Latest / Best of Business / Dean Hamilton: Ryman Healthcare executive chair defends price hikes and job cuts

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Dean Hamilton: Ryman Healthcare executive chair defends price hikes and job cuts · Best of Business

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  Speaker 1: You're listening to a podcast from Newstalks. The'd be follow
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  Speaker 2: The country's largest age care operator is pumping up prices.
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  Speaker 2: Ryme In Healthcare will increase its deferred management fees that's
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  Speaker 2: the amount that residents pay when they finally permanently vacate
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  Speaker 2: their units, and also the weekly fixed charges they're going
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  Speaker 2: to go up as well. Dean Hamilton is the Ryman
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  Speaker 2: Healthcare executive chair.
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  Speaker 1: Heyden, Hi, Hey, how are you well?
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  Speaker 2: Thank you know, you're essentially pumping up your deferred management
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  Speaker 2: fees because people are living.
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  Speaker 3: Longer, right, Well, I wouldn't call them pumping up. We are.
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  Speaker 3: We're moving more to a market basis. We've currently got
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  Speaker 3: a twenty percent deferred management fee, which essentially is rent
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  Speaker 3: that we take off the resident when they depart so
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  Speaker 3: they don't pay rent on the way through. So we're
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  Speaker 3: currently about twenty percent of the value they give us
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  Speaker 3: when they move in, and we're going to move that
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  Speaker 3: to thirty percent, which is where the majority of the
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  Speaker 3: market is a large part because people are living longer
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  Speaker 3: and sing with us longer, So we just believe we
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  Speaker 3: need to get that restructure right to.
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  Speaker 2: Reflect that, I mean, that's obviously going to only affect
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  Speaker 2: new residents. I would imagine you're not changing existing contracts.
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  Speaker 3: That's a key thing here that it's all about new resident.
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  Speaker 3: It's we've got lifelong commitments for all our current residents,
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  Speaker 3: whether that's on DMFF or whether that's the weekly fees.
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  Speaker 3: So this is from one October the shift for a
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  Speaker 3: new resident, there'll be a choice of DMF thirty or
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  Speaker 3: twenty five, and there will be either a fixed fee
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  Speaker 3: or an inflating weekly fee. So hopefully, you know, for
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  Speaker 3: the whatever financial position they're in, we can find a solution.
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  Speaker 2: But so what that means then is that you're potentially
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  Speaker 2: a couple of decades, if not more, away from actually
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  Speaker 2: seeing this flow through.
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  Speaker 3: Right, Probably not a couple of decades. The average person
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  Speaker 3: in the living sect and up stays around nine years
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  Speaker 3: a decade.
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  Speaker 2: Yeah, thank you, fair enough. But what about the weekly
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  Speaker 2: fixed charges? How much are they going up by?
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  Speaker 3: So we haven't said that it differs by region, difference
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  Speaker 3: by country. We've got our fifty villages, ten of those
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  Speaker 3: exist in Victoria. We've got forty throughout New Zealand. So
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  Speaker 3: they'll be different by country, and we will look to
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  Speaker 3: largely move our current rate to an indexed rate. So
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  Speaker 3: if you're paying roughly two hundred dollars an hour around
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  Speaker 3: that rate will be our base fee that you'll index off,
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  Speaker 3: and depending on the region, we'll then have a higher
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  Speaker 3: fixed fee that says that'll never move again, but that
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  Speaker 3: needs to capture nine years of inflation. So it's a
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  Speaker 3: significantly higher number than the.
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  Speaker 2: New weekly Okay, do you know how much high?
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  Speaker 3: Well, again, it will change by regions, so we're kind
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  Speaker 3: of not pulling a price list out in the media
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  Speaker 3: today because will differ by region. So in terms.
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  Speaker 2: Of the number of units that we've got available in
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  Speaker 2: the country, are we meeting demand yet or are we
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  Speaker 2: still lagging here?
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  Speaker 3: Well, I think in terms of the current mark there
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  Speaker 3: we are reasonable balance at the moment, probably a little
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  Speaker 3: bit more supply than demand because the residence obviously we've
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  Speaker 3: still got this wave of aging population, but they are
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  Speaker 3: now struggling to sell their houses because of the residential
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  Speaker 3: property market. So invariably hither they need to sell their
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  Speaker 3: family home and take that capital and purchase an occupational right.
