When it comes to senior living pricing strategies, one expert encourages operators to stand out from the crowd with dynamic pricing based on inventory.
In second-quarter market surveys of 125 senior living communities across the nation, senior living marketing consultant Bild & Co. analyzed senior living rates from the first half of 2023. What the firm saw was a return to seasonal occupancy and pricing trends, which are laid out in detail in a white paper.
When looking at independent living, rates took an initial dip in the first quarter compared with 2022 rates before jumping in the second quarter.
Although the independent living setting typically doesn’t see much fluctuation in rates, the jump in second-quarter rates presented somewhat of an anomaly, CEO Jennifer Saxman told McKnight’s Senior Living. That leads to questions about what additional services might be sneaking in and whether care levels are increasing along with the needs of prospective residents.
“We didn’t do what we do in independent living today what we did 10 years ago,” Saxman said, adding that it will be interesting to see what the 55-plus communities start to look like compared with independent living communities once more baby boomers start to move into senior living.
Assisted living and memory care, on the other hand, initially saw prices increase in the first quarter over 2022 pricing, only to see prices dramatically fall in the second quarter. Saxman said those rate declines were a means to drive occupancy.
One thing Bild is looking at closely is assisted living and memory care in the same building, Saxman said. Cannibalization of assisted living resident admissions can happen within a community as care levels drive residents over to the memory care side of the businesses, leaving the assisted living side to struggle. In response, operators might lower their assisted living rates while increasing memory care rates on the simple basis of supply and demand.
Pricing strategies confuse consumers
When analyzing senior living pricing, Saxman said, investors like to see pricing per square foot. She even has seen room rates priced out per day. But the strategy can be misleading, she said.
“Make it easy to buy,” Saxman said, lecturing operators not to force prospective residents to get out their calculators to figure out monthly rates. “Let’s make sure our pricing is relative to consumer demand.”
Operators also tend to get hung up on room size when setting rates, she said. Instead, Saxman suggested that providers look at the benefits of a smaller room for individuals with ambulation issues, for example. From a sales perspective, she said, remember that “there is something for everyone.”
Truly dynamic pricing, Saxman said, means pricing based on inventory, similar to what happens in the hotel industry. It looks at a room’s proximity to the dining room, or raising the rate on a one-bedroom apartment because it’s the only one left. And that least desirable room should be at a reduced rate.
“We see such static pricing in our industry,” she said. “Putting some time, effort and energy into dynamic pricing would really do our industry well, and we don’t see it enough.”
