Why Regus’ announcement of their 2,000th center is phenomenal news for independent workspace providers!

June 2, 2014 Laurent Dhollande Leave a comment

By Laurent Dhollande, CEO of CloudVO & The Pacific Workplaces Group

Regus announced the opening of its 2000^th business “Centre” location in Boulder, Colorado in a recent press release, shortly after CloudVO hosted a webinar where we dissected Regus’ successful strategy, centered on the value of their network and emphasized by their Businessworld offering.

In this “Dissecting Regus’ Businessworld” webinar, we shared the impressive growth of the Regus network that:

• Doubled in size in 4 years
• Grew by 420 business centers and 78 “3^rd places” in 2013 alone
• Generated a 23% revenue increase last year

We also projected that Regus would add 300 locations this year, plus or minus 100. This was based on their last annual report suggesting that they would generate enough cash flow to fund 300 new locations, and the steps they took to increase their lines of credit to allow for the possibility of more. They seem to be on-track. Given the strength of the demand for flexible offices, I am even tempted to upgrade my forecast to the high end of that range, particularly if we include their “3^rd place” locations.
Should independent providers be threatened or encouraged by this impressive execution of their strategy and phenomenal growth for a $2 billion company?
The answer: Neither! This is more than encouraging; it is incredibly exciting for all independent providers. Four reasons for this:

1. The demand for on-demand offices from Enterprise users is exploding!
   The Regus growth is fueled by a surge in flexible office space demand that benefits everyone. Their press release mentions that 34% of global businesses want to shed their fixed office space this year. The demand for on-demand workspace by Enterprise users is indeed exploding, and we are only scratching the surface.
    
2. Regus is no longer the only player that can provide ubiquitous access to a network of on-demand office locations.
   For now, Regus is still the largest network, but the wave of their marketing clout lifts all credible alternative ships. Allow me to speak to our own efforts. With the CloudTouchdown network and access cards, CloudVO™ has already built a credible alternative to Regus Businessworld. CloudTouchdown™ cards give mobile workers and the distributed workforce of Enterprise clients access to a network of locations under a fixed monthly price, with no surprise to their monthly budget. Today CloudVO™ is already 450 locations strong. But the better news is that there are many more quality on-demand workspace providers around the world than there are Regus centers. Thus, we will eventually beat Regus in this important race to ubiquity, if we can continue to be credible in uniting the industry to offer an alternative that combines local/regional focus with single point of billing and global support, which Enterprise clients and highly mobile workers need.
    
3. The consumerization of the workplace favors local workspace providers.
   At the 2011 GWA conference in Las Vegas, I moderated a panel on Social Media and the Workplace, where Mark Gilbreath (GWA Board Member and Liquidspace Founder) and Josh Waldo (Microsoft SMB Marketing Director) conceptualized the consumerization of the workplace. In that same forum, and at CorenetGlobal events that same year, I talked about the “Bring-Your-Own-Device” trend in IT that was spilling over to “Bring-your-own-Workplace”, with outsourced, hosted, touchdown office space.  The anticipation of these new trends was the basis for the creation of companies like CloudVO™ and Liquidspace early in this decade, following in the footsteps of Davinci who started a few years earlier. All three have been instrumental in accelerating these nascent trends into undeniable reality.
   
   Whereas a large portion of on-demand users are still restricted to providers approved and managed by their enterprise sponsor (such as CloudTouchown™ or Regus), an increasing number of users are free to access local providers on their own, under their own decentralized budget. They often do this via apps that offer pay-per-use ecommerce solutions sites like CloudMeetingRooms, Liquidspace, or DavinciMeetingRooms. Technology providers like HappyDesk in the US or RJMetis in Europe are now equipping independent providers with new and interesting white site e-commerce capabilities embedded in the local provider web site, giving that many more opportunities for local providers’ day offices and meeting rooms to be booked by empowered enterprise users.
   
   And when the “Enterprise” is reduced to one solopreneur (a growing breed!), the local provider often has the edge, being more nimble, more community oriented, and less encumbered by expensive overhead than Regus. Case in point: Coworking locations, whose value propositions are inherently local and community based, have grown almost 10-fold since 2009, while Regus “only” doubled in size.
    
4. Regus is a viable exit strategy for many Independent Operators
   This is my least favorite reason personally, but certainly something of value to many operators. Because Regus just can’t keep up fast enough with the demand based on pure organic growth, they have been extremely active with acquisition of independent business centers. In fact, the majority of their growth last year came from outside acquisition. We also see signs that they are now seriously pursuing coworking acquisitions as well. Because Regus is the only major acquirer today, the multiples remain low, but with the broiling interest for our industry by Private Equity Firms, we believe that multiples are likely going to rise in the coming years.

If you missed the “Dissecting Regus’ Businessworld” webinar live, view a slightly edited version here. We had 300 registrants to the webinar, which generated a rich Q&A discussion that extended beyond the webinar itself. See an extensive list of Q&A below the video on the same landing page and feel free to volunteer questions and observations to Partners@CloudVO.com. We will continue to enrich that discussion as a reference for the entire industry.