Brookdale Senior Living came out with its Q2 earnings, and the occupancy results revealed just how prolonged the post-pandemic recovery has been for seniors housing and care, making many early predictions of a swift return to pre-pandemic census sound more and more ridiculous in hindsight. The good news is that Brookdale reported its highest month-end occupancy since before the pandemic, at 78.5%, up 30 basis points from the previous month and up just 10 basis points from the previous high recorded in September of last year. The bad news is the fact that Brookdale has taken this long to get back to last fall’s level of occupancy. To us, that is not “progress” in the larger goal of getting back to pre-pandemic occupancy, which was also disappointing at the time.
Brookdale noted in the Long-Term Organic Growth Opportunity section of its investor presentation that getting back to pre-pandemic occupancy of 84.5% would result in at least $295 million of incremental revenue, and a return to historic occupancy highs of 89% would drive at least $465 million in incremental revenue. Sounds great, but how realistic are those goals for Brookdale?
Looking at its Q3 guidance, Brookdale anticipates that its best-case projected gains from improved operating performance in the quarter would be wiped out by “normal 3Q seasonality factors.” While acknowledging that the third quarter has historically been the highest sequential growth period for census (which is backed up by our own analysis of NIC MAP data going back more than a decade), the company notes higher utility costs and higher labor costs due to a couple more weekend days and holidays than other quarters. We are used to hearing of seasonality factors in the other three quarters driven by winter weather, flu seasons and the end-of-year holidays affecting move-ins. But Q3 is when most can make hay while the sun is shining. We know a lot of work goes into even just maintaining census and margin, let alone improving it, but at this rate, the pie-in-the-sky projections just seem a little misguided.
