Convene’s Ryan Simonetti Bullish on Office Amenities, Business Meetings
‘Onsite is the new off-site.’
There has probably been no more impactful post-Great Recession commercial real estate development than the rise of coworking. But like any new thing, it had to prove itself — that it had staying power and could handle a headwind or three and hang in there. It seemed to do just that around the close of the last decade, its various companies growing throughout the U.S. and inspiring the co-living concept to boot.
Then, along came COVID-19, which was not only severe but unexpected, and tested everything like nobody’s business.
Convene had trouble in triplicate. As a coworking company, suddenly its core clientele were locked down and couldn’t even access their temporary offices. And when restrictions loosened, there was doubt the original business model of coworking — that people wouldn’t mind sharing a workspace with a complete stranger whose medical history they didn’t know — was still valid. As a manager of amenity spaces for landlords, there was hope, but that required getting the landlord on the phone.
As for Convene’s third line of business — as a provider of spaces for live conferences — that was just wiped out.
The company did what it had to do to survive. It let its chief design officer walk. It laid off close to one-fifth of its staff, around 150 people. It closed all 32 locations around the U.S. It wasn’t pretty. But Convene is still here, with 22 locations now nationwide (the company also has a 23rd location planned for London).
Ryan Simonetti, Convene’s co-founder and chief executive, answered some Commercial Observer questions about all that in early March.
His remarks have been edited for length and clarity.
So Convene has three basic business lines: coworking, which is changing, evolving; servicing amenity platforms, which seems more important than ever; and providing conference space, which basically dropped dead in the pandemic. Am I missing anything?
You got it. We do all of those things. And, of course, we partner with landlords and manage their services as well.
Give me your best prognostication for those things, now that we are maybe on the cusp of the post-COVID-19 world.
In the last few years, it’s been challenging, as you mentioned, for all of us, especially a company like Convene that’s in the business of convening people. Despite the challenges, I think our team did a really nice job navigating our way through the last few years. And also still doing what we’ve always done, which is finding new and exciting ways to evolve our offerings to serve our clients. There’s no doubt in my mind that the future is flexible. And it’s also about creating hybrid experiences in order to attract, retain and inspire talent.
Our flexible workspaces held up really well throughout COVID. In just the second half of last year we saw a 320 percent increase in flexible workplace contracts signed, and more than a 50 percent increase in Q3 and Q4 bookings relative to that same time period in 2019. And that part of our business has recovered incredibly quickly. Compared with where we were in the second half of last year, we saw a 320 percent increase in contract signings and an increase in Q3, Q4 bookings relative to that same time period in 2019.
I would say there is a ton of surging demand for flexible options for Convene, just like it’s happening more broadly in the office sector.
And we’re seeing this flight to quality. There is a huge difference, as you know, in how trophy Class A new office is performing. We’re seeing that same thing in our sectors. We’re getting the benefit of that rotation to quality.
In bucket number one [coworking], I’m very bullish, and I’m seeing a lot of net new customers there as well. Today, 57 percent of our customers are first-time workspace customers for Convene. So, for us, the pie is growing. And more and more companies are now looking at flex as a strategic alternative to signing a new long-term lease.
In bucket number two [amenity management], it’s no longer about onsite hospitality and amenity services and conferencing and food. The level of expectation around the technology is changing dramatically. And one of the new capabilities that we have is we launched something called Convene Studio, which is really a high-end audio-visual capability to support our clients, hosting hybrid and virtual events. And we see that playing across all of our product offerings.
And in bucket number three [conference hosting], with COVID, we think there’s a tremendous amount of pent-up demand in that part of the business. If I look at November, December , pre-omicron, looking at our event book, we’re actually on par with 2019. So I’m really bullish about the meetings business. Onsite is the new offsite. People need to come together with intention.
Looking at your website, it appears you guys are trying to push into the virtual and live-virtual hybrid conferencing market. So, you think that’s not going to go away post-COVID?
