How to Track Competitors of Your Coworking Space & Be Ahead of Rivals
Coworking and flexible workspaces operators can benefit from using the right kind of data. Here is a tour on some of the latest sources of information on coworking and flexible workspace market and operational intelligence.
Existing flexible workspace and coworking market
- Looking at a single flexible workspace or coworking space data
Key operational performance metrics about space, for instance, occupancy directly reflect the profitability of the space.
For spaces that want to look at their own operations, if you are using property management software such as andcards you will find a trove of data about your coworking or flexible workspace.
Such data include bookings and payments and sometimes the occupancy and utilization rate, average desk rate, and average rate per square feet/meter. We describe those in more detail below.
However, looking at the data for one space does not tell the whole story. For instance, if occupancy is increasing, how would you know whether it is due to an initiative from the space or a general increase in the neighborhood's popularity?
- Looking at flexible workspace and coworking market data
If you would like to look at a broader picture, for instance, a group of competing operators around you or for the whole city, CoworkIntel provides competitive benchmarking as a service.
This is where coworking and flexible workspace "Comp Set" data enters.
A competitive set is a term coined by the hospitality sector's revenue managers. This is a group of 4 to 5 spaces, which have similar characteristics to your space.
Let us now describe the power of benchmarking tools for coworking and flexible workspace a little bit more.
A concept coming from the hospitality industry
First, let’s wind back a bit; what precisely is a Comp Set report?
Developed by the hotel management analytics firm Smith Travel Research, the Comp Set report is a benchmarking tool that compares a hotel’s performance against a set of similar hotels.
In order to receive their STR report, hoteliers must submit performance data (like daily occupancy and Average Daily Rate) to Smith Travel Research, who then compiles all of the data they receive into the nicely presented STR reports.
You can find your own flexible workspace and coworking data in your property management system, so the real advantage to looking at a Comp Set report is understanding how your space is performing against other similar properties.
The Comp Set report uses a variety of metrics to show performance data. Here are a few of the main terms that you’ll see throughout the report:
- Occupancy = Desk Occupied / Total Number of Desks. Occupancy is expressed as a percentage, like 78%. For private offices occupancy can be calculated on a square footage or meter basis: Square Footage Booked / Total Number of Square Footage. For hot desks, one may refer to the utilization rate by dividing the Memberships by the Total Number of Desk Desks. Similarly to gyms, hot desk utilization can be higher than one, say 2x or 3x as not all members come on the same day.
- RevPAW (Revenue per Available Workstation) = Total Revenue / Total Number of Workstations. RevPAW can also be calculated as the Average Price per Desk (APD) x Occupancy. RevPAW is the average desk rate sold for a given time period.
- Revenue per Square Foot (or Square Meter) (RFS) = Total Revenue / Number of Square Footage Sold.
- Average Length of Subscription (ALOS). This metric identifies the average length of subscription of your members, which is calculated by dividing the total occupied desk days by the number of subscriptions.
You’ll also see your space’s performance compared to an index, which shows you whether your space is performing better or worse than average within your competitive set. The index is calculated by averaging your competitive set’s data. for occupancy, for example, the average of all the competitive set’s occupancy numbers.
Reading it is easy:
- If your space scores higher than the index, then you’re outperforming your compset, or capturing more than your fair share.
- If your index is below the index, then you’re not earning your fair share and have some room to improve.
Pick comparable spaces
In order for the Comp Set to provide relevant information, you need to select an appropriate group of competitors. You should pick a compset that most closely resembles your flexible workspace or coworking type. A strong compset should include 4 to 5 spaces with the following characteristics:
- Located within the same geographical area, exceptions could be for spaces located in very remote areas or certain airport spaces, which compete with different markets
- Selling similar rates
- Offering similar amenities
- Targeting the same type of members, for example, a space intended for large corporations will not want to include spaces with a focus on hot desks
You can always change them later
Keep in mind that you can always change your competitive set, so it’s okay if your first iteration isn’t perfect. Let’s now look at how you can gain insights from your Comp Set report.
