Why Senior Living Should Be an Emerging Segment Within Hospitality

Developed for Hotel Executive – now shared here on RLAGlobal.com.
Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com
Written by Roger Allen

New senior living capacities will be very much in demand in the coming decades, which will undoubtedly offer great opportunities to investors to tap into this fast-expanding market. For now, it remains a question whether hospitality companies can and will participate.

Ageing is expected to become one of the key factors driving social transformation in the 21st century, as the elderly population is growing faster than other age groups. One in six people (16%) will be over age 65 globally by 2050, up from one in ten (10%) in 2022, with the number of individuals aged 65 years or older forecast to be twice the number of children under age 5, the UN said.

These demographic trends are foreseen to support growth in the senior living industry in the coming decades. Market research firm Technavio has estimated that the global senior living market will grow by more than $127 billion, or at a compound annual growth rate of 5.9%, from 2023 to 2028, partially as the baby boomer generation enters retirement age and health care technologies advance.

Seniors set to spend more on housing, hospitality

The affordability of housing remains a problem for many seniors in a number of economies. But the OECD said the income of people aged over 65 increased compared with that of the total population in more than two-thirds of the organization’s member countries in the last two decades. It is also telling that the share of housing in the overall consumer spending of people aged over 50 is predicted to rise to 22.8% in 2050 from 21.5% in 2020, Economist Impact said in a report covering 76 countries.

Demand for senior living facilities and amenities is foreseen to rise not only because of the growth of the elderly population. As average life expectancy climbs, seniors increasingly desire to live independently, remain socially engaged and enjoy leisure activities and experiences. Economist Impact also forecasts that people aged over 50 will allocate 7.9% of their total spending to recreation and culture and 6.2% to restaurants and hotels in 2050, up from 5.5% and 5.7% in 2020, respectively.

Health care providers, insurance firms are all in

The expected demographic shift and concerns about supply of new senior living capacities will likely sustain investor interest in the sector in general, although investor appetite may vary in certain markets. Growth opportunities in senior living attracted investors’ attention from various industries in recent years, ranging from property development to health care, insurance and even retail.

Health care providers often venture into the senior living sector to complement their offerings. US clinics and medical centers operator Sanford Health announced plans in February 2024 to build at least 146 senior living villas at Sioux Falls by 2026. In another example, Swiss rehabilitation services provider Reha Rheinfelden acquired the four-star Park-Hotel am Rhein and its related senior living apartments near Basel from thermal baths operator Parkresort Rheinfelden in April 2024.

Senior living is also attractive for insurers, which can take long-term operational risks. Sagicor, a Barbados-based insurance firm operating in the Americas, started to build the first 88 residences of The Estates at St. George in Barbados, an “active lifestyle residential community”, in 2019. Although there are no age restrictions for prospective buyers, the complex is geared towards seniors and features 24-hour emergency care, special medical clinics and pharmacy and memory care.

At first glance, it may seem surprising to see the emergence of South Korean department stores operator Shinsegae as a potential investor in senior living. The group’s property unit announced plans to develop a “high-quality senior residence project” in December 2023. While not too many details have been disclosed about the development so far, the company said it wants to integrate offerings from other members of the Shinsegae group in the envisioned senior residences business.

Hospitality projects target 55+ active adults

Despite the promising opportunities, hospitality firms have so far largely overlooked the senior living sector, and participated in only a handful of deals or projects in the past few years. US hotels, resorts and restaurants franchisor Margaritaville, founded by tropical rock singer Jimmy Buffett, teamed up with residential developer Minto Communities in 2017 to open Latitude Margaritaville Daytona Beach, its first senior living community for those over age 55, in Florida. Since then, the partners opened two other communities in Florida and South Carolina and are planning to launch additional locations in Texas and Mexico.