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  Speaker 3: And I think Auckland clearance rates are roughly twenty five percent.
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  Speaker 3: So we have these people signed up, but they're just
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  Speaker 3: struggling to sell their houses. So you know, I think
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  Speaker 3: that will take a little bit of time to work through.
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  Speaker 2: Do you have but then okay, so let's say we
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  Speaker 2: work through that, Dean, then where are we are we
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  Speaker 2: going to have still supply outstripping demand or all that
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  Speaker 2: flip around?
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  Speaker 3: I think they'll flip around because, in essence of the
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  Speaker 3: recent report done by the government by an independent company
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  Speaker 3: called SAPIIRT, in the next teen years will be twelve
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  Speaker 3: thousand age care beds short, and there's potentially going to
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  Speaker 3: be a similar number of retirement ville studits short as well.
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  Speaker 3: So yeah, I think the danger will be particularly on
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  Speaker 3: the age key is setting with. You know, we believe
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  Speaker 3: the government underfunding age kre reasoning to age communities and
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  Speaker 3: people just aren't going to be building those new villages,
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  Speaker 3: which is one of the reasons why we're pause. We
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  Speaker 3: want to see what this government lands before we start
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  Speaker 3: building more beds. We said we will, but you know,
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  Speaker 3: you have to provide a reasonable return on capital. Otherwise
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  Speaker 3: these people will not come into villages. They'll end up
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  Speaker 3: in your hospitals, and now they will cost you even
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  Speaker 3: more so, we just think they need to lean in
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  Speaker 3: that one.
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  Speaker 2: Hundred and twelve thousand number. Is that just baby boomers
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  Speaker 2: or are we starting to count the exits there as well?
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  Speaker 3: Now that's twelve thousand, not one hundred and twenty thousand,
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  Speaker 3: twelve thousand, twelve thousand, twelve thousand. They'll be short in
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  Speaker 3: age kre beds within ten years.
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  Speaker 2: Okay, so that's still baby boomers.
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  Speaker 3: Yeah, yeah, that's just the aging population now, and you
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  Speaker 3: know it's coming.
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  Speaker 2: When you guys cast ahead, when that baby boomer bubble
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  Speaker 2: bump goes through, are you guys going to end up
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  Speaker 2: having way too many units?
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  Speaker 3: No? I think if most of those demographics that run
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  Speaker 3: through there, that's at least twenty five years away. And
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  Speaker 3: so that's that's beyond my time frame, So not mine though. Well,
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  Speaker 3: you're lucky you're younger than we'll have a bed for you.
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  Speaker 3: It will give a bed for you.
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  Speaker 2: Under millennials. I thought the millennials were a really big
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  Speaker 2: cohort as well.
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  Speaker 3: Now, what do you describe as a millennial. Everyone's got
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  Speaker 3: a different definition.
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  Speaker 2: Okay, Well, I thought a millennial is sort of anyone
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  Speaker 2: up to about like forty forty three is forty four ish.
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  Speaker 3: Yeah, that's still homeowners, isn't it by and large, Yeah,
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  Speaker 3: and so they will be looking to I think I
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  Speaker 3: think the future, in my view, there'll be a combination
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  Speaker 3: of people aging in place in their homes. Also people
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  Speaker 3: wanted to move into residential age ke like a Rhyman
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  Speaker 3: village that has a continuum of key. You can start
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  Speaker 3: out independent. You got a garage in your car and
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  Speaker 3: you're driving the golf, but you're coming back, you having
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  Speaker 3: dinner there, some in the paul playing bowls, and then
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  Speaker 3: as you know, as you get older or your partner
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  Speaker 3: it becomes ill, you can move the service or you
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  Speaker 3: can move into KRE. So we still think the product
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  Speaker 3: remains in high demand and it'll be part of the solution.
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  Speaker 3: I think roughly I saw a number today twelve percent
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  Speaker 3: of people over seeing your father actually inside of residential BLITZO.
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  Speaker 3: We're not saying it's the sole answer, but certainly part
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  Speaker 3: of the solution we think.
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  Speaker 2: Dean, it's very good to talk to you. Thank you
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  Speaker 2: so much, really appreciated. That's Dean Hamilton, Rhyman Healthcare's executive chair.
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