WeWork: In Need of a ReWork
Co-working Not Working
Founded in 2010, WeWork Inc. (WeWork) provides flexible co-working spaces and meeting rooms designed as a solution to meet dynamic and adaptable workspace environments. With 750 locations across 39 countries in 2022, WeWork serves a diverse range of clients, from entrepreneurs to large businesses, boasting a membership base of 545,000 and an average commitment period of 19 months. WeWork primarily earns revenue through its membership fees to use its space, and the sales of WeWork’s on-demand membership for workplace solutions account for 95% of its revenue.
However, troubles have plagued WeWork since its peak valuation of USD 47 billion in 2019, when it failed to successfully launch its first IPO due to conflicts of interest within management and COVID-19 popularizing working from home. Despite being one of the world’s top startups at its peak, WeWork filed for bankruptcy in late 2023. As its locations largely sat empty with remote work during the pandemic, WeWork accumulated substantial debt during its rapid expansion. Its unprofitable office spaces, paired with membership revenue significantly below expectations, led to USD 18.6 billion in debt and eventual bankruptcy.
As part of its restructuring plan following bankruptcy in 2023, WeWork aims to reduce its network to 300 locations. Notably, WeWork has exited key leases in markets like San Jose and Houston, where its previous commitments to large office spaces no longer aligned with its operational goals and financial sustainability. Additionally, Yardi Systems Inc. (Yardi), a provider of property management software, stepped in to contribute $337 million in equity, putting it at a 60% stake in WeWork. Yardi believes its software will help WeWork optimize its operations. WeWork’s forgiven debt and new investors like Yardi have solved its cash problem and given it a new slate.
Even with a second chance, WeWork cannot make the same mistakes as before. The company is currently working towards profitability using the same model that has previously troubled it. As office vacancies have nearly doubled in major American cities—from around 8% pre-pandemic to over 15% now in New York—WeWork desperately needs a new strategy that avoids the unpredictability of the commercial real estate market. The company must find a way to capitalize on its strengths while maintaining a more sustainable financial approach to drive future profitability.
Innovation Stagnation
According to a survey by American Express Canada, 64% of working professionals born between the late 1990s and mid-2000s prioritize business travel. Gen Z is generating a growing demand for business travel and prioritizes enjoying experiences, spending “more per capita than any other generation at the same age.” Given the higher tendency to spend on hospitality, hotels could benefit from business travellers increasing their spending on complimentary services.
Recent trends also show a resurgence in business travel as companies prioritize in-person team and client interactions to strengthen culture and strategy development. At the same time, the flexibility of remote work allows business travellers to extend their stays before and after work trips, combining work trips with leisure — a growing trend known as “bleisure.” These positive shifts create a new opportunity for hotels to sell additional accommodations and services.
Business travellers value modern, premium environments for meetings and remote work. However, many hotels have not adapted to the modern worker's needs. Traditional business centers often feature outdated desktops, minimal desk space, and suboptimal layouts, making them ill-suited for the growing demand for co-working facilities. Furthermore, conference rooms are seeing lower utilization overall, with significant events moving online for cost-cutting measures and greater accessibility. A report from CBRE Group, Inc., an American commercial real estate firm, indicates full-service hotels saw a 66.1% decline in room revenue per available room, including revenues from other hotel services. A transformation of these spaces becomes an opportunity to align with new trends and preferences.
As businesses introduce return-to-office (RTO) mandates, the number of people travelling for client meetings, team offsites, and company trips is rising. Hence, the demand for collaborative meeting spaces outside company office buildings is increasing. For hotel chains, offering premium and consistent co-working spaces worldwide would provide even more of a reason for substantial firms to maintain their lucrative loyalty, particularly in smaller cities where clients are located and offices do not exist.
The global co-working space market represents a substantial opportunity, projected to reach approximately CAD 54.9 billion by 2030, with an impressive CAGR of 14.9%. Hotels are uniquely positioned to capture this growing demand as they are usually the top accommodation choice for business travellers, attracting 71% of this demographic.
Workation Relocations
WeWork should pivot its business model from a business-to-consumer (B2C) to a business-to-business (B2B) model by partnering with a major hotel chain to transform their underutilized event and conference rooms into modern co-working spaces.
As its existing office leases expire, WeWork could relocate its co-working locations. By entering into a contract with a hotel chain, both parties could evenly split the cost of renovating old conference spaces into new co-working spaces. The new agreement would be a one-time transformation cost without recurring payment obligations. The partnership would aim to increase the utilization of the conference spaces as a joint endeavour. The renovation would favour the hotel chain, as it pays regular expenses to maintain the underutilized conference rooms.
