The Impact of the COVID-19 Epidemic on the U.S. Senior Housing Market—Analysis of Changes in Brookdale’s Market Capitalization Based on Smoothing Splines Regression

Abstract

The U.S. population is aging, with a large portion of the population already entering retirement age. As a result, demand in the senior living industry continues to increase. This article explores the impact of the COVID-19 pandemic on the senior living industry, focusing on changes in market capitalization for industry leader Brookdale. Based on Brookdale's market cap data from 2005 to 2023, smoothing spline regression was used to analyze the impact of the pandemic on the company's market worth. Three different cross-validation methods including ordinary cross-validation (OCV), approximate cross-validation (ACV) and generalized approximate cross-validation (GACV) were tested for regression parameter selection. The study found that ACV provided the best model fit with an R-squared of 0.7181. The results show that Brookdale's market capitalization has experienced a significant decline during the COVID-19 outbreak, and the predicted values are consistent with the actual reduction in Brookdale's market capitalization. Factors contributing to the decline include lower occupancy rates in senior care facilities and the impact of the pandemic on the overall economy. This underscores the likelihood of challenges within the senior living industry during public health emergencies, warning both investors and operators to prepare for potential risks. The employment of the smoothing spline model in this study enhances the precision of market trend representation and facilitates rational decision-making among industry stakeholders.