Brookdale CEO Identifies Cost Control Strategies to Counter Record Inflation

Inflation is an industry-wide problem — Brookdale Senior Living (NYSE: BKD), for example, has watched food prices climb at a rate in the “high teens,” and the company expects a rise in utility costs ahead, according to CEO Cindy Baier.

But as big of a challenge as record inflation is, Baier is confident that the Brentwood, Tennessee-based company will be able to mitigate some of those rising costs through occupancy growth and a focus on environmental, social and governance initiatives.

“Food inflation for us has been in the high teens, but we have been able to largely mitigate that,” Baier said during the Jefferies Healthcare Conference on Thursday. “And we expect to be able to mitigate it largely going forward.”

As more residents move into Brookdale communities, that will help those communities cut down on food waste, thus offsetting cost inflation, Baier said. And on that front, the company has momentum, with an occupancy rate of 76.2% as of the end of May.

Brookdale also reached a “milestone” in May with more than 2,000 move-ins for the month, according to the operator’s latest occupancy report.

“During Covid-19 waves in the U.S. we do see the consumer tend to pull back a little bit,” Baier said. “But when you put it in perspective, we saw more cases in the U.S. in mid-April and May, and yet we had a great response in terms of our occupancy increase.”

Brookdale also has made progress growing rates, with revenue per occupied room (RevPOR) growing more than 5% in the first quarter of 2022 without a significant increase in resident attrition.

The company is also keeping a close eye on the cost of utilities. While Baier said Brookdale “hasn’t yet seen a significant increase” in utility costs, the company “does expect future increases as fuel costs and geopolitical disruption take hold in prices,” she added.

But there, too, the company has a solution: more energy efficient and sustainable communities. For instance, last year, Brookdale upgraded 81 communities with LED lighting, which the company noted “created an energy savings of 9,583,000 kilowatt-hours.”

As of the publication of its 2021 ESG report, Brookdale had reduced its electricity usage by 18% and its water usage by 28% since 2019; with 523 communities that were Energy Star compliant.

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