Hotels turn unused rooms into co-working spaces

There will always be a need for in-person meetings, although some speculation about the future of business travel has been pretty dire. Microsoft founder Bill Gates famously forecast that corporate travel will permanently halve and several multinational employers, including Microsoft and McKinsey, have announced significant cuts to travel by their workforces in order to reduce their carbon footprints. Accor's chief executive Sébastien Bazin recently repeated his belief that 20-25% of business travel demand has disappeared forever because of the rise of videoconferencing.

However, such forecasts do not tend to factor in the very real revenue opportunities for hotels created by the huge changes to the way we work, changes already in motion before the pandemic and then accelerated by it. In fact, during an investors call, Bazin commented: "There is an enormous change in behaviour from guests at Accor. We have to get much better at local stays."

Co-work to go work

New changes to the world of work include the widespread acceptance of remote working as a permanent policy and the downsizing of corporate floor space.

"Today's business traveller is just as likely to arrive on foot or bike to start her working day at a hotel as she is to fly in for a conference," says Kevin Edwards, business development director at hotel consultancy Alliants. Several hospitality outfits, including Village Hotels, Ennismore and Soho House, took the prescient step of investing in co-working spaces long before Covid struck.

Co-working is an opportunity to monetise a traditional meeting and events space that would otherwise remain empty for much of the time; it also brings more people into a hotel for more hours of the day. Having a range of subscription or fee structures including perks and discounts can incentivise co- workers to spend additional sums on a hotel's fitness, leisure and food and beverage facilities at times when most overnight guests are not in the hotel.

It is not just individuals and freelancers who use co-working spaces, but also companies that have downsized their real estate. Jamie Hunter, director of business development and VWorks at Village Hotels, explains: "We have at least 20 companies that have sizeable memberships with us. One was paying £12,500 a month on office rent. Now they've got 35 platinum memberships – which include the use of leisure facilities as well as the co-working space – with us and they have more than halved their outgoings.

"At Leeds North, our co-working membership is entirely made up of employees from five companies who have their own dedicated desks. They are all from different sectors, which brings a variety of conversations during the coffee breaks and they love it. They even socialise together."

Surrogate offices

Opening the co-working spaces has meant that Hunter has established a whole new set of professional relationships with the brokers who not only help him sell co-worker memberships but also sell office space, including meeting rooms inside the hotels.

"I did two deals during lockdown with Instant Offices and sold two meeting rooms at our Village Hotel in Nottingham as dedicated offices on a two-year licensed agreement," says Hunter, adding: "I got approached by a recruitment company, we did a profit and loss analysis on it and thought let's give it a whirl. They've invested in the space to make it their own, added their own branding, and now we have 60 people in those offices every day. And that's on top of the co-working space."

Renting the rooms over the medium term, rather than for individual meetings, turned out to be a very cost-effective solution. "Where a hotel might have 20 meeting rooms, it's a real battle to sell them, day in and day out. It takes a lot of labour," Hunter says.

Karen Small, director at research consultancy BVA BDRC, agrees: "The time that goes into turning around one proposal for less than 20 people is likely to be a commercial disaster."

Opening a co-working space or turning meeting rooms into surrogate offices can encourage hoteliers to look at their ROI per square metre or the revenue streams that are possible from various parts of the property. Compared to a low-maintenance co-working space that provides recurring revenue, the selling and preparation of one-off meetings, both big and small, requires a lot of labour and resources that eat into margins. In fact, the success of the co-working spaces at Village Hotels informed the group's decision not to include any large meeting spaces at its newest hotels (new-builds in Basingstoke and Eastleigh and a conversion of a former Hilton in Bracknell).

"Working patterns have changed," says Hunter. "We have really shouted about it and we're getting it right now from a co-working perspective. Our member feedback is really good and there are no hidden costs. Compared with other business centres, we have the advantage of having a leisure club, great food and beverage, a Starbucks, parking and hotel rooms on-site."

Play by the book

Historically, hotel sales professionals resisted online booking solutions for meetings because they wanted to retain control of the space, pricing and the ability to upsell. Corporates have also tended to favour a personal service.

However, when all that is required is a simple meeting, an online booking platform can make life a lot easier for under-resourced hotel teams, says Small. Such a booking system should have in-built upselling capabilities, for example, to ask whether attendees will require overnight accommodation.

In 2019 Marriott, Hilton, IHG and Accor invested £40m into Groups360 to create a live groups, meetings and events availability and instant booking platform. A further £28m investment was made this April, which included Blackstone giving its 100,000-strong hotel portfolio access to the service.

John Stecher, chief technology officer at Blackstone, says: "We believe that Groups360's inventory distribution model and instant booking capability will help drive industry-wide transformation and can create value for Blackstone's hotel portfolio."

