Industry Quests for ‘Holy Grail’ of Improving Senior Living Penetration Rates

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For years, senior living operators have tried in vain to increase average penetration rates. In 2024, it is the industry’s “holy grail.”

If you’ve read Senior Housing News at any point in the last decade, then you are probably aware that penetration rates have been stuck, with recent NIC data pegging such rates at between 10% and 12% nationally.

Given the demand for senior living ahead, it would be logical to think penetration rates will rise on their own in the years to come. But I recall the words of industry visionary and Nexus Insights Founder Bob Kramer, who told Senior Housing News earlier this year that it is not a foregone conclusion if operators don’t also innovate.

“If we think we’re going to try out the same product the same way – and have even the same penetration rate, let alone a higher penetration rate – I think we’re naive,” he said.

I also believe senior living operators must go further than what they offer today to expand penetration rates. But the exact nature of why the industry’s overall penetration rate remains muted is still somewhat of a mystery, NIC Head of Research and Analytics Lisa McCracken told me.

“Figuring out the ‘why’ behind the [penetration rate] of senior living is the holy grail to move the needle, and we’re not there yet—it’s complicated,” she said.

Mystery or not, I think it’s clear that operators must change sales and marketing practices to reach new consumers and better present the value of their services to prospective residents.

In this week’s members-only, exclusive SHN+ Update, I analyze the current state of senior living demand and penetration rates, including:

– Solving the puzzle of relatively stuck penetration rates

– Why independent living penetration rates are stagnant

– How it all comes down to showing prospects value

Senior living penetration rates a ‘challenging puzzle to solve’

On paper, the industry’s demand outlook is stellar.

The U.S. Census Bureau projects that by 2030, 73 million baby boomers will be 65 years old, and 34 million older adults will be 70 years old in that same period. According to the National Institutes of Health, those 85 and older are the fastest-growing cohort of the U.S. population.

But occupied penetration rates tell a slightly different story. 

Senior living occupied penetration rates for assisted living and memory care units increased 3.9% and 1.4%, respectively, in the 31 primary markets NIC tracks between 2017 and 2023. Independent living’s occupied penetration rate, meanwhile, is now 4%, which is three percentage points below where those rates were in 2017.

In 2023, U.S. markets with the highest overall occupied penetration rates included Minneapolis (21.6%), Portland (19.2%), Seattle (14.6%), Kansas City (14.4%), Denver (13.5%), and Dallas (13.3%). New York and Las Vegas came in at the bottom of the pile with penetration rates of 4.3% and 4.2%, respectively.

Coastal and metropolitan markets are also recovering more quickly and reporting higher penetration rates since 2017, according to NIC data. This uneven nature of recovery and margin expansion could be an opportunity for operators to attempt to better connect with those in rural markets, as 17% of those 65 and older live in non-metro markets, according to federal census data.

The uneven occupied penetration rates across the industry are likely due to changes in demand dynamics and migration patterns, according to the summary by NIC Principal Omar Zahraoui. We’ve consistently heard from operators in recent years as the needs-based senior living continues to drive demand.

But even with that data, Zahraoui said the senior living industry’s overall penetration rate at the national level “remains a challenging puzzle to solve.”

Even as occupancy continues to improve nationwide for operators, the decrease in occupied penetration rates observed by NIC Analytics within independent living – coupled with the fact that penetration rates are still relatively stuck elsewhere – should be a warning for all senior living operators.

On the independent living side, operators are being squeezed by active adult, a product type that can look and feel like independent living to the general public despite its obvious differences. Independent living communities are also generally more expensive than active adult properties.

The incoming generation of older adults desire affordability and socialization in their housing options, boxes that active adult communities can check. If independent living operators don’t differentiate their services or show the value of what they provide, I believe they will be at a disadvantage.

“If you need to say those are your selling points, you’ve potentially got a little more work to do, and it’s even more of a sales job by an operator to say, ‘Can you be a better version of yourself in a community than what you can be in your own home,’” McCracken told me.

With demand for assisted living and memory care strong due to underlying needs-driven dynamics of each sector, the high-acuity trend witnessed by operators in recent years is “still the story here,” Zahraoui told me.

In the last four years, the build-back and recovery of assisted living and memory care have been quicker than independent living, Zahraoui said. That is due in part to residents once in independent living in 2020 having progressed to assisted living or memory care.

“That’s actually influencing the demand for assisted living and memory care,” he added.

Some operators, including Tutera Senior Living, Atlas Senior Living and Anthem Memory Care have embraced growth strategies with high-acuity senior living in mind. For example, Tutera President and COO Randy Bloom recently told my colleague Andrew Christman about the company’s focus on “specialized training and new staffing models” to prepare for a more acute senior living environment.

But despite the inherent demand of needs-based care, assisted living and memory care are also prohibitively expensive for a wide swath of baby boomers, totaling more than half of the cohort by 2030. Even if older adults need these services, costs are a growing and often insurmountable barrier to buying them.

So, finding a scalable middle-market senior living model would represent huge step forward in the quest for higher penetration rates. However, I also think that providers can and must do a better job of showing how current market rates are a reasonable or even good value, given all that senior living can deliver to residents. There are many ways to do that, including showing the benefit of senior living resident health outcomes and prioritizing value-based services that include wellness and other popular service offerings.

At the end of the day, I believe that creating models of senior living that appeal to the next generation of consumers and effectively marketing the value of senior living are important steps in driving penetration rates, but they are also big-picture challenges with no easy or quick solution.

‘Laid-back’ sales approach a problem

I think it’s possible that the sector could see a more rapid jolt to penetration rates by tightening up a chronically troubled sales process. For one, senior living providers still aren’t always talking to their prospects in a timely fashion, according to recent data from marketing consultancy Bild & Co.

Bild & Co. data of over 220 communities in 11 states show that over half (51%) of mystery shops that submitted a web form contact request for more information did not receive a personalized response within two hours and 12% of those inquiries did not receive a return call after 24 hours.

“We are still seeing this laid-back approach, but speed is king,” Bild & Co. CEO Jennifer Saxman told me. “Speed to lead is what you’ve got to be focused on more than anything else.”

The disconnect between the marketing team’s messaging and the sales team’s execution highlights the need for significant improvements in senior living sales practices to align with current demand.

While some operators have equated inquiries for information regarding a community as vital as a senior living “911 call,” it’s clear that there’s still much work to be done in shifting the practices of senior living sales teams.

“If you don’t carry a lead through the entire sales cycle, you’re going to continue to struggle,” Saxman said. “I don’t think we do a great job of engaging our buyer right now.”

This comes as the industry has become in some ways “very dependent” on paid referrals, Saxman said, even as American Seniors Housing Association (ASHA) President Dave Schless told me recently that there was “misalignment” between operators and paid referral sources.

To break through that misalignment, ASHA is in the midst of a relaunch for Where You Live Matters, its senior living referral site that is aiming to become an independent referral service to connect consumers directly to operators.

Robert Grammatica, who provided technical support in the buildout of ASHA’s Where You Live Matters 2.0, told me that the industry is “not telling the right story” in attracting prospective residents to communities. I agree.

I’ve written ad nauseam on the importance of integrating technology into senior living operations since I started writing on the sector in 2022, but if operators are slow to showcase those efforts, their marketing potential will be for naught.

Improving the senior living sales cycle to be more dynamic and responsive will be key for operators to expand market penetration and fully capture the rising tide of demand that’s beginning to swell on the industry’s shores.