… and why don’t we use penetration rates?
Bryon Cohron, vice president of market analysis and business development:
Something that really makes our firm unique is our ability to estimate demand using specific consumer preference. Here, we don’t have to rely on penetration rates. And while penetration rates are a commonly used metric, the challenge we have with that is research has clearly shown that penetration rates do not correlate with occupancy. In other words, there are parts of the country—in Lancaster, PA, for example—where we see penetration rates exceed over 30% in a market area, and their occupancy is well over 94%. There are other markets with penetration rates that don’t even reach 3%, and we see occupancy struggling.
So then the question is, “Well, what penetration rate is right?” And the answer to that question for us is, there is not a right answer.
What we are able to do is, because we’re a consumer-driven firm, we’re able to rely on consumer preferences as it relates to senior housing. So instead of using a penetration rate, we have a national demand methodology that’s based on, again, consumer preference and their willingness to move to the various components of senior housing.
As we know, as the senior housing market continues to expand and grow during this prosperous time, using penetration rates, in our opinion, can really lead you awry. I think a couple of reasons you can sort of check off on these things are, one, with a penetration demand analysis, you never really see a negative demand. Maybe it’s an unfavorable penetration rate, but that doesn’t really express demand. Also, our demand model is able to estimate those who move annually, compared to penetration rates, which is just the overall demand at that specific time. I think those two variations can really make a big difference.
And with over 35 years using consumer preference for our demand model, we believe—and have billions of dollars of development in our background to support using our consumer research. And, again, it sort of goes back to letting our clients and customers make informed decisions with the best data possible.