Here's the deal for all you high-end operators out there

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John O'Connor
John O'Connor

These days, many senior living operators appear to be upgrading as quickly as possible.

The new game, it seems, is to offer the best of everything. The choicest properties. The finest buildings. The latest service-related accoutrements. The most caring staff. Sound familiar?

But as one highly regarded brand recently learned the hard way, the aura of prestige doesn't always deliver at crunch time. That venerable company is none other than American Express. Yes, the American Express with more affluent users than MasterCard or Visa. The firm with a cachet that has allowed it to charge merchants a higher swipe fee. The company with customers who run up the highest charges. The company that gave us the black titanium charge card. Yes, that American Express.

But after a 16-year “marriage,” American Express and Costco Wholesale Corp. are ending what many once saw as a match made in heaven. As a result, Costco will no longer accept just AmEx cards for credit purchases.

According to several reports, AmEx officials became incensed during recent negotiations when Costco managers referred to the august firm as a lowly “vendor” instead of a “trusted partner.” But what really hurt was when Costco CEO Craig Jelinek allegedly said AmEx was no different than a ketchup supplier — and if he could get a better deal on ketchup someplace else, he would.

Where did the love go?

Following the announced breakup, two interesting things happened. One is that AmEx stock plummeted. Then it was revealed that about 10% of all AmEx cards — about 11.2 million — were Costco-branded. Apparently, many people seeking the cachet of an AmEx card were not above buying paper towels and mayonnaise by the trunk load.

So what lessons can senior living operators take here? I see two.

First, the business partner who loves you today may not want you around tomorrow. Corporate marriages can be a lot like actual ones, except they tend to be far more fickle. Begin any potential partnership with an exit strategy in mind.

Second, never forget that all appearances to the contrary aside, senior living remains a commodity business. Yes, you might be currently sitting on a nicer piece of real estate and offer higher-end amenities than your cohorts in the Yellow Pages. But what's to stop any competitor from eventually overtaking you? In a word, nothing.

If you are counting on your secret sauce to carry the day, here's a stark reminder: to many of your residents and their check-writing children, you really are the equivalent of another ketchup vendor. When they can get a better deal elsewhere, they will.

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