Premier Inn was one of the earliest adopters of Groups360, and 85% of all its meetings business now comes via the online channel. Groups360 powers Hilton and Marriott's UK meetings room websites too, allowing planners to instantly book meetings for up to 30 people.

"It's very easy to book meetings with us, particularly smaller meetings," says Callum Ross, general manager at Hilton Glasgow. "We've seen the return of larger meetings and business events as well – often on very short lead times. Our focus has actually been on ramping up our commercial team to cope."

For larger events with more complex arrangements, Groups360 claims that it has simplified the request for proposal (RFP) process for venues and bookers, and halved the time needed to finalise a contract.

Group bookings traditionally provide hotels with security and an occupancy bedrock, but one drawback has always been that information about the individual guests within the group is withheld by the organiser until shortly before arrival. Groups360 has another online tool that enables hoteliers to market and upsell to group guests in advance of their stay.

Kevin Edwards at Alliants says: "Groups360 is not the sole provider of technology that helps match meeting planners with meeting venues, but with significant investment coming from some of the largest hotel brands, and more recently from Blackstone, it looks like Groups360 is on the way to becoming a dominant player in the B2B market, much like Booking.com is in the B2C space.

"The co-operation between hotel brands to invest in Groups360 is admirable and signals a collective recognition that sales processes across the meetings and events industry need to be smoother and quicker for all."

The long overdue digital transformation of the booking process is helping to drive demand, according to research by BVA BDRC. "With the benefits that dynamic pricing brings, it could also mitigate the impact of inflation for hotel venues," says Small.

Some hotel operators believe that whatever the forecasts say, there is plenty of business demand out there; it is simply a case of finding it. Tom Magnuson, chief executive of Magnuson Hotels, a global affiliation group, says: "Over the last 20 years, hoteliers have moved from proactive market building to reactive, where we throw our fishing lines out to the online travel agents and we get what we get in the net rather than going out and finding it."

In contrast, Magnuson says his franchisees never stopped targeting ‘essential' business travel – that is, people who have to keep moving for work in industries such as logistics, transport, construction, government and medical.

He says: "We have always taken a very proactive, old-school approach. Start your marketing close to home. Draw a diameter around your property and identify your primary organic drivers and build those on a corporate negotiated rate structure. It's direct, not from an online travel agent."

Co-working at Village Hotels

Jamie Hunter, director of business development and VWorks at Village Hotels, explains why the company started converting its underused restaurants into co-working spaces in 2018.

"Each of our hotels would have a pub on one side and a restaurant on the other. The restaurants weren't used Monday to Friday during the day, because our corporate meetings and events would either have a buffet lunch outside or in their room or in the pub. And they weren't really used in the evenings because we had the pub concept and nearly all of our demographic was favouring a more informal feel.

"We thought, what are we going to do with this space? We had massive gym and leisure facilities with 130,000 members. We already had that concept of membership and lifestyle installed, so the co-working spaces just complemented it."

During the lockdowns, Village Hotels were open for key workers but, sadly, the co-working spaces had to close because the business was categorised as ‘hospitality' while larger workspace providers like Regus and WeWork were able to stay open.

Village Hotels has four types of co-working membership – standard (from £90 plus VAT per month), platinum (which includes health and wellness club membership, and starts from £124 plus VAT per month), national and corporate. At first, co-working membership remained fairly low. After life started to open up again from May 2021 onwards, Hunter noticed pent-up demand from couples who had been fighting over use of their dining room table or companies resizing their headquarters.

Village Hotels offered 200 trial days with a 90% conversion rate and now has around 1,000 co-working members (70% of them are on the platinum package). "We definitely saw an ROI after two years, even with the lockdowns," says Hunter.

Collaborate to attract business demand

Resident Hotels do not include bars, restaurants or any meeting space, but that's a deliberate policy. Because they are located in central London and Liverpool, they are surrounded by a plentiful choice of cafés, bars, restaurants and attractions.

Resident Hotels acts as an ambassador for the neighbourhoods and recommends where guests should eat and drink.

Pre-Covid, the hotels attracted 60% leisure and 40% business travellers. The leisure percentage went up to 80% during the pandemic, but now business travel is back, according to chief executive David Orr. Resident Hotels collaborates with other businesses, such as the Institute of Directors and Searcys, to deliver long-missed meetings and team get-togethers.

There is a trend for clients to mix socialising with work meetings, taking in a range of venues, resulting in longer stays of two or three nights, says Orr. "We're getting groups business, which we wouldn't normally get.

We are finding venues where people can gather again, choosing the best venues for team get-togethers. "Is it a sugar rush of activity? That may be part of it, but also people are now more thoughtful about what they do. After such a long hiatus, meetings need to be more interesting rather than run of the mill, and energising people in an urban environment does feel like it's part of the agenda.

"We're agnostic. We're not trying to promote our own meeting rooms, because we don't have any. We want to be ambassadorial for all those people in the meetings and events business, just as we are with the restaurants and bars."