We believe that most live experiences moving forward in the post-COVID world will be some parts hybrid and some parts virtual audience and there will be some part virtual speaker participation. That’s a fundamental structural shift in the industry.
If I look at our bookings today, over a third of our meetings that we have today are hybrid, leveraging some form of our studio platform and capability. Looking at revenue from our meeting and events business, 60 percent of that revenue is now attached to hybrid in some form or fashion.
We don’t want to be the next Zoom, but we want to make sure we have technology-enabled production and easy services capability that help our clients use these immersive experiences and hybrid events in a magical way that’s a natural extension of our lives.
So it’s not going away. It’s a permanent change, the genie is out of the bottle. People will always want to be there, but if they can’t be there, they’re going to learn to love being there virtually.
Yeah. Our behavior has fundamentally and structurally changed. I believe that the future of meeting events at work is going to be in this new hybrid way. It’s going to be up to companies to figure out how to make that all work in an interesting way.
What are your expectations for the post-COVID world, and is it going to be good for companies like Convene?
As you know, we have been increasing for a very long time around this, let’s call it, integration between hospitality and office. I think there is no doubt in my mind that our working life around those two things is blending in a way where the places that we go to work, we are going to expect from them more hospitality and amenities. That was something that we’ve been preaching for a long time and I think COVID really accelerated the adoption of that kind of thinking at the customer level, but probably, more importantly, at the landlord level.
I don’t think that that trend changes. I believe you will continue to see a deeper and deeper integration between the things that folks like us do and what property management does to create this type of end-to-end experience for tenants in buildings. The second thing is the future is flexible. Companies want to outsource more and in-source less. They don’t want to sign long-term commitments if they don’t have to.
The flight to quality really is happening, and I’ve seen it all over the world. I’ve seen all of our competitors’ spaces. And nobody does what Convene does the way we do it. I think we’re the premium brand in the market.
And the last thing is, I believe, that, in order to maintain culture, companies will have to collaborate face to face; we feel it’s the best way to build trust and authentic relationships. That part of Convene’s business then is going to be in higher and higher demand as companies that are hybrid or remote, or whatever we want to call it, are going to have to physically bring their teams, their clients, together with intention more often, and they’re probably going to have to do it in a hybrid way. The meeting and conference side of our business is going to do extremely well. What we’re going to have a year from now, two years, five years from now is going to be a supply challenge, not a demand challenge.
Things have been bumpy for your company. You lost your chief design officer, you laid off something like 150 people, you shut down outposts. Sounds like you did what you had to do to keep the lights on and last into the post-COVID world.
Our plan from Day 1 was to survive and thrive. Legally, I wasn’t able to operate my core business for almost a year. Literally, the meeting and event/conferencing business, which was a very significant revenue source, went to zero overnight. But one of our key values is our grit. We did what we had to do but we also innovated, we evolved.
We’re really excited about getting back to what we really love to do, which is growing and serving our clients and geographies and workplaces in new and exciting ways. And there will be a lot more exciting news to come as we emerge from this crisis.
And of course, you weren’t the only ones with problems. Knotel went bankrupt. WeWork (WE) famously had to pull back from its IPO; they’ve made movies about it. Do you think those days are over?
We live in a very dynamic world. All you have to do is look at the tragic situation unfolding in Eastern Europe and Ukraine. None of us have a crystal ball. Organizations that have a real sense of purpose, that are adaptable, that are resilient, have a real mission, are innovative; all those things represent our company.
Project for me what the coworking business is going to look like in 2025, presupposing that COVID is either over or has faded into the background.
Flexible space, including coworking, will continue to be a bigger and bigger part of the overall supply, and will start to become the dominant way a huge company consumes real estate. I really believe that more and more companies will outsource their workspaces to help them deliver a great day at work in this new hybrid world.
And experiential technology will play more and more of a role, and the challenge will be making that as seamless as possible. And the largest landlord in the world will own no real estate.
This interview originally appeared as part of Commercial Observer’s Tenant Talk newsletter. Please consider subscribing here.