• Posted on March, at 27,

    Meet Kai Hsiao, CEO of Elmcroft by Eclipse Senior Living, based in Lake Oswego, Oregon. Hsiao recently took on the CEO role for Eclipse on the heels of a deal in which Ventas REIT transitioned the 70-plus-property Elmcroft portfolio to the new operating company. Hsiao has held previous roles in senior living including most recently serving as Senior Managing Director, Senior Housing Properties at HCP, Inc. and prior to that as CEO of Holiday Retirement.

    Spotlight on Technology

    Data continues to be a major theme in senior housing and we’re talking a lot about technology. If you had a CEO dashboard that you wanted to look at every morning. What would be on it?

    Hsiao: We’ve got one. I think people get confused between profit and loss (P and L) and key performance indicators (KPIs). P and L is the result of your KPIs, so there are certain metrics that we take a look at that actually drive that number—whether it be sales metrics, or dining metrics or facilities metrics. Give me insight in terms of predictive information. Where am I going to be in the future? And I like to think that we are more proactive than reactive that way by having those KPIs in front of us.

    At Holiday, you were among the first to introduce dynamic pricing to the industry. You were one of the leaders to take technology from other industries and bring it into senior living. What’s next?

    Hsiao: There are a lot of applications out there that we’re taking a look at right now—again, looking at best practices from other industries. We were the first ones in the senior housing business with a 24/7 call center. That’s a hospitality thing. Revenue management that you talked about is another outside-the-industry type of thing…optimize your website, we brought that in as well. There are some other things out there that we’re bringing in. You’ll probably see some things that are happening in staffing that we’re going to be talking about pretty soon from outside the industry.

    We still go to the conference for the International Council of Shopping Centers (ICSC). It’s basically the NIC for the retail industry. We still go to the multifamily trade shows because we really think there’s a lot of stuff to learn from those places and bring into senior housing.

    His background outside of senior housing, however, is part of what gives him perspective, he says. With experience in advertising, retail development and hospitality, Hsiao credits much of his success to having learned non-industry lessons including those around scale, service and people management. We sat down with Hsiao to get his take on why dynamic pricing is the future, where technology is headed next, and why working in “healthy for the wealthy” was a good prep course for a career in senior housing.

    Senior Housing News: Tell me about how you got into senior living.

    Hsiao: It was strange. I was with Canyon Ranch beforehand, which is a resort spa. I call it “healthy for the wealthy.” Canyon Ranch was working on development projects—in Costa Rica, in Miami Beach, and one in Chicago with Related Midwest, and the folks at Related Midwest heard Fortress had just acquired Holiday Retirement at the time. The financing for the projects I was working on at Canyon Ranch were being done by Lehman Brothers, so once Lehman went away, that’s when I connected with Holiday.

    How did Holiday approach you about the job?

    Hsiao: It was about sales and marketing. They had just acquired Holiday and felt that they needed some help in sales and marketing, so I started off on that first. I sort of worked myself through the company.

    When you think of Holiday, you don’t necessarily think of “healthy for the wealthy.” So tell me about this change.

    Hsiao: When I was at Canyon Ranch, I was brought in by the president, who was in turn brought in by Morgan Stanley, who had taken a stake in the company, so it was really more of connections about, you know, private equity type groups. So on the Holiday side, I was brought in by Fortress. I’ve always been sort of the outsider being brought in by the new ownership group. Same thing when I was at Macerich. They had acquired a company called WestCor, which is a retail developer.

    Is it weird being the outsider coming in?

    Hsiao: I actually think that’s been a benefit. Right out of college, I started off in advertising. I think being in advertising actually helped, especially with PE groups because in advertising, if you don’t perform, you’re gone. Coming in as the outsider, you always have a sense of objectivity, and you can assess what’s working and what’s not, and fix what isn’t working.

    Going from obviously hotels to Holiday, what made you want to stick around Holiday long enough to become CEO?

    Bill Colson built a great company. They were developers by trade. And suddenly they had developed so many—close to 300 properties—that they had to really focus on operations. So it was a switch from development to operations, going from a mom-and-pop company to a true scalable national operating platform.

    I started off in sales and marketing and then started working the other parts of the company. Whether it be HR, or IT, or on the finance side.

    What were some of the biggest challenges you faced at Holiday?

    Hsiao: Maybe it’s not so much about Holiday, but senior housing in general—the ability to leverage technology. I’ve always said senior housing is 20 years behind hospitality, 10 years behind multifamily, and the use of technology to have insight into the business. Those other industries have done it already.

    Why do you think it’s been so hard for senior living to start to adopt all that technology?

