Many senior living executives hoped 2023 would be the year that the senior living industry finally pivoted away from its biggest ongoing challenges. That did not happen as planned.
In 2024, operators are sure to confront many of the same challenges as they have for the last almost four years. Staffing, occupancy, margins and other woes remain at the forefront of senior living executives’ minds as they start a new year.
But the period of survival may be coming to a close all the same. In the last couple of years, many leaders have taken the phrase “survive to ’25” to heart as they have sought to ready their companies to capitalize on the post-Covid landscape. After a year in 2023 defined by operational stops and starts, many feel as though they’ve survived long enough and are ready to thrive instead. Just ask Solera Senior Living CEO Adam Kaplan, who proposes the industry should instead seek to “thrive in 2025.”
“It’s time to rally around a more inspiring future,” Kaplan told Senior Housing News. “Senior living needs more than incremental change if we are going to reach our full potential and distribute the greatest benefit across all stakeholders.”
Senior living companies are seeking to thrive in part by adopting forward-thinking programs meant to help attract a new customer base. All the while, they are pondering what exactly thriving means to them and what is best for their organizations.
To learn more about how senior living executives are feeling heading into the new year, Senior Housing News connected with a variety of industry leaders. What follows is the first part of a two-part series sharing those responses:
Cindy Baier, CEO, Brookdale Senior Living
As we look ahead to 2024, we are focused on several areas of opportunity and growth. We are responding to both changing demographics along with new technology. Taking both into account, we have introduced some exciting new programs to help improve the lives of seniors.
One of these innovations is a new model of care coordination in assisted living called Brookdale HealthPlus, which we are successfully implementing in a number of our communities. Brookdale HealthPlus is a community-based, technology-enabled, proactive care coordination program. This initiative has not only brought increased coordination of care to our residents, it has also helped deliver better health outcomes for them. An independent third-party confirmed urgent care visits were 78 percent lower and hospitalizations were 36 percent lower for Brookdale HealthPlus residents compared to seniors residing in other senior living communities or living independently.
Brookdale HealthPlus is designed to enhance health outcomes by focusing on preventative care, chronic condition management, and timely coordination of care. By integrating technology with value-based care, we are looking for better ways to help our residents live well longer.
This exciting program has the potential to completely change the game as we know it. As we look into the next year and beyond, we believe that it is important to demonstrate social responsibility to our residents, their families, and current and future associates. We are focused on taking steps to help protect the environment in which we live, promoting diversity and inclusion in the workforce, and adopting best-in-class corporate governance.
Retaining associates is a challenge our entire industry faces and it’s one we have worked hard to overcome. One of our continuing goals is to attract, engage, develop and retain the best associates in the business. To help overcome this challenge, we offer services and support for our associates.
Over the past year, we have been able to increase our internal workforce, and focus our efforts on boosting retention. We also continue to work toward staffing our communities with engaged full- and part-time Brookdale associates and leaders who are united around our mission to serve our residents.
As we move into the future, we will continue to see increased demand from an aging population. We can and should utilize emerging technology to further coordinate quality care. As always we remain committed to our mission of enriching the lives of those we serve with compassion, respect, excellence and integrity. I am proud of the proactive and innovative steps we are taking to continue to drive better health outcomes for older adults.
Greg Puklicz, President, 12 Oaks Senior Living
As we closed the books on 2023, we celebrated the success we achieved in regaining much of the census lost in the past few years. Much of this growth occurred in the first half of the year, as pent-up demand produced a wave of delayed, needs- based move-ins. As a portfolio, our average occupancy went up a dramatic 16.5 percentage points from 61.5% to 78.8%. More impressively, 25% of our communities are exhibiting occupancy greater than 90% compared with only a handful of a year ago. Additionally, renewal increases averaged 10.4% for 2023, helping to drive REVPAR above budgeted values.
For 2024, we expect occupancy increases to moderate and our focus will be more focused on occupancy by level of care and unit type; attempting to finely tune unit pricing to drive occupancy for unit types within specific markets and communities that lag the overall occupancy growth. We expect concession based selling to decelerate while renewal increases will also moderate, more to a 5%-7% level in 2024. Our goal for 2024 is to achieve a portfolio wide 85%+ average occupancy and meeting or exceeding our REVPAR budget projections
Staffing
We feel staffing concerns have moderated during the last half of 2023, as wage increases to the “new normal” levels for line staff and care positions were implemented, stressing budgets, but necessary to achieve hiring targets. 12 Oaks Senior Living expanded their internal recruitment staff and efforts resulting in positive hiring in eight straight months, to close 2023. We measure new hires and terms, just like move-ins and move-outs, and our efforts to increase recruitment and retention have proven successful.
