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How Full Is Full Enough When It Comes to Senior Living Occupancy?

The senior living industry breathed a sigh of relief in 2016. For most communities, occupancy rates returned to more normal levels. After the heart-stopping census declines of the downturn, it felt pretty good to see occupancy rates approach and exceed 90%.

According to Ziegler and the National Investment Center (NIC), by the middle of last year, average occupancy in not-for-profit CCRCs was above 92%, while for-profit CCRCs averaged 86%, likely lower due to the relatively higher number of start-ups in fill-up mode. These occupancy percentages produce better-than-break-even financials in a typical CCRC model.

So the sigh heard around the industry was for good reason.

But where do we go from here?

Gluttony is one of the seven deadly sins, but when it comes to occupancy, we believe you simply can’t be too full. Here’s why:

Consider a CCRC with 280 independent living accommodations, an average entrance fee of $400,000 and average monthly fee of $3,200. At 92% occupancy, there are still 22 vacant homes. This represents lost entrance fee revenue of a whopping $8,800,000 and lost monthly fee revenue of $884,800 per year – $70,400 for every month that these apartments stay vacant.

The perplexing thing is that when boards and senior management reach break-even occupancy, they often couple their sigh of relief with an immediate reduction in their marketing efforts, to “save money.” Big mistake, as evidenced above.

So how full is full enough? My definition of the perfectly marketed community is:

  • Every home sold or reserved
  • Reoccupancy time of 60 days or less
  • Wait list of 3 times annual attrition, with a ready list of 1.5 times annual attrition
  • Active lead list of 25 times annual attrition

The ROI on an aggressive marketing program is huge if it takes you from break-even to full occupancy.

So as we start 2017, take out your calculator and look at how much revenue you’re leaving on the table. Let’s go eyes-on-the-prize. Remember, as Yogi Berra said about baseball games, “It ain’t over till it’s over!”

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