By Tad Melton, Managing Director, Ziegler
For many senior living organizations, the past year has brought more change than we have ever seen in a single year. So many trends have been playing out so fast around us for quite some time now, and the pandemic only accelerated them. This has dramatically increased the importance of single- and multi-site communities having a solid plan for the future.
Many organizations have not updated their strategic plans for years. I’m on the board of trustees for Randolph-Macon College, my alma mater, and the college’s last strategic plan was done in 2017. Think about how the world has changed since then, not to mention just in the past year.
The same is true for senior living organizations. Many communities may be able to point to their strategic plans and say, “We’re still following the plan we created three or four years ago.” In my judgment, a lot of strategic plans are now out of date with even where they were 18 to 24 months ago.
At this point, you may be asking, “Why am I focusing on strategic planning, when the title of this article is about master planning?” It’s because the two are inextricably interrelated. The strategic plan sets the direction and needs to be developed first, while the master plan is the implementation of the strategic plan. One can’t exist without the other. I believe communities must be focused on their master plans, and to do that, their strategic plans must be current.
I’m looking forward to sharing more thoughts on this in the upcoming webinar I’m doing with Melissa Pritchard, managing principal of SFCS Architects, and Rob Love, president of Love & Company. It’s called, “Why Master Planning May Be More Important Now Than Ever Before,” and I hope you will register to join us for it on Wednesday, May 26 at noon EDT.
Melissa shares a similar philosophy of strategic planning and master planning: “Communities often want to jump into a master plan because they have already made a decision on what they should do, without really looking into the bigger strategic questions. They have formed concrete ideas about a solution way in advance of understanding what the constraints and opportunities are on the campus.
“The strategic plan is the ‘Why,’” Melissa continues. “The master plan is the ‘What’ that goes with the ‘Why,’ and the two are very closely interrelated. The strategic side gets a head start, but the ‘Why’ questions lead to more ‘What’ questions, and the ‘What’ questions lead to more ‘Why’ questions. The strategic plan does come first, but they are close together, and they overlap. I believe the overlap of the processes leads to the best thinking, innovation and solutions that help set an organization apart with the best strategies.”
One question I frequently get from community leadership and boards is, “Which of these changes are here to stay, and which are going to go away?” Oftentimes, when we are in these periods of change, we go through shocks, and then things go back to the way they were. I don’t think this is going to happen this time. We still need to be mindful of COVID; it’s not going away.
So what changes are here to stay, and how do we react to them? Most importantly, I believe we need to respond to the changing needs of consumers. This is a very complex environment. We are fortunate that interest rates are so low, yet construction costs are extraordinarily high. But what we really need to focus on is where consumers are, as well as their needs and expectations.
As my co-presenter Melissa shares, “We’ve come through a year plus of a pandemic. The population we serve has been the most greatly impacted by it, and it has definitely affected the psychology of consumers. From some, we are hearing, ‘I’ve made it through this on my own, but it was hard and I’m more interested now.’ Yet for others, there is research data telling us that people are less interested now than they were before.”
I also see consumer sentiment evolving, and in a much more positive way in recent months. Most of Ziegler’s clients have seen census stay high through the pandemic, and new or expanding communities that are in presales now are seeing significant improvements since vaccines started. Projects that were making one to two sales each month are now making seven to eight.
I think this change in consumer behavior is good for independent living, though not as good for assisted living or skilled care, which may take years to recover. I feel I’m seeing the upper tiers of financially qualified prospects—that section of the market that has historically been most likely to move to a Life Plan Community—coming back strong. They have experienced strong asset inflation and have greater capacity to move to our communities. And the pool of people who have the financial wherewithal to live in our communities will be bigger simply because the entire boomer demographic is getting bigger.
This brings us back to my original point of the importance of master planning: What do you need to do to be successful in this rapidly growing and evolving market? Where is your niche?
I see the trend for larger residences as accelerating, particularly those in the 1,400, 1,600 and 1,800 square foot range. My co-presenter, Rob Love, agrees and adds, “For single prospects, a one-bedroom residence with a den is now by far the most popular option. We all have our laptops and home offices, and we need a place for that. At Love & Company, we are seeing demand for the traditional one-bedroom residence with one bathroom going the way of studios, with steadily decreasing demand leading to increased occupancy challenges.”
This change in inventory preferences can be particularly challenging for older communities, as they wrestle with the question of reinvestment versus replacement. We saw so much growth in the 1980s and 1990s, and these buildings are now 25 and 30 years old. Multiple communities are now looking at replacing independent living buildings that just cannot be reconfigured to meet today’s consumer’s needs. This has the double challenge of taking inventory offline—and thus decreasing revenue—while a building is being replaced. How are you going to manage that financially when space is limited on your campus?
The financial equation is changing right in front of our eyes. Fifteen years ago, you might have gotten 60% to 65% of the cost of a residence back with the first entrance fee. Today, it might be 30% to 35%, so even after it has been resold a couple of times, it still hasn’t been paid for. A big reason for this, of course, is that construction costs have increased faster than we’ve raised our fees.
The key question for many organizations, then, is, “How do we grow to support this?” And this is where strategic planning and master planning are critical to determining your community’s best market niche.
In her master planning work with communities, Melissa is helping organizations create visions for their next-generation environments. She shares, “I agree that reinvestment in a community to create a distinct market niche is very important. Whether it’s new space or a renovation, we are seeing a focus on highly curated, unique environments as amenity spaces. They aren’t big. They are small, unique experiences. We are seeing them in dining, in hobby spaces, and for passions.”
“Take books, for example,” Melissa continues. “Libraries have been historic parts of communities. Now we are seeing the next generation of libraries: Smaller environments, with technology embedded into them. It’s not a multi-purpose library. It has a theme, a feel of a club library, or a beautiful library you might see in an estate type home.
“Let’s say you have a passion for art. We are no longer seeing a multipurpose art space. Instead, we are seeing well-thought-out, highly designed spaces that support a specific function, such as a painting room, a crafts room or a ceramics room. It’s a space that helps create and support a passion. This is where niche identification becomes important: If there is a group of residents with a shared passion, we can custom design a space for that passion.”
The ideas Melissa, Rob and I have shared in this article just begin to scratch the surface of what can and should be done in master planning to help position your community for success in the years ahead. On behalf of all three presenters, I hope you will register to join us for additional exploration of strategic planning and master planning in our May 26 webinar, “Why Master Planning May Be More Important Now Than Ever Before.”
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