Meeting Room Business Review of Shared Office Spaces in ...

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© CloudVO copyright 2019 Meeting Room Business Review of Shared Office Spaces in the U.S. Pricing, Utilization & Other Metrics A white paper by the CloudVO Analysis Team April 1st, 2019

Transcript of Meeting Room Business Review of Shared Office Spaces in ...

©CloudVOcopyright2019

MeetingRoomBusinessReviewofSharedOfficeSpacesintheU.S.

Pricing,Utilization&OtherMetrics

AwhitepaperbytheCloudVOAnalysisTeam

April1st,2019

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ExecutiveSummaryThismicro-economic analysis ofDayOffice andMeetingRoompricing, utilizationrates,andrevenue, isanupdateto thecomprehensivemeetingroompricereviewfirstpublishedbyCloudVOin2015.Itisahigh-levelsummaryofaconsiderablelargeramountofdataandanalysescollectedandperformedinQ12019.Inthefirstquarterof2019,wecollectedhourlypricesfrom20,710dayofficesandmeetingroomsin3,378locationsacrosstheU.S.,availableforbookingonlinedirectlyfrom the providers’ownweb sites or via resellers like CloudVO, Liquidspace andDavinci.Weminedthedatatodrawcomparisonsacrossregions,acrossproviders,between resellers and original providers, and of course a comparison betweenCloudVOpartnersandRegusineachregion.AmorecomprehensiveanalysisismadeavailableforfreetoCloudVOpartnersatafiner layerof granularity,whereCloudVOpartners can forexampledrilldownontheirregionofoperationanduseittosetupmoreeffectivemeetingroomstrategies.InthispublicversionwearesharingdataaggregatedonaUS-widebasisthathighlightdifferent strategiesacrossprovidersand should raisemanygoodquestions in theoperator’s mind.We also share meeting room utilization metrics from our sistercompanyPacificWorkplaces.We believe this survey paints an accurate picture of the meeting room businessprovidedforbytheSharedOfficeSpaceindustryintheU.S.The survey does not include data from hotels or conference centers that have adifferentvaluepropositionandtypicallychargehigherrates.Themeetingroombusinessisasubstantialsourceofrevenueforsharedofficespaceoperators,withexpectedrevenuesignificantlyhigherthanalternativeuses,suchasfull-timeofficesorcoworkingspace.Thisanalysisgivesasenseofthepotentialforrevenuepertypeofroomandpersquarefoot.Italsosharesstatisticsonobservedretailhourlypricesforvariousroomsizes.AveragepublishedretailpricesintheU.S.formeetingroomsareasfollows:

- DayOffices(£3seats):$23.9/hour- SmallMeetingRooms(4-5seats):$42.8/hour- MediumSizeMeetingRooms(6-10seats):$58.3/hour- LargeMeetingRooms(11-20seats):$79.3/hour- XLMeeting/TrainingRooms(21+seats):$117.6/hour

However,theserateshidesignificantdifferencesbasedongeographicalandbuildingstanding criteria, but also due to sensibly different marketing approaches byoperators.

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MeetingRoomInventoryTheaverageCloudVOpartnerlists3.5dayofficesandmeetingrooms,withtypicallyonedayofficeorasmallsizemeetingroom(5seatsorless),onemedium-sizedmeetingroom(6to10seats),andonelargeconferenceroom(11+seats).Often,oneotherroomisaddedtothatmix,typicallyamediummeetingroom(for38%ofoperators)oranadditionaldayoffice(in14%ofthecases).

However,sincemanyoperatorsusevacantofficestoaccommodatespill-overofdayoffice bookings, and since a few operators do not put all of theirmeeting roomsavailable forbookingby3rdpartiesonline,wecanconsider that the truemeetingroominventoryofthetypicalCloudVOpartnerispossiblyincrementallyhigher.Regusseemstosystematicallyputtheirvacantofficesupforonlinebookingsas“DayOffices”.Wesuspect that their ITplatformdoes it automatically.Thisexplains theveryhighnumberof“DayOffices”thatareavailableforbookingonlineatmostoftheirlocations2weeksinadvance(12-dayofficesonaverageavailableforbookingonlineperlocation).Thisapproach(agreatideaweencourageourpartnerstoemulate)hasprobably helped resolvemuch of the booking congestion that, in the recent past,caused a tremendous amount of dissatisfaction by Regus users, at least for smallmeeting room bookings. On the other hand, Regus is not as well equipped withmediumandlargemeetingroomsasmostofourCloudVOpartners.

