There may be a move to adopt the concept of dynamic pricing in seniors housing, but it comes with its own perils.
I may be a bit of a contrarian on this one, but I have to admit I am not too wild about the concept of dynamic pricing for seniors housing. I know it works well with hotels, airlines and multifamily, but all three are very different from seniors housing. I am all for more transparency with pricing, such as posting prices online, but dynamic pricing with weekly price changes based on changing local dynamics doesn’t do it for me. Marketing the seniors housing product is a relationship sale over several months, not instantaneous like a plane ticket. This is a lifestyle decision with the first decision being, do they really want to move out of their current home, and the second decision being, which retirement community really fits their budget, taste and comfort level, not to mention the type of people that are already in residence. I understand that dynamic pricing may be used to better manage, and increase, revenues. But it can also be used to justify lower prices in order to get your occupancy up. Perhaps, just perhaps, there are other things management should be looking at for their low occupancy. Finally, three visits to the community and three different prices? Not a good way to start that relationship.
Excellent points well made. While occasional specials will always help when a negative spike occurs due to an unusual dip in occupancy, your point about this being a relationship process is so key to the sales process and longterm stability in senior living communities. And, the relationship just begins in earnest when they move into the community. I know of one community who has done dynamic pricing during the past couple of years and it has also become an issue with current residents, as well as prospects, creating fears about annual increases being too high, creating some unneeded stress amongst those in their 80s and 90s. Management sometimes forgets that these ‘old people’ are still sharp as can be and monitor these things often and discuss them daily at meals and and activities. Imagine the conversations residents have with friends who are thinking about moving into the community, or, the challenges for sales staff when working with a prospect and a unit priced $3,500 in July, is being priced at $3,800 a few months later (because of high occupancy in the area) … and their friends who are residents moved into the community in June at $3,350! The irony here is that the community became aggressive because of area occupancies being very high and a new owner who purchased the property raised monthly fees substantially simply saying, “That’s life.” Sounds like the hotel and airline business as you noted. A new property now being built 3 miles away has a prospect list growing by leaps and bounds with one person saying, “We’ll teach the new owner a lesson about ‘that’s life’ when the new place opens.” In the end, I doubt those angered by dynamic pricing will really move and others have already figured out the new place will probably follow suit in such pricing too. For those who are in this business to build, fill and flip (generally very unfamiliar with daily operations), their investors and bean counters love the idea. For those of us who are in the business hold and managed longterm, we don’t need to play these games. Thank you for your posts …. always appreciated. Gary