    Hsiao: I think most folks in senior housing come from the health care side—not necessarily from the business side—and it’s just a different perspective. In health care, it’s very hands-on. When I was at HCP and worked with a lot of different operating companies, I think most people have the sense that technology is an expense versus an investment. I think it’s begun to evolve a bit over time.

    You went from Holiday to HCP, and now you’re back in the game in operations. When you joined HCP was that always kind of your plan to eventually get back into operations?

    Hsiao: No. It was part a personal evolution to be on the ownership side. I really went into it thinking it was just the next step. But then I realized it’s the difference between pushing the string and pulling the string, and I much prefer the operations side and being able to pull the string and see results the very next day.

    …then I realized it’s the difference between pushing the string and pulling the string, and I much prefer the operations side and being able to pull the string and see results the very next day.

    You can only push so hard too when you’re at a REIT, right?

    Hsiao: There are some boundaries there.

    Working at HCP, was it interesting for you to be on the other side of the table? Did you learn anything that surprised you or frustrated you?

    Hsiao: I think it’s always good to get perspective. As an operator, you’re always trying to squeeze as much out of every single community as possible, but from the ownership perspective, it’s about portfolio management. It’s not just about the community; it’s about larger qualifiers.

    Doesn’t sound like it is as much fun.

    Hsiao: I think for folks who enjoy that, it’s lot of fun for them. I think just having come from operations and being in operations for so long, rather than asking, I’d rather just do it.

    How did Eclipse form?

    Hsiao: I sort of blame [former HCP President] Justin Hutchens. When he decided to get back into operations [and become CEO of U.K. operator HC-One], I was like, “Gosh. You know, that does sound really good.” The folks at HCP had asked me about my thoughts once Justin left, so I told them I wanted to get back into operations myself. I started to talk a bunch of potential equity backers. I had worked with Ventas when I was at Holiday and our conversation sort of rolled into “Hey, there may be an opportunity here.”

    Kai Hsiao, CEO, Elmcroft Senior Living

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    Let’s go back. You go from HCP wanting to be back in operations. Who are the first people you call?

    Hsiao: I think it was a who’s who in New York in terms of the private equity firms out there, who are either in the space already or looking to get into the space, and those were all closed-door conversations. But on the Ventas side, the folks I had worked with before understood how I like to run things. And how the team likes to run things.

    What was it like meeting with the equity groups in New York? Were they receptive?

    Hsiao: For the folks that had invested in senior housing already, I think they were looking for something different from what was already out there. PE firms are looking for something that scales, and I think that’s one of the challenges in senior housing.

    There’s still the notion of: “Hey, look, the best performers are regional operators.” I actually don’t subscribe to that. I do think that some people will say bigger is not better. I think you still can be big and be good as well.

    So did you go to those PE meetings, then pick up the phone and call Ventas to say “I need scale?”

    Hsiao: Not really. You develop relationships, start talking to people, and they ask you what you have going on. There was an [opportunity] with Holiday moving from Portland to Florida. I think that was fortuitous because I’ve heard about that as, well, saying “Gosh, there’s some people that I’ve worked with before, I would love to work with them again.” As you get older, I think working with people that you like starts meaning a lot more than before…Shamim, Scott, Sheila…I’d like to think that we can build a company in whatever industry and still do pretty well.

    Did you look at other Industries in finding your next act?

    Hsiao: Sure, there was always the opportunity get back into hospitality or retail development, but I sort of got bit by the senior housing bug.

    You said you were going to do an Eclipse regardless, so what attracted you to the Elmcroft portfolio?

    Hsiao: When you think about it, Holiday spoke to the middle market, and I think Elmcroft is in the same way. It’s just higher up on the acuity scale. You could almost think of them as in the same market, but just a different acuity level.

    Were you concerned about the Elmcroft portfolio?

    Hsiao: No. It’s a great company. We felt it was a good platform to leverage and grow some more.

    Was the plan to then grow the Elmcroft brand or grow the Eclipse brand?

    Hsiao: Going back to your question: Can big actually do well? I think it can if you make it manageable — I mean bite-sized. To go back to hospitality, whether it be Starwood or Marriott or Hilton, when you look at the count, it’s pretty big. But they make it manageable by putting them into brands or sub-brands, and I think by doing that you make the big smaller and a little more focused. Eclipse was always going to be a family of brands, and Elmcroft is just one of those brands.

    Are you going to have your high-end brand? Your Four Seasons?

    Hsiao: Absolutely. The X and Y axis is going to be a value proposition and also acuity level. So you could have a high-end IL brand… you could have a high-end memory care brand.

    So on day one with the Elmcroft portfolio, what’s the first thing you do?

    Hsiao: You always get out to the communities and visit with the residents and associates. We want them to understand that there’s nothing to be scared about. If I could provide them better tools to do their jobs in terms of what nirvana looks like then we should be able to get that.

