Co-Living vs. Faux-Living
Disclaimer: this is content is “handwritten”, not AI generated 🤓
Co-Living has not only been a buzzing word in the hospitality but also in real estate. Over recent years it has come up as a new asset class. The new needs of this particular market have made room for some truly high margin business cases that have drawn the attention of institutional investors. However, defining it, like most buzz words in the industry, seems rather difficult. Like boutique, lifestyle, serviced or branded residences, buzz words can also create confusion and cause the high expectations of both guests, owners and even employees not to be met.
While digging into the space both IRL and online, I have come across a multitude of definitions. Some of them based on hospitality trends, some just related to chain that conceived the brand and some drawn from a legislative perspective. A few examples:
Assets with a residential permit renting out for a strict minimum number of months where inhabitants share space like workspace, kitchens living space etc. Usually, this minimum stay is linked to residential legislation of the country. Depending on in which segment the property operates, the property might have additional services like a hotel would have, such as laundry services, common lounges, grab & go bar, restaurant, housekeeping services, (digital) concierge etc.
Assets with a hotel permit, balancing short and long stays. Any length of stay between 1 night and the maximum amount of months the permit allows. The maximum length of stay is often linked to the country’s legislation as well. The hotels are usually more lifestyle/instagrammable properties that have a combination of standard hotel rooms and studios with kitchenettes.
Long-stay assets with set target market like student housing, remote workers, senior living, or for example corporate housing. These concepts generally focus more on a thriving community aspect between its guests.
Though, I feel there is an important oversight in the business. There are those who see co-living not as an asset class but as a lifestyle. These people are the core customers themselves. They are those who are probably the initial drivers of the segment itself. They see co-living, not just as a prolonged bleisure trip, but as their primary residence and way of life. This brings completely different needs than what the hospitality industry often offers. These nomads are very serious about what should be called co-living and, especially, what shouldn’t.
As big-time institutional investors smell green, they have flooded the market looking for an edge. Smart operators and real estate owners market their properties as co-living as to take part of this influx of cash in the market. Sometimes to the dismay of the true co-living nomads. The term “Faux-Living” or “Co-Living washing” is used to describe those properties call themselves co-living without offering the essential elements that are required by the target market: convenience, wellbeing, sustainability, and most of all community.
Don’t get me wrong, I strongly believe that there is also a business case for these properties. But, maybe market them differently, like Community Based Hospitality (or CBH) for instance. A hybrid model where both long staying guests and short stays can mix and co-exist, and, where certain of the core co-living elements are present.
Not being able to define the co-living segment properly, raises some business concerns. The future of the business might be in peril if expectations between guests, owners and employees aren’t better managed. Some business models are overly zealous by having the topline revenues of a short stay property and GOP margin of a residential model. This has already caused some bankruptcies in the market.
Over the last years, I have visited many of co-living properties all over the world. From little family-owned properties, to large chain-backed boxed. Both sides of the co-living/CBH space have their merits. Whether you subscribe to the co-living as a lifestyle, a hotel, or residential asset class, there are benefits to all as long as the stakeholders involved are aligned. The issues come when the definition of your property clashes with the needs and expectations of your target customer.
In the next few blogs, I will share my co-living experiences. The good, the bad and the truly wonderful which makes me so enthusiastic about future of this space.
Mathijs
