Case Study: When Looks Really Matter
 CEO Felicia Donahue was recently visiting communities operated by her company, Bluebird Assisted Living, when she noticed that some upholstery and furniture was beginning to look worn and a few walls had scuff marks and could use a new paint job. Faced with uncertainty about how an unstable economy would affect move-ins, Bluebird’s leadership had postponed plans for rehabilitating interiors last fall and even had put off some regular touch-ups that the company used to do annually. On the other hand, the company also recently postponed some infrastructure repairs and updates to save on upfront costs, but these updates could curb energy expenditures over the next three to five years. How long can Felicia postpone renovation/rehab work and not risk losing move-ins? On one hand, competitors have also cut back, but on the other, if Bluebird was proactive, could the company position itself to increase occupancy rates over their competition? What categories of renovation/rehab work should Felicia prioritize? Cosmetic repairs? Or those that offer long-term cost-saving like energy-efficient appliances? Are there deals and tax breaks she can leverage to get more bang for Bluebird’s buck in a down economy? Roger Bernier President and COO Chelsea Senior Living rbernier@chelseaseniorliving.com Providing a safe and pleasant environment for residents is a basic requirement of the senior living business, just as it is for anyone’s home. We don’t sell peace of mind in 4 x 6 newspaper ads, but through visits to our communities. Our buildings are our single most important marketing tools because they are the physical embodiment of our mission, from that first glimpse of a photograph on a Web site to the sounds and smells picked up during a visit. The effects of withholding needed renovations are quickly evident to everyone in the community, residents and staff alike. A residence might never recover from the kind of negative word-of-mouth generated by shabby physical conditions. Unlike a hotel where guests come and go and can deal with dog-eared furniture, frayed carpet, and peeling paint for one or two nights, our residents expect and deserve a home in good repair – day in and day out, year in and year out.  The challenge of keeping a community in good repair during economic hard times can be a true test of management foresight. If it’s just occurring to you that you can’t afford to rehab an important part of your building, it’s probably already too late. Through careful prioritization of building systems and creature comforts and early, ongoing communication and partnership with residents, there’s no reason repairs and renovations can’t be phased in over a period of time. You can have it all, you just can’t have it all at once. Most of our residents have owned homes at one time or another and are keenly aware of the costs involved in maintaining them. Bringing resident councils on board early in the process can help remove any doubt that you are doing the right thing by them in keeping their home in good repair. As for the marketing benefits, the smells of fresh paint and new carpet are vivid signs that a company is tending to the basics and are unlikely to chase new residents away.  Executive Vice President, Corporate Development Brookdale Senior Living tkaestner@brookdaleliving.com CEO Felicia Donahue would be well advised to consider both the short- and long-term implications of postponing necessary improvements that would enhance the appeal of her communities. In an unstable economy, the market shrinks; fewer people are willing to part with their cash and make the move – or at the very least, prospective buyers and their families look to put off life-changing decisions as long as they can. As the universe of qualified and motivated buyers becomes smaller, marketplace dynamics work increasingly to the buyers’ advantage, allowing them to be more selective in where they choose to live at a time when communities with inventory are more willing than ever to sweeten the deals for hot prospects. Accordingly, the marketplace becomes more competitive; not less so. By making improvements now, particularly while the competition has postponed necessary improvements, Bluebird can provide a greater degree of market separation from the competition. Its market position would be stronger and more difficult for competitors to counter when the market finally does reverse its downward trend. Our priorities should always occur in the following order: first and foremost is life safety for the residents, followed by preservation of the buildings/physical assets, and growth and protection of the business. Adhering to those priorities, renovation and rehab work should be evaluated on a case-by-case basis, depending upon the severity of the deficiency to be repaired. Obviously, HVAC, plumbing, roofs, windows, and other fundamental aspects of a community’s structure must be kept operational, reliable, and serviceable. Cosmetic improvements such as landscaping, painting, updating wallpaper, furniture replacement, or repairs in common areas are typically the most visible aspects of a community to a prospect and those that provide or enhance the community’s curb appeal. They are also more economical to make than structural or system upgrades and improvements. In much the same way that Bluebird’s prospects gain a purchasing advantage in a down economy, so, too, does Bluebird when it becomes a consumer rather than a supplier in the same environment. For example, the company can use any regional or national size advantage it has to make bulk purchases of carpet, furniture, wallpaper, or other cosmetic items to “freshen” its communities. It can also pack its dollars with more purchasing power with building contractors and those providing professional services while their businesses, too, compete in the weakened economy. By prioritizing large projects carefully, managing budgets with discipline and enhancing the curb appeal of her communities, Ms. Donahue’s company can take giant marketing steps while her competitors busily march in place. The financial gains and positioning improvements that Bluebird generates during the downturn will potentially reward the company with renewed marketing vigor and sales success when the economy resumes an even keel.
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