    So what does nirvana look like?

    Hsiao: Nirvana looks like great care for the residents. You want to be an employer of choice. If you can get those things done, then all the other benefits fall into place.

    What are some of the things you’re doing after going out there and talking to residents?

    Hsiao: As with any company, there are a lot of functional areas that can evolve and improve. Our dining side can evolve. Facilities management in senior housing in general is under-optimized. There’s definitely some work to do there.

    What about the technology side?

    Hsiao: Technology is a given. We are doing that from day one. We actually did a survey with all the associates before we transitioned over and asked: “What can we do to help you the most?” Technology was the number-one answer.

    What kind of technology are they looking for?

    Hsiao: It’s about technology that’s actually integrated in real time and Elmcroft was no different from a lot of companies out there now, which [require employees to enter] information into three different systems and then [wonder], “Which one’s the source of truth out there?” There’s a lot of confusion and inefficiencies around that.

    You talked about Elmcroft being a little higher up the acuity scale than Holiday was. Is that a challenge for you and your team?

    Hsiao: Shamim [Wu] has had great experience at Emeritus and at Silverado. She’s seen everything. At Holiday we actually managed 25 assisted living, memory care communities. That always got lost in the bigger picture. It was close to 5,000 beds. There are entire operating companies out there that don’t have 5,000 beds.

    You brought up the word scale. How big do you want Eclipse to get?

    Hsiao: Our goal is to match the senior to the right product and there are a lot of seniors out there, so as long as we can always provide the right product, we’ll just continue to grow that way.

    Do you think there’s a difference between “affordable” and “middle market?”

    Hsiao: I think the middle market is changing on us, and I think what is affordable is changing. This may sound strange, but I was talking to the folks at Harrah’s casinos, and they were talking about how there are nine levels of household income. Upper-upper, upper-middle, that kind of thing. Ten years ago when people retired, they dropped down about one level just because they stopped working. Flash forward to today, and 10 years later they’re dropping down three to four levels. Fewer people have pensions, fewer people are saving. With home equity, they are spending it on kids’ college educations and vacations. So the level of savings has become a challenge. Affordability is a concern, based upon retirement savings trends.

    Ten years ago when people retired, they dropped down about one [income] level just because they stopped working. Flash forward to today, and 10 years later they’re dropping down three to four levels.

    Let’s talk about trends. Recent NIC data shows that operators face increasing occupancy pressure. How do you think operators are going to get through this? Do you think it’s as bad as some people might be indicating?

    Hsiao: My folks came here from Taiwan, they migrated to the U.S. I think the U.S. is a great capitalist country, and the strong will survive, and the weak won’t. The good operators will survive it.

    Does it present an opportunity?

    Hsiao: I think it’s a great opportunity. There are three buckets of growth for us. One is we’re a property management company. Then developing and acquisitions. In that first bucket, we’re getting calls. I figured that would be the case, because people are looking for folks with a track record—not necessarily the developer who is suddenly now an operator. It’s probably twice as many inquires as I thought there would be.

    Does that scare you a little bit?

    Hsiao: It’s a great opportunity for us.

    Do you have to be selective about who you who you want to work with?

    Hsiao:  I think the biggest challenge is how to grow methodically and not get too far over our skis. 

    Are people calling you and saying are they having problems, or is it they’re looking for different things?

    Hsiao: Track record. I think our results speak for themselves. With our team, with the exception of Shamim, everyone’s from outside the industry. People who are doing things a little bit differently, get into a different result. Our CFO, Scott, is from multifamily. Sheila, our CIO, came from Martha Stewart and e-commerce businesses. I come from retail development and hospitality. I think all the best practices from those industries apply to senior housing, and this has helped us get to the results that we have.

    Do you think there’s a strength in not all having the traditional senior living backgrounds?

    Hsiao:  If I were to do it over again, I would do exactly the same thing and bring in people from outside the industry even today as we’re building Eclipse. My preference is bringing people from outside the industry.

    What are some of the trends you think that senior living can get from retail?

    Hsiao: The flexibility from a staffing standpoint. Who they’re targeting in early stages of the career versus later stages of the career. I don’t think about retail in general—just from the consumer interface. Retail’s migrating from bricks and mortar to online. We just launched the revamped Elmcroft website. How do we provide consumers information they want sooner rather than later?

    Have you integrated dynamic pricing yet?

    Hsiao: Dynamic pricing will be rolling out for us. We had it in independent living because that was an algorithm that was easier to get to. On the AL side, it takes longer because you have to put in the care component. Quite frankly, you’ve got to lock down how you’re delivering that care. Elmcroft isn’t different from a lot of other senior housing companies.

    There’s so many different methodologies out there, you’ve really got to standardize it first before we get to the right algorithm.