Once you’ve chosen a solid competitive set and have received your new report, it’s time to dive into the data. But with so many numbers to look at, where do you start? We’ll explain a few strategies to reading a Comp Set report effectively.
Let’s start on the “Overview” page, which is the first one. On this sheet, you’ll see occupancy, Revenue per Square Foot, and RevPAW broke down by each month of operation. There’s a bar for you and your compset. Again, if your number is over the index, you’re doing better than your compset average, and if it’s below it, you have room to grow.
By taking a quick look at this sheet, you can easily see if your indices are above or below the Comp Set, in general, as well as if your performance changed positively or negatively over the last months. What trends do you see? Is your performance up or down? How about your compset? Is a particular Month of the Year performing better than others?
Looking at the percent change compared to last year can also provide insight into your performance. By looking at the RevPAW totals, you can get a quick snapshot into your space’s and your compset’s year-over-year performance for that month.
Did the month perform better in 2020 than 2019? Or worse? And was your performance in line with the compset or different? Think about why that could be, perhaps a special event happened last year that didn’t return this year, or maybe several new spaces opened in the area which could lead to lower occupancy overall (or higher by creating momentum).
On subsequent sheets, you can explore further your year-over-year trends to pinpoint which segments were affected. For example, maybe your occupancy for private offices stayed the same, but your dedicated desks occupancy decreased.
When you look on your “Private Offices” sheet, you might notice that your Comp Set Revenue per Square Footage grew while your Occupancy decreased. This means that your competitors are making more profitable use of their Private Offices. Could this be an opportunity for you? Knowing this, you could start to brainstorm strategies to attract higher-paying private office members.
As you study your Comp Set report, we recommend taking a lot of notes about your observations and explanations. You might add notes about a company meeting room booking that canceled last minute as a cause for low revenue numbers, or maybe a spaces next door had a power outage and you received a lot of unexpected business that led to higher RevPAW on a particular date. A year from now, when you wonder why your year-over-year numbers look the way they do, you can look back and thank yourself for taking detailed notes!
CoworkIntel Comp Set report flexible workspace and coworking data contains a tab describing Ancillary Services. These are everything that is not a desk: events, virtual offices, coffee, and bar, etc. The report contains a filter as shown below enabling you to make sure you are comparing like-for-like between your Comp Set and you.
Could you make a quick revenue increase by increasing the coffee price? It also enables you to identify the services offered on the market but not in your space. Are you leaving money on the table by not offering virtual offices? Some spaces cover their rent with virtual offices only!
The airline industry offers interesting examples of ancillary services strategy.
The Comp Set report shows the Average Length of Subscription (ALOS). This metric identifies the average length of subscription of your members, which is calculated by dividing the total occupied desk months by the number of subscriptions. A higher number is better, as a low LOS metric means reduced profitability due to increased labor costs. For example, 6 one-month hot desks require more labor costs than serving one 6-month dedicated desks, even though the total desks bookings are the same.
If your LOS metric shows that for a certain time period you are accommodating more short-term subscriptions than usual, then you can make revenue management adjustments and maybe increase your short-term rate while offering a higher discount for 2+ month memberships.
Similarly, if you have a slow month in the year (usually August), you can place a minimum LOS restriction on August, channeling more than 2+ months members to your demand pool and helping your slow months.
While the Comp Set report shares a lot of valuable data, it’s purely quantitative. It tells us the “what” but not the “why.” To really understand what’s happening in your space’s performance and the market, you’ll want to dig into the “why” behind the data. Coupling your findings from your Comp Set report with insight from a business intelligence tool or advisor can help you develop more effective strategies to capture even more of your fair.
The article was written by Ben Tannenbaum. Ben is a founder at CoworkIntel, the reference performance intelligence on flexible workspaces.