The co-working giant posted a $504 million loss for the first quarter of this year, although the figures are heading in the right direction. But has it run out of steam after setting right so many wrongs in the past?
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Co-working space provider WeWork spent the pandemic dealing with the repercussions of over-expansion and bad management after ousting its CEO and co-founder in 2019. As that was going on, the world’s working model was changing all around it.
But are there now opportunities for the contracted brand amid the “great merging”? Does WeWork align with the (relatively) good news other sectors are now seeing, such as travel that is now bouncing back after the pandemic, or the revival of the experience economy?
It’s a “crunch year” for WeWork either way, according to one data expert.
WeWork last week posted a $504 million net loss for the first quarter of this year — not the result it would have wanted considering easing of Covid-related restrictions, but a marked improvement on the $803 million loss over the previous three months, and miles ahead of the $2 billion loss recorded in the same period a year ago.
Part of the improvement is down to the fact WeWork has been slashing away at costs, in particular “sales, general and administrative costs,” according to Cowork Intel. They were down 57 percent compared with first quarter of 2019. Now, they represent just 20 percent of total costs as apposed to 43 percent in the 2019 quarter.
Yet this may have been too much. Other companies have since grown, making acquisitions. WeWork rival Industrious, for example, this month acquired The Great Room in Asia and Welkin and Meraki in Continental Europe.
Other companies have been doubling down on marketing. Airbnb, which has made no secret of its bid to woo remote workers, refined its approach to reduce its reliance on Google in 2020 before the pandemic hit; now its new in-house marketing, advertising and creative department employs hundreds of people.
Another concern is location. WeWork is fairly dependent on New York City and London. In the former, just 8 percent of Manhattan office workers are back full time, according to reports. And in London there’s still uncertainty from the banks, and an ongoing battle with government workers.
Hotels and airlines may be able to hike up rates, but it’s a more delicate situation for WeWork, and other office providers. “They’re trying to remain competitive and make co-working more accessible,” said Jade Tinsley, head of marketing at Coworkintel. “Flex desks is the pillar they’re building their culture on. Raising the prices will also impact occupancy. It’s a balancing act.”
While the pandemic impacted pricing structure, confidence is returning, she added. And with murmurings of a recession, particularly in the UK, WeWork CEO Sandeep Mathrani has said that may play into its hands, as “uncertainty … it makes people not do long term deals.”
“There’s a growing appetite for flex space from larger companies. If businesses are deciding to capitalize on the new working culture and shared offices, then flex desks might be the new normal for corporate institutions,” added Tinsley. “On the other hand, smaller companies and individuals might take the decision to stay at home instead.”
Investors are also rallying around the co-work sector.
On Wednesday, commercial real estate services and investment firm CBRE Group announced a new $100 million investment in Industrious, to help it expand out of the U.S. and into other countries. CBRE invested $230 million in Industrious in late 2020 and early 2021.
“The investment rests on our shared understanding that there is a monumental opportunity in front of us as companies rethink their real estate strategies,” said Industrious co-founder and CEO Jamie Hodari.
WeWork’s Mathrani has said the company will post its first profits later this year, and Tinsley has outlined how it could soon breakeven in a recent blog post.
“It’s a crunch year for WeWork, operationally,” she said. “As almost trail-blazers of the concept, they’re not at the point where it’s make or break. They’re treading new ground, and have a good amount of investment behind them. They’re trying to figure out that path to break even, and they’re moving in that direction.”
It’s usually during the quieter summer period when companies put out press releases with quirky surveys, mainly to make up for the fact there’s not too much going on. Summer’s come early for SAP Concur, the travel and expense platform. It’s taken the pulse of U.S. business traveler for its latest Pulse report.
The survey found that most of them travelers (78 percent) were satisfied with the pace at which their company is returning to pre-pandemic travel habits, such as reduced or eliminated safety protocols. More than half of business travelers (55 percent) were unhappy with their current amount of business travel, including 20 percent who would prefer to travel more than they are.
As expected the survey suggested flexibility remains a top priority. But a worrying sign is how many business travelers have commonly worked in a restroom during a trip, at 39 percent. Fortunately it’s below coffee shops (70 percent), and hotel lobbies (64 percent.)
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