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Do Market Penetration Rates Baffle You as Much as They Do Me?

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By Steve Moran

At the NIC Fall Conference, Beth Mace led a panel discussion on market penetration rates titled “What Opportunities Exist to Increase Penetration Rates Across Senior Care Properties?” It was high on my list of things to attend because I think market penetration rates is one of the least understood and most fascinating aspects of senior living.

They range from really low in places like Alaska to really high in places like Pennsylvania. And because those numbers are interesting but not very helpful they are every bit as crazy from market to market. So the question remains this:

Are market penetration rates helpful at all?

Some Things to Think About

Some of what follows comes directly from the panel discussion and some comes from my sort of noodling about it during the presentation and after the presentation.

  • It seems fairly clear, by inference at least, that a big factor is barriers to entry. So you would expect market penetration rates in places like San Francisco and New York City to be low.

  • What is more baffling is that there seems to be much less correlation between market penetration rates and occupancy than you would think. This means it is possible to . . .

    • Have a low market penetration rate and a less than stellar occupancy rate, which leaves one going “Huh?”.

    • You can also have a high market penetration rate and high occupancy, this seems less odd because a high market penetration rate suggests a high level of acceptance of senior living in the marketplace.

  • There are potentially other more complex issues to think about. For instance, places like Arizona and Florida get a ton of “permanent snow birds”, which significantly increase the age and income eligible population. Except that, in many cases, as they age and become more frail, they have a high propensity to move back home, where their family is, where there are kids who can manage their care.

  • One of the things that Beth pointed out was that perhaps there is a big mismatch between what seniors in a given area want or are willing to accept and what is actually available. This is a fascinating idea.

    We build -- regardless of organization -- product that is pretty similar and we kind of assume that because, at least, some seniors and their families are willing to purchase what we are selling it must be the right thing to sell. When you think about it, this might be the most colossal dumb thing we do when it comes to new construction.

    We know for instance that being old is not that good of a reason for people to congregate and that most boomers want to live intergenerationally. Yet, we develop as if those two things are not true.

Two Things

There are two clear opportunities that seem to remain unexplored:

  1. If a senior living organization were willing to explore those high occupancy rate markets and ask, what is it about this market and the product that exists there today? Then go out and look for similar marketplaces, it would likely be a homerun in the making.

  2. There is a a huge opportunity for NIC or some senior living organization to do an in-depth study of penetration rates and what makes the difference.

As a final word, if someone were to whisper in my ear that one or two organizations are already doing these two things I would not be surprised. Nor would I be surprised that they would not want to advertise what they are doing.

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