has been edited for clarity:

[00:01:39] Tim Mullaney: Can you describe Vitality in terms of levels of care you provide the competitive differentiators for the company, the things that the company does best?

[00:01:55] Chris Guay: As you noted, I launched the company in 2016. I launched it on the premise of really wanting to do a smaller, regional-based provider that was nimble, that looked at opportunities in the space and took advantage of those opportunities, so I’m pretty proud of the team over the last five years. We’ve been able to do that.

We operate in all aspects of senior housing up to the skilled nursing side; we are not in the skilled nursing world, but primarily independent living, assisted living, memory care, and then most recently, at the turn of the year, we’ve entered the active adult space with a couple of development projects as well. Really that’s the theme and thread of who we have been.

We tend to do more of our own ownership in projects. We look for opportunities, whether it’s an opportunity in a market, an opportunity in a certain space, and we’re trying to adjust our business to make sure it meets where our customers are. Over 25 years, we’ve seen the industry is [still] similar in so many ways, but it’s evolved in so many ways — I think the last few years and COVID probably exacerbated that. We’re really seeing the customer base change and switch, and so we’re trying to be a company that’s able to react appropriately to that and then take advantage of where we are in the market and grow a really good company.

That’s always been important to all of us. We want to stay a regional player. My partners and I also want to be successful from a business standpoint, but also want to have a really good company that creates a great experience for everyone we serve.

[00:03:27] Tim: Let’s jump right in and talk about labor because I think this is absolutely top-of-mind for everyone right now. How is recruitment and retention going? Have you implemented any wage increases, any new approaches or programs related to staffing that have been helpful or that you’re hoping will be helpful?

[00:03:47] Chris: I’m not shocked we’re starting with labor. I think it is the number one thing and, frankly, pre-COVID labor was a top issue — it was occupancy and labor. I think it’s important to understand how we got here. We knew prior to the COVID pandemic that labor headwinds were going to hit this industry. Our customer base was outgrowing and outpacing our labor force. We knew that there was competition, as we competed not just with senior housing but with other forms of health care and expanding out.

I think COVID exacerbated this; it accelerated these headwinds for two reasons. One, some people just left the market. I’ve read articles and stats you’ve quoted where people have just left health care, and so we already had a thin workforce and then it got thinner.

Secondly, we know that everybody in not just the senior housing industry but in hospitality, in casual dining, every industry is inflating wages, and so our employment force has more options and more choices.

So back to your question, I will tell you, we don’t have the magic pill yet. We don’t have the answer.

Like most of my peers and most companies, we’re looking and trying to approach this in segments. The first segment was, “Hey, let’s make sure our wages are fair.” To your question, yes, we’ve made adjustments to wages, primarily in the line staff, caregivers, culinary folks, housekeepers, those wages we’ve gone back and looked to make sure we are competitive. Are we competitive in the market, but no longer just to other senior housing competitors, we’ve expanded that look to say, “Where do we compete against casual dining and where do we compete against hospitality and where can we adjust as needed?”

One thing that we’ve done, I think very effectively, is we’ve tried to make sure we have good wage scales in our buildings. Meaning that first and foremost, if you’re going to make wage adjustments, make sure your in-house employees — those employees, those team members that have stayed with you over time — are adjusted accurately in the market.

We usually look internally and make sure we have a scale in place that rewards the employees who have been with us, that have tenure, and then pays people fairly for how much experience they have, meaning if I’m a new grad and I don’t have any experience as a caregiver, I shouldn’t make as much as someone who’s got five, six years.

It’s a simple thing, but you’d be surprised how many communities don’t have proper wage scales in place, and really understand that you have to effectively keep your current people fairly compensated and then adjust the market rates accordingly. No different than how you do your rates with occupancy and just regular street rates.

The second segment is, “What do we need to do from a benefits perspective, to create benefits that matter?” I’m not convinced that the traditional PTO, 401(k), health insurance benefits are going to attract the people we need.

Definitely, you still need to have them. Don’t misunderstand me. You need to have those core basic benefits. People want to know they can take time off. People want to know they have good health insurance. People want to know they can invest in their future. I think we’ve got to expand and try to create benefits that are also more attractive to an expanded audience.

What can we do to help people know they have career pathing? What can we do to help people see other benefits that maybe aren’t traditional, that are attractive to them?

I think we’re really trying to step back; benefits like daily pay, we hear a lot about that. People like InstaPay, people like more flexibility in their scheduling.

We’ve played around with those pieces, like giving people more ability to be flexible with schedules. We’ve introduced an InstaPay feature. We use a company called FinFit that gives financial support and education to employees … this is going to be a work in progress as we start to retool what a benefits package [looks like].

That’ll be the third thing that we’re really focusing on: How do we message and brand the differentiator that we have in this business versus Five Guys? My son is 18. He can go to work at Five Guys and probably make $16, $17 an hour flipping burgers. He chose to work at one of my buildings making less than that because he likes working with people. And that’s his choice. He likes that he has an opportunity to make a bigger difference. That example I use because it was very personal to me. Obviously, I’m proud of him that he chose that — ,aybe it was a little arm twisting from dad, but still, he chose.

