Metrics that Matter #11: Pricing deep-dive

For this week’s “Metrics that Matter” let’s deep-dive into a hot topic: pricing!

With current inflation and labor challenges driving up expenses, senior living leaders are even more focused on pricing (particularly on rates) to offset expenses. I’ve been asked a few times if dynamic pricing (a la airlines or hotels) would be a good idea for senior living. I’ll go into that more, share some KPIs that can inform pricing strategy, and offer recommendations for how to dig deeper. Shout-out to our Senior Data Scientist, Minghui Xiong, for his help (he used to run pricing strategy at American House).

What is dynamic pricing and is it right for senior living?

Dynamic pricing refers to changing pricing frequently to respond to market conditions. You’ve probably experienced it while searching for flights: the prices seem to change every day. In theory, dynamic pricing allows an operator to set the best price for a unit each day based on demand, availability, and other variables.

However, senior living is very different from airlines and hotels. There is a deeper relationship in  senior living, and residents remain customers much longer than a flight or a short hotel stay! Also, residents are more likely to talk to each other about what they are paying since they live together for a long time. If each resident is paying a slightly different rate (and rates tend to be locked in for at least a year), then you’re likely to have a communication problem as some residents may feel like they got a bad deal.

If dynamic pricing isn’t the answer, what is?

At Clarent we have created a KPI Library of 150+ senior-living specific KPIs. Our approach is to use these KPIs to give operators (from executives to EDs) clear information so they can make better business decisions.

When it comes to pricing, I suggest looking at the following 5 KPIs for each community and your overall portfolio:

1. Actual rates vs. budgeted rates (how much are you discounting)

2. Occupancy


4. Length of stay

5. Length of vacancy (how long does a unit stay unrented after a move-out)

These KPIs, analyzed together, can offer a full picture of pricing (with context). I’d first sort all communities by KPI #1 - actual rate vs. budgeted rate. Then I’d dig into where the most discounting is taking place, and look at the occupancy - how full is the building? From there, MIMO will tell you if there have been recent changes in occupancy. You may find that a building is discounting heavily as they are behind on move-ins and trying to catch-up. While this can recover occupancy, rates are fixed so it may be hard to recover the revenue once a resident has moved-in at a discounted rate. Lastly, I’d look at length of stay and length of vacancy to get further insight into turnover at the community. This is just a quick summary - if you’re interested in learning more please contact us to chat futher!