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Number of Meeting Rooms Per Location for CloudVO Partners - in U.S. - Q1 2019

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CloudVOpartnerstendtohavemoremeetingroominventorythanothernon-Regusoperators.ThisisprobablyexplainedbythemorediscriminatoryapproachCloudVOtakestolistnewlocations,comparedtootherresellers.Onecaveattothisdataisthatit only includes rooms available for booking online. In some cases, coworkingoperators do keep additional meeting rooms or meeting tables exclusively formembers,oftenonafirst-comefirst-servedbasis.Keepingthatinmind,20%ofCloudVOpartnersoffer5ormoremeetingroomsand5%have7ormore.Theytendtobethemostprofitableoperations.While comparing the data with what we collected in 2015, we found that theoperatorswiththelargestinventoryofmeetingrooms(95thpercentile),increasedtheirinventoryfrom6to7overthelastfouryears.

Day offices (3 seats or less)

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Small (4-5)12%

Medium (6-10)39%

Large Conf Rooms (11-20)

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XL (21 +)8%

Meeting Rooms Inventory in U.S. Non-Regus Providers Only

5,879 Rooms - Q1 2019

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Small (4-5)6%

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Avge Number of Meeting Rooms Per Location Available online in U.S. - Q1 2019

Regus CloudVO Partners All Non-Regus

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Thissuggeststhatoperatorswhofoundthesuccessfulrecipetomarkettheirmeetingrooms are able to maximize utilization, otherwise they would convert poorlyperformingmeetingroomsbackintoprivateoffices(wheninfactthereversetrendistrue),andincreasetheirrevenuesignificantly.

Theabovegraphsuggeststhat64%ofCloudVOoperatorsmakeavailableonlineatleastonedayoffice,43%offeratleastonesmallmeetingroom,85%atleastonemedium-sizedmeetingroom,54%atleastonelargeconferenceroom,and12%withoneormoreextra-largeroomswithacapacityof21seatsormore.

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% of Locations with at least one Meeting Room per Category - US only Q1 2019

CloudVO Partners Regus All Others

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The above graph suggests that 38% of operators have at least two medium-sizedmeetingrooms(6to10seats)availableforbookingsonlineand4%ofoperatorshaveatleast3dedicateddayoffices.

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MeetingRoomPricingInatypicalsharedworkspacelocationintheU.S.,dayofficesarepricedat$22/hour,small meeting rooms at $40, medium-sized rooms at $50, and large rooms at$70/hour.Averagepricesareabithigherthanmedianprices(whichisthedatausedtoillustratethe”typical”location),atexpensiveroomsintrophybuildings,andsomemis-priced rooms on the high-side by operators, are pulling the averages up,

particularlyforlargerooms.However,thesemedianandmodepriceshidelargevariations.Forexample,25%ofmediumconference rooms (6 to10 seats) arepricedatorbelow$40/hour,whileanother25%arepricedatorover$71/hour.WhencomparingReguspricingwithallotheroperators,thedifferenceofstrategyisstriking.Regusisalotmoreaggressivethanindependentoperatorsonthepricingofdayoffices:$22.4forRegusversus$32.7forotheroperatorsonaverageacrosstheU.S.(31%less).Conversely,theytendtopricelargermeetingroomsmuchhigherthanotheroperators(e.g.$104.3versus$75.4onaverageforlargemeetingrooms,or38%more).Indoingso,webelieveRegusisbetterabletomaximizemeetingroomrevenuethanindependentoperators.

