It seems so easy to set up a price point for senior housing: Just look at what the place down the street is charging, right?
Unfortunately, that is how the formula goes for many senior housing operators. They think that by simply remaining competitive on their pricing plan, they will be successful in their markets.
In fact, pricing derives from a number of factors beyond just what the competition may be doing. It’s worth taking a close look at some of these, before setting that final figure. Of the major expenses, dining and staffing take the leading positions (running almost neck and neck) so let’s look at those first.
1. Resident Dining Costs
Pricing for senior housing is highly dependent on the expense of dining. A central facet of the senior housing experience, food service has to be done with some level of sophistication, especially when serving a population for whom quality is paramount. So what will it cost you to do it right? You’ll need to factor in servers, food, a skilled kitchen staff, upkeep and replenishment of linens, utensils, cups and plates. Crunch the numbers hard here, before setting a price.
2. Senior Housing Staff Costs
Workforce stands right at the head of the expense list alongside dining. Pay factors high and it’s worth considering: The minimum wage is on the rise, putting pressure on operators to keep entry-level positions competitive. Government mandates are putting more employees into the health care pool, driving up insurance costs for employers. In this high-turnover industry, ongoing training is a necessary and not inexpensive cost.
3. Medical and Senior Care Costs
Medical costs can be substantial for senior residences that offer any level of care, from the most basic supportive services to more sophisticated medical interventions. Nurses for example are among the most in-demand medical professionals in the game today. A savvy operator will consider not just the expense of caregivers today, but the likely cost of such professionals as demand increases in the near future.
4. Senior Living Technology Investment Costs
Technology investments may not be the biggest expense an operator will face, but they are important enough to merit a place on the list. Technology may take the form of communications portals to encourage socialization. It may mean senior-friendly health centers equipped with easy to understand digital feedback to encourage exercise and wellness. Technology may take a medical turn, supporting falls prevention, keeping bed sores at bay and performing a range of other early illness detection and wellness-related functions. All these investments will need to be kept up to date as technology evolves.
5. Senior Housing Facility Operations Costs
Facilities operations and upkeep go into the hopper as well. Buildings wear over time. They require regular maintenance (replace the carpets) along with long-term upkeep (replace the HVAC). These elements, while not immediately visible or even noticeable on the monthly ledger, nonetheless must factor in over time and must be part of the price equation.
These factors are just the tip of the iceberg that may be unique to senior living. Many other costs go into running a business, any business. (SG&A costs? Legal fees? The accountant?) Setting a price for senior housing can’t be taken lightly. In fact, it will likely be one of the biggest decisions you make. Have you considered all the factors?