We have something that is different. We talk about it. If you had five of us up on a panel, we’d all talk about that differentiator. We see it because, as you noted, I grew up in this industry. I’ve been in this industry 25 years, so it’s just embedded in my DNA. I think the younger generation wants to make a difference. We got to get better at showing them and helping them see that this career track can really be something that can be a rewarding career and then obviously financially beneficial and fair to you. Those are the three things that we’re really focused on.

[00:09:38] Tim: I’m assuming labor expenses have gone up. I think there’s been a lot of talk about the pricing power right now in the market. Are you able to raise rates sufficiently to cover the expense or mostly cover it?

[00:10:04] Chris: That’s a great question. Margin compression is what we’re all experiencing. Obviously, many of us took hits during COVID, just in occupancy, but then now having to double down on that and improve and increase wages, we’re seeing more compression.

You look at utility costs, supply costs. Food cost is one that stands out to me. Food costs have gone up substantially, whether it’s supply chain issues or what have you. We’ve all experienced margin compression and really, the only way to combat that is going to be through rate.

Your question specifically, have we been able to [raise rates], we’re starting down that path now. What we’ve been really starting to do is get a little more creative with rate adjustments.

What I mean by that is, we have a lot of buildings that are new builds. They’re going through the fill phase. It’s difficult to take a building that’s halfway through its startup fill phase and say, “Hey, we’re going to drive rates up.” In those scenarios, we’re looking at saying, “Did our one-bedrooms fill up? Are we 90%-plus occupied in one-bedrooms? We are? Okay, let’s drive the market rate up on those.”

We’re looking at specific real estate within the business, and if there is less supply, we’re pushing rates where we can, we’re pushing market rates on those. We are now starting into rate increase season for our existing resident population. I will tell you, in all of our properties, across the board, we are doing much higher rate increases than we have traditionally. I think that is the story that’s still to be told. I feel confident because I think we deliver a good service. I think what we deliver is fair.

I think our reason and rationale for why we need to increase our rates, I think our customer understands that. Does that mean they’re going to be able to manage that increase? Time will tell, but I think we can’t afford to raise wages in some cases 10%, 15%, and then only go after a 2%, 3% rate increase. The math just doesn’t work. The margin compression gets to the point where the finance side of me and my financial partners [understand] we can’t, that just doesn’t make sense. Really, now it’s about pushing those rates and how do you do that in a manner that I think is fair to your internal [resident base], just like we’re talking about with wages with employees.

Let’s be fair to our internal customer, and then we tend to push those market rates more aggressively … but I think both internally and externally, we are going to have to [push rates], and we are. Rate increase letters are going out as we speak for January increases. I’ll probably have a lot more data for you in the next couple of weeks.

Then from there, I think it’s going to also be looking at the expense side. Are there ways to adjust this business and maybe adjust the expense line by doing things differently?

There are things that we can change the delivery model on and maybe reduce some costs, and save some of that margin. One of the things we’re experimenting with is, maybe we don’t do three meals a day. Maybe our customer is okay, saying, “Hey, I’m okay only doing two meals a day, if that works.”

Just trying to find ways to maybe also save some costs, because the one thing we know about this current situation, unlike what happened in 2000 when you just had occupancy fall down and everybody had to try to move rates … you can’t adjust wages and then go back to employees in two years and say, “Hey, we’re pulling those back.” Another way then to correct that is we’re going to have to find a way to pay for it.

[00:14:10] Tim: Here’s a question from an attendee. In lower acuity settings, have you had instances where you’ve had residents do work, or work share for rent discounts, to help offset labor issues? Also, volunteers from the community, any kind of hyperlocal approach to assist workforce?

[00:14:32] Chris: That’s a great question. It’s a really good question … On the independent and on the active adult side, we have done that.

On the active side we’ve done it quite a bit … we have [a situation] now we’re talking about, which is an employee who’s a concierge. She wants to move into one of our active adult communities. She’s a little short on her end. We said, “Hey, let’s figure out a way, because she’s fantastic and what’s better?” She wants to live in the community. We’re figuring out a way to let her work and then offset some of her rent by the work that she’s doing. I think that’s a good win-win.

It’s a great question. The answer is yes. I think if we can get more creative like that, you might also be able to expand your customer market too. You’re working on occupancy and labor, which is a win-win for everybody.

[00:15:45] Tim: Do you have any sense, looking ahead three, five years, do you think margins are just permanently lower? Do you think they’ll get back to what they were pre-pandemic eventually?

[00:16:28] Chris: I usually go back to history. One thing I know is the demographic tailwinds have not changed. We know baby boomers are aging into this retirement population.

We know all the same demographics and factors that pushed a lot of investment, a lot of people into this industry because of opportunity, COVID didn’t change that. What it did change is possibly some of the economics.

Like I said earlier, we’re not going to be able to pull back on wages, so we’re going to have that headwind. To your point, I do think we’ll see maybe food cost and some of the utilities, and the other supplies costs, not inflate as high, but we know we’re still going to have some inflation on those costs annually, regardless of what’s going on.