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Hourly Prices Per Room Size - All OperatorsUS only - Q1 2019

75th Percentile 50th percentile Mean 25th percentile

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Attractivelypriceddayofficesareoftenawaytobringmoretraffictoalocationwhichmay eventually convert into a full-timemembership. Many day office users alsobecomerepeatcustomersandbooklargermeetingroomslater.Ingeneral,usersareverypricesensitivewhenbookingsmallmeetingroomsordayoffices,andalotlesspricesensitivewithlargermeetingrooms.Thisisbecausethehardcostofthemeetingroombookingbecomesamuchsmallerpercentageoftheoverallcostofthemeetingwhenmanypeopleareinvolved.A2-hourmeetingwith10peoplecarriesanopportunitycostof20hoursofworkfortheentiregroup(plustraveltime!),whichissignificant.Ifaproblemarisesduringalargemeeting, it cannot be easilymoved,whereas the opportunity cost for a 2-personmeetingissignificantlysmallerandasmallmeetingcanmoreeasilyberelocatedifsomethingunexpectedhappens.Some of the noticeable price differences are geographical or due to variations inbuildingstandingsandamenities,butmanysimplyreflectdifferencesinmarketingapproachesacrossoperators.Forexample:

- In theWashington,D.C. area,dayofficesareonaveragepriced24%higherthanintherestoftheU.S.,andmeetingroomsarepriced49%higher

- InNewYorkCity,dayofficesareonaveragepriced21%higherthanintherestoftheU.S.,andmeetingroomsarepriced38%higher

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All Operators Average Hourly Price Per Room Size - US only - Q1 2019

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- Inbusymarkets,likeinNewYorkCityorintheSanFranciscoBayArea,wherethere is a lotof competitionbutalsoaveryactivedemand,operatorshavelearnedthebenefitsofpricingdayofficesrelativelylow,whiletheyareabletogeneratesignificantpremiumwithlargemeetingrooms.

- Operatorsthatseemlessactivewithmeetingroomrentalstendtopricerooms

ofvarioussizesinatighterrangethanoperatorswithstrongmeetingroomrevenue,probablybecausetheyhavenotmasteredthedynamicofthemeetingroombusinessaswell.

MeetingRoomUtilizationWhereas there are approximately 170 business hours in a typical month, in ourexperiencewhenaroomisbooked100businesshoursinamonthitiseffectivelyfullyutilized.Thisisbecausebookingsdon’talwayshappenimmediatelyaftereachother.Forexample,someonemightbookaroomfrom9:30AMto12:30PMandanotherusermightbook the1:30PM to4:00PM timeslot. In this case, it isunlikely thatsomeoneelsewillbooktheroombefore9:30AM,inbetweenthese2userstimeslots,andafter4:00PM.Above100-hourutilizationpermonth(duringbusinesshours),servicequalityissuesariseasusersstartto“feel”liketheroomisalwaysbooked.Notethatthisdiscussiondoesnotconsiderroomsbookedoutsideofbusinesshours,whichprovideadditionalrevenueandcustomerserviceopportunitiesforoperators.WewillusedatafromoursistercompanyPacificWorkplaces(PAC),asacasestudy,toillustrateandexpandonthispoint.Whenmeetingroomutilizationisconsistentlyinexcessof100hoursatoneofthePAClocations,PACwilltypicallyconvertaprivateofficeintoanewconferenceroom.Asaresultoftheiraggressivemarketingapproachwithmeetingspace,PACfeatures118 meeting rooms in 17 centers involved with this study (mostly in NorthernCalifornia).No location features fewer than4meeting rooms.One locationhas13meetingroomsordayoffices,onehas10andanother9.Ineachcasetheyincreasedtheirinventorybyacouplemoreroomsoverthelastfouryears.Ourexperienceisthathealthymeetingroombusinessesfeedonthemselvesandonlygethealthierwithtime.PACgeneratesamuchhigherrevenuepersquarefootofmeetingroomspacethantheydofromanequivalentsquarefootageoffull-timeofficespace.Thisiswhythecompanycontinuallyputsmucheffortintopromotingitsmeetingroombusinessandkeeps on converting private offices into meeting rooms to add to the inventory.Compared to four years ago, each PAC location has added onemore day officeormeetingroom,onaverage.Themixhaschangedtowardssmallersizes.Forexample,dayofficesandsmallmeetingroomsnowrepresent56%oftheinventorywhenitwas

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only45%fouryearsago.PAChasfoundthatthesmallroomsarealotmoreprofitablethanthelargeonesandlookateveryopportunitytoconvertformerfull-timeofficestohigherrevenuegeneratingmeetingrooms.Insomecases,largeboardroomswithacapacityof15-20seatsarebeingconvertedinto8-10seatmeetingroomsandadayoffice.

