On its face, net operating income (NOI) is a simple formula: revenue minus operating expenses. Therefore, increasing NOI is only a matter of increasing revenue or reducing expenses.
Of course, all operators know it’s not nearly that simple. Where can you unlock new revenue, or cut expenses without also damaging that revenue? There are thousands of different ways to do so, but the “secret sauce” that keeps revenue high and expenses low is a difficult recipe to uncover.
What’s more, sometimes the most logical source of good NOI — high occupancy — isn’t enough.
Dana Wollschlager, principal with senior living real estate consulting firm Plante Moran Living Forward, has tales of clients who were 100 percent occupied and completely private pay, yet somehow still losing money.