You’re right. Insurance and labor probably doesn’t change. I think it’s going to be, over the next five years, how can we adjust the rate model to pick up for that high increase in the labor force and in insurance costs and close that gap?

I remember when I started this business, you could get an AL/memory care to maybe a 40 margin. That’s really difficult to do in today’s current environment.

I think over time, if you can stabilize a building, and stabilize your rate increases to the point where you outpace your expenses, of course, we can get back to those margins, but I think you’re going to have a lower starting point from where maybe we would’ve started four or five years ago. The margin may start lower. You may get back into an area [similar to the past], but it’ll take a longer period of time. I think it never has been a business for those that are in a short time frame. I think that timescale for being in this business and being successful has gotten extended.

[00:18:33] Tom: Do you think that any of these labor pressures will moderate at all in 2022? Are you already seeing any reasons for optimism in any of your markets?

[00:18:51] Chris: I’m still an eternal optimist. The last two years have been the most difficult two years. I’ve watched this last two years take its toll on our industry, take its toll on our peers, take its toll on people. Yet then every day I’m amazed. You see the resilience. You see that the industry still has so much opportunity. Don’t get me wrong. I have the same fears everyone has, we’ve now got the omicron variant, and I want to be cautious.

When we got through that first wave of COVID, everybody took a little breath, and then, man, we got hit again. I want to be cautious. I think we’ve got to remain sensitive. We’ve got to remain diligent. We’re still following a lot of the same protocols that we had in place prior and we’re not changing that, we’re still masking. We’re still pushing vaccinations. We’re still being smart with distancing and those things.

I am encouraged by what I see as [positive] signs … You’re starting to see sheds of light. One you brought up was occupancy. We’ve had some pretty good occupancy gains over the last 10 or 11 months. Now, we’re a Southeast company. I always like to be very transparent, very open. I think the Southeast just by geography was not hit as hard as some parts of the country. We’ve had a little less restriction. We’ve had a little bit more room to move, for lack of a better term. So, that demand cycle is going. We’re starting to see people maybe get interested in coming back to the industry. We’re starting to see some things coming through.

I’ve been through three pretty tough times in this industry: the early over-development of the 2000s, the recession in the mid-2000s, and now the pandemic. We’re not quite out of the pandemic, but the previous two, people have been resilient. Something good has come out. Companies have adapted and the industry has carried on.

I feel like 2022 is the year where you start to see some of that resilience flow through and you start seeing some adaptation start to happen, and companies start to learn how to live with this virus, because it’s not going away. To think we’re just going to wake up one day and it’s going to be gone, that’s not feasible. That’s not reality.

It’s adjusting to today — what life looks like now — and then growing our business. I go back to, there’s still plenty of people that need what we have. There are people that are aging into our market every single day. If we really all follow through on our mission, they need what we have. They can benefit from what we have. There’s a lifestyle we can provide. I still think there’s attractive opportunity there. It may just look a little different, but I think this year we started to see some of that come through more and more.

[00:21:51] Tim: Let’s talk a little bit about how Vitality has grown over time. Have you been mostly growth through acquisition or new development or a mix?

[00:22:00] Chris: It’s a mix. As I said in the beginning, we built this company to be nimble and opportunistic.

What I mean by that is, we’ll look at where the market is, and we’ll adjust our strategies where we think it makes sense and where opportunities are. Pre-COVID, being very candid, we were doing more development. We were looking at developments, the cost to build was better. It was cheaper and there were more opportunities.

We think the Southeast has got some great markets that are still prime opportunities and we were looking and tapping into those. As COVID set in, like everyone, we took a step, a pause, and said, “Okay, where are opportunities?” As we started to exit COVID, we saw acquisitions — there were some opportunities for us to buy great properties at what we thought was a fair price. We’ve adjusted. Where we were developing, our last development that we did, we’ll probably open Q1 of next year.

Everything we’ve done is so far in 2021 has been acquisition or helping take over a business that was already existing. That seems to be the direction we’re still going as we head into 2022. We are looking at some development in the active space and we think that’s a real opportunity, but right now it’s primarily acquisition that our growth is happening. Over the time of the company, it’s been a mix of both.

[00:23:25] Tom: I think you’ve done some interesting projects, maybe we can just zero in on some of those. One of them I think is the Copeland Tower project. Can you describe that?

[00:23:35] Chris: We’re doing that with a partner called Al Copeland Investments. The Copeland family. They have a rich tradition in New Orleans both in the restaurant and hospitality businesses. They had a hotel that they were looking to do something different with. They had some foresight, and they wanted to convert it. We’ve been working with them for about a year and a half, two years now. We just opened. It was hotel conversion. We took a 180 hotel room business and now it’s 150, it will be when it’s all completed about 150/155 active adult apartments. A really interesting project.

It’s in a great suburb of New Orleans, great area, great location, with an ownership group that is very world-class. They want to do everything right and they also have great pride and great connections in the New Orleans market. It just really opened for business last month. It’s been going well. I was down there last week, meeting some of the residents, they’re loving it. Interesting piece about that building is, it being a full-service hotel, we had some amenity space and amenities from a hospitality standpoint that we have access to that we don’t traditionally do.

