MDS

If You Need To Know The Senior Market

You Need To Know MDS

Consulting and Strategy Solutions

A Two Generation Company - Serving Clients For Over 39 Years

Strategy of The Month for January 2010

2010 . . . MODEST IMPROVEMENT FOR SENIOR LIVING

BUT WE FACE ANOTHER CHALLENGING YEAR

            Last year at this time, we thought the current credit crisis, stock market volatility and a less than optimum national employment and home selling situation would have continuing 2009 impacts on the Senior living industry in general and your specific Senior living communities in particular.  Five of the more serious potential impacts identified were:

1. Depressed Home Sales – Slowed Senior living unit absorptions due to inability or reluctance of Seniors to sell their homes to opt for independent living which is largely a discretionary decision and assisted living which is primarily a need-driven decision.
2. Decreased Financial Qualifications of Consumers – Some potential new residents considering your community may face increasing perceived or actual net worth declines or income affordability pressures.  Some Seniors may delay or cancel their move to your community.
3. Growing Affordability Concerns of Existing Residents – Experience indicates that in economic recessions a limited number of existing retirement community residents experience increased financial pressures that impact their ongoing ability to pay the prevailing market rates for their specific living arrangement.
4. Resident Turnover – Due to typical annual resident turnover, your assisted living community will likely have to refill about 50% of your living units annually in order to sustain your the current stabilized occupancy.
5. Potential Reduction in Occupancy – On average, there has been a 2% to 3% decrease in stabilized occupancy in 2009 for many assisted living communities. 

            Last year at this time, we concluded that “Flat is up;” meaning that success in 2009 would likely be defined as holding your own.  That’s exactly what happened.

            There is currently “delayed demand” for assisted living.  This is due to the current economic environment that has impacted a typical Senior consumer’s savings and investment portfolio and the ability to sell their home.  And no one can predict the specific timing of a full economic recovery.  Construction of new facilities is currently at an all time low and there are significant barriers to entry for the development of new projects in terms of cost and approvals.  This unfavorable current situation will eventually lead to a relatively strong assisted living recovery.

            You can’t control the external market, but you can control your internal operations.  The recession is a great time to sharpen our internal operations.  The fancy term for this is “organic growth”.  There are two areas offering significant opportunities in 2010:

1.      Operations enhancement through expense reduction.

2.      Optimizing occupancy – even in difficult markets.

            Step back and take an objective, sobering look at your operation.  There is no question that our industry will continue to experience increased turbulence over the next 12 to 18 months.  So fasten your seat belt and prepare to be a proactive survivor rather than a reactive victim.

            For the past 18 months, MDS has provided a series of newsletters to various state Senior living associations helping professionals prepare and survive this rough ride in the Senior living marketplace.  As you make your year-end plans, here is a summary of past newsletters addressing some practical strategies to revisit as you develop survival, growth and profitability strategies in 2010:

1. Assisted Living Cost Creep is a Fatal Business Disease – Many Owner/Operators Are Experiencing a $1 Million Plus Wake-Up Call – June, 2008

            http://www.m-d-s.com/WJune08News.pdf

2. The Opportunity Cost of a Vacant Unit – Using Objective Thinking to Make Tough Financial Decisions – July, 2008 http://www.m-d-s.com/WJuly08News.pdf
3. Facing Reality With Food Costs – It’s the Second Highest Cost Center – August, 2008 http://www.m-d-s.com/WAugust08News.pdf

4. Everybody Needs An Exit Strategy – You’ve Got to Know When to Hold ‘Em and Know When to Fold ‘Em – September, 2008

            http://www.m-d-s.com/WSeptember08News.pdf

5. Are You Properly Planning for the Future – There Are Five Sobering Questions to Address – October, 2008  http://www.m-d-s.com/WOctober08News.pdf
6. Communities Also Age in Place – Product, Price, Value & Services Are What Really Count – January, 2009  http://www.m-d-s.com/WJanuary09News.pdf
7. Cost Recovery for Campus Improvements – Creating a Financially Viable Improvement Plan – February, 2009  http://www.m-d-s.com/WFebruary09News.pdf
8. Providing Increased Assistance to Independent Living Residents – Responding to a Resident’s Increasing Needs Presents a Huge Sponsor and Owner/Operator Dilemma – March, 2009   http://www.m-d-s.com/WMarch09News.pdf

9. Successfully Addressing Aging in Place – Striking a Delicate Balance Between the Desires of Seniors and Long-Run Operator Viability – April, 2009  

            http://www.m-d-s.com/WApril09News.pdf

10. It’s Time to Focus on Organic Growth – Professional Referrals – A Largely Untapped Resource – May, 2009  http://www.m-d-s.com/WMay09News.pdf

11. The Changing Mindset of the Senior Consumer – Prospects and Residents are Demanding More as their Value Perceptions Change – June, 2009

            http://www.m-d-s.com/WJune09News.pdf

12. Straight Talk About Senior Consumer Finances – The Don’t Ask – Don’t Tell Era Is Over! – July, 2009   http://www.m-d-s.com/WJuly09News.pdf
13. Financial Planning For Seniors – A Necessary Financial and Estate Planning Tool for Seniors – August, 2009  http://www.m-d-s.com/WAugust09News.pdf

14. Learning From the Ones That Got Away – To Market Effectively to Lost Prospects, You Need to Know Why They Said No – September, 2009

            http://www.m-d-s.com/WSeptember09News.pdf

15. Community of Choice Or A Price Sensitive Commodity? – The Ultimate Market Positioning Challenge – October, 2009   http://www.m-d-s.com/WOctober09News.pdf
16. Creating a Community of Choice – Ten Steps to Avoid Becoming a “Price-Sensitive Commodity” – November, 2009  http://www.m-d-s.com/WNovember09News.pdf

            2010 will probably be another tough year, but there will be operational opportunities.  While not all of the positive strategies and financial enhancements addressed in the past may be simultaneously realized, benefitting from just a small portion of each of them can easily have a significant positive and largely permanent financial impact on your senior living operations.  When a senior living company gets into real trouble, they must sharpen their focus on existing operations.  Why not do it before serious problems exist?

Jim Moore is president of Moore Diversified Services, Inc., a national Senior housing and health care consulting firm based in Fort Worth, Texas.  He has written several books about assisted living and Senior housing, including Assisted Living Strategies for Changing Markets.  A new book titled Independent Living and CCRCs was recently released in September, 2009.  Jim Moore can be reached at 817-731-4266 or jimmoore@m-d-s.com.

To visit Moore Diversified Services, Inc. – www.m-d-s.com

To review information regarding Jim Moore’s new book - http://www.westridgepublishing.com/ILandCCRCmain.htm

Moore Diversified Services, Inc.    │    3001 Halloran Street    │   Fort Worth, Texas  76107

(817)731-4266    │    Fax (817)738-2031

E-Mail:  MDSResearch@m-d-s.com

Web Address:  www.m-d-s.com

Suggestions or Comments About This Website:  webmaster@m-d-s.com

All Material Copyright © 1998 - 2010 Moore Diversified Services, Inc.