Changing consumer preferences with the arrival of the baby boomers. The middle-market. Rising expenses. Evolving resident care needs.

The Senior Living industry is in the midst of a host of changes creating new challenges and opportunities for operators. A melange of forces are driving that change, from the pandemic to a historic labor market and the looming arrival of the baby boomer generation.

Few are more focused on those issues than the CEOs of Brookdale Senior Living (NYSE: BKD), Brandywine Living, Maplewood Senior Living and Priority Life Care. All four leaders are navigating the current environment with a keen eye on what comes next, not the rear-view mirror.

To Brandywine Living CEO Brenda Bacon, the industry is truly in a new era in the post-Covid world. And it is one that requires brand-new operational strategies, and an appetite for embracing change.

“I hear people say so much, ‘We need to get back to a stable workforce, get back to the margins,’” Bacon said Thursday during a panel discussion at the 2022 NIC Fall Conference in Washington, D.C.. “I really think we need to think about, ‘How do we go ahead?’ Because I don’t think anything goes back.”

Boomers loom large

The Senior Living Industry in 2022 is at the crossroads between the outgoing Silent Generation and the incoming baby boomers. Only 19% of Brandywine’s customer base are under the age of 70, and she noted that “we’ll have a while still before the baby boomers come.”

But she added that when they do arrive, they will come with very different ideas on what senior living should entail.

“Baby boomers don’t live in the world of need, they live in the world of want,” Bacon said. “So, I think the way that we market to them, and what we offer, has to be in a way that they are making choices about the things that they want.”

Maplewood CEO Greg Smith concurred, and added that he has seen a “real shift in expectations and demand” in the boomers, and one that he expects will continue to evolve in the coming years.

For Brookdale CEO Cindy Baier, the biggest shift has occurred in the way older adults embrace new technology and devices. And it is “going to play a big role in the implications of our future,” she said.

“By using technology to assist us in providing the right services for the right residents, I think that we can actually exponentially improve the quality of the offering that we have,” Baier added.

Relative to other industries, Baier said the senior living industry has not invested as much in technology. The world is full of technology — from apps that can diagnose skin lesions to custom iced coffee machines — and the senior living industry must catch up, she said.

Priority Life Care CEO Sevy Petras believes that the industry actually has an opportunity to serve two generations with current product, not just one. After the boomers have moved through the acuity stream, she envisions Gen-Xers following in their footsteps.

“If we create the right products for the boomer … we’ve got a real product for two generations coming up,” Petras said.

Serving the middle market

Another challenge — and opportunity — is how the industry will serve the roughly 11.5 million older Americans age 75 and older who will be unable to afford assisted living in the coming decade.

Priority Life Care primarily focuses on the middle-market segment of senior living. And to reach the boomers, she believes the industry needs to look at another product made for them: Hotels.

“[The hotel industry] thought there was high-end service, full-service or no-service, and then along comes these mid-level or mid-services [hotels] like Hilton Garden Inn and Embassy Suites,” she said. “And it’s probably one of the larger markets now.”

Her point was that the senior living industry has an opportunity to differentiate itself by price much in the same way hotels do today. Like in the hotel world, she envisions an ecosystem of service tiers of senior living for the boomers.

And perhaps more importantly, she added that middle-market properties, as no-frills as they are, can still have margins in the low- to mid-20s.

But the boomers are also arriving with more complicated care needs than their predecessors, she added, which could complicate operators’ abilities to keep their rates affordable for middle-income residents.

Rising expenses, pricing power

The rising cost of operating a senior living community is among the industry’s biggest challenges in 2022. Even as operators regain occupancy and reach pre-pandemic levels, rising costs are eating into margins.

At the same time, the U.S. economy is at somewhat of a crossroads, and it’s unclear whether a recession or another hit to the economy is just over the horizon.

Baier said that she has seen inflation in “every aspect of the P&L of running a community.” While that is important to manage and mitigate, Baier said her north star is resident satisfaction.

“Regardless of the economic environment, the most important thing to focus on is your resident, and to make sure that you are providing value and services,” she said.

That said, she believes that, as the company gains occupancy, “pricing is more important today than it ever has been in the past, because we’re in an inflationary environment.”

Looking ahead, she does not believe that labor expenses will decrease over the next 12 months. And that is why it’s important to price units accordingly before resident rates are locked in for a year.

“You can’t expect the cost structure in your community to be stable for the next 12 months or 15 months,” Baier said. “What you have to say is, where is it going?”

Rising interest rates are another thorn in the industry’s side, and Baier noted that Brookdale would incur about $15 million in new costs for every percentage point that interest rates rise.

Bacon said she believes the industry has pricing power, and she said that, like other operators in the industry, Brandywine saw little pushback when it raised resident rates last go-around.

While she doesn’t think returning to pre-pandemic margins across the board is realistic in the near future, she does believe that Brandywine and other operators like it can return to occupancy north of 90%.

That said, she sees a real need to course-correct different aspects of the business for the new era of senior living.

“We have to think about how we get there and beyond,” she said. “And not think that if we just settle down, it will go back to normal, because … that’s not going to happen.”

Like Bacon, Petras also believes that the industry is “not going back” to its old, pre-pandemic ways. While she is focused on cost efficiency, there is one area that she thinks operators must invest and reinvest in time and time again: Its people.

“My job is to create more opportunities for them, because if we take care of them, they’re going to take care of our residents,” she said.

Smith added that he thinks the industry will “feel a little bit of pain before we get better.” But

“We’re 95% occupied, and we told our team to stay at that level and increase our rates, try to keep wages and culture at a certain level, and keep a retention to a level that we don’t have to continue to go out and deal with turnover,” Smith said. “Individuals and their families understand that this is the world we live in — you want great service and great care, and we’re all going to have to make sacrifices.”

Rethinking memory care

At least 12 million older adults in the U.S. are projected to have Alzheimer’s or another form of dementia by 2050. The industry is operating on a memory care model that has served it well for years, but it will have to make some changes given the wave of demand ahead of it, the panelists agreed.

Demand for memory care is only increasing, Smith said he sees “a rough few years” ahead given the industry’s already acute staffing shortages. At the same time, construction starts have also cooled off, and he believes the industry will have to play catch-up in the years to come to meet overall demand.

“We’re going to have absorption,” Smith said. “You will get up to 95%, 100%, with a waiting list, and all of a sudden, there are a whole bunch of people that are waiting to get to the communities, and there isn’t anything.”

But if the industry hopes to meet the incoming wave of demand, it must also change common memory care practices to make them more resident-centric, Petras said.

“We really need to rethink how we even approach dementia care,” she said. “We have to start to think differently and outside the box.”

Technology can play a role in memory care, too, Baier said. And she added that she does see needed innovation occurring in the sector.

“Whether it’s programming, whether it’s technology to detect a fall … I do think there is a lot of really important innovation that has happened in the industry that allows people to live better,” Baier said.

The post ‘Not Going Back’: Brookdale, Brandywine, Maplewood, Priority CEOs Prepare for Senior Living’s Uncertain Future appeared first on Senior Housing News.