We’ve got a full-service restaurant, we’ve got conference space. It’s an interesting project, and like I said, I was there just last week. Our first 10 residents who have moved in are just loving the experience. They think it’s a great experience. I’m excited about that project. [It’s] more of a high-end lifestyle play that I think in the right market plays really well.

[00:25:12] Tom: Are either the restaurant or the conference space available to the general public or are those reserved for the customer?

[00:25:17] Chris: Yes. That’s the plan. The plan will be Al Copeland, Mr. Copeland, has a restaurant background … We’re naming the restaurants on the 16th floor. If you’re ever in Metairie, it’s a beautiful view. That is the intent, to open it up. Obviously, [we’ll] make sure our residents always have the first opportunity, but [we want] to use those spaces for the general public as well, really becoming a community center, a place where people can gather and be together. We think that helps from the standpoint of obviously marketing the business, but also that we’re part of the community.

[00:25:49] Tim: I’m curious about the hotel conversion opportunity. We just had our BUILD conference and this came up a couple of times. In the early days of the pandemic, there was a lot of chatter I think about, oh, maybe senior living can pick up hotels more easily because the hotel industry was so stressed.

We have seen some of that; your Copeland project, Maplewood’s Inspīr building in DC used to be a hotel. We’ve seen some other ones around the country, but then I’ve also heard on the flip side, don’t get too excited because these are really hard projects and it’s actually really hard to find hotels that work well.

Do you see other hotel opportunities there and was there anything about this building that lent itself to the senior living product?

[00:26:38] Chris: Yes, I do agree. Obviously, there’s a lot of hotel product out there. A lot of these hotels are in great markets. Right. They’re great locations. Maybe the industry, the market for the hospitality side has changed. That’s what happened in this Metairie project, I think the surrounding area had changed a bit and it was still a good hotel, but the market had grown around it where it was more residential, so it made sense. I think it’s also, we had the benefit that Mr. Copeland was very thorough when he rebuilt this hotel after Katrina; he rebuilt it and converted most of the hotel rooms to one-bedroom apartments, so that he had the ability to make it a residential setting.

We know that most of our active and independent folks like larger apartments. I think a hotel conversion that’s just single-room studios, probably not gonna be a high-end [senior living community]. Maybe there’s a mid-market for that.

I think there is opportunity, but I think it’s, does the space fit a market, and are you able to provide the right lifestyle? I do think you have some real opportunity in hotels because a lot of these older hotels, maybe they don’t compete with newer products. Some similarities in senior housing. Some of our older stuff [struggle], but they’re in these great markets.

… We hear from some of our residents at Copeland that the market, housing rates have gone up in that market tremendously. Now we have a lot of folks that have a lot of value and equity in their homes. Many of us think, okay, I could sell this, but where am I going to go? I think there is an opportunity if we create the right spaces where older adults can tap into that equity and then have someplace to go, which I think is very valuable and very powerful.

[00:28:45] Tim: Do you think that this is a particular moment to drive that active adult product? I’m thinking about my own parents. I asked them, “Hey, are you going to sell your house? I’m sure you can make a lot of money on it.” My dad said, “Well, I’m sure we can sell it, but where would we buy? Where would we go?” They’re in Appleton Wisconsin. I couldn’t say, “Oh, well there’s a great active adult community right around the corner for you.”

[00:29:20] Chris: Yes. To your question, I think there’s a real opportunity there. I think there’s this market. We spent a lot of time trying to figure out the active adult space, and I want to be clear, we do not have it figured out yet. We’re just dipping our toe into it, but I see it as a real blue ocean opportunity for a lot of us in this industry.

We’ve watched our resident population getting older. If you look at the typical community-based IL, your resident is probably that AL resident you had 5 to 10 years ago.

You look at AL, your ages and your acuity levels are getting higher, and then obviously it goes from there. I know we’ve got this group of folks between their ’70s and early ’80s that are very independent, that are active, that probably you’ll look at their home equity and you go, “This may be my opportunity to cash it in, but I can’t go anywhere.” Maybe you want to make a lifestyle change, want less responsibility and worries, and want freedom, and that’s what I think active adult brings. And also they want to probably be around their peers.

We hear that a lot, why would someone choose an active adult community over just a traditional multi-family apartment? I do think older adults would rather be hanging out with … they want some young people but like being with their peers. We’re seeing that in our buildings, where the comradery and the socialization is so natural and so much fun to watch. I think that’s attractive to people. I think there is a real opportunity there to create something that allows our parents to cash in on that equity in the home they have, and/or create more freedom in their lifestyle to enjoy their retirement that they’ve earned.

I was having this conversation with a resident at our Copeland building last week. She moved from her house, and she said it took a long time for her to do it. It took a long time, but now that she is there, she can’t believe how much happier she is. I think it’s hard for people to change, but they discount how important that social connection is, and I think that’s the other lesson out of COVID. We know social connections are really, really important now, so I think that’s our other opportunity coming out of this pandemic. We can create spaces where people know they’re connected and they’ll have better mental health along with social interaction. I think that’s important.

