This article was featured in the fourth edition of Coliving Insights, in the chapter Scale, make sure to download your copy here. If you are interested in learning what the subscription living models means for real estate as a whole, check out our previous article Why You Should Tap Into Subscription Living Now.
Subscription services have been offered by businesses since before any of us can remember. Farms have been delivering fresh milk by horse carriage to neighbours in their village, and collecting their monthly payment prior to Jane Austen’s first book. Nowadays we can hardly spend an hour without using one of the multiple subscription services that we have integrated into our lives. Your mobile internet, gym, entertainment and public transport are all paid per subscription; even your fridge might be stocked via a subscription box. Whether you might have noticed or not, you have been living by subscription for years.
The convenience of a monthly payment and guarantee of delivery of a consistent, trusted service have been the qualities that made subscription-based businesses a source of value for users since the start. The model also provides something that most businesses would kill for: a recurring revenue flow.
The rise of the subscription economy took place mainly in the last decade; the phenomenon marks a change in consumption patterns that were heavily influenced by the disruptive power of millennials. The generation’s thirst for digital access to all sorts of personalised services and products, together with their narrow interest in ownership, made subscription-based businesses multiply in a variety of sectors. Today, beyond receiving milk and newspapers at your door, you can now subscribe to high fashion brands, jewellery, smart bikes and even underwear.
As we are incorporating an increasing number of subscription-based services into our daily lives, it is only a matter of time until subscription-based living solutions disrupt the coliving industry. To stay on top of emerging real estate innovations, it is crucial to trace new demands in the market and sometimes tweak your strategy to meet those needs. How, then, can the subscription economy be integrated into coliving models?
The demand for flexible living solutions has never been higher. Being able to move between different cities and countries while pursuing a career is a choice more people are asking for and taking everyday. For at least a decade, concepts like remote work and digital nomadism have been steadily increasing and the 2020 pandemic helped to push and spread these trends through every corner of the world. According to the Boston Consulting Group’s recent Workplace of The Future survey of over 12,000 employees, businesses already anticipate that, in the future, about 40% of their employees will follow a remote-working model.
Simultaneously, millennials and their incessant thirst for new experiences continue to disrupt the status quo of various industries, and by demanding living solutions that better suit their lifestyles, the real estate market is no exception. Their generation will not be seduced by competitive mortgage interests, acquiring assets through decades of monthly instalments or having their name on a deed. Millennials and Gen Z want to live in the now; they want to be free to choose, want a quick answer to their needs - preferably through personalised services - and demand a fast delivery of products and seamless online transactions.
If remote work, digital nomads, millennials and Gen Z are all seeking flexibility, access and experience, what is the living solution that meets their needs? As an innovation hub working within real estate, we are going to be putting our bets on the living solution that fulfils these demands: a hybrid of coliving and subscription-based living.
Coliving spaces already operate in a similar manner to a subscription service - but here the outcome/product for the user is a living experience service. Subscribers look for bespoke products and services that will improve over time; subscribing to a service creates a fluid relationship between users and a business. Most coliving operators have already established a relationship with the end users, so what can the subscription economy really add to their business model?
One way to scale up a coliving business into a subscription-based model is to provide more choices to users. Offering a property or location upgrade might be an interesting option to consider by operators with different targeted locations spread between cities and countries. This option also attends to the various life cycles of users. For example, families often need more space when having a kid, and less space when their children go to college. Having the possibility of more easily shifting between various living spaces enables people to follow their natural journeys in life without being bound to one place. Giving users the freedom to move out of an apartment they have outgrown or relocating to a new city hassle-free are benefits that can retain a customer potentially for a lifetime.
One of the great values of subscribers is that they are keen to add more services to their basic subscription once they get acquainted to and build trust in a service. In this sense, to enjoy the perks of scaling/adapting to a subscription model, coliving should consider how to make living easier for users in every possible aspect. Imagine a potential resident with a “services menu” at hand when considering a coliving property - what would they want to add to their living subscription? Furniture, a 50’’ flat screen TV, a storage unit, a car, a gym membership, weekly grocery delivery, nanny care twice a week, daily dog walks? For each ticked box, value is added to the user experience, making ROI increase while generating a predictable revenue.