For 2024, we feel a restoration to normal scheduling, with most positions filled, agency out of the communities, and overtime waning, we will be able to return to a more normalized scheduling of staff, thus reducing operating expense and, most importantly, the stress of filling positions and shifts borne by community leadership.
Margins
The last year was one of stabilization, so the focus wasn’t on margin per se, as much as it was on the elements that are manifested in margin at the end of the day. Occupancy, revenue, staffing, food costs, utility costs, insurance and property taxes all provided challenges with unique attention required for each. We have seen stabilization in most of these categories, especially the controllables, through the addition of improved technology and systems implemented as part of our 12 Oaks growth strategy, to achieve best-in-class operating results for our regional, high-touch operating model.
For 2024, we expect a restoration of margin, albeit not quite to pre-pandemic levels, as we feel there is more work to be done. The real success will come in 2025, where we predict a full return and restoration of normalized operating margins, as market demand and supply achieves equilibrium and our ability to drive real REVPAR increases with high occupancy will be achievable.
The 12 Oaks business plan
The past year was an important tipping point for 12 Oaks Senior Living as we significantly enhanced our portfolio to now 40 communities under management. Our focus on 2024 will not be so much on continued growth as it will be on solidifying our position as the best-in-class regional operator in the southwest, through our proven performance model consisting of high-touch community management, experienced leadership, integrated systems, and most importantly, optimized culture.
Steve Lindsey, CEO, Garden Spot Communities
As we look forward, we continue to see a VUCA (volatile, uncertain, complex and ambiguous) world, but believe that there are some exciting opportunities in the coming year that will help shape our future. In developing our strategic blueprint this year, we identified our organization’s envisioned future as “sparking a pro-aging revolution.”
We believe that the biggest impact that we can have is to begin a conversation that stops denying aging, but begins to define again in new terms — one that sees aging as a natural progression of life that brings many benefits, not as a liability. We see older people having gifts of experience, wisdom, resilience and self-discovery that need to be shared with the world and we believe that the way we craft our communities in the future can have a significant impact on the health and well-being of our society at large. We believe that attention paid to both physical and social design can lead to vibrant campuses that are community hubs — locations where wisdom and knowledge are shared, relationships between diverse people can develop and human flourishing is the norm. As such, intergenerational design is a primary consideration and a focus area for 2024. We have to find ways to bring people of all ages together in authentic community.
We also believe that economic factors continue to move us towards looking for opportunities to increase scale and we see interest in our field for affiliations and acquisitions in order to accomplish that goal. As nonprofits, the challenge is to make that a strategic growth decision and not a survival tactic. New construction is also in our plans, but we see the future design of senior living being more integrated with the larger community. This effort to blur the boundaries between our campuses and the surrounding neighborhoods will play a critical role in reducing the stigma typically associated with senior living environments. We are also exploring the development of smaller locations that are located in walkable neighborhoods, rather than a traditional life plan community model.
We know that we continue to have a growing demographic, but have experienced challenges in the recent past with access to capital and escalating construction costs that have limited our ability to build new environments. We see indications that this may be changing and look forward to starting construction on some new projects in the coming year.
Staffing challenges have eased somewhat, but we need to remember that the issues witnessed in the post-COVID environment are likely a harbinger of things to come. We are preparing for this by developing a new team member value proposition, looking at creative benefits (we initiated a first-time home buyer program for staff this year) and doubling down on team member engagement by redesigning our operating systems around a model of distributed leadership.
It is a losing proposition if we find ourselves trying to continually battle forward on the hedonic treadmill by feeding into our consumer culture, so resident engagement also remains critical as we continue to focus on nurturing a culture of purposeful living and other-centered service. While this isn’t always the easiest message to sell with a clever slogan on a billboard, it creates a quality of living and well-being that begins to sell itself.
Larry Gumina, CEO, Ohio Living
As I reflect on 2023, but even more so move forward into the New Year, Ohio Living campus occupancy percentages continue to strengthen quarter over quarter to pre-pandemic levels, home and community based operations — hospice, Medicare, certified home health, palliative medicine and our primary care verticals — are hitting record setting volumes. We’re also seeing the partnership appetite amongst providers begin to improve, which is exciting. “A rising tide raises all boats,” so if we can align vision, values, culture and trust amongst providers to support the needs of our community, everyone benefits. Finally, our labor markets are beginning to ease here in Ohio, but our ability to meet the increasing demand is tied solely to our talented team, so culture investment strategies are so critically important!
With the occupancy percentages on the rise on our 11 campuses, and increasing demand for home-based care and support increasing across our 51 county footprint, we’re strengthening our core operating performance quarter over quarter.
Strengthening our operating core will be a continued focus for our team as we eventually head back out to the markets to secure capital to support our growth strategies. We can’t ignore the demand coming at us so we need to strategically prepare as best as possible and I’m very proud of our team as we move our Ohio Living “ship” forward.
