Why the surge in coliving facilities might come from an unexpected source
We are writing this article at a time when WorkNomads is considering to expand its coliving hotel operations across continents. It’s an important step for our company, which requires the necessary reflections about the business model behind this trending housing style.
There’s a lot of noise in the market and claims of people being in the same line of business. Coliving is used to sell the dream lifestyle as a digital nomad, as the answer to loneliness, the housing crisis or as a new business stream for existing hotels, etc. Whether those claims are rightful or not, it demonstrates some kind of target audience fragmentation as a result of emerging issues, trends and opportunities within our society.
The New Housing Mindset
Coliving spaces have been popping up in the 2010s, targeting young professionals in major cities who were looking for affordable accommodation. While now cumulative concerning is the scarcity of available rental properties. Additionally, the pandemic and advancement in technologies, enabled people to become more location-independent, in search of communities to live and work around the globe.
As a result, coliving spaces are now attracting Millennials and GenZ’s who have enough money to live in apartments by themselves but choose to be part of a community, not out of necessity. Their life goals have changed and they will no longer pursue the rat race to have a self-owned car and housing. They might still invest in housing but no longer with the aim to live it in themselves or at least not full time. Instead the new generations’ pursuit is all about the freedom to live and work anywhere anytime. They adopt a minimalist lifestyle, seeking to reduce excess possessions, reflecting sustainable practices and making room and time for meaningful connections.
Scattered and uncatered offering across the fishing pond
The flexibility, convenience and community experience living are key factors that appeal to today’s mobile and digitally connected workforce. It is estimated that these generations will make up over 50% of the total workforce in the next coming years. Needless to state the obvious that in terms of target audience there’s a huge fishing pond. Yet, the commercial alternatives to traditional residential leases are scattered across individual venues, hostels, hotels, airbnbs, etc. Few offer basic requirements in quality accommodation. Often existing hospitality venues focus on the maximizing the square meters to increase the number of small-sized guest rooms, leaving living or communal spaces either minimal, impersonal or unequipped to facilitate the community experience. While smaller and individual facilities simply are forced to have an elevated kitchen table with some office chairs as an alternative coworking space.
Thus, there’s an opportunity gap for an improved product or service offering by organized players who want to go after the higher disposable income Millennials and GenZs. Those who are ready to spend and enjoy better lifestyle standards with community experience being a key element.
The winner couldn’t take it all
Last year the most well-known coliving brand, Selina, collapsed due to insolvency. People quickly pointed to their aggressive growth strategy and lower quality accommodation as the main reasons, however, few people questioned whether the coliving business model is actually viable.
In essence, coliving is a low-margin, high OpEx and CapEx business. Just like Selina, most Coliving operators are essentially hotels with high operating costs and demanding customer expectations. They seem to supplement the coliving stays with the regular hotel stays or vice versa depending on the seasonal variability. Very few players in the market seem to publicly share their real occupancy split between the coliving and hotel stays.
WorkNomads Coliving Hotel – the ‘corporate community hub’ of the future
For little over two years WorkNomads has been running our WN LAB hotel in Bulgaria. In general we have around 20% occupancy from coliving, the majority coming from our own employees and regularly returning digital nomads who value our facilities. Like other operators, the rest of the occupancy is filled with short-stay business and leisure hotel guests.
The ultimate goal of our WN LAB Hotel is to serve exclusively as a flexible working and living hub for WorkNomads’ remote employees and engineering services clients. Already today it fulfils this function, albeit not exclusively. Currently we employ over 150 people, 25 nationalities living and working remotely across continents. They have the freedom to live and work anywhere. Every day, our WN LAB hotel is filled with WorkNomads employees, who use it as their main residence or main office space or as a touch and go community whenever they see fit.
The WN LAB Hotel is also used as hub for our client meetings. The client and the WorkNomads team of experts will all come onsite to live and work together for a few days or weeks, whichever is needed for the project. It creates a deep level of trust and understanding of each other. More than 80% of WorkNomads annual turnover comes from delivering those remote engineering services to our clients, only 20% is generated from our coliving and hotel operations and this rate will only reduce every year. However, the WN LAB Hotel serving as a flexible working and living community hub is key to deliver our brand promise, namely giving people the freedom to live and work anywhere anytime. It’s our ambition to create a limited number of hubs across continents, so our employees and clients will have a community base close to their homeland, business operations or their travel plans, allowing them to explore a new continent at their own pace and time.
We anticipate that this type of hubs will replace the current corporate offices. It’s a fact that companies are reducing in size their traditional corporate office spaces due to home-office or hybrid work while trying to invest more into designing a variety of social spaces in the office to attract talent and foster collaboration. In addition, offsite days and even company-organized workations are increasing in popularity. All these trends will ultimately lead to a shift in designing and organizing the corporate offices into all-in-one flexible working and living hubs.
Whilst the coliving offering is still quite immature, the bigger hospitality brands will battle amongst themselves for the Millennials and GenZs looking to experience life at its fullest. However, their biggest fight might ultimately be with the ones who’re already employing those generations.