[00:31:50] Tim: Let’s talk about the Vitality project in Madison, Georgia. I think there was a standalone single-family cottage-type component to that as an active adult play. Is that right? Can you describe that project and that component of it specifically?

[00:32:10] Chris: That’s the complete opposite of what we did in the New Orleans project. That’s a patio home development; our partners there had done a lot of multifamily, a lot of single-family, lot of student housing. It’s outside of Athens, Georgia, so it’s in a nice bedroom community to the college town … We took 20, 30 acres and put 86 patio homes.

We [could have] put hundreds of units, but that wouldn’t have played well in that market. We were able to really, from a land cost standpoint, [and] our partners with their construction background, we were able to do less density, but create what I think is a really unique living opportunity that creates a really great space for people. Completely opposite of the Copeland Tower, this is 86 patio homes, they’re their own places. No culinary amenities, there’s no restaurant. We have plans in the future to possibly add those spaces if people want them, but really what it is is the lifestyle being on this acreage. We have walking trails, a dog park, pickleball courts, a pool, and a nice community center with a fitness center, and that’s the amenity space. People like it because they have choice and they have that lifestyle two miles outside of downtown Madison, which is a gorgeous little Southern town.

We’re seeing people that either A) they have a connection to Athens, possibly they have family there or they even went to school there or B) they’re trying to get out of that city market and get out more to the country and have a lifestyle play. That’s been a very successful project. The team there is amazing, but we’ve got some really great people living in that community.

[00:33:58] Tim: That cottage product, is that for purchase or rental product?

[00:34:02] Chris: That’s rental.

[00:34:07] Tim: I think that you said that in some of the cottages, the layout is a quad style, is that right?

[00:34:13] Chris: Yes, we’ve got two, and that was our partner’s genius, our development partner. With the student housing background, he had done some of these quads.

So essentially there’s four one-bedroom apartments and there’s some common area, a living space in the middle, a couple sitting rooms, a nice outdoor porch. It allowed for a price point [with] a little more affordability, for someone who didn’t want a two-bedroom.

These are still good size one-bedrooms. They’re very good-sized patio homes. We have a couple of sisters that each have a quad, cousins. Obviously in the south, family is important and connections are important, so we feel that that quad has worked out really well, because you create this community within the community, and then all the quads are connected. There’s walkways and these little patios in between all of them. It just creates this really great sense of community. Our partner had a lot of success in the student housing industry doing that. He brought that idea, and it’s worked really well for us at Madison as well.

[00:35:16] Tim: Would you say your portfolio is generally market rate, is it more luxury, and are you thinking about serving the middle market more?

[00:35:29] Chris: Our prices right now are more middle to upper market. I do think that mid to lower market is going to be an interesting — we talk a lot about what that looks like. I think it’s going to play in the amenity piece.

Again, it’s market to market, what’s the right fit for your market? I think if there’s a market where affordability and price is an issue, that’s probably where we’ll make the spaces that have probably less amenities because it’s that extra amenity space that usually adds to some of your construction costs.

We’re kind of playing around with that. I don’t have the answer yet. Right now, we’re finding the price we’re in, we’re in that more mid to upper market, and it’s working for us, but I do think there’s a mid to lower market opportunity there and it’s going to be just how you construct the project so that it’s probably more of the apartment and staying closer to multifamily rates, and having less amenity offerings, or maybe it’s à la carte amenity offerings. We’ve played around with some of those à la carte offerings as well.

[00:36:32] Tim: Looking ahead to 2022 and the company’s growth, it sounds like mostly acquisitions. Do you anticipate anything changing in terms of the development landscape? And on the acquisition side, I’m curious what kind of market dynamics you’re seeing, because one thing I’ve heard is that pricing actually hasn’t really moderated as much as people thought it would due to the pandemic, and there might be a little bit of a split in the market between kind of distressed properties that are turnarounds that maybe aren’t appealing to everyone and then the stabilized properties are actually hard to come by and going for a premium still. Do you see opportunities out there?

[00:37:13] Chris: Yes, I would agree. I think it’s all risk-adjusted. What’s the risk-adjusted opportunity? Right now, I think if you’re going to get a price below replacement, you’re not getting a brand new building that’s running great. You’re getting something that has some opportunity, wherever the opportunity may be, whether that’s expansion, whether that’s repositioning. There’s some kind of opportunity to that, and I think that continues. I think there may be some more opportunities that open up in 2022 as people make decisions of, do they want to stay in this business, do they want to shift, but I do think anything that’s stabilized, that is a good product and got the business running well, is going to go for a premium, and it should. If the ownership group is stabilized and created a good business, you go for a premium.

I do think where the opportunities are going to lie are on those value-adds, for lack of a better term, or buildings that need some change, repositioning, maybe just a different way of thinking. It doesn’t mean that the group that was operating prior got anything wrong. It’s just sometimes fresh ideas and a new perspective helps a business.

I think we’ll see some of that, and then on the construction side, I wish I had that crystal ball. Really, it depends. If construction costs still remain super high, it’s really hard; and then not just cost, but then getting supplies in. Projects are getting delayed just because the costs are going up and you can’t get the materials to finish a project. I think until we have some more clarity on that, it’ll be hard to really do a lot of construction unless you’ve got a good opportunity or you’ve got access to what you need to make it successful.

