As channels consolidate, know who you are dealing with!
The announcement on March 16th that DaVinci Virtual was absorbed by The Instant Group, which itself announced earlier it was acquired by Regus’ parent company IWG, raises existential questions for many flexible office operators. Now Regus directly controls web brokers like Instant Offices and marketplaces like DaVinci, EasyOffices, Rovva, and Worka.
Operators should consider the following risks this poses:
A Bias Towards Regus
Whereas these platforms will likely continue to list independent providers, their primary role will clearly be to expand Regus’ market reach and, subtly or not, channel prospects to Regus. These acquisitions were not cheap. IWG did not do this to be nice with the rest of the industry!
In the recent past, Regus has not been upfront about being behind some of these channels. For example, Rovva has only listed IWG locations, providing the exact same virtual office packages that could be found directly on Regus.com. Why use another brand to offer the exact same VO products? This creates a marketing fog that only gives the appearance of choice and competition, when prospects are really channeled away from non-Regus locations. See the article on “A changing landscape in the flexible office industry” published on Pacific Workplaces for the impact this will have on end-users.
In the last few months, we noticed a change in DaVinci’s behavior after they started to list Regus locations, as they clearly displayed a bias in favor of Regus. That was presumably a move designed to please their new partner before consuming the merger with Instant Offices. For example, the upfront fee DaVinci charged for Regus locations was discounted compared to the upfront fee charged for packages sold at independent providers’ locations. A few operators shared with us other unnatural behavior by DaVinci they observed the last few months leading to the acquisition.
That sort of bias is not new. Web brokers like Instant Offices or Office Freedom have listed Regus locations for a long time. In the past, these service providers would attempt to strike a somewhat difficult balance between taking their representation role of the entire industry seriously and an understandable desire to please their biggest partner. It worked for the most part because Regus was not present everywhere, with a lower market share in years past than it has now. Today, the industry landscape is different. Regus’ market share is bigger than ever. They announced they would grow by another 1,000 locations, IWG has acquired some of the most prevalent channel companies like Instant and DaVinci, and Regus locations are now listed on other platforms like Liquidspace (although only some of them and not all of them yet), that want to be comprehensive. Expect Regus to benefit from that situation and independent operators not.
CloudVO’s mission, on the other hand, is to promote its partners, all of which are independent operators. That guarantees that we are looking for the best non-Regus and non-WeWork options for our clients. Other platforms like Alliance Virtual or Preferred Office Network do too, but the camp that chooses not to list Regus or Wework is shrinking.
Risk to Leak Proprietary Information
There are many reasons to be wary of listing with Regus-controlled marketplaces. In working with them, you may directly or indirectly provide Regus with information on your market and your clients. For example, if the demand is strong in a market where you operate but Regus does not, you may give them incentives to open a new location in your neck of the woods. Remember: they announced a goal of opening 1,000 new locations.
If your lease expires soon, that kind of market information may give incentives for Regus to go after your landlord in an attempt to replace you. That is particularly true if you are not in perfectly good standing on your master lease, perhaps because you are still paying down deferred rent accumulated during a crisis like the last two years of COVID. Regus has not been shy in exhibiting that kind of behavior during and after the Great Recession a decade or so ago, and may do it again.
What should independent operators do?
First, be aware who you do business with. Monitor industry announcements, particularly on mergers and acquisitions, because the landscape can change again. Consider de-listing from Regus-control platforms. Today, there are Regus- and Wework-free alternatives. CloudVO is one of them. Be wary of someone that may become the exclusive partner of one of your large competitors, like Upflex with WeWork. And remember that even if you are the only game in town today, that could change quickly.
Second, learn to increasingly rely on your own marketing strength by continuously improving your SEO and boosting your own local pay-per-click and social media campaigns.
Finally, understand the risk, but do not be paranoid about it. Delivering better service than your large competitors and leveraging the CloudVO brand and network will help you thrive!
Read our CEO Laurent Dhollande’s view of the impact on end-users in this blog published on Pacific Workplaces.