Competing in the assisted living industry: A hospitality perspective; assisted living providers should provide hospitality services--and teaming with hospitality providers can help. (Feature Article).

The hospitality component in assisted living is by comparison much larger, and the healthcare component much smaller, than in any other segment of the healthcare industry. This may explain why, in recent years, firms in the hospitality industry, such as Marriott International and the Hyatt Corporation, have been expanding into assisted living. (1)

Hospitality firms are especially well positioned to compete in this field. They are experienced in creating value and ensuring quality service through customer satisfaction. However, anyassisted living facility (ALF), regardless of whether it is affiliated with the hospitality industry, should also focus on creating value and ensuring quality service through customer satisfaction. Some suggestions for accomplishing this follow.

Make Customer Service a Top Priority

In an attempt to fill units, many ALFs have tried to cut costs and reduce prices. (2) Decreasing prices to increase occupancy, though, can lead to an erosion in quality of service. ALFs should focus instead on providing exceptional quality, ensuring quick recovery from any service failures, and training and empowering employees to respond efficiently and effectively to customers' needs. By using a marketing philosophy as their orientation, (3) ALF operators can earn profits by serving their customers "better than the next guy.

This would include: Enhancing revenues with ancillary services. The movement toward aging in place will provide opportunities for ALFs to sell ancillary services. One approach is to offer the services of assisted living but in the seniors' own homes. In 2001, Sunrise Assisted Living began offering "At Home" Assisted Living by Sunrise. This includes an in-home aide to help the senior dress and/or bathe, and technology to provide assistance in taking the right medications at the right time, or to call for help in times of emergency. (4) Besides home health services, ALFs can offer other services in the home, including rehabilitation services and geriatric assessment. (5)

By offering such services at seniors' homes, ALFs can maintain operating margins while virtually guaranteeing a source of future residents. For example, when seniors who subscribe to Sunrise's "At Home" Assisted Living become too frail to stay at home (even with assistance), they are likely to move into a Sunrise ALF. Already familiar and comfortable with the service and personnel provided by Sunrise, a senior will find it easier to make the transition to an ALF setting.

Maintaining occupancy by focusing on resident health and wellness. Health and wellness programs are important to ALFs because they help residents to age in place, and thus help the ALF to maintain satisfactory occupancy rates. As one analyst has noted, "Managing acuity means managing costs, and managing costs will help to preserve assisted living's value and capacity to compete with providers of other health sectors." (6) Managing the medical needs of residents through health and wellness programs can help ALFs address financial issues.

According to a 1999 study by Decision Resources, Inc., a healthcare research and consulting firm, "the accelerated growth of the U.S. elderly population will... [spur] the growth of assisted living facilities (ALFs) with an emphasis on wellness care." (7) The study also states that "managing residents' medical needs will allow ALFs to control costs, increase revenue, and increase market share" since "approximately 65 percent of the revenue ALFs derive from monthly fees is service-based revenue, indicating that revenue enhancement can be gained through ancillary services."

ALFs have the capacity to encourage a wellness lifestyle. For example, weight training has been used in ALFs as part of a wellness initiative. (8) ALFs could also offer risk assessment, health education, and disease management programs.

Joining integrated delivery systems. ALFs, in general, can improve their alignment with their caregiving environment by joining an integrated health care delivery system. This can be accomplished through sole or joint ownership of a provider, cooperative management agreements, and/or providing assisted living services at seniors' homes. By joining an integrated delivery system, an ALF can help secure its supply of new residents and appropriately refer residents it can no longer serve. The ALF can increase its profitability by serving the residents it should be serving economically.

Identifying unique sources of competitive advantage. ALFs owned by hospitality firms might have a unique advantage in that combining with other facilities in the hospitality industry can offer even more synergy than combining with healthcare organizations in an integrated delivery system. For instance, ALFs owned by hospitality firms might find a competitive advantage in generating referrals, since two important sources of referrals for ALFs are the adult children of seniors and the seniors themselves. Hospitality operators of ALFs have special opportunities to capture these referral sources by making better use of shared facilities and services through resort/ALF and time-share/ALF combinations. Here's more detail on how that would work:

Combining resorts and time shares with ALFs. ALFs owned by hospitality firms may have the ability to "grow their own" future residents by combining with resort facilities or time shares on the same campus. This would allow independent seniors, baby boomers, and other adults to familiarize themselves with the idea of assisted living in a nonthreatening manner. Then, when the time comes to find an alternative to independent living, they would be more likely to select the "attached" ALF (or another in the same chain) because of their familiarity and (presumably) satisfaction with the company's level of service.

