(Credit: Getty Images)

Incentives are on the rise among senior living operators trying to increase occupancy, but it’s more important to focus on rate integrity and showing the value of a community, cautions one industry sales and marketing expert.

The most common discounts communities were offering in the third quarter were reduced or discounted rent, waived or reduced community fees, or veterans/signature club discounts, according to a recent white paper from Bild & Co. on concession trends seen among more than 250 senior living locations across the country. 

The average community move-in fee in the first quarter was $2,403. That amount climbed to $3,048 the third quarter — higher than the 2022 average of $2,551. But of the 43% of communities that waived or reduced the community fee, 26% offered between a 50% and 75% reduction, whereas the other 74% of communities offered to waive 100% of the community fee.

Rent reductions typically lasted for one month, but could go up to 12 months in some cases, with the most common reduction being for three months. And those rent reductions ranged from $1,545 to $4,000 per month.

“The trends we have seen with this case study are that incentives are on the rise,” Bild & Co. CEO Jennifer Saxman told McKnight’s Senior Living recently, adding that holiday deals are common. “However, we really need to focus on rate integrity. No matter the incentive, if you haven’t shown the value of what your community can bring to the life and care of a prospective resident, then we are missing the true essences of what we do.”

Although the Pacific Northwest normally is seen as being high in terms of senior living community fees, Saxman said, the report showed the South Atlantic region and areas that typically are perceived as more affordable are “really pulling away” with higher-than-normal community fees. But she added that the region also is one of the quickest to waive that fee, which compromises rate integrity.

“Why do you have it if you’re going to waive it?” Saxman asked, saying that operations expects communities will be collecting those fees on the majority of individuals. “If regionals are telling communities to waive the community fee — if that $3,000 waive is happening for everyone — you’re losing revenue.”

Rate increases on the rise

After dipping in the second quarter to 3.98%, the average monthly rate increase for senior living communities in the third quarter was 4.15%, up from the 2022 average rate increase of 3.93%.

Saxman said she was surprised that rate increases in the West Central region — which typically includes Iowa, Kansas, Minnesota, Missouri, Nebraska, and North and South Dakota — posted the highest rate increases in the nation, at 7% and higher. And 30% of respondents to Bild’s market survey analysis indicated that they were planning a 7% or higher rate increase in the new year. 

“Especially in the Midwest, where slow and steady wins the race, they’re surprising us as they come to the end of the year,” Saxman said. 

Saxman attributed the rate hikes to a slower recovery from the COVID-19 pandemic in Illinois (Chicago), Colorado and into areas in the Mountain region. Many of those properties delayed capital investments on properties during the pandemic and are in need of those additional funds to make those upgrades. Those areas also are seeing a lot of operator and portfolio turnover.

“Even in ‘Minnesota nice’ — those areas that don’t like to push rates — it does show, and they’re in a situation where their back is a little more against the wall,” Saxman said. “They’ve got to be driving rates and rate increases. They cannot wait any longer.”

Saxman said that that observation shows that providers are under pressure to increase occupancy. But she said that the focus should be on the right care fee, the right rate and rate increases. 

“When you slack on that and are only focused on driving occupancy and not driving revenue of each individual community, it’s going to hurt the business,” she said.

The most common mistake she sees with marketing teams is slipping into the role of pleaser rather than adviser. Rather than pushing the sales process, she said, sales staff members are doing “lackluster followup,” particularly in the South and the Midwest, by not pushing at close.

“We have to keep in mind this is sometimes a very emotional-based decision, but they’ve got to make it,” Saxman said. “They probably needed services months or even years ago, if not longer than that.”