Another hospitality company opening master-planned residential facilities for buyers aged 55+ is Disney – it can be considered a hospitality firm as it offers theme parks, cruise ship vacations and golf courses, among others. For its Storyliving by Disney senior living concept, the company works together with DMB Development and third-party contractors to build and sell 2,000 homes at Cotino, the first community in the Greater Palm Springs area in California. A second Storyliving by Disney community, Asteria, is envisioned to open at Raleigh, North Carolina, in 2027.

Hotel brands show muted interest, at least for now

Adopting a hospitality approach has become popular for senior living operators, which increasingly introduce more sophisticated hotel-like features and amenities to residents. These can include concierge services, various food and culinary options, a wider variety of programming and social engagement activities as well as additional wellness and wellbeing treatments or services.

Some hotel operators took notice of this trend, discovering that they could leverage the power of their brands in senior living, partially as baby boomers tend to have strong loyalty for their favourite brands and could favour housing that offers quality associated with respected hotel brands. Yet, the number of hotel operators entering the senior living sector seems to be low, at least for now.

One example of hotel firms testing the waters of senior living is Lotte Hotels in South Korea, which established its Vitality & Liberty (VL) senior residence brand in 2022 “as a new growth engine”. It plans to open two properties, VL Lhour in Busan and VL Lewest in Seoul. The latter will feature a 24-hour health center affiliated with Lotte Medical Foundation’s Bobath Memorial Hospital.

Accor launched Accor One Living, a platform to support the planning, development, marketing and operation of mixed-use projects including branded residences, in 2023. Jeff Tisdall, the platform’s chief business officer, reportedly said at a hospitality forum in Athens in November 2024 that Accor is looking at the senior living opportunity, especially at those aged 55 years and above, and how they create an offer for mature active buyers. He said they are seeing interest, especially from Asia.

Residential tie-ups are the way to go for hotels

Senior living is one of several potential areas in residential real estate that hotel companies should consider expanding in to maintain growth, real estate advisor CBRE said. “To drive higher same-store sales, hotel brands and owners will need to expand services to existing customers or attract new customers beyond traditional business and leisure travelers and engage them beyond their typical peak travel years (early 30s to late 50s),” it said.

“Imagine if a company like Marriott could begin to capture a large share of future guests’ wallets at 18 by entering student housing or co-living, offer them corporate housing or serviced apartments as those individuals secure and change jobs in new cities, and if that brand loyalty and trust could be extended into the later stages of life. Marriott, or any globally recognized hotel brand family, could then capture a larger share of guests’ wallets from ‘college to grave’, so to speak”, it said.

CBRE expects hospitality firms to partner with real estate companies “to create trusted and amenitized living options like student housing, co-living, senior communities and vacation homes,” it said. These partnerships, joint ventures or brand alliances can provide numerous benefits to participating partners, and allow hotels to “enhance diversification, improve returns on existing assets, extend growth, and enhance their competitive moat”, the company added.

New customers will need new senior living products

Hospitality companies, potentially in partnership with senior living providers, are in a position to design and market “enhanced lifestyle-driven” housing appeals to baby boomers now and new generations in the future, “instead of waiting until they are in their mid- to late 80s”, Bob Kramer, co-founder and strategic advisor of the National Investment Center for Seniors Housing & Care (NIC) in the US wrote in the Boston Hospitality Review.

He believes that new senior living concepts, such as Latitude Margaritaville and Storyliving by Disney, show that hospitality leaders are already recognizing the business potential of this opportunity. “The most successful businesses will appreciate the value of reaching these dynamic new customers long before they […] feel forced to bring care services into their homes or spend their last years in a more traditional assisted living or skilled nursing facility. This outlook supports the case for seizing this unprecedented opportunity now,” he said.

The senior living sector is about to see the rise of new communities for new generations of older adults who want to avoid the type of communities that served their parents, Kramer wrote. The challenge for service providers – whether they come from the housing, healthcare or hospitality industry – is to provide experiences that are metaphors for being alive rather than the end of meaningful life. “The demand will be huge, but this product is yet to be delivered”, he added.