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Costs Up, Revenue Down: Senior Living Providers Seek More Stability, Profitability in Dining

When the pandemic ramped up last year, many senior living providers made sweeping changes to their operations to keep residents healthy and safe.

For some providers, expenses rose in the early days of the pandemic as food prices, disposable items and food waste costs ticked up. At the same time, dining revenue plummeted across the industry as catering operations and special event reservations all but ceased entirely.

One year later, senior living dining operations are still not back to normal, and culinary revenue is nowhere near pre-pandemic levels. But providers including Kennett Square, Pennsylvania-based The Kendal Corp. and Bellevue, Washington-based Aegis Living are also hopeful that conditions will moderate as the industry returns to more stable operations, and have budgeted for the year ahead accordingly.

Providers are also mulling what will make dining rooms more efficient and food more palatable to residents in the future. They are considering a wide variety of concepts, from implementing server robots and doling out meal kits to launching ghost kitchens and in-house grocery stores.

“Many communities have been working feverishly through this downtime to reposition or start to think about repositioning their programs — offering new menus, new services, or a change in the service style that they’re offering to residents,” said Ben Butler, who is Kendal’s vice president of culinary services and procurement. “I think that’s going to be critical coming out of the pandemic.”

Cost and revenue

At the outset of the Covid-19 pandemic, senior living dining departments across the country turned on a dime, going from communal meal service to serving residents in their rooms.

Culinary workers who before the pandemic were used to serving food on ceramic plates for residents eating in a dining room suddenly found themselves packing orders in to-go containers with disposable cutlery. That hit Aegis’ culinary budget, according to the company’s enterprise culinary service director, Ashleigh Pedersen.

“The immediate response within the culinary world was to move to everything being in a disposable container,” Pedersen told Senior Housing News. “That had a definite impact, and then because of the shortage of disposables that existed within the marketplace, that increased costs even further.”

Disposables also weighed on dining expenses at Seattle life plan community Bayview, according to Director of Culinary Services Dan Galvin. And to-go containers contributed to rising costs at Wake Robin in Shelburne, Vermont. Director Of Dining Services Kate Hays lumps them into a category called “compostables” in reference to the fact that all of the life plan community’s food waste and to-go containers are composted, not thrown away.

Kendal last year saw a 3.5% increase in its overall food costs as the price of meat, eggs and dairy climbed. In 2019, that number was closer to 2%, according to Butler. The rising price of meat during the pandemic had much to do with that increase.

“Meat prices had not experienced, in our recollection, that level of [cost] inflation since 2014,” Butler said.

Still, Kendal’s culinary costs were down overall in 2020 due to the style of service it adopted during the pandemic.

Similarly, Bayview’s Galvin estimates that the life plan community’s food costs in 2020 were about 8% lower than in the previous year.

At the same time, revenue related to dining fell sharply at many communities. For a number of providers, it was the loss of catering and special events, lower alcohol sales or the closure of dining venues that had the biggest budgetary impact.

For instance, infection control restrictions led Bayview to close all three of its dining venues, including its 10th-floor “Cloud Room,” a lively venue that previously hosted resident dining, parties and events.

“That had a huge impact on the revenue side, there’s no doubt about it,” Galvin said. “It was a bumping place, and it just kind of went dark.”

Similarly, Kendal’s dining revenue “fell to zero” as catering and special events ceased, Butler noted.

“There was a significant loss of revenue in the communities’ culinary departments,” he said.

A similar dynamic played out at Aegis as resident and family events dried up. The company also made alcohol service complimentary during in-room dining as a gesture of support for residents.

“We have recently reestablished the charges for alcohol service,” Pedersen said. “We still, though, are unable to host events … within Aegis or within our communities themselves.”

One area that didn’t seem to hit senior living dining budgets as much was labor, as many providers were able to shift their existing departments to in-room dining without increasing costs. Though some providers did have to hire more workers as resident needs changed during the pandemic, they have done so without putting pressure on the bottom line. For example, while Wake Robin did hire more culinary workers after the pandemic began, those employees are now working shorter shifts.

“In terms of our bottom dollar, payroll has been down, and expenses have been up on compostables,” Hays told SHN.

SHN conducted a reader survey on dining costs and revenue between March 27 and April 6, and while the sample set is small at 22 senior living provider respondents, and the survey is far from scientific, it helps illustrate what the industry is experiencing in the spring of 2021.

The survey showed that nearly 32% of respondents reported dining-related expenses increased between 1% and 9% in 2020 compared to pre-pandemic levels. Almost 23% of respondents said dining-related expenses rose between 10% and 20%, while another roughly 23% reported no change in dining-related expenses last year compared to before Covid-19.

Additionally, nearly 14% reported that dining-related expenses fell by 1% to 9% as compared to before the pandemic.

How has Covid-19 affected dining-related expenses compared to pre- pandemic levels? How has Covid-19 affected dining-related expenses compared to pre- pandemic levels?

The survey also showed how far revenue fell across the industry, with about 36% of respondents reporting that dining-related revenue decreased 20% or more compared to pre-pandemic levels. About 27% of respondents reported no change in dining-related revenue.

How has Covid-19 affected dining-related revenue compared to pre- pandemic levels? How has Covid-19 affected dining-related revenue compared to pre- pandemic levels?

Budgeting for the future

Despite the major disruptions to expenses and revenue last year, senior living providers are optimistic that their budgets will begin to look more normal in 2021 and beyond. But that hinges on the pace and scope of a larger recovery in the industry; the faster the recovery, the sooner providers can lift restrictions and get back to normal.

Nearly 41% of the SHN survey’s respondents reported no change in their 2021 dining budgets compared to the previous year. Another roughly 27% said their culinary budgets are 1% to 9% higher in 2021, while almost 14% said their culinary budgets are 1% to 9% lower.

Aegis is budgeting for elevated food costs and lower revenue in 2021, but overall, the company held steady with its dining budgets. Bayview is also budgeting for a more normal year in 2021. Similarly, Wake Robin’s Hays believes that costs at least are moving in the right direction — but she also thinks labor expenses will likely rise in 2021.

“Our food cost will come down, and our labor will go up, because the shifts will get a little bit longer,” Hays said. “But I expect to see a return to normal.”

Kendal’s communities are also budgeting normally for 2021, but the company is focused on breaking the mold this year. Though the organization has no concrete plans, Butler is already talking about the possibility of introducing food-serving robots and ghost kitchens into Kendal’s communities.

“UberEats could deliver to the markets around one of our communities, and not only generate more revenue for the community, but also provide a service,” Butler said.

Wake Robin is also focused on reinventing the senior living dining experience for residents, and in turn generating more revenue. The community offered groceries as a service during the height of the pandemic lockdowns in 2020 — and Hays recalls that it was not only an important service, but also “a great way to generate revenue.”

Now, she is working on new ideas to both serve residents and add to the bottom line, including selling residents meal kits àla HelloFresh.

“Right now, it’s easier for our residents to dine with other Wake Robin independent residents in their homes … whereas I don’t know that I’m going to be able to have eight people sitting at a table in the dining room yet,” Hays said. “So if I can incentivize a way [to do that] — maybe you spend some money and we will kind of cater to you at home with these systems — that is the direction I’m going to explore next.”

The post Costs Up, Revenue Down: Senior Living Providers Seek More Stability, Profitability in Dining appeared first on Senior Housing News.

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