Why Operators Must Strike a Narrow Balance Between Discounts, Rates in 2024

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Earlier this month in his State of the Union Address, President Joe Biden lambasted companies engaging in “price gouging” and “shrinkflation.”

The president was referring to a practice wherein some companies shrink the amount of goods and services sold without also reducing the price. It’s a phenomenon most often seen in grocery store aisles, but I think it also applies to senior living communities – at least in a way.

According to the latest economic data, inflation was higher than expected in February. That likely gives operators runway to continue raising rates, even after historic increases in recent years. But for the average consumer, I also think steep price increases could very well look like “shrinkflation” or “price gouging,” especially if they don’t understand the value of those services – and operators must be careful pushing forward rate growth while keeping residents and their families aware of what they are buying and why they need it.


At the same time, operators are warring over price by enacting discounts to attract new residents and dull sticker shock – but a move too far in that direction risks eroding the value of the services they are trying to sell.

In this week’s exclusive, members-only SHN+ Update, I analyze the current state of inflation and resident rate growth and share key takeaways, including:

– The tightrope operators walk in raising rates for residents


– How inflation and larger macroeconomic factors could impact concessions

Rates follow inflation but operators remain aggressive

The latest inflation data shows a slight increase from last month, and past history tells us that the senior living industry will continue to align rates with the pace of inflation this year. This comes as operators have taken an aggressive approach to pushing added costs onto residents, citing rising inflation and expenses as reasons for doing so.

Operators are wielding a wide range of approaches for resident fees in 2024, depending on market, ranging from aggressive double-digit increases to modest rate increases to align with the consumer price index (CPI).

The CPI for all urban consumers increased 0.4% in February following a 0.3% increase in January, according to a March 12 report from U.S. Bureau of Labor Statistics. At the midpoint of last year, NIC data showed that asking rates were at “near-record highs” for independent living, assisted living and memory care.

NIC Principal Omar Zahraoui noted that the pace of rate growth “is expected to align with inflation at some point in 2024,” something that’s based on past trends and an “observed 6-to-9 month lag” in rate growth and inflation as seen in 2022. That means operators appear to be setting rates to account for inflation after prices first rise.

While some primary markets tracked by NIC have shown slight decreases to rate growth in late 2023, and the pace of double-digit increases slowed from highs seen in 2022, I think this lag could give senior living providers more room to maneuver in keeping rates elevated in the near-term.

That said, I also think that operators would do well to pair rate increases with new payment structures, like membership-style offerings; or to supplement increases with ancillary revenue.

After three years and change of operators pairing higher-than-typical rent increases with explanations tied to inflation, I think residents are likely less receptive to that line of reasoning in the coming years – even if inflation is proving more stubborn than many analysts forecasted.

I think now more than ever in recent history, senior living operators are faced with the challenge of needing to showcase lifestyle and wellness-based value to customers while also being stretched thin to provide care. Pressure to hire, and maintain care staff levels, makes a provider’s room for error on operations razor-thin, potentially cutting into the scope of services offered to residents.

Operators are getting creative by using data to inform their operations to breaking convention and creating new sales processes.

But without clearly demonstrating new amenities, renovated communities or updated programming, senior living operators could be perceived as pushing too hard on rates.

Operators are walking a tightrope between presenting value, adequate funding operations and preparing for the future, and that tight rope might be getting shakier underfoot.

I say that because I am reminded by what Didier Choukroun told SHN Editor Tim Regan last week about the “disaster” of senior living providers fighting each other on rates.

With the industry fragmented, operators today are still receive the lion’s share of their revenue from resident rates With just a 5% management fee to operate a property, Choukroun believes that operators will spend most of their time and energy warring with each other over price – “a disaster for everyone,” he said.

’Important questions’ on rates, concessions

Among the biggest tools in the senior living sales and marketing toolbox is discounting. On that front, the industry is a mixed bag, Independent living discounts having grown in recent years, while average discounts in assisted living and memory care have not had such a clear upward trajectory.

According to recent NIC data, independent living discounts have increased since the fourth quarter of 2019, averaging a discount of 10.3% by the end of 2023.

Discounts among assisted living communities were lower, averaging a 6.3% discount in December 2023 and memory care discounts averaged 7.1% in December 2023, with discounts decreasing since 2021. 

“These trends and patterns also suggest that the pace of move-ins—lowest independent living and highest in memory care — had some impact on the discounts being offered,” wrote Zahraoui.

He added that the data “raises some important questions,” like whether current discount strategies are sustainable. He also wondered about the long-term impact of discounts on resident retention and the cadence of move-ins and move-outs.

“Will senior housing properties maintain the upper hand in pricing as inflation continues to moderate?” Zahraoui wrote.

Given the short-term fix discounts can provide, I believe they could be unsustainable in the long-term. I say that because I often have operators telling me about how tough the battle of improving margins is, and I wonder if concessions and discounting could be like putting a small Band-Aid on a deep cut in need of further treatment.

Given all we have heard in the last two years just how important an operator’s external branding strategy can be, in tandem with a strong digital marketing effort, I think that discounting does a disservice to an operator’s overall branding message of quality.

I’m hardly the first person to raise this concern, but as they try to maintain a precarious balance while walking the tightrope of rate increases versus reductions, I think providers must wield their pricing power wisely but for as long and as strongly as possible.

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