Co-Live Spaces: Brilliant But Flawed

A new trend is emerging in accommodation called the co-live space. What is it? Essentially it’s a large property resembling a big house. Everyone has their own room and bathroom. However, all other common spaces are shared with other guests. That might include a kitchen, entertainment facilities, work spaces, laundry, outdoors, and more. So it’s really more like a hostel but nicer and private within your living quarters.

These are popping up all around the world. Each co-live space is different. Some are focused on bringing a like-minded community together. Others are indistinguishable from a condo building. Some are focused on long-term (1 month minimum), while others resemble the nightly hotel model. Some are urban, others are more in touch with nature. Some have a business mindset, while others are more lifestyle oriented. The common theme is that it tries to address a market segment not found in traditional accommodation types.

Co-live spaces hypothetically do all the things that make each current accommodation type great:

• They have the amenities of a hotel
• They have the community of a hostel
• They have the culture of an Airbnb
• They have the technology and work spaces of corporate housing

In idea, it is a great concept. However, they miss their high potential with a couple of major flaws…

1. Outstanding concept, poor marketing. It sounds really unappealing the first time someone hears “co-live space”. Some are a bit more sharing oriented than others, but it’s clear that privacy is something we all value. When you hear you’ll be living with someone else, you might envision sharing a bedroom. You might envision a big group sharing a small house. You might envision actually living with others (not tourism). The “co-live” title dooms it to mainstream failure. Until this concept is more widespread, most people won’t investigate enough to discover its real features.
2. No search engine. Along similar lines, most people won’t be seeking co-live spaces directly. And since these property types are too different from a hotel concept, they probably won’t be listing on Expedia or other booking engines. So it’s very difficult to find them. Even if the concept would otherwise be appealing, the chances of finding them are pretty remote for the average person. Coliving and CoWali do their best but are unsatisfactory. Listings/information are incomplete and in some cases dated, there is no booking engine, and there’s only a small number of global options. To encourage more co-live developments, a booking engine is essential. It has to go beyond social media, word of mouth, and the occasional media story.
3. Limited founders/investment managers. A lot of the people starting these spaces lack the financial understanding of real estate, operations, and investment. They often struggle to articulate a marketing strategy to have on-going occupancy. Their pitches often lack operational details (insurance, maintenance, staffing, etc). Their knowledge of things like booking engines, room optimization, pricing optimization, and other accommodation details are spotty. And they often lack business sophistication to raise money, have a viable business plan, build it effectively, and everything that entails. And it’s not their fault. Their motivation for starting such businesses are more lifestyle-oriented. They seek a community of travelers and like-minded people, while business talent is mostly around customer facing sales rather than scalable investments. Some aspiring co-live owners have these skills and do get investment. However, most don’t and either do short-term Airbnb rentals or organize a traveling co-live group and then select existing properties (in a tour group type business model).
4. Booking is customer unfriendly. Most co-live spaces require an application to reserve spaces. The co-live managers are trying to ensure a positive guest experience by only accepting people that fit the community profile. They don’t want people expecting a full service hotel. They don’t want an elderly couple that won’t fit in. They don’t want the creepy old single man seeking a living situation with young millennials. Because there is this screening process to book, it creates a deterrence. We’re too used to instant booking common to other accommodation types. We’re used to being able to see the room we’re reserving like Airbnb.
5. The business model isn’t mainstream enough. Adjustments have to be made for it to reach a more widespread audience. Community is great but shouldn’t be a required feature for more independent people. Business facilities are great but most traveling for work have dedicated offices. And occupancy risks force prices higher than Airbnb (into hotel price territory) so the business stays profitable.
6. Regulatory issues. A lot of co-live owners are operating in a legal and regulatory gray-zone like the common Airbnb listing. They are offering an accommodation service but aren’t always adhering to the regulations of a common hotel (zoning, land use, licensing, taxes, safety standards, reporting, etc). Some operate like a hotel and accept the regulatory costs. Others are ignoring these things and deal with significant regulation risk. It’s really not ideal either way.

With all that said, co-live spaces should become more popular in the coming years. They’re extremely popular with remote workers (which are gaining in number). They also might find a good niche as a replacement for traditional apartments (for people living alone). But they need to fix some of the problems outlined before they achieve more widespread success.

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