[00:39:04] Tim: I know you said you’ve been able to drive census pretty well over the last 10 months or so. I don’t know if you’re going to share what your average occupancy is now —

[00:39:19] Chris: [chuckles] We can’t share those trade secrets.

[00:39:23] Tim: When do you think you’ll reach pre-pandemic occupancy levels? Do you think that’ll happen in 2022 or will it take longer?

[00:39:30] Chris: Well, it’s interesting. One thing that I will say that resonates all the time in this business, I have some buildings that I’ve been able to rebound. We’ve got buildings that are, like I said, opened in the middle of pandemic, and we’ve seen that really start to gain some steam and really grow.

I will go back to the fundamental pieces, where I have strong leadership, we have good teams in place, good executive directors, good leadership teams, that stability, those buildings are bouncing back faster, right? They’re getting back on track … I think the key is, you still have to stabilize and have that strength of your leadership on-site in the market, and then making sure you understand the market.

We’re fortunate, we have a lot of great leaders. We’re seeing our buildings start to churn and start to get back to focusing, and as things open up and outreach can get back to normal, I think we definitely realize some of that pent-up demand at the end of this year.

I think that’ll start to diminish a little bit as things start to get back to normal. I do think, and I’ll say this … as long as we do not have a relapse back and that relapse may happen from an Omicron variant — we’ve all seen buildings, out of nowhere they just get a small outbreak and it sets them back a little bit — if we can avoid any significant market fallbacks due to the pandemic, I do think we’ll start to get back by mid-year and you’ll see buildings starting to turn. We’re already seeing some of that.

I have been pleasantly surprised. Usually, Q4 really starts to slow down, and through November, we’ve been able to hold our own. December is not even close to being done, so I don’t wanna get ahead of myself, but I think as long as we don’t have any significant headwinds or setbacks with the virus, I think we’ll start to see markets start to get back on track.

[00:41:38] Tim: In terms of the threat of Omicron, I’ve heard from other providers that right now, it really is just wait and see how effective the vaccines are, see what the data says, and in the meantime, you’ve got the usual COVID protocols in place ready to go, ready to ramp up. Is that accurate?

[00:41:59] Chris: Yes. What COVID has taught us is, don’t react too quickly. I think we’ve got to be smart.

What I mean by that is, definitely make sure you’ve got safety protocols and to protect your residents from any virus … I think if we had some of these protocols in place prior to COVID, we’d have less norovirus, less flu issues. I think if you have good practices — and I know every operator on this call or who’s listening, I know has good practices in place because I’ve seen it, witnessed it, and everybody’s done a really great job — but keeping that diligence I think is important. Not falling off on masking and screening and all those things that we’ve educated our residents, our teams, and our families on, to help prevent the spread or prevent the virus, I think that remains vitally important.

At the same time … we’ve seen this, I’m not making the statement to be political, but we know the media can take something very quickly and start to … create panic and anxiety. I think we have to be cautious to make sure we talk and we educate. We talk to our employees, our families, and our residents, so they understand we are taking measures to protect people, but I don’t think we should react until we know what the right reaction is.

I don’t know if you saw, there was an article in the Wall Street Journal yesterday that there are some initial signs that this variant isn’t as deadly as Delta was. Let’s hope that sticks.

I don’t want to react and we end up [overreacting], because we know the damage over-isolating and over-mandating can have on our people. I think it’s important we find that balance but remain diligent.

[00:44:02] Tim: What sales and market messages are you putting out there that you find are resonating right now?

[00:44:48] Chris: I think more than ever, that socialization and safety are real important.

The adult child and the resident are asking, “What if?” You’ve got to be able to articulate what you’re doing to keep your people safe … Your sales team has got to be able to talk about that. You don’t want to run away from COVID. You want to try to ignore it, right? You got to hit it head-on and be able to say, “Here’s what our team has done. These are the safety protocols we have in place. Here’s why we feel very confident that if, God forbid, we ever experienced another pandemic like this, we can help keep your loved ones safe or keep you safe.”

I think that’s an important message you got to hit in your sales piece. I think the other piece is just really connecting. The sales process is all about connecting, right? Meet people where they are and figure out why they’re sitting in front of you.

No one wakes up and says, “I’m going to assisted living today.” Something has occurred. That hasn’t changed … the sales team’s got to make sure they also engage the activity and engagement team, and are able to show the experience and the differentiators.

I think we have a lot of people coming to our doors now that spent a lot of time alone. They may not want to admit it, they may not want to say, “That’s why I’m here,” but I think there’s a factor there. If we can show them that, “Hey, even if we have an outbreak and we’ve got to isolate, you’re never going to truly be alone if you live in one of our communities versus if you’re sitting home,” I think that’s a real important message that we’ve got to help get out there for people.

We know the physical impacts of COVID-19, but we’re really learning the social and psychological impacts for our resident population. Someone sitting alone and completely isolated … Alexas and TV and Zooms don’t check off all those boxes, right? They need social and they need human interaction. I think that’s the benefit of what we offer. Even in isolation, you’re not truly alone.

