What does your vision of revenue management strategy for your coworking and flexible workspace look like? Offering last-minute discounts to potential prospects? Calling your competitors to check if they are bargaining more than you do? Okay, maybe you have better processes in place, but it is sometimes helpful to take a step back and think critically about the status quo, in particular when it can help you overcome tough economic conditions and make the most of periods of uncertainty.
If you’ve ever felt overwhelmed by everything you need to handle on a daily basis or frustrated that your flexible workspace or coworking space isn’t hitting its long-term goals, we’ll show you examples of shifting away from case-by-case revenue management to a more process-based approach.
Evolving processes of revenue management
First, let’s explore the differences between process-based and case-by-case revenue management. What do the two terms mean? Can you have one without the other?
Process-based revenue management refers to your overall revenue management strategy. Process-based has a longer-term focus, and it involves some thoughts on both first and second-order effects. For example, your over-arching goal is to generate stable and positive cash-flows. Let us say you observe that more flexible memberships can be priced at a higher price. What is the second-order effect? More erosion during a downturn. Thus one should consider how the higher immediate revenues could be balanced out by more fragility.
Case-by-case revenue management, on the other hand, refers to the specific actions you take. If your goal is to drive ancillary revenue, then case-by-case might include setting up packaged offers with bar & restaurant credits or sending email blasts that advertise your events. For many operators, case-by-case also include setting last-minute discounts in an effort to book any additional desks on short notice.
Of course, you can’t achieve your long-term goals without fiddling with some shorter-term moves, so both types of revenue management are necessary. However, many operators - maybe including yourself - spend so much time on the short-term moves piece that they stop looking at the bigger picture. Over the long term, what customers do you want in your office and how do you attract them?
The future of coworking or flexible workspace revenue management
The coworking or flexible workspace industry is exposed to cycles in demand. As the economy gets stronger or weaker, so does the demand for office space.
When demand is low, all we can think about is getting "butts in seats" to use the restaurant's term. It’s tempting to throw out our process-based revenue management playbook and grab whatever case-by-case approach we can get our hands on. Slashing rates, giving away free months or offering very large referral rewards might seem like good ideas in the short term, but what is the second order effect? Large contractual discounts make it more difficult to build rates back up after the downturn.
Instead of jumping to short-term “wins” that could hurt your performance in the long run, operators benefit from using a slow period to focus on process-based revenue management. Operators should take the coworking or flexible workspace's entire value proposition into account when setting rates, being mindful of the opportunities they can create for other departments by offering value adds (meeting room credits, for example). It’s also prudent to only make rate adjustments for months that you’re absolutely certain will be affected by decreased demand.
What’s needed for process-based revenue management?
Just like running a coworking or flexible workspace, you can’t do process-based revenue management entirely on your own. Operators that apply strategic revenue management effectively know how to leverage technology.
There is a famous quote saying you are not overwhelmed, you are insufficiently leveraged. Using technology leverages your decisions - good and bad! We look at two examples of tools: channel managers and benchmarking.
- Automate, automate, automate! Let technology handle the case-by-case piece while you focus on process-based revenue management. A successful operator uses a channel management system to automate tasks like pulling and sending updates across software such as distributing rates to various online channels. Think of your channel management software as your trusted lieutenant, there to make sure your decisions apply across all your online presence and internal communication tools.
- Leverage data: Benchmarking software such as CoworkIntel can reveal information about your market, your competitors, or your guest behavior that you can use to shape your strategy. Especially after a market downturn, you’ll want to have a pulse on not only your competitors' rates, but also the demand for your market as a whole. You don’t need to spend your valuable time doing research; a technology solution like CoworkIntel can provide real-time insights based on market data.
By making process-based revenue management an integral part of your coworking or flexible workspace’s operations, you will be better prepared to weather the storm and less inclined to jump to impulsive case-by-case approaches. In particular, benchmarking, by giving you the pulse of the market can act as the famous Greek hero Ulysse's "wax in your ear", preventing you from exposing yourself to hidden risks.