Meeting roomsaremonetizedbymaking themavailable forbookingonlineby3rdparties,bybundlinghoursinavirtualofficepackage,andbychargingmembersforoveragewhentheyusemorehoursthanallottedintheirbundles.Full-timememberscanget4to12freecreditspermonthtoaccessmeetingrooms,iftheybuypremiumpackages,whichisalsoanindirectwaytomonetizethemeetingrooms.Onecreditcanalwaysberedeemedforonehourofdayofficeuse.Largermeetingroomsmayrequireseveralcreditsperhourofbooking.Only20%ofPAC’sbookingsaremadeby full-timemembers,withthebulkof theusagecomingfromvirtualoffice,“walk-ins,”andCloudTouchdowncardusers.AtypicalPacificWorkplaceslocationfeatures2or3dayoffices,1or2smallmeetingrooms,2mediummeetingrooms,and1largeboardroom.Theclients’usageisprettyevenlydistributedacrossmeetingroomsizes.

Day Office (<3)36%

Small (<5)20%

Medium (6-10)28%

Large (11-20)15%

XL (21+)1%

Room Bookings as % of Total17 Pacific Workplaces - Q4 2018

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MeetingRoomRevenueAssuming100hoursofutilizationpermonth,therevenueperroomgreatlyexceedsalternativeuseoftheseroomsasfull-timeoffices.Intherevenuegraphbelow,wemadeadistinctionbetween“GrossRoomRevenue”based on the retail hourly price of the room and “Expected Room Revenue afterDiscountsandIncentives.”Thelatteristhenetrevenuetoexpectfromthemeetingrooms, considering special discounts provided to existing members, marketingincentives,andwholesalediscountsprovidedtoresellers.

Tokeepitsimple,weassumeda35%“discountandincentives”leakageforthedayofficesandsmallroomsand25%forthemediumandlargerooms.Translatingtheseratesonapersquarefootbasis,usingourobservationofaveragemeetingroomsizes,weendedupwithnetrevenueinthe$13to$22range,whichsignificantlyexceedstheexpectedrevenueofasimilar-sizedfull-timeofficededicatedtooneorseveralusers.

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TheserateswouldbemuchhigherinexpensivemarketslikeNewYorkCity(40+%higher)orSanFranciscoorD.C.,andmuchlowerinstateslikeFloridaorUtah,butinallcasesremainquiteabithigherthanwhatcanbeexpectedfromadedicatedoffice.Weplantohighlightregionaldifferencesinmoredetailinfollow-upreportswhichwillbeavailabletoCloudVOpartners.OtherInterestingFacts:

• On average, meetings booked online via CloudVO last 3.3 hours. DatapublishedinpastyearsbyDavinciweresubstantiallysimilar.

• Pacific Workplaces generates 30% of its revenue from Virtual Offices.Manyvirtualofficeplansincludeabundleofhours(orcredits)toaccessdayofficesandmeetingrooms.Whenanalyzingtheimpliedrevenuefromthe meeting room components of these plans, PAC found that meetingroom revenue constituted the largest revenue and profit segment of allvirtualofficecomponents.

• Regional differences are significant (e.g. New York City is much moreexpensivethanNorthernFlorida),butvirtuallyallconclusionsdrawninthisUS-widesummaryapplytoeachindividualregion.

• 20%of the timewenoticeddiscrepanciesbetween thepublished retailprice on the operator website and CloudVO’s retail prices. Thesediscrepancies can be even more widespread with other resellers.Operators should pay attention and update their prices on resellerwebsitestoensuretheyarethesameacrossallchannels,otherwise,itcanonlyconfusethemarketplace.Thinkabouthotelroompricesavailableonsites like Expedia, Hotels.com or Travelocity. Hotel room prices arecarefullycoordinatedacrosschannels.Ourindustryhasnotyetachieved

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the maturity of the hotel industry, but we need to continue to makeprogressinthatdirection.

• Thissurveydoesnotincludedatafromhotelsorconferencecenters,whichhaveadifferentvalueproposition,donothandlesmallermeetingswell(20peopleorfewer),andtypicallychargehigherrates.

