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Brookdale Aims to Regain Historical High for Occupancy, with ‘Nice Setup’ in Place

Brookdale Senior Living (NYSE: BKD) is basing its optimism for 2023 and beyond on its new sales-focused leadership and a tepid – if not ice-cold – development market.

Brookdale CEO Cindy Baier does not only have “great confidence” in regaining pre-pandemic occupancy, but says the ultimate goal is to get back to the company’s historical high for occupancy. The organization is doing “everything that we can” to achieve that goal in a “reasonable period of time,” she said Wednesday at the 2023 RBC Capital Markets Global Healthcare Conference.

The lack of new supply entering the market creates a “nice setup” for achieving this goal, she said.

And after recently announcing positive first-quarter results, Baier doubled down on the company’s dedication to a sales-minded strategy.

“Everybody has an even tighter focus on getting every available room in service it at the most profitable rate,” Baier said at the conference. The company’s shift in philosophy to one of sales was announced earlier this year after it reported a year-over-year occupancy increase of 360 basis points.

In addition to community-level leadership prioritizing sales, Baier pointed to a recent and sustained slowdown in senior living construction as a reason the operator feels optimistic about the next few quarters.

“I think that construction in senior living was all needed, but it absolutely happened too early which is why there was oversupply prior to the pandemic,” Baier said. “And the fact that there is less supply now is always a good thing.”

Brookdale Chief Financial Officer Dawn Kussow referenced data from NIC MAP Visionthat showed a 49% decline in inventory in the 100 primary markets since 2018. “And if you just look within a 20-mile radius of Brookdale communities, there’s been an 84% decline in starts,” she said.

The slowdown in new construction starts puts Brookdale in an opportunistic position.

“Think about it, labor costs have gone up, material costs have gone up … and then interest rates have gone up about 500 basis points in the last 12 months,” Baier said. “I couldn’t be more excited about where Brookdale is positioned because we have our communities in place.”

Brookdale is now forecasting improvements in occupancy in the second half of the year with “summer selling season being our busiest selling season,” Kussow said. She added that the company expects a general return to seasonal occupancy trends with a bump in occupancy in the third quarter and into the fourth. And while year-over-year occupancy is expected to rise into 2024, the increase won’t be as dramatic as what the company reported earlier this year.

But while the supply-demand fundamentals put Brookdale on the offensive in the second half of the year, the operator is not immune to the impact that inflation is having on operations. Like many of its competitors, it raised rates to keep up. And those increases helped moved the needle after they took effect.

With the goal of getting back to its all-time occupancy peak, Baier reported that Brookdale had an 8.6% year-over-year increase in revenue per occupied room to go along with a year-over-year overall occupancy increase of 290 basis points.

“We will make sure that we’re incorporating the cost to operate our business, including labor capital costs and other inflationary costs when we set our rate increases going forward,” Baier said.

The post Brookdale Aims to Regain Historical High for Occupancy, with ‘Nice Setup’ in Place appeared first on Senior Housing News.

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