Corporate Real Estate Managers and users of flexible office spaces: As channels consolidate, know who you are dealing with!
On March 16th, The Instant Group announced that it merged DaVinci Virtual Office Solutions into its online marketplace that already includes EasyOffices.com, Meetingo.com, Rovva, and Worka. This is after IWG, the owner of Regus, announced the acquisition of The Instant Group on March 8, 2022.
It is a major development in the flexible office industry, whose impact cannot be understated. Online marketplaces and web brokers that, until recently, worked as channels for the entire flexible office industry are now directly or indirectly controlled by Regus. In this post, we will explore what it means for flex office users.
Harder for users to find alternatives to Regus
Our first observation is that the lack of common branding across these multiple platforms creates a marketing fog, with only the appearance of competition, when unsuspecting prospects may actually be channeled toward Regus locations at the expense of the competition which in some cases could present a better alternative.
Perhaps we should give Regus some time to integrate these new acquisitions and see if they will all be rebranded as “Regus.” Recent history suggests we can be skeptical. As an example, Rovva has operated as an exclusive channel for Regus for quite some time, presenting the exact same workspace options online that could be found directly on the Regus website. It begs the question as to why Regus has not been upfront about it. Users should know that they ultimately deal with the same company whether they shop on the e-commerce sites of Regus, Rovva, EasyOffices, or DaVinci Virtual.
Regus’ dominant position means higher prices, lower QoS
This is happening at a time when Regus, the largest provider of flexible office space in the world, announced its intention to open 1,000 more locations and to increase its dominant market share, estimated today at over 30%.
Like always, when a dominant player operates in any industry, expect Regus to gain pricing power. We see signs of that already through significant price increases, particularly in locations where they have little competition or where competitors are not attached to any strong brand.
Corporate accounts, that are not as price-sensitive as local businesses and small entrepreneurs, tend to gravitate to brands that can provide ubiquitous solutions for a whole host of reasons. But they will now pay a steeper price when dealing with Regus.
WeWork, the second-largest player in the flex office industry with 749 locations comes way behind Regus’ 3,400 locations worldwide. On top of that, WeWork’s footprint is heavily concentrated in downtown areas of large cities and does not present a credible alternative when companies need distributed flex offices for their employees throughout the country or in suburban areas.
A number of corporate real estate folks that use Regus for their employees are wary of that situation. It’s never a good idea to be dependent upon one single provider.
They do have options, with platforms like CloudVO, Preferred Office Network, or Alliance Virtual, that have organized solid networks of independent providers as an alternative to Regus and WeWork. These platforms provide a single point of contact, invoicing, and support, a necessity for large Enterprise accounts.
CloudVO, a sister company to Pacific Workplaces, manages a network of 950 carefully selected locations, 700 throughout the US, all operated by local, independent providers. Its stringent vetting process demands amenity-rich spaces, and careful monitoring of customer feedback leads to superior Quality of Service and customer reviews. Alliance Virtual and Preferred Office Network are other alternatives that do not seem to have an inherent Regus bias. The Alliance has more of a focus on virtual offices and procuring flex space services for smaller businesses, while the Preferred Office Network has historically been focused on full-time offices with an effective corporate account infrastructure.
Quality of Service (QoS) is an issue for Regus
Besides the need to always look for alternatives, Quality of Service (QoS) should always be an important consideration. Regus customer reviews suggest some systematic issues on QoS that the company has not been able to shake off for many years. It could be that a quasi-monopolistic situation does not provide incentives to increase operational efficiencies and QoS. Why bother if customers sign up with the program anyway?
Pacific Workplaces publishes customer ratings captured by Google, Yelp, and TrustPilot for all its locations. They consistently exceed the ratings at the closest Regus locations, often by a big margin. Pacific Workplaces is not the only independent operator that overperforms relative to Regus. CloudVO, which carefully tracks customer reviews everywhere, shows a similar pattern in the vast majority of its locations: most of the independent operators that are part of its network tend to overperform Regus and WeWork on customer ratings, often significantly.
Small business and local entrepreneurs are paying the price
As Regus’ large corporate accounts grow and become a significant share of its total revenue, small local businesses and local entrepreneurs become less critical to Regus’ occupancy. This will translate into higher prices, in line with corporate account prices that have traditionally been much higher than the prices paid by smaller players, who are perhaps more careful with their budget. As smaller users become less important in Regus’s client mix, they will lose bargaining power.
Because the vast majority of inquiries come from the web, many unsuspecting users will land in a marketing channel that will naturally drive them to Regus locations, whether they transit through Rovva (which lists only Regus locations), DaVinci, or Instant Offices. Only when Regus does not cover a particular area requested by a user will these channels be motivated to present alternatives.
In the end, it is important for users to see through the fog, understand the biases of the channels they work with, and avoid being dependent upon one single option.
Written by Laurent Dhollande
CEO of Pacific Workplaces
If you are interested in the implications this has for flexible office space providers, check out this blog article published on CloudVO.
About Pacific Workplaces
Pacific Workplaces (PAC for short) are great flexible office and coworking places, with a wide range of part-time and full-time furnished office spaces including virtual offices, private offices, and mini-suites, in a shared infrastructure environment, with curated communities that maximize networking opportunities and serendipity. Members have access to meeting rooms, coworking areas, business lounges, enterprise-grade internet, VoIP telephony, phone answering services, IT support, and preferential access to a network of 950 vetted touchdown locations worldwide, under a Workplace-as-a-Service™ model. Most of the PAC centers are located in Northern California and all are operated by PBC Management LLC under the Pacific Workplaces and NextSpace brands.