Seniors Living – knowing your market is the key to success
Australia’s ability to cope with the rising tide in our ageing population remains a hot topic of discussion, with Government and the community each providing considered commentary on the supply and demand sides of the seniors housing issue.
The recent aged care reforms have certainly contributed to significant restructuring of property, and movements in property ownership across seniors housing options. It is hard to argue that aged care reforms have not contributed to improved commerciality of aged care supply.
With increased demand and attention on the sector, a solid understanding of the customer can be a competitive strength. This is particularly so for the Baby Boomers market, who have clear expectations and are economically savvy when it comes to their retirement living requirements. This scenario presents a number of risks for seniors housing and care providers. With consumer markets ranging in age between 55 - 95, consumer demands can be broad and complex, and can change significantly in the short term. I recently spoke with a Retirement Village (RV) provider that initially attracted a younger resident cohort with a capped Deferred Management Fee (DMF). As a result the DMF cash flow is unlikely to realize for up to 30 or 40 years, placing strain on cash flow for reinvestment when they looked to expand.
The planning process is a bit like driving a car – you need to moderate the view of the horizon with the immediate situation. Scanning forward but maintaining awareness of the current needs, threats and direction. Taking forward projections based on current attitudes assumes current attitudes are consistent. When I was 20 years old, what I thought I wanted at 40 was different to what I find myself valuing at 40.
To mitigate this risk I encourage providers to use strategies such as defining their customer and analyzing the Voice of the Customer (as employed in Lean Sigma Six Methodology). Getting the Voice wrong, or misaligning the Voice with other stakeholders, can be devastating on project success.
I believe this a well-accepted viewpoint - that a well-defined strategy and project will enjoy a higher probability for success. This has become especially pertinent for the Aged Care sector over the last 10 years, as the Voice of the Customer has become louder and bolder, rather than the voice of government – who are progressively moving to a user-pays model.
For Retirement Living providers, this has some obvious impacts. A shift in user-pays within Aged Care and promotion of Home Care; reinforced by the 2018 Federal Budget, has seen more demand for substitutes such as Retirement Villages and Home Care.
More demand has changed the ownership structures. Retirement Villages are now popular with for-profits as the market forecasts signal long-term demand.
However, with demand comes competition and the seniors spotlight. The older cohort can be a vocal group with a strong voice. Ensuring your Retirement Village addresses current and future Voices and engages your resident early, will be critical in long-term demand.
The above simply reinforces that in many cases no one rule fits all, and that when planning for and defining your services and property objectives, the Voice of the Customer is instrumental in lowering risk and increasing the likelihood of achieving your goals.