    But eventually you think you’ll get there?

    Hsiao: We will.

    How long do you think it’ll take?

    Hsiao: My hope is to be rolling that out 2019.

    So you’re going to these multifamily and retail conferences. Are you starting to see the senior living world integrate with those at all in any way?

    Hsiao: Not enough. Take a look at the training they provide…the Ritz or Four Seasons, and how they actually ingrain that into how they deliver the service. A lot of folks talk about it, but is there actually the accountability on holding people to those standards?

    Senior housing is strange. If you look at hospitality, if the GM were to go away, you’re not going to see the revenues crash. In senior housing, when the ED goes away, it suddenly goes from X to Y. It’s “because the ED left.” Wait a minute—if your process and your systems are actually good enough, you shouldn’t see that type of bounce.

    If you look at hospitality, if the GM were to go away, you’re not going to see the revenues crash. In senior housing, when the ED goes away, it suddenly goes from X to Y. It’s “because the ED left.” Wait a minute—if your process and your systems are actually good enough, you shouldn’t see that type of bounce.

    For the industry to be so dependent on one person and if that one person goes away, then suddenly things crater, there’s a problem there.

    How do you fix that?

    Hsiao: It’s about processes and systems. Do you have the process and systems in place to offset for that? I’m not saying that people aren’t important. People need to execute. But the processes and systems should drive what [you’re] trying to execute, and therefore you should minimize that kind of variability of performance.

    If you have strong processes and systems, you should be able to go away, and everyone’s still running. You shouldn’t see things crater when your ED goes on vacation.

    Why do you think the industry is behind on this?

    Hsiao: I think it’s a mentality, but from an operating standpoint, you still have to have a bigger, wider scope.

    You mentioned the resident experience. What are you seeing as far some trends, and what does Elmcroft do in order to deliver a new and improved resident experience?

    Hsiao: One-on-one touch. Go back to the different, multiple brands. I think you know the level of touch that goes to the value proposition. If I’m paying X, I expect this type of service. Not all seniors are built the same. You’ve got to speak to different service line targets depending on which service you provide.

    With these different levels of service and different brands and price points, does that start to complicate what you are doing? Are you looking at it more as like each brand is its own distinct company, with a shared back office?

    Hsiao: The best thing that we can provide is the back office support and services—from a building standpoint, from a recruiting standpoint, from a marketing standpoint. Those are the things that we’re providing. We’re a support center.


    Let’s talk about leadership. What’s your definition of leadership?

    Hsiao: Lead, follow, or get out of the way. Look, you’ve got to paint a vision for people so they understand what they’re trying to get to. You’ve got to you got to be clear in terms of defining what nirvana looks like.

    I like that. Nirvana. During your during your senior housing career, what’s the biggest challenge you’ve faced?

    The mentality of: “That’s the way we’ve always done [it] so let’s keep on doing it that way.” You don’t have to do that way. Going back to when I started off in advertising, we said if it’s working, then break it, so you can make it work better. And I think that mentality has worked with a lot of the PE firms I’ve work with, too. “Hey, maybe there’s a better way of doing it. Let’s give it a shot and let’s not be afraid.” We tried a lot of things at Holiday, and not all of them worked. But that’s fine. You move on and figure out what does work.

    What’s the biggest risk you’ve taken in your career?

    Hsiao: Leaving jobs thinking that I could do better on the next one. At HCP, I could be comfortable. At Canyon Ranch, I didn’t leave because suddenly there wasn’t anything to do. There’s always a sense of: “Have I done enough here?”

    What’s the best piece of advice you’ve received in your career?

    Hsiao: I remember when I became CEO at Holiday, Granger Cobb called me. He had no reason to give me the call. He just said: “Look, you’re a first-time CEO. You’re probably going to question yourself for every single decision and it’s gonna be lonely at the top. I’ve heard of you. We don’t know each other, but I’ve been in your position before, so give me a call whenever you want to talk.” We started having these quarterly coffee sessions, and I will always thank him for that. Yeah, when you’re young and a first-time CEO, it is a little lonely at the top.

    Who do you consider be your mentor, and how have they helped your career?

    Hsiao: I think there are a bunch of people out there. Granger [Cobb], Justin [Hutchens]. I take a look at even the folks who work for me, like Shamim and Scott, our CFO. Some of the folks I’ve met with on the PE side. Jack Callison, the CEO when I started at Holiday.

    What are some of your greatest strengths as a leader?

    Hsiao: Painting out what nirvana looks like for people, and being maybe a little myopic—these are the goals and objectives and just making sure that we say them again and again and again. I think most people will say there’s never any doubt in terms of what Hsiao was looking for.

    What would you say your biggest weakness is?

    Hsiao: Probably social skills.

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