Hospitality, Travel, Senior Living & Multifamily News April 2022
Omni Hotels & Resorts President Peter Strebel Reveals Current Travel Trends
The hotel executive also acknowledged on “Mornings with Maria” that prices for accommodations are “a little on the high side” caused by supply and demand as well as the inflationary environment.
Inflation hit a fresh 40-year high in February, with the consumer price index climbing 7.9% on an annual basis, according to data released last month by the Bureau of Labor Statistics. Month over month, inflation rose 0.8%.
From January to February, nearly every category of goods and services got pricier. Gas jumped 6.6% and accounted for almost a third of the price hikes. Grocery costs jumped 1.4%, the sharpest one-month increase since 1990, other than during a pandemic-induced price surge two years ago.
According to data provided by the Bureau of Labor Statistics, prices for airfare shot up by 12.7% in February compared to the same time period the year before. Inflation data for March will be released next week.
Strebel stressed that despite soaring inflation, demand for hotels is strong. “So we are selling out and obviously when you sell out, you can increase prices,” he said.
He also noted that the hotel industry is experiencing “a big, big load of inflation.” “It costs much more money now to employ people,” he told host Maria Bartiromo, noting that wages for his employees have shot up over 20%.
Strebel also pointed out that input costs are a lot higher, including food items like chicken, eggs and beef. “We’ve got supply chain issues from stuff coming overseas so it’s been tough,” he continued, adding that “the business is a strong business” because people love to travel and don’t want to give it up.
The report, based on data from the United States, Australia, Canada, Mexico, Japan, India and the United Kingdom, revealed that in the fourth quarter of 2021, global card member bookings made through American Express Travel, increased 24% compared to 2019 and have continued to strengthen in 2022, the release also pointed.
Strebel said on Tuesday “every day” his hotels set a new record for occupancy.
“COVID moves fast when it comes, the business slows down, but when it goes away the business speeds up real quick,” he said. “The pace of our bookings has never been stronger,” Strebel added, noting that his hotels are 25% higher in reservations for May, June and July compared to 2019, “which was a very strong travel season.” “We are about 60% above where we were this time last year so Americans are back on the road, Americans are back traveling and they’re going to all the great destinations across the United States,” he continued.
Strebel revealed that the most popular destinations include those with beaches, noting that Hilton Head Island in South Carolina has been in demand. He also noted that city destinations, including New York City, “have come back really fast.” Strebel pointed out that, according to his booking data, there is a “bounce back” in business travel in cities including San Francisco, Chicago and Austin. He noted that pre-COVID his hotels “would basically sell out every, Tuesday, Wednesday [and] Thursday with business travel” and now occupancy is reaching about 60 to 70%.
Senior Housing On Road To Recovery 🧓🏘️
Brookdale Senior Living CEO Cindy Baier believes the company is on track to make big gains in occupancy and revenue in 2022.
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.
Though Baier and Brookdale’s other leaders have focused in the last two years on recovery, she also believes that the company is in a position to grow and capitalize on its portfolio in the months and years ahead.
Brookdale’s leaders set the company’s CapEx guidance for 2022 at $160 million for non-development, working out to about $2,000 to $2,500 per unit; and $20 million for development, compared to $3 million for last year’s development allocation.
Brookdale is pursuing a higher-acuity strategy, and roughly 70% of the company’s senior housing portfolio is assisted living or memory care. And as residents age in place, Baier believes the operator will undertake more unit conversions, such as going from independent living to assisted living, or assisted living to memory care.
“We do see that there are communities that will be better if they either have a major renovation or if we add more memory care,” Baier said. “So, we’re really getting back to our normal development process.”
Baier also sees opportunities ahead to undertake some select acquisitions, although she doesn’t see this year as the year when that will happen.
“I’d like to get back to being able to have strong organic growth and then also to have inorganic growth, because we’ve got a great platform,” she said. “I don’t think it’s going to happen in 2022, it’s a goal for the mid- to long-term.”
Brookdale’s biggest challenge
Like many other executives in the senior living industry, Baier sees staffing as the biggest potential hurdle in the ongoing recovery. As she has said in the past, the current labor challenges are the worst she has seen over her career.
“Whether it’s senior housing, whether it’s health care, whether it’s outside of health care, everybody is struggling to get the workers that they need to have their business work properly,” Baier said.
Brookdale’s same-community senior housing facility operating expenses increased by $10 million, or 2.2% in 4Q21, with the company’s leaders attributing that rise to the significant use of contract labor and overtime. The operator also has seen cost inflation for certain positions, such as nurses, caregivers, med techs, CNAs and dining staff.
To mitigate those challenges, Brookdale is emphasizing flexibility and career paths for its workforce in order to recruit and retain more of them instead of relying on agency staffers to fill gaps.
“We historically have had about 33,000 associates, and we’re going to hire more than that,” Baier said. “When you have a variant that is infectious, you may have a high percentage of your staff out, so you have to have more part-time people who can fill that need.”
On the flexibility front, the company in the first quarter of 2022 rolled out a new electronic scheduling tool that allows associates to swap shifts and pick and choose the hours they’d like to work.
“I’m embarrassed to say we used to have people who had to do manual schedules,” Baier said. “By having an electronic scheduling tool, that gives you automation that makes your people more productive.”
To keep each of its communities staffed at the right levels, the company uses a proprietary model to assess the needs of residents and calculate how many workers will be needed to care for them.
Brookdale also has worked to create career paths for employees, so that workers can move up from frontline positions to leadership roles within their community and at the company.
“The pandemic made people reevaluate what was important to them and what they wanted out of life,” Baier said. “So, as employers, we have to step up and make sure that our jobs are compelling.”
Reflections on the past
With six years at Brookdale and four as its CEO — not to mention two years and change of a pandemic — Baier feels as though she has reached a milestone, and a time to reflect on what she has learned so far.
She culminated those reflections in her forthcoming book, which offers a behind-the-scenes look at how Brookdale Senior Living navigated the Covid-19 pandemic. In the book, Baier and many other Brookdale leaders share personal stories and accounts of what life was like during the early days of the pandemic, and what they did to cope with the numerous challenges.
“Maybe today we won’t all want to go back and say, ‘How was this possible?’” Baier said. “But I do think it’s something that is preserving history and preserving our important place in it.”
The Affordable Mouse House 🐁🏘️
Disney sets aside 80 acres in Florida for low-cost housing.