Early results look promising with Capital Senior Living’s shift to compensating its sales professionals based on their meeting revenue targets rather than move-in goals, President and CEO Kimberly S. Lody said Thursday.
“It’s really a mindset change, and it’s interesting, because when you speak with the sales directors, they articulate it extremely well, that they are absolutely focused on occupancy, rate, level of care fees, controlling move-outs — everything that we want them to be focused on,” she said during the company’s first-quarter earnings call.
Although it’s too soon to know the effect that the four-month-old sales strategy is having on tours and move-ins, Lody said, “What I can say in terms of early indicators is that we are pleased with the level of leads that we are seeing, both year-over-year as well as sequentially from the fourth quarter.”
The CEO said the change happened after the company analyzed rates in the fourth quarter to ensure that they were appropriate for the competition levels in each market.
“One of the reasons that we did that was, there was quite a bit of discounting and concessions going on throughout 2018, and we felt that that was not the right approach, not in the best interest of the company or its shareholders,” she said.
Now, Lody said, sales professionals have some discretion to offer short-term discounts to “help accelerate the move-in process … but it is limited to a specific overall amount that they can utilize.”
Average monthly rent for all communities was $3,615 in the quarter, an increase of $23, or 0.6%, from the same quarter of 2018, according to Capital Senior Living. Average monthly rent for same communities was $3,619, an increase of $27 per occupied unit, or 0.8%, from the same quarter of 2018.
Average monthly rent decreased 0.9% for all communities and 0.8% for same communities in the first quarter compared with the fourth quarter of 2018.
Top two priorities
Improving operating performance and the company’s financial foundation are the top two priorities for Capital Senior Living, Lody said.
“While there is still much work to do as we continue to execute our Stabilize, Invest, Nurture and Grow strategy, we are encouraged by the emerging signs of operational stability indicated by our first quarter results,” she said.
Consolidated occupancy, net operating income and NOI margin, for instance, remained “consistent” with the previous quarter, the CEO said.
Overall occupancy was 83.1%, a decline of 10 basis points from the previous quarter and a decrease of 270 basis points from the same quarter of 2018. Capital Senior Living said the decrease in part was due to the re-opening of two communities affected by Hurricane Harvey in the third quarter of 2018.
Occupancy for same communities was 84.4% in the first quarter, a decrease of 10 basis points from the previous quarter and a decrease of 170 basis points when compared with the first quarter of 2018.
Same-community net operating income decreased 8.5% in the first quarter when compared with the same period a year ago.