More than providing easy access to various services and amenities, operators need to facilitate subscription to additional options that can be personalised. This would create a convenient and integrated living experience that gives users peace of mind to relax and enjoy their home, with the assurance that what they need will be delivered as they like and charged in one single transaction.
Another path for coliving brands to reap the benefits of the subscription economy is through an integrated platform of coliving operators, partnering together. Such a solution would require a network offering subscribers a wide range of living solutions spread across the globe. Users would enjoy the freedom and convenience to move between locations, without the need to break a rental contract or pay a new deposit. Being part of a subscription-living network would increase brand awareness and provide added value to each apartment unit, while maintaining each businesses’ autonomy and business model.
Corporate subscription is nothing new in hospitality, but just recently, hotel and hostel chains are introducing subscription plans for wanderlust-driven guests and remote workers.
Anticipating the demand for accommodations designed for living and working, the global hospitality platform Selina launched its first three subscription-based products last August. The Selina Nomad Passport allows members to purchase 30 night credits at lower rates that can be used at their discretion to spend time in their preferred Selina location. The Selina CoLive plan instead offers guests a continuous stay in any of the 74 Selina properties for 1, 3 or 6 months. At last, a B2B Remote Work Pass was created for businesses to easily book 1 to 12-month stays for their remote-working collaborators. The Selina CoLive and B2B plans include weekly cleaning and other services, while all three products include an assigned coworking station, daily wellness classes and restaurant discounts. Similarly to Spotify, Netflix and every other thriving subscription-based business, the real value provided by Selina’s subscription plans are convenience and flexibility to make choices and access quality services.
CitizenM, a hospitality brand designed for “mobile citizens”, rolled out its subscription plan in early September, inviting at-home workers to try working from anywhere. Designed for digital nomads, freelancers and adventurers, the global passport by CitizenM includes a minimum of 7 days and maximum of 29 days in each of their 21 locations worldwide, unlimited access to work spaces, special prices for breakfasts, discounts for F&B and a swift booking process. Beyond exploring opportunities to overcome the pandemic, CitizenM understands the growing demand for flexible living and delivering a solution advantageous for all of their potential users and stakeholders.
To make the subscription model work, businesses like Selina and CitizenM limit the number of subscriptions offered to each plan and passport. This way they are able to predict the ROI that these products can generate, learn from their first trials and adapt their future strategy.
When scaling up or adapting to a subscription living model, the biggest challenge for coliving is mainly operational. Pricing different living offers, tracking customised requests and various subscription types, and on top of all this, delivering excellent customer service, are all crucial processes that require high precision and seamless technology automations. When considering a subscription-living offer that involves multiple properties, the complexity of operational and logistical processes increases significantly. Therefore, the only way real estate can scale through subscription living is by investing in modern technology, taking advantage of digital tools and platforms that will allow for a deep understanding of data insights, comprehensive automatisation and CRM management.
Nevertheless, none of these challenges should scare coliving businesses away from embracing subscription living. One fact to always keep in mind is that subscribers are better than customers: they provide recurring revenue, frequently purchase added services and help brands generate specialised market data.
The subscription economy is already marching at its own pace and trotting over narrow-minded businesses that ignore its disruptive force. Every company needs to keep up with the times we are living in, and now is the moment to offer experiences, flexibility and convenience - one of the best ways to do it is through subscription models. For the coliving sector, embracing the subscription economy means more than enjoying a steady cash flow, a long relationship with users and overall increase in brand value; it is an opportunity for business to scale. By supporting the scaling process of the coliving sector, institutional investors will be drawn in and drive development to consolidate coliving as a stable asset class.
While subscription based services have been around for quite some time now, the high demand for flexible living by younger generations means it's time for coliving and real estate to join the movement. Whether it’s providing consumers with a greater variety of choice or offering easy access to service and amenities, subscription-based coliving has much to offer.
Are you ready to embrace the subscription living model in coliving? As the potential for a subscription-based living model becomes clear, the next question should be: how do we create it? Research, experience and innovation are at the core of Spatial Experience: we support our partners, clients and ecosystem in the development of contemporary business concepts and help them adapt their real estate models to current demand and market trends. In a joint effort with Digital Estate, a tech-driven venture from Spatial Experience, we support our ecosystem in getting a step closer towards bringing the subscription model to the shared living sector.
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