The comments were made during the “State of the Industry” panel at the event, which was held in late summer at the Westin Buckhead in Atlanta and drew more than 400 industry professionals.
Katie Davis, chief strategy officer for Sherpa, moderated the panel, which included Doug Schiffer, president and COO of Allegro Senior Living; Scott Stewart, managing partner of Capitol Seniors Housing; Joe Weisenburger, vice president of seniors housing for Welltower; Andy Isakson, managing partner at Isakson Living; and Alan Plush, president and senior partner at HealthTrust.
Schiffer cited a recent time when a competing property opened near an Allegro community and immediately offered pay raises to any employee who would switch communities.
“People want to mine our fort and take our staff,” said Schiffer. “Everyone was offered a $2 per hour raise, which is a 20 percent increase for some. No matter how much you like us, that’s hard to turn down.”
Allegro kept most of its employees by matching the offers, but this significantly drove up operational costs at the community. He also noted that there are at least two new competing communities under development in every market where Allegro operates.
Isakson suggested one solution to labor woes can be found in the actual operational model. He noted that the Isakson Living communities that use the household model — where a smaller group of seniors are clustered around a shared set of amenities — experience extremely low employee turnover. He credits this stability to employees having a small, dedicated group of seniors under their care, allowing residents and staff to become better acquainted.
“I can tell it’s going to be good for us as far as keeping our people,” said Isakson.
As is often the mantra for seniors housing, Stewart emphasized that the strength of the operator will make or break any community when attempting to stave off the competition or minimize staff turnover.
“In real estate, they say success is ‘location, location, location,’” said Stewart. “But in seniors housing, it’s ‘operator, operator, operator.’”
Overbuilding Concerns Mount
The combined wage pressure and increased competition in seniors housing could lead to a backlash due to what Plush calls “economic physics.” By this he means there will be a natural correction in the market if wage pressures continue to increase costs while competition continues to decrease revenues.
“We’re seeing numerous markets with three to five new projects coming on line,” said Plush. “You overlay that with wage pressures… how much can these markets take? The next couple years are going to be interesting.”
Weisenburger echoed the concerns of overdevelopment.
“One new facility never screws up a market. Two starts to cause a lot of issues. When you get more than that, it’s a bloodbath,” said Weisenburger. “It’s really hard to differentiate yourself when there are three shiny new pennies out there.”
Davis, a former operator, says one solution is to take some of the money traditionally allocated for recruiting efforts and use it to provide higher wages for existing employees.
— Jeff Shaw