With move-ins exceeding move-outs and other sales metrics trending positive, Brookdale Senior Living (NYSE: BKD) CEO Cindy Baier sees evidence that the company’s recovery plan is on track.

Although Brookdale’s leads are still not where they were during the same period in 2019, that is partly related to the fact that the Brentwood, Tennessee-based operator has been “more effective with the targeting of [its] marketing spend,” according to CEO Cindy Baier.

“We’re using digital marketing to target people who are more likely to move in,” she said Wednesday during a presentation at the Barclay’s Global Healthcare Conference.

The operator is also seeing more move-ins than move-outs and higher conversion rates at the 679 communities it manages in 41 states across the U.S. – a factor of the company’s ongoing “sales transformation,” according to Baier.

“All of those things, I think, are pointing towards a very successful recovery,” she said.

Recovery continues

Brookdale enacted solid rate increases for residents in 2022 – a trend that has played out across the rest of the industry, as well.

“We have really seen a pretty traditional response to our rate increases, which means that the residents have accepted those increases,” Baier said.

Given how residents took those increases, the company is banking on a “mid-single-digit increase” in revenue per occupied room (RevPOR) in 2022, according to Baier.

Also giving Baier confidence was the fact that occupancy trends for the operator are favorable, given seasonal cycles.

“If you look at pre-pandemic sequential occupancy improvement between the fourth quarter and the first quarter, normally what you would see is a decline of about 80 basis points,” Baier said. “And, we’re trending much better than that in January and February of this year.”

In February, the company also saw more move-ins than move-outs, the first time since 2014 that has occurred in the month.

One thorn in Brookdale’s side is staffing, and Baier acknowledged that the current labor market is the toughest she has ever seen. Given those challenges, Brookdale is still relying on costly contract labor to get by.

“Probably our single-largest pain point has been nurses, and that has been difficult throughout the pandemic,” she said. “It’s true in our industry, it’s true in all of healthcare.”

The company is also seeing pressure hiring for other positions — such as caregivers or med techs – and some elevated turnover in community leadership positions, particularly among health and wellness directors.

“We’ve looked at wage rates for every market across the country, as well as we’ve increased our recruiting efforts to make sure that we can attract talent,” Baier said. “But it’s competitive at many levels.”

Baier noted that the company’s spend on contract labor has trended downward between December, 2021 and February, 2022. And at the same time, Brookdale has seen three consecutive months of hiring more employees than are leaving their jobs.

Still, she said it will take some time for the operator to significantly decrease labor costs, given the fact that new hires must be trained and onboarded.

As she has noted on previous earnings calls, the lower rate of new senior living construction starts in the U.S. is also a favorable tailwind ahead.

“New competition is going to be more expensive when it comes to the cost to construct a building than it was historically, which is good for us,” Baier said. “We have a very good portfolio that is attractive, and when replacement costs are well above the cost of our portfolio, that’s a good thing for us.”

Brookdale spent time in recent years restructuring leases with its biggest landlords, and to that end, the company’s next significant lease expirations aren’t until 2025.

Looking farther out, Baier sees opportunities to grow Brookdale beyond its current size, either by becoming more dense in its existing markets or by undertaking new development or select acquisitions.

For now, the company’s big focus is on capitalizing on its existing portfolio, according to Baier. The company’s current CapEx guidance for 2022 is set at $160 million for non-development, working out to about $2,000 to $2,500 per unit; and $20 million for development, compared to $3 million for last year’s development CapEx allocation.

“We do see an opportunity to get some of our communities repositioned where we’ll have a more attractive portfolio, and normally those projects have very good returns,” she said.