Adam Kaplan, CEO, Solera Senior Living
I’ll start by saying that we would benefit from reframing the “survive to ’25” mindset. It’s difficult battling through fatigue, burnout and PTSD, but it’s time to rally around a more inspiring future.
I propose “thrive in 25.” This is a tall ask for an industry that, over consecutive years, has dealt with oversupply, a pandemic, a staffing crisis, and a capital markets collapse. Fortunately, the industry has started to benefit from demographic tailwinds. I have also witnessed a shift placed on the value of socialization for seniors, given the loneliness epidemic’s implications on mental health and physical wellbeing. I believe these factors have contributed to improvements to topline metrics, especially for well-positioned properties.
Unfortunately, that positive data points are mostly overshadowed by intense, short-term pressures. Residents and family members are demanding significantly more of us in terms of the culinary experience, resident engagement, and healthcare services. The pool of compassionate and committed front line talent continues to shrink and yields more pressures on talent acquisition, career development, and team member engagement. Financial demands are untenable due to cost escalation, interest rates, and lack of liquidity. It feels impossible, candidly, to satisfy each stakeholder, which is why operator consolidation will continue to be a leading trend in 2024.
At Solera, we have pursued a patient growth strategy to-date. Due to market conditions, we are interested in acquiring not only individual properties but high-quality management companies that are synergistic to our core competencies. While we may not re-invent the model in 2024, we are going to strive for meaningful change in terms of process improvements, revenue optimization, healthcare delivery innovation, and technology adoption. We will align with the technology providers that are crafting custom solutions to address our industry’s unique operational deficits. I am bullish that Gen AI and other AI technologies will continue to be integrated into existing and new solutions, enabling providers to redesign their operational processes in a meaningful way.
Solera will partner with healthcare providers that want to co-design and implement coordinated, integrated delivery models purpose-built for senior living. New care models, such as Guiding an Improved Dementia Experience (GUIDE), which was developed by CMMI to enhance the quality of life for people with dementia, will be important in shaping the senior living model of the future. Long-term, I predict that senior living providers will need to possess the requisite technologies, services, and reimbursement models to assume varying degrees of financial risk on their resident populations.
I believe senior living is not just a social model, but a healthcare setting, that it is very well-positioned to positively and proactively influence both the social and physical determinants of health of residents. To that end, we will commit additional time to supporting our industry associations in educating policy makers on the value of our services to residents, families, and taxpayers alike. There will be resistance. There will be missteps. The benefits will be slow to accrue to the industry, but senior living needs more than incremental change if we are going to reach our full potential and distribute the greatest benefit across all stakeholders. Let’s thrive in ’25!
Fee Stubblefield, CEO, The Springs Living
As 2023 comes to an end, The Springs Living has seen steady improvement in the quality we offer our residents, occupancy, and margin growth.
Our same-store CAGR for NOI will come in at 2.7% positive growth for the years 2019 to 2023 and the forecast is to have that NOI CAGR grow to 4% by the end of year 2024. Occupancy has been a zig-zag line of a thousand tacks starting the year at 92% and temporarily rising to 94% only to end the year just under 93%. Our communities in lease up have outpaced our same store move-ins and NOI growth in 2023. Hiring has stabilized, and banks seem to be answering the phone for refinancings and acquisitions. Our teams are mainly rested and excited to celebrate our journey forward.
Of course, we have struggles and challenges, but are working through them by solving problems and being proactive. No doubt we have made significant progress over this time last year. We’re at a very exciting inflection point in seniors housing and care where operators and their capital partners move forward together to meet the challenges for the next generation of older adults.
“A Tale of Two Cities” and “It’s a Wonderful Life” reflect my view of the seniors housing and care industry in 2024.
Senior living’s best and worst times
“It was the best of times, it was the worst of times … it was the season of light, it was the season of darkness.” The Baby Boomers are headed toward our doors. At the same time, organizations are dealing with the impacts of the debt crisis and other long-COVID impacts on operations. Some companies are thriving with stabilized occupancies, margin recovery, plus strong cultures and teams. Others are struggling to accelerate their marginal gains in occupancy and lack any margin to justify their investments.
The future is bright, but not for everyone. Our job is to ask why. The outcomes are likely to include the consolidation of managers and operators. Investors are making hard decisions to “switch horses,” and banks are increasingly feeling the weight of the keys in their reluctantly outstretched hands. The haves and the have-nots will become evident and that realization will lead the way to a bright future. But have no doubt, while change will be hard and expensive, the transformation will be well worth the price of admission.
