Should retirement communities be owned and run like a McDonald’s? (Part 1)

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Note: This is Part 1 of two. Read “Should retirement communities be owned and run like a McDonald’s? (Part 2)” here.

Five or ten years ago, there weren’t that many really large companies building continuing care retirement communities. Sure, Brookdale and Sunrise were big, as was (and is) Emeritus and Atria. But, they largely focused on nursing homes and assisted living.  Most CCRCs were owned by smaller, regional companies or by nonprofits.

Since the market crashed in 2008, that has changed dramatically. Senior housing has become an increasingly attractive play for anyone from hedge funds to real estate investors.  This has spurred a round of consolidation that is relatively unprecedented.  It’s very possible that in the next decade, the majority of retirement communities in the United States could be owned by the same two or three companies.

Is that a bad thing? 

We tend to distrust big corporations, and I think for good reason.  But, yet, we all tend to eat at chain restaurants, shop at chain stores, and buy products from the same big online retailers.  Is it really a big deal if retirement communities follow suit? Would having a few national chains control the entire market impact consumers?

I see several benefits and drawbacks to this scenario:

Most large firms have better access to capital. Smaller retirement communities have to work harder to get credit in the event of financial difficulty, and it’s more expensive.  Larger firms can negotiate for loans and financing on a much more national basis, making it easier to finance campus improvements or new communities.  They also have better access to development consulting and other services, which might be prohibitively expensive for smaller companies. Overall this is good for residents, since providers can get the funding their need in a more efficient manner.

Standards and procedures will be more uniform. Ever visited a family restaurant that just didn’t function well? The cash register was too close to the buffet line, and the tables didn’t leave enough room for servers to walk? Well, most of those issues have been solved in chain restaurants.

As firms get larger, they learn which strategies work the best, and they optimize their organizations.  That’s good news for senior housing where staff have to handle a large array of situations and can benefit from additional training that smaller companies might not have been able to provide.

Lifestyle improvements. Larger corporations will probably be better-suited for creating amenities and activities that improve residents’ quality of life:

  • Better activities:  Smaller companies usually rely on one dedicated activity coordinator to handle all aspects of resident life.  If there were a few national providers, these organizations could pay a department of people to craft activities, travel, or other amenities that would help improve resident quality of life.  Since large corporations can negotiate on a grand scale, these services might also be cheaper.
  • Travel agreements among communities in the same chain would allow seniors to effectively visit any city in the country and always have a place to stay.
  • Large corporations can afford to investment in aging in place technology, which might help seniors stay independent for longer.

Read Should retirement communities be owned and run like a McDonald’s? (Part 2)

Want to learn more about senior housing? Check out these articles:

What to expect on your first visit to a retirement community.

Three sneaky sales tactics and your best defense!

How to find a CCRC.

What is LifeCare?