Author: Antonia Norris

The big three private operators have just released their sales results for the last 12 months after the Four Corners TV program of27 June (2017) that caused sales to crash.

For 2017/8 Aveo resales were down 38%, Lendlease down 26% and Stockland down 23%.

Only now is new customer enquiry getting back to pre Four Corners levels.

See the Aveo chart above.

The sales conversion ratio used to be one in three, meaning for every three people that visited the village as a potential customer, one would buy. A conversion rate of 33%.

Our estimate, based on regularly talking to operators across the country, is that 25% of operators are still achieving sales at this rate. (Yesterday I was at Mount Gilead village outside of Sydney and they are building and selling 10 to 12 new homes a month!).

The big operators aren’t. The Aveo chart shows they need to make 22 sales a week across the country to clear the turnover of their existing village homes.

Before the TV program they had to make 175 appointments each week, with 135 people actually turning up at the village to give them actual 22 sales.

This equates to a ratio of 16% or one in six people who ‘walk down the drive’.

Aveo is now getting fewer people down that drive but their success is up to one in five, or 20%.

All reports say that these potential customers now have their adult children with them who want a clear explanation of the contracts.

So each sale requires considerably more time. Is this your experience?

If sales have been slow then you most probably have a buildup of stock to sell, with unhappy families waiting for their cash.

What you need is fewer but higher quality potential customers, not ‘tyre kickers’ that take your time.

You need to have a sales ratio of at least one in three.

Our website villages.com.au delivers 800,000 people a year who are genuinely thinking about and searching for retirement villages. We carry every retirement village in Australia on the website for free but to really work requires a promotional listing at $800 for 12 months.

If you have a promotional listing, then thanks. But when did you last look at it and update to better quality photographs, sales points, and pricing?

Good quality listings will generate you better quality enquiries and faster sales.

If you need a hand with this, email us at info@docomemonday.com.au or call us on 02 9555 9576.

The same resident committee make this comment:

“C2.2 From our experience, we would like to see something added to prevent operators from

changing management staff at too frequent intervals. We have had a number of complaints

about this happening in our village. Two years is far too short a time for a VM to get to know a

village, let alone its residents; residents end up feeling demoralised and give up trying to

know the names of the staff – whose salaries are paid by residents!!!”

We agree. Common sense says that it takes at least one year to understand the full operations of a village and to understand not only the residents but the budget.

The second year allows the manager to make improvements that will benefit the village in the longer term – the next couple of years.

At the same time the village manager builds a real appreciation for each resident and their journey, plus supports new residents that join in large part because of the reassurance the village manager provides that their welfare will be respected and nurtured.

Supporting the resident committee statement, our survey in January this year of village managers showed that 50% stay in the job for three years or less.

We regard this as a very telling statistic. Either the wrong people are being selected as village managers or they are not receiving the support and reward they deserve and need to provide a fulfilling career.

Again, your thoughts?

Aveo is releasing two new contracts next month, adding to their standard contract which they call the Aveo Way.

This standard contract is a 35% DMF over three years. You can depart the village within six months and get your money back. They guarantee to buyback the unit within six months if not sold. You don’t share in the capital gain, but you don’t pay any marketing costs or refurbishment costs.

It has been operating for three years.

‘Aveo Essentials’ is perhaps designed to address media criticism of the 35% over three years DMF.

It will now offer 35% over five years but the money back guarantee is only for three months and the buyback guarantee takes place after 12 months.

Most of us appreciate that once a person is into a village they are unlikely to move out within three or six months of course.

Aveo has not indicated whether this contract will have a higher entry price to their standard contract to compensate for the five-year DMF.

‘Aveo Certainty’ is all about a care path for the incoming resident. It’s a three year/35% DMF with a six-month money back guarantee and buyback guarantee.

And it adds that you can transfer to any Freedom unit (Aveo’s private aged care program delivered in a service department) or an Aveo aged care facility with no extra DMF. Your net equity is treated as a RAD.

They will charge $2,000 a year ‘membership’ fee for this privilege.

This contract will only be available at selected QLD locations.

Most not-for-profit operators with a co-located facility would say all their contracts are like ‘Aveo Certainty’ (without a membership).

Rymans brought this model over from New Zealand four years ago very successfully.

These contracts do not reflect the level of choice that say the new Lendlease options provide customers. But Lendlease points out that while they offer significant choice, around 85% of customers still choose the traditional DMF model, reinforcing the view that village customers would prefer to enjoy the village now at a lower price and pay for it later when they are no longer with us.

Is this your experience?

The chart above is interesting.

It shows the average weekly booked appointments with Aveo, the actual appointments where customers are seen at the village and the actual sales made.

Before the Four Corners program Aveo was booking just over 170 appointments a week and seeing about 135 people, then making 22 sales. This means 16% of people who came to the village purchased.

12 months later they book 150 appointments a week and see 105 people at the village and achieve 21 sales, or 20% of people who came to the village.

Slightly fewer people but more committed.

What is more, Aveo increased their prices by an average of 12% on resale stock over the 12 months. They have committed to increasing village prices in line with residential prices.

This is another interesting point. Is demand knocked today by residential housing prices? They were in the GFC; village sales stopped when housing sales and prices dropped overnight. This also happened in WA three years ago and hasn’t recovered.

But check out the declining green line in the chart – this is the option clearance rate across Australia over the past 12 months. It has dropped from 72% to 54%, with far fewer properties going to auction.

Aveo CEO Geoff Grady told analysts yesterday that retirement villages are a ‘needs’ purchase and sales are isolated from the property downturn.

Separately they have argued that with the sector building villages at less than half the rate required to maintain penetration rate of 8% of all people 75+ living in villages, demand is naturally strong.

Our research has always supported that villages are a needs purchase. People don’t want to move to a retirement village, they need to because of events in their life

This means demand far exceeds supply. Do you agree? How are your sales conversion rates?

The role of the village manager is both challenging and rewarding.

How challenging is reflected in the fact that for many it is a high turnover career.

In January this year we commissioned Australian Online Research (AOR) to survey the managers in villages covered in our National Resident Survey villages. 283 responded, a significant number (out of 545 invited).

From the chart above you can see 21% had been in the job for less than a year and 51% had been in the job for less than three years.

As you would know, it takes a couple of years to understand a village, its budgets, its residents, the service providers.

So this turnover is not good.

Village managers were also asked for any added comments they would like to offer. The following are some of the themes which emerged:

1. High job satisfaction

2. Dealing with unrealistic expectations of operators, residents and families:

• Increased demands of compliance, regulatory and corporate reporting, taking away from needs of day-to-day job
• Challenges of increasing care and support needs of residents as they age, which may exceed the intended ‘offer’ of a retirement village
• Unrealistic expectations for village manager to be on call 24/7
• Poor understanding of contract terms by longer-term residents
• Increased pressures to do more with same budget

3. Issues with job appeal and description undervaluing the role

• Complexities of the job undervalued, requiring complex set of skills
• Poor pay structure
• Poor job growth opportunities (e.g. promotion)

4. Insufficient staffing/support to run the village

5. Need for more authority – particularly with maintenance and approval of capital expenditures

6. Impact of bad press on the industry, perceptions and demands

7. Decline in respect by residents – no longer mutual respect, but matter of ‘we pay your wage’

Do these themes match your own?