Update: 2019 Meeting Room White Paper is now available.
A Guide for Shared Office Space Providers (Part 1)
If you are a CloudVO partner and have the ambition to develop a healthy meeting room business, your meeting rooms should be available for booking to people outside of your core members. Not only can outside visitors be a good revenue supplement for your business, but they may also enrich your community experience. Some of your meeting room users may later decide to take on a more permanent membership at your location.
Booking a meeting room in your location is a great way to respond to a user’s immediate need, but also for him/her to experience your location first hand.
So how should a Workspace-as-a-Service operator price its meeting rooms? We believe pricing meeting rooms should be a function of:
- A Realistic Approach to the Market
- The Competitive Environment
- Supply & Demand
A Realistic Approach to the Market
Sometimes we get emotional about our own space and we can easily convince ourselves that our space is unique and therefore deserves a considerable premium. Remember that the first time a user experiences a new meeting space is probably online, on your web site, a competitor’s web site, or on a reseller’s web site, where all meeting room pictures tend to look really good. So while you should not be shy about commanding a premium for unique amenities, don’t price yourself out of the market. Conversely, really low pricing may suggest a problem with the amenities for some prospects. A new coat of paint, a good wifi connection, or a new HD TV might be better solutions than giving the room away.
A good strategy we like to recommend is to price Day Offices and small meeting rooms aggressively, to lower the barriers to entry into your space, while keeping healthy margins on medium size and larger meeting rooms. This is because the users of small rooms are often also users of larger rooms when they need to get a team together or make a presentation to a larger group.
Day Office bookings represent roughly ¼ of all of the meeting room bookings, so slightly tighter margins on 25% of the business, to seed and feed healthier margins on the rest, seems to be a winning recipe.
The Competitive Environment
Unless you are the only space in town, the pricing level of other providers in your area matters. So check what your competitors are charging.
We found the meeting room business to be very price sensitive for small rooms and Day Offices, but a lot less price sensitive for larger meeting rooms (6 seats or more). This is probably because when a client books a larger room, it typically involves a larger group, often with a higher “utility” level attached to it, to use an economist term.
In fact, the cost per user of a larger room is typically much lower than the cost per seat of a small room, which suggests a very rationale behavior by users when they are less price-sensitive for larger rooms.
Another way to say this is that if I make a sales pitch in front of a large group of potential clients, I want to make sure that I am in a place with great amenities, which may impress positively upon my audience, and maximize my chances of having a successful meeting.
On the other hand, if I have a one-on-one meeting, I can stay more easily in control, and there is less of a risk the meeting will flop, even if I take my visitor to a coffee shop. Thus I am likely to be more price-sensitive while shopping for a small meeting room than for a large room.
Benchmark your competitors by checking their website or going on websites like Liquidspace, Davinci, and CloudVO to see what others are charging in your market.
Our experience is that going too far out of the middle of the range can severely restrict your business, unless of course your center is in a trophy building that serves free French Champagne on tap!
The graphs below, recently released by CloudVO in a “Meeting Room Business Review” white paper for CloudVO partners, shows the nationwide average of CloudVO partners’ pricing of conference rooms by size.
Supply & Demand
Pricing should also reflect the popularity of your service offering and the dynamic of your center. If your meeting rooms are fully utilized, there is clearly no need to price them aggressively. Conversely, if you have a low utilization, which we define as 60 hours or less of paid conference room usage per month, you may want to consider more aggressive promotions or lowering your price level. Remember that 10 hours at $100 gets you a lot less revenue than 100 hours at $40!
The following graph shows an actual meeting room utilization chart at 86 Pacific Workplaces Rooms, broken down by quartile.