I recently received a question about the pro’s and con’s of converting hotels to assisted living facilities.
That’s a big question and the answer is something I’m working on since it’s such a frequent question, too.
But this was my quick answer for the reader who sent it the question recently.
Leave a comment below if you also have a question on this topic. And, if you have any experience with hotel conversions – what were the advantages and disadvantages you found?
See the special note below.
Advantages of Converting Hotels to Assisted Living
1. Some hotels (many hotels?) are struggling financially right now. The Covid pandemic has been brutal to the travel and hospitality industry. So that might lead to some interesting opportunities to pick up properties at prices less than the cost of construction. Keep in mind that the cost of purchasing the hotel is just one of the costs, and there will be many more costs in remodeling and starting up operations.
2. Most hotels require a high visibility location, so a hotel conversion might give you an assisted living facility with an excellent location, one that provides good drive-by visibility. Just be careful about picking locations that are too busy.
3. Many hotels are built with some of the same infrastructure needed for an assisted living facility. This includes things like commercial kitchens, dining areas, community rooms, and even a welcoming front desk. At the same time, nearly every hotel will require some level of remodeling to make a competitive assisted living facility.
4. Assisted living facility sizes vary considerably. So do hotels. But the size and scale of many hotels provide enough units to allow the space for some units to be combined and re-purposed to provide even more amenities for assisted living residents. Remember, in your effort to maximize the number of units available to rent, don’t forget about using enough space in the building for amenities and common space if you want to be competitive and fill those extra units.
Disadvantages of Converting Hotels to Assisted Living
1. Hotel locations can be an advantage but they can be a disadvantage in some cases. First, zoning rules might now allow assisted living at the site – although having the use changed to assisted living might not be too much of a problem. Second, some sites might be too commercial, too busy, for a residential living option.
2. Don’t be lured into the trap of thinking that an inexpensive hotel will lead to an inexpensive assisted living facility. Remodeling can be very expensive, sometimes nearly the same price as new construction depending on age, condition, and other factors. I once saw the developer of a school conversion go broke after paying only $1 for the property – the remodel costs were far too much.
3. If you’re already an assisted living operator, you know this one – if you’re new to assisted living, be warned. Getting into the property at a low cost doesn’t always lead to more profitability. Nearly half of assisted living expense is in labor so your remodel plan should keep staffing efficiency in mind. Whether for resident convenience or staff efficiency, some long hallways in hotels can be a challenge for assisted living.
4. The hotel might just be too large for the market you plan to serve. Make sure you do a market feasibility study and help confirm that you’ll have residents to keep your hotel conversion at a reasonable occupancy rate. Otherwise, you might have a large former hotel with excess (costly) capacity.
That’s a quick answer to a question about the pro’s and con’s of converting hotels to assisted living facilities. Stay tuned for more on this topic here at SeniorCareMike.com including a guide to assisted living conversions. Leave a comment or send a message if you’d like the guide when it’s available.
[Special note: every situation is different – while this general information may be appropriate for some, it may not be for you – check with your own advisors and do your research to make sure you have the information you need before taking the next steps.]
John Kamali says
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