Margin Momentum: Senior Living Operators Grow Revenue, Trim Expenses Ahead Of 2025

Senior living operators expect continued margin expansion in 2025 – as long as they can continue to entice older adults to move into their communities.

Operators including Benchmark Senior Living, Cogir, Discovery Senior Living, Merrill Gardens and Stellar Senior Living have increased margins in 2024, and they all believe there’s more opportunity ahead to increase the delta between revenue and expenses.

Improving senior living margins in 2025 hinges on increasing occupancy, a fact that is especially true as operators expect to have less leeway to raise annual rents ahead.

Margins have increased in 2024 as operators have grown occupancy and stabilized expenses, including more wage growth.Operators expect these tailwinds to continue heading into 2025.

Of the operators that spoke to Senior Housing News for this story, companies reported stabilized community operating margins between 25% and north of 40% in certain settings like independent living, a historically lower acuity and revenue-generating sector for many organizations.

Rent, occupancy still ‘largest moving targets’

The senior living industry is steadily adding occupancy as demand surges, as seen by the recent NIC data showing that the average census increased to 86.5% in the third quarter of 2024. Operators have made good progress on margins in 2024, and looking ahead to 2025, they believe they can continue that momentum combination with rent growth, albeit in smaller increases for residents than in the past.

Bonita Springs, Florida-based Discovery Senior Living reported 5% margin growth in 2024 compared to 2023. That’s due to the operator’s ability to rein in expenses across its eight management companies and over 300 communities, according to Discovery Chief Operating Officer Bill Sciortino.

“Our growth on the bottom line has been almost all new revenue and we’ve had a 6% increase in overall revenue growth while trying to hold the bottom line flat,” Sciortino told Senior Housing News. “That’s been the secret of our margin growth.”

Stabilized community operating margins for Discovery ranged between 25% and 35% to 40%, with some communities reporting an operating margin between 45% and 50%, but those higher margins are “still hard to come by,” Sciortino noted.

“Indpendent living has led the charge into people being willing to pay for services, they’re customers that are willing to travel, willing to do activities and willing to pay for us hiring more staff,” Sciortino said.

Waltham, Massachusetts-based Benchmark Senior Living’s occupancy is “back over 90%,” according to CEO Tom Grape. Amid this increase in occupancy, margins have also improved as rate growth continues and large expenses in staffing have improved.

With cost management top of mind, Grape said Benchmark had seen improvement in wage pressure as wages have increased less dramatically compared to the last four years.

“We’re optimistic about our margins and being able to get back to where they were but it will take us a year or two to fully see the benefits of our efforts on cost management,” Grape told Senior Housing News.

Benchmark stabilized community operating margins have remained in the mid-20th percentile in 2024, even with the company’s mostly assisted living and memory care exposure. This regrowth on margin comes as Benchmark reported a pre-Covid-19 pandemic operating margin between 29% and 30%. Grape estimated that the company expects to see similar operating margin profiles akin to those pre-pandemic levels over the next 12 to 18 months.

“We’re confident we can get there given what we’re seeing across the board right now,” Grape added.

Cogir USA CEO Dave Eskenazy told Senior Housing News the company’s occupancy success in the latter part of this year has helped drive margins wider heading into 2025.

With improving occupancy past pre-pandemic levels, Eskenazy said he believes the company, and broader senior living industry, will continue to reap the benefits of improved census and low new supply over the next two years.

In 2024, Cogir USA reported stabilized community operating margins in the “high 30s” and upwards of 40% in certain buildings this year.

“You have to have the right template to go in with a certain size building and strong market with occupancy to go with it,” Eskenazy said. “But if you have those things, I don’t see margins all that different than they were pre-pandemic. There’s no reason we shouldn’t be able to get to 40% margins in the right markets.”

Midvale, Utah-based Stellar Senior Living has also reported strong occupancy growth, mixed with cost management around staffing and expenses. That has widened the company’s margins, according to Senior Vice President Adam Benton.

Operating margins for stabilized communities this year have ranged between 35% and 40% in the most accretive cases, Benton added, with a majority of properties reporting 25% to 30% operating margins.

“There’s still a lot of price discovery on where rents need to be as occupancies increase and if you aren’t careful with that, you might miss opportunities related to charging properly for the care and services that you’re giving,” Benton told Senior Housing News. “The largest moving target is still occupancy and the rents you’re charging.”

In 2024, Merrill Gardens President Tana Gall said the Seattle, Washington-based operator put a “huge focus” on gaining back lost census from the previous four years. With improved operating fundamentals, Gall said operators across the industry have been able to get back to the core business of providing quality care rather than running constant crisis management seen in the early days of the Covid-19 pandemic.

Stabilized community operating margins have ranged between 30% to 40% in 2024, something Gall credits to Merrill Gardens’ portfolio of communities in primary markets and buildings less than a decade old.

Outlook for margins in 2025 depends on staffing, expense control

Senior living operators have faced a revolving door of challenges with regard to staffing, including wage growth and the need to use overtime to help fill operational gaps. Looking ahead to 2025 margins, operators say managing those expenses remains a key factor in continuing margin growth.

Reducing overtime will be a priority for Discovery in 2025, along with weathering increases to utility costs. That’s coupled with more communities leveraging technology to improve care, specifically in using in-room sensors to assist care teams evaluating and billing properly for care, Sciortino said.

To continue to attract new residents, Sciortino said capital providers have started to understand the importance of capital expenditures (CapEx) to improve older buildings to bring them up to the demands of incoming residents seeking active lifestyles.

“There’s a willingness to put money into their communities and eventually, the product has to get better,” Sciortino said. “If capital partners are willing to start helping us with technology and investments, I am optimistic.”

Coupled with controlling overtime spending, expense control also remains a priority for operators in looking to increase margins in 2025. Benchmark is budgeting for 3% overall expense growth, something that’s returned to a more normalized level compared to recent years, Grape said.

“Wages remain the thing that we’re most watching,” Grape said. “We’ve talked about some ways we can purchase smarter and we’re managing our food expenses but we think that’s settled down.”

In 2025, Grape said he expects operators can continue to improve margin if they’re able to capture new census growth.

“Operators that have done a good job improving occupancy expect to see margin improvement and those that haven’t are still struggling need to focus on occupancy first,” Grape added.

The industry could also see continued improvement in revenue generation, but that’s based on occupancy growth—something that takes a sound operating model to execute on, Eskenazy said.

“As we increase occupancies and our rates and shed concessions, those things in combination will certainly result in increasing margin for the next 12 months in my view,” Eskenazy added.

As new supply remains muted and operators look to make occupancy gains, Benton said he believed margin growth would continue across the industry in 2025 and into 2027 before new developments enter the market, adding to competition and potentially slowing continued occupancy gains for established operators.

“I think 2025, 2026 and 2027 is going to be about margin expansion and no new construction in this phase of recovery,” Benton said. “That’s where we’re at.”

Gall added that the “silver bullet” to solving ongoing staffing challenges on retention start with identifying strong executive director candidates. Setting up a strong leader at the community level can help turn around a community’s occupancy journey and margin growth, she added.

“Our tertiary markets have been lagging in their recovery of margin and our primary markets are not, they’re setting the standard,” Gall said. “We want to maintain that recovery and I am bullish on getting back to where we were.”

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