President of the Retirement Villages Association (RVA) Executive Committee GRAHAM WILKINSON looks at what lies ahead for the retirement villages industry.
After almost 20 years on the RVA executive, I received the consolation prize of being appointed president, possibly the only way my colleagues could get to see me to leave after the requisite stint.
When INsite asked me to reflect on those years, and what the future might bring, I had to stop and think back pretty hard. The days of virtually no regulation, the lifestyle versus care debate, and no publicly listed retirement village companies all seem so long ago.
Our industry is now publicly accepted, with a mainstream product, operating in a sound regulatory environment. We are seen as world-leading and we have four public companies and more likely to come; the 75+ population is about to expand considerably in the near term and new villages seem to be announced weekly. Industry cohesiveness is truly impressive and customer satisfaction is at levels only dreamed of by almost every other industry. Even Apple Corporation would be happy with our NPS!
All beer and skittles?
So, is it all beer and skittles? Clearly the current real estate market is favouring projects that are underway, particularly in the upper North Island with unprecedented sales levels, but is this a case of, as Warren Buffet would say, “waiting for the tide to go out to see who is swimming naked”?
While the good times continue to roll, almost any project underway can gain traction, but real estate has a horrible habit of being cyclical. An economic downturn, coupled with an overbuilding regime, will quickly expose those with their togs off. Smaller villages with structural issues may find their new, large, corporate neighbour hard to compete against if they don’t have that unique selling point. While the public entities have large capital resources to withstand economic downturns, even they could be susceptible to advances in homecare technology, particularly with advances designed for the future market, the currently pre-village baby boomers.
Personally, I am optimistic that regardless of the issues any particular village may have, or any slowdown in the economy, the fundamental desire for security and companionship will ensure villages continue to evolve and satisfy the needs of senior Kiwis for many more years. In fact, the only real risk our industry faces is shooting itself in the foot by a failure to collectively deliver on the basic promise that a village offers: “We welcome you to live here, and we will look after you for the rest of your natural life, and when you leave us we will pay you or your estate in a timely manner”, leading to a negative public perception. Provided that promise is delivered on, and no ‘wrinkles’ develop, then our industry will continue to grow regardless of any media sideshows or one-off failures.
Matching and exceeding expectations
But here’s the crux. Together we need to lead the evolution of the industry and ensure that terms and conditions for our clients match, or better still exceed, public expectations. A short-term benefit in loading a capital loss onto a resident will not make for a happy family. After taking sometimes hundreds of thousands of dollars from a resident on exit, why would anyone charge them a few thousand for weekly charges that in no way relates to their occupation or issues? Is it fair that regardless of the circumstances that delay the return of capital to an estate, should an operator simply say “sorry”? Australian company Aveo recently introduced a six or 12-month buyback guarantee for residents but at the same time increased the deferred management fee to 35 per cent. The result: more sales and more profit because the promise is always kept. One day, we could easily see something similar in this country.
Subject to continuing to meet those public expectations, the future is certainly bright. Consolidation and corporatisation is likely to continue but a well-located, well-run individual village can always succeed. Branding will become more important but so will segmentation, where the public start to differentiate between what they may see as homogenous versus upscale offerings. Technology has the ability to be the wildcard both in existing villages and in new offerings. Twenty years ago, a vertical village was seen as unlikely; is a “virtual village” the next iteration?
We will see more scrutiny and regulatory attention, but provided we ensure our members operate with a clear moral compass, we have nothing to fear. The RVA will continue to represent the interests of members and, in doing so, the residents of those villages that those members operate. It is only a matter of time before we see 100,000 New Zealanders living in villages of all sizes and sorts. I hope I can be around for another 20 years to see it happen.