WeWork would manage the renovation of the spaces, ensuring they reflect the high-quality, consistent design in its locations worldwide. Partnering with a specific hotel chain would make the transformation more effective, as WeWork could use the same suppliers, contractors, and processes to scale across its significant locations. WeWork could also use its otherwise unused assets to save on costs as it relocates offices.
WeWork would also provide the hotel chain access to its online software platform, known for its effective booking and reservation system. WeWork could integrate this platform within the hotel chain’s existing reservation service and handle all technical aspects of the offices. In contrast, the hotel covers the day-to-day operations of the physical location. WeWork would also migrate its existing customer base of 545,000 members to the closest hotel co-working spaces. The hotel would benefit from WeWork’s existing users visiting their hotels, promoting more significant foot traffic and providing opportunities to sell its hospitality services, including food and beverages, spa treatments, and accommodations. Hotel locations would receive the revenues from each new membership and booking of its spaces, while WeWork takes a commission at an agreed-upon rate.
In hospitality, brand loyalty and rewards systems are crucial for attracting and retaining customers. Partnering with WeWork, a leading name in the co-working industry, enhances the value of a hotel chain’s amenities and offerings. The hotel could offer guests discounted access or “free trial” days at other WeWork locations, allowing them to experience the premium WeWork environment while further elevating the brand’s appeal.
This model offers hotels a compelling advantage: it enables them to turn underutilized spaces into profit-generating assets and establish a consistent revenue stream. For WeWork, this strategy would simplify its business model, allowing it to earn more revenue without the financial strain of leasing and day-to-day costs, which include reception, utilities, and cleaning. Coming out of bankruptcy, WeWork would no longer have to cover the renovation cost of establishing a new location while closing less desirable ones as leases end.
The Race for New Space
Beyond revenue growth and easing financial pressures, this model enhances brand visibility among business travellers who may not typically use traditional co-working spaces. WeWork’s presence will also expand in prime locations worldwide by leveraging the established hospitality network without incurring the high cost of such expansion. This partnership opens doors to exclusive partnerships, loyalty program synergies, and co-branded marketing initiatives.
The relocated WeWork sites would appeal to business travellers who prioritize convenience and efficiency, particularly those in sales. A survey by the Global Business Travel Association found that 83% of business travellers consider proximity to meeting locations a top factor when choosing accommodations. In fact, for many, the convenience of hotel locations surpasses perks like loyalty rewards or flying business class. WeWork locations inside hotels could offer dual monitors, office supplies, and hospitality services such as food and beverages, offering a working environment for business travellers without them ever having to step foot outside of the building. Moreover, a consistent platform to book collaborative spaces and familiar work environments across locations could help a partnering hotel chain offer comfort and reliability to its clientele during their hectic travels.
Remote-first tech startups, digital nomads, and small to medium-sized businesses that are existing members would merely view the relocations as a “move” and continue with WeWork, mainly as most hotels are located relatively close to the downtown core of cities. Existing customers would also gravitate towards hotel chains with WeWork locations as their preferred choice for night stays and hospitality. The new business traveller segment would address WeWork’s location occupancy issues and increase the utilization of spaces without competing with its existing customers.
Reve-new
WeWork and hotels can mutually benefit from converting underutilized spaces. Take a look at the Sheraton Centre Toronto Hotel as an example; the hotel boasts approximately 130,000 square feet of conference space. The hotel generates CAD 12.57 million annually, assuming a revenue per available metre (RevPAM) of $1,040. Converting 70% of the Toronto hotel’s conference space into coworking areas could raise the RevPAM to $1,400, assuming a higher occupancy rate with new co-working spaces, adding $11.84 million in revenue. The remaining 30% of conference spaces would still raise $3.77 million. This would bring the total annual revenue to $15.61 million — a 24% increase without a transformation.
Additionally, co-working members’ use of hotel services, such as dining and accommodations, could generate $1.5 million in ancillary revenue, pushing total revenue to $17.11 million — a 36% overall increase. On the other hand, WeWork could earn $5.92 million in revenue from commissions, netting $3.42 million after operational costs. This partnership offers a compelling win-win, with diversified revenue streams and higher space utilization driving financial and operational success for both parties.
Hotel Suites to Office Seats
Hilton Hotels & Resorts is already recognizing this demand and has demonstrated a willingness to invest substantial amounts in this opportunity, as seen with the launch of its Signia hotels in 2019. This initiative aims to develop technologically advanced meeting spaces across four locations. In particular, earlier this year, Hilton introduced a new Signia property in Atlanta, featuring 100,000 square feet of state-of-the-art meeting space at a development cost of $500 million. Although innovative, Hilton’s approach with Signia lacks the scalability, cost-effectiveness, and speed necessary to meet increasing demand. Hilton also markets its hotel