TakeAway&Recommendations

• Buildameetingroombusiness:it’sgoodrevenue!

• Benchmarkwhatyoudo–UsethisreportbutalsoshopRegus,WeWork,andotheroperatorsinyourneighborhood.Mostpublishtheirretailpricesonline, although WeWork for now uses its meeting rooms mostly forinternaluse(thatwilllikelychange).

• IfyouareaCloudVOpartnerandwantaregionalpricingreport,contactusandwewill analyze themarket in your geographic area and produce amoredetailedreportforyourstate.

• Convertfull-timeofficesintodayofficesormeetingroomswhenutilizationofexistingroomsapproaches80to100hours

• Smallerisoftenbetter.Manyoperatorslikethelookandfeelofaverylargeboardroom,butthetruthofthematteristhatsmallermeetingroomsandday offices are more profitable. A 10 to 12 seat meeting room is anappreciatedamenity,butaroomthatcanseat18to20canbesuperfluousandnotthehighestandbestuseofthespace.

• Makesureyouhaveadiversityofroomsize,attheveryminimum1or2dayoffices,1mediumand1largemeetingroom(butnottoolarge!).

• Thinkofyourmeetingroomsasasignificantrevenuestreamandnotasjustanamenityforfull-timemembers.

• WorkwithresellerslikeCloudVO:theycangreatlyexpandyourbusiness.CloudVOpartnerscancallusanytimefordataandadvice.

• Make sure you have an onlinemeeting roombooking capability that iscompatiblewithCloudVO,oranyotherITplatformthatcanseamlesslytalktoaGoogleCalendar.GoogleCalendar isawaytosynccalendarsacrossplatforms.Notthepreferredway,butsometimesitistheonlyway.

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MethodologyTheCloudVODataTeamcatalogued20,710dayofficesandmeetingroomsin3,378locationsacrosstheU.S., available forbookingonline,directly from theproviders’ownwebsites(includingRegus)and/orviaresellerslikeCloudVO,LiquidspaceandDavinci.We also mined our own CloudVO database and actual bookings made on ourCloudMeetingRoom.comwebsitesandbyCloudTouchdowncardholders.CloudVO provides virtual offices andmeeting rooms at 700 locationsworldwide.CloudVO is a reseller ofmeeting roomspace at partner locations,which CloudVOtypically augments with our own support services, such as phone answering,corporate accounts, and CloudTouchdown network access cards. CloudVO alwaysattemptstoalignitsmeetingroomretailpriceswiththeretailpricesofitspartners.The CloudVO locations are spreadout throughout theUS, in38States, 215 cities,mostlyinurbanandsuburbanareas,butalsoinmedium-sizedcitiesthroughoutthecountry. The majority of the locations describe themselves as “Office BusinessCenters”or“ServicedOffices”,or“HybridFlexibleOffices”whileagrowingnumberofpartnersdefinethemselvesas“CoworkingPlaces.”The locations thatdescribe themselvesas “CoworkingPlaces” tend tostartwithasmallermeetingroominventoryandlessfocusongeneratingmeetingroomrevenuefromnon-membersthantheothers,butmanyhaveplanstoaddonemeetingroomordayofficeatatime.The CloudVO team has also used internal data from our sister company, PacificWorkplaces(PAC),inacasestudyusedtoillustrateutilizationissuesandtoderiveroomrevenueestimatesat fullutilization.PAC is aFlexibleOfficeSpaceprovider,basedinCaliforniawith17locations,threeofwhicharepurecoworkingplaces,whilethe14othersfollowahybridmodelandhostmostlyprivateofficespace.Finally, thesurveydoesnot includedata fromhotelsorconferencecenters,whichhaveadifferentvaluepropositionandtypicallychargehigherrates.About CloudVO CloudVO is the umbrella brand of Cloud Officing Corp, headquartered in San Francisco, California. CloudVO’s mission is to provide comprehensive virtual office and meeting room solutions to mobile workers and telecommuters under a Workplace-as-a-Service™ model. CloudVO operates the CloudTouchdown network that grants preferential access to day offices and meeting rooms at 700 locations worldwide for mobile workers and distributed workforces under a subscription model or on a pay-per-use basis.