The industry’s wonderful life
In “It’s a Wonderful Life,” our main character, George Bailey, receives an incredible gift: He sees what his hometown would be like without him. It’s not good. Through the story he learns the powerful impact one person can make to so many. The spirit of George Bailey is what keeps many of our caregivers and servant leaders caring for our residents, day in and day out. Many hang on, because if they leave our profession, who will take care of the residents? So they stay in order to fight their own “Mr. Potter.”
Every day, the Georges of senior living are being rung out, exhausted, broken and many times feeling like failures. But if we lose “George,” who is going to take care of our residents? If “George” can no longer carry the burden of a missed pro forma or the weight of analyst expectations, what does this mean for our industry? My prediction is that George won’t have to fight Mr. Potter for much longer. New capital will arrive and long-time capital providers will pivot and better understand how to support operators and managers. They will begin to understand how their resources could be better used to take care of people, which will lead to greater financial predictability and returns. With the power of doing good, we can have both.
Chris Hollister, CEO, Pegasus Senior Living
Pegasus Senior Living is a senior care company spanning independent living through to assisted living and memory care, the latter always within a continuum with assisted living. So that’s the focus of my remarks: We really have no presence or knowledge of “active adult” or “55+” communities which we see really as an entirely different business.
The more things change the more they stay the same. Our mission is to “celebrate and enhance all lives with dignity and integrity.” The fundamentals of care and service are the trends we see will not change – it still comes down to having a great team working together to deliver quality care and service to each individual customer. The trend towards residents coming in with higher needs, often in the form of several interrelated health, medication, social, and mental health issues, will continue. This puts tremendous pressure on our teams to constantly monitor residents for changes in condition and adjust our care plans accordingly at an accelerated rate over what it was even 5 years ago.
It is a blessing to be out of crisis mode and we are excited to now focus on what really matters. Often the simple things are most important – getting folks to participate in an activity, providing a comforting word, adjusting the room temperature, or delivering a cup of tea. These things were hard during Covid and the related labor crisis and it’s paramount that we get back to the basics and re-embrace our mission.
Barring another existential crisis like Covid, we do expect the overall supply-demand picture to slowly improve and we have already seen a much better labor environment versus the “Covid years” and their immediate aftermath.
The best news of 2023 was the (finally) widespread understanding that many markets – major Sunbelt markets in particular – have been overbuilt, particularly in low barrier to entry suburban markets. With the leading edge of the Baby Boom turning 80 in 2025, demand will begin a steady year over year increase – not quite the “hockey stick” some are forecasting – but steadily improving month over month.
More significantly, with the realization that markets need time to catch up to supply and the tremendous cost to construct combined with “higher for longer” interest rates, this gently growing demand will be coupled with mostly an overall constricted supply environment for at least the next 24 if not 36 months in most markets.
The bottom line is we expect solid growth in occupancy in 2024 as more and more of our communities achieve stable occupancy and higher NOI as we have already mostly rationalized our staffing patterns. The caveat on this always is the need for solid leadership and a great culture where people feel appreciated. That’s where our focus is. Hence the mantra I have already heard from several colleagues that seems to have become a bit of a buzz phrase: “Survive to ’25.”
Michael Levine, Senior Managing Director, Greystar
Greystar Active Adult anticipates a promising year ahead in 2024.
Despite some delays in deals attributed to loan concerns, our growth in third party is expanding across the country. The continuous influx of inquiries about management received daily via phone serves as a testament to our reputation and expertise in the industry. Looking forward, our pivotal strategy for 2024 and beyond involves leveraging Greystar’s scalable model to centralize the assistant community manager role. This innovative approach not only ensures our teams remain deeply connected with our residents but also optimizes cost efficiencies during stabilization. Already implemented across 11 communities, this initiative marks a significant step toward enhancing operational effectiveness and resident satisfaction for the long term.
Anticipating the challenges of a more demanding landscape in 2024, we’ve made strategic and substantial investments in building a formidable regional team. Comprising skilled operators, astute analysts, and dynamic sales and marketing professionals, this cohesive unit is dedicated to redefining and reshaping our approach within this evolving industry. By pooling expertise and resources, we’re actively steering the course toward innovation, aiming to set new benchmarks and elevate our services to meet the dynamic demands of this shifting landscape.
Despite our robust rent growth and sustained premiums at stabilization, the landscape is evolving as we find ourselves increasingly competing with multifamily developments. This changing dynamic prompts us to reassess and refine our strategies to maintain our competitive edge in the market. As the industry continues to witness multifamily expansion, we’re committed to leveraging our strengths and unique offerings to adapt, innovate, and consistently deliver unparalleled experiences that set us apart in this evolving landscape.
Companies featured in this article:
12 Oaks Senior Living, Brookdale Senior Living, Garden Spot Communities, Greystar, Ohio Living, Pegasus Senior Living, Solera Senior Living, The Springs Living