[00:47:10] Tim: We talked in the past, Chris, and you said you anticipate a decade of significant change for the senior living industry. I assume you still believe that this is the case. Can you talk a little bit about what changes you anticipate?

[00:47:38] Chris: It’s funny, Tim. I appreciate our conversations because you always bring back stuff that I’ve said to you now over the last five, six years. I said that, and I did expect a lot of change. I expected a lot of disruption in the space.

Vitality was getting going. There were a lot of small regional players that were starting to come up. I think a lot of great innovative thinkers, a lot of great leaders have come out of the big [providers] over the last several years that are starting to go out and do their own thing. I expected those great leaders to create more innovation, more disruption, and do great things.

I never anticipated that we would have had this pandemic. I think it’s been a hard two years. This pandemic has exacerbated and exposed some opportunities, but some definite weak points that we’ve got to work on. My statement doesn’t change. I think it’s just going to be different. I think you’re going to see a lot of us look really internally and figure out, how do we create that safety really that people want? How do we become better people, organizations?

We’ve got to find a way to attract more people. Young people, older people, we need to get more people to come work in this space. We got to figure out a way to innovate this business to offset the margin compression we talked about earlier. I think we’re going to see significant change. I think we’re going to see shifting in players. You were at NIC. The big talk was about the super-regional starting to develop versus the bigs. I think you’ve seen some of that shift happen.

I don’t pay much attention because I’ve seen that happen over the years. Big, smalls, everybody spaced in between. I think you’re hearing a lot more about innovation. You’re hearing a lot more about people looking at expanding into different businesses that try to support the core business. I think you’re going to see an evolution. I think COVID is going to speed up some evolution.

When I said over the next 10 years, I think we’re going to see things happen in the next 5 years that would have taken a lot longer had we not gone through the last two years.

[00:49:41] Tim: We’re seeing some of the regionals grow so fast in the last year, taking on 15, 20, 25 properties all at once. That makes me a little nervous. How do you take on that many properties at one time? … But I also think a lot of the companies that are taking over these buildings are innovative, and have proven themselves with their portfolios so far. What do you think in terms of just the pace of growth that we’re seeing?

[00:50:30] Chris: It’s a great question.

My current thought process would be Vitality is a super-regional, I guess by choice. That only is because when me and my partners looked at how we wanted to design this company, we wanted to have a relatively high touch. What I mean by that is, we wanted to be able to get into our buildings, not just our regionals but partners and the people who work for the supporting aspect of the company.

Because of that, we said the Southeast, we think, makes sense, because we can get to our buildings fast. We also think the Southeast has a lot of great opportunity. You have these cities that are growing exponentially compared to other cities, and you’ve got professionals moving in. Nashville’s a great example, between Oracle and Amazon, we’ve got so many professionals moving in and they have aging parents.

I don’t think for us, for me … taking on one building in Washington where I can never get there or don’t have any people there, doesn’t make a lot of sense.

That’s the current state and I think it makes sense. Where I have seen failure is when … the people who are in charge of really driving the vision and the strategy of the company are too far away from the ground level, too far away from the people who matter; the caregivers, the directors of wellness, the sales leaders, the dishwashers, the cooks, all those important people who put hands and interact with our people every day, they’re the most valuable. When you get too far away from that as the CEO or anybody, I think it’s hard to make good decisions.

A lot of my peers share that thought process. That’s why I’m encouraged by smaller companies that are a little more high touch.

Now, I’ll go back to the past. It can work, I was fortunate. You mentioned Emeritus. We had 15 years with Emeritus. This industry tends to always focus on the failures and not the successes, and I will tell you with Emeritus, one of the most successful mergers we did was Sunwest. We took over a portfolio of 180-plus properties. The leadership team there was led by a great man Granger Cobb. We had great leaders in place. We have Chris Hyatt, Jayne Sallerson, Chris Belford, myself, it’s really good people. We were all focused on the right things, and we did a good job managing that and putting that through.

Big doesn’t mean failure, that’s the underlying theme I hear is, “Big companies in the industry will fail all the time.” I don’t think that’s necessarily true. Now, is there maybe a number that’s too big? Possibly, because if you get too far away, as I said earlier, if you get too far away from the business, it’s hard to manage this business.

It’s a market by market, people by people business, but I do think with the right leaders that are focused on the right thing — and I used that Emeritus experience as that — I feel like it can be very successful.

[00:53:27] Tim: I’m curious what you think about home care. We’ve seen a lot of capital flooding with the home care space … Do you see the rise of home care as a threat to communal senior living? Or do you think about that differently?

[00:53:55] Chris: I think about it differently. Now, of course, it’s a threat because just by the nature of … people can choose to stay at home and get services. With that said, there’s going to be a percent of our population that’s not going to leave their home. No matter what we do, no matter how much we push them, they’re going to choose to try to stay at home and they’ll have the means to afford to pay for it.

Because that’s the key piece; if you’re [receiving] private duty home care, it’s more expensive than most senior living communities, on average. If you’re going to use the Medicare side of home care, it doesn’t last forever. It’s not an unending source of support. At some point, whether it’s economically driven or just from a standpoint of benefits wearing down, you may need a more supportive housing option.

I see it more as a bridge, if we can partner with good home care agencies, if we can build relationships. There’s times when bringing home care into your community can help supplement and help people have better aging experiences through, especially, Part A home care, where they come in and take care of things episodically.

There’s episodes happening that maybe you can prevent someone from having to move out of your community, or move to a higher setting. We know when people leave our buildings, it’s hard, sometimes it’s hard getting them back into our system. I do think there’s an opportunity to work together, and to create a more synergistic opportunity and then use home care as a bridge, but it is a growing business. I think it is going to take a bigger piece of our pie now more than ever because people are choosing [home care].

Again, there’s a group of people from an economic standpoint that won’t be able to– You do [at home] round-the-clock 24-hour sitters like we have in our communities, it’s a lot more than our monthly rents. I do think from the economic standpoint, it’s not for everybody, and that’s where we fit in. If we can synergistically work together, there’s probably opportunities for both industries to coexist and have better outcomes for the business and for the people we serve.

[00:56:02] Tim: We’ve got about three minutes left, so I’ll ask you to look in your crystal ball for 2022. What are you most worried about from a business perspective? What are you most excited about?

[00:56:13] Chris: I’ve already covered what I’m most worried about, a recession back into some pandemic. One of these variants, the vaccine doesn’t affect or prevent it or battle it, so we end up reverting. Because I think people are tired. Our employees are tired, our residents are tired, everyone in the country is just tired. That does concern me, I don’t want to think everything’s going to be rosy and we’re through this thing. That’s my biggest concern.

Secondly of concern is workforce. Can we get enough people back to this industry to take care of the people who [we] need to take care of the right way? I don’t mean just from an economic standpoint, [but] people with hearts, people who want to serve, people who are going to bring the right culture and experience that we need.

My positive is, I feel like we, yet again, went through some of the toughest times. We had a tough two years, and you see the resilience of this industry, and you see the people who are still focused on it … We know there are folks out there that need what we have, and can have a better life experience. We just go out there and we deliver on our missions and visions, we make sure we deliver on that, and we also really start educating and really connecting with people on why this is a good choice, regardless of what the future brings. We’ve got the opportunity to do that.

Also, I’m excited about the innovation that comes out of this. There will be some really cool, new, unique things inside the business that people do or create out of this, that take us in different directions that I think will be helpful.

[00:57:59] Tim: On the innovation piece, is there either something that you want to do new and differently next year or within the next three years, or is there something that you’re doing right now that you are most excited about to see how it plays out, whether that’s the active adult project and hotel or something else?

[00:58:19] Chris: We need another hour to talk about this. I am very excited about the active adult. It’s interesting, it’s new, it’s a chance to dig into something.

Secondly, the other thing I’m excited about is … we’ve done such a good job on the sales side, creating the sales experience. I’m excited as we pivot, I’ve challenged my team to create that same experience with people who want to work in this business. We start treating possible employees like we treat our sales prospects and start running that similarly until we have the same outcomes.

That’ll take time, but I’m excited about the shift to really becoming a people-centric industry. Creating opportunities for people to really have careers, but to do something that really matters. That’s an exciting opportunity. My son being example of that, I want to tap into that, grow that. That’s going to take a lot more than a year, but I’m excited to start down that path.

[00:59:16] Tim: I know maybe this is a big thing to ask right at 10 o’clock, but your last comment brings it to mind. It seems from everything I hear, that there’s a huge opportunity to improve the senior living sales process; you hear the stats of how difficult it is to get someone on the phone, how mystery shops always go wrong. I hear other leaders saying, we want to improve the sales process, and then we want to bring that same process into the recruitment process. It seems to me there is just a huge amount of upside there, but I guess my question is why has it taken so long if everyone recognizes — or maybe not everyone has recognized — that there is all this opportunity to improve these really fundamental pieces of the business, to my mind? What’s been the issue? Is this different now?

[01:00:16] Chris: It’s time and resources. All of us, we have been so occupancy-focused because we need that occupancy to stabilize. Stabilized occupancy gets you to where you can start focusing on the other things.

[Previously], it’s all been, “Let’s drive that occupancy”… and you know how occupancy has been up and down. I think what the pandemic has taught us is we can’t afford to wait for occupancy to show up to start fixing the people piece.

That’s why I think it’s balanced out that we’ve got to hit both and figure out a way to realign resources. Economics hasn’t changed, we still have the same amount of resources, but how do we readjust those and take what we’ve learned?

It’s outreach, speed to lead, the initial experience towards an onboarding piece, and then feedback, and staying connected once they’re in your system. You take those four key points that we do with sales and start putting them into people. I think COVID woke us all up, and we know we can no longer afford to put that as a back burner [priority]. You’ve got to put it front center and attack it head-on.

[01:01:16] Tim: Thanks for taking the time. Thanks for everyone who tuned in and for everyone who submitted questions.

[01:01:51] Chris: Tim, you’re welcome. Thank you, everybody. Happy holidays to everybody out there. Bring on 2022.

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