Another option for hospitality operators considering a resort/ALF or timeshare/ALF combination is to gear the resort or time shares themselves to adults 55 years of age and older. Many independent seniors with leisure time and disposable income are quite active, but may nevertheless require some modification of living quarters. One example would be bathrooms equipped with roll-in showers; another would be grab bars that are functional but artistically designed. Furniture such as sofas, chairs, and beds might be adjusted to heights that make them easier for seniors to get in and out of. Other feature modifications might include brighter lighting; a larger font size for all printed materials; a handicapped-accessible airport shuttle service; personal golf carts; scooter rentals; large-screen televisions; exercise equipment and exercise classes geared toward older adults; restaurants capable of satisfying special dietary needs; lifts in pools; and easy access to medical care, either nearby or on the campus. A ch eck-in process using low desks at which both the front-desk agent and the guest could sit might be another desirable feature.

The sharing of services and facilities in these combination-type units would lead to maximally cost-effective operations for the hospitality/ALF operator. They might, for example, share laundry, housekeeping, food and beverage, human resources, sales and marketing, and other staff and production personnel and operations.

Additional revenues might be generated by offering discounts to ALP residents for using such readily available amenities as room service, restaurants, golf courses, and spa treatments during off-peak hours. Residents would be afforded access to an array of leisure and social activities without having to leave the resort/ALF or time-share/ALF campus.

Obviously, design issues are especially important for these ALF combinations--no resort or time-share facility wants to create an unappealing image. ALFs might occupy separate buildings on the same campus. Alternatively, locating rooms or time-share units in "pods" or segments connected via hallways or common service centers would provide the flexibility to convert resort rooms or timeshare units to assisted living units or vice versa, as needed, allowing for increased flexibility. Design in these combinations should focus on maximizing satisfaction for customers who are interested in two different products being offered in one physical location. The operational goal would be to maximize resource use, increase revenues, and generate a steady source of future residents for the ALFs.

Conclusion

The new model for long-term care could be the ALF that offers home healthcare. This new model reflects the view that health should not be narrowly defined; i.e., it is not merely the absence of disease. (9) And when health is more broadly defined, it then becomes clear that a significant portion of the services provided by the healthcare industry will necessarily involve the hospitality function. Healthcare in this sense is concerned not only with whether one is well enough to eat, but whether one can enjoy the act of eating.

The deinstitutionalization of healthcare that occurred with home healthcare has weakened support for the institution-based, biomedical model of care delivery. A direct result has been the increased importance of the hospitality function in assisted living. Hospitality-based companies may have a head start, but ALFs that are not operated by the hospitality industry would do well to learn from them.

References

(1.) Allen JE. Assisted Living Administration: The Knowledge Base. New York: Springer Publishing Company, 1999.

(2.) Smith R. Assisted living firms grapple with oversupply--Construction falls sharply and operators offer incentives to fill space. Wall Street Journal. April 18, 2001:B12.

(3.) Lewis RC, Chambers RE. Marketing Leadership in Hospitality: Foundations and Practices. New York: Van Nostrand Reinhold, 1989.

(4.) Shapiro JP. Growing old in a good home. U.S. News & World Report. May 21, 2001:56-61.

(5.) Moore J. An assisted living top ten: Issues to address this year. Balance 2000;4(2):24-5.

(6.) Breslin CS. Assisted living must radically restructure service delivery in order to financially survive. Balance 2000;4(6):16,26.

(7.) Study highlights growth of assisted living facilities. Healthcare Financial Management 1999;53(5):24.

(8.) Zinn L. Weight training: Not just for kids. Nursing Homes/Long Term Care Management 2000;49(10):100-2.

(9.) World Health Organization. Constitution of the World Health Organization. 1948.

Gregory O. Ginn, PhD, is assistant professor of healthcare administration, and Cheri A. Young, PhD, is assistant professor of hotel management, University of Nevada, Las Vegas. For further information, phone [phone] (Ginn) or [phone] (Young). To comment on this article, please send e-mail to [e-mail].