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Brookdale Senior Living (NYSE: BKD) CEO Cindy Baier believes the company is on track to make big gains in occupancy and revenue in 2022 despite facing historic labor headwinds.

With occupancy increasing, a portfolio of 679 communities she feels “really good about,” and a plan to grow resident rates in 2022, Baier is much more certain about the company’s future than she was when she came aboard — despite facing what she called “the worst labor market in my entire life.”

In particular, she is pleased with the current Brookdale team and improvements in operational practices that have been achieved since she became CEO in 2018, and she sees a big opportunity to drive occupancy.

“If you think about pre-pandemic occupancy, we were just starting our recovery from the oversupply in the industry,” Baier told Senior Housing News during an interview at the recent NIC conference. “There is a huge opportunity at Brookdale to go from that 73% weighted average occupancy back to that 89% or 90%.”

After two intense years of the Covid-19 pandemic, Baier is also taking time now to reflect on her tenure as CEO and on all the company has gone through — in fact, she penned a book about Brookdale’s pandemic response. “Heroes Work Here” will be released digitally later this month and in hard copy in May.

“I have spent a lot of time in different industries, and I have never seen an industry where people will sacrifice so much for the good of others,” Baier said. “I thought that it was important to take a moment to pause, to celebrate the people at Brookdale and throughout the industry who did such amazing things.”

And Baier has been facing challenges since day one on the job at Brookdale, even before Covid-19 swept across the globe. When she first joined the provider six years ago, the Brentwood, Tennessee-based company was in far worse shape, with a portfolio of more than 1,000 communities that was bleeding cash amid multiple underwater lease arrangements and a host of other pressures.

“We spent several years renegotiating leases and converting leased assets to owned assets really to get to a portfolio where we have the ability to win,” Baier said

Occupancy, revenue runway ahead
For 2022, Baier and Brookdale’s other leaders are focused on three main objectives to further the company’s recovery. The first is to regain occupancy, the second is to fill every room at the best-possible rate to grow revenue; and the third is to increase the number of Brookdale associates and reduce the company’s reliance on agency staffing.

On the occupancy front, Baier sees positive momentum. The company is up 390 basis points from its pandemic low about a year ago; and in February saw more move-ins than move-outs — the first time that has happened in the month since 2014.

“That really tells us that we’ve got occupancy moving in the right direction,” she said. “[That is] despite the fact that we’ve had some slight occupancy loss in January and February, which is much better than historical norms.”

Baier’s optimism about the future is based in part on tailwinds she sees on the horizon, chiefly regarding new supply and demand.

Senior living operations also have many built-in fixed costs, Baier noted. Growing occupancy to an average closer to 90% would increase revenue, and thus “change the cash flow of the business.”

“There is just so much opportunity from just basic execution and doing what we’re best at,” she added.

In terms of where the senior living industry is in its recovery, Baier likened it to the early innings of a baseball game. And although she joked that baseball analogies aren’t her strong suit, her point was that there is still “a lot of the game that’s left.”

“Even though we’ve made such great progress on our recovery, we still have a long way to go to get back to our pre-pandemic occupancy,” Baier said.

Baier is also encouraged that the rate of new construction starts has fallen dramatically, with new openings down 67% and new starts down 62% within 20 minutes of a Brookdale community. And she sees significant impediments continuing to constrain new supply. In particular, she highlighted rising construction costs. This not only limits new development projects but drives up the value of existing stock like Brookdale’s communities, as replacement costs surge.

“Have you seen the price of a two-by-four? It is multiples of what it was historically,” she said.

Baier also sees demand trending in the company’s favor, with “a million new potential residents entering our market every year for the next decade.”

With occupancy on the move, rate growth is another important target for the year. And like with census, there is also positive movement on that front, according to Baier.

“Our executive directors did an amazing job when it came down to explaining to our residents the need to increase prices, and the fact that it was really funding higher wages for the people who take care of them,” Baier said.

The company’s actual rate growth for 2021 ended up a little over 3%, and the company did not see residents living in its communities revolt as a result of that increase. And that lack of pushback gives Baier confidence that there is more room to raise them in the future and grow the company’s revenue per available room (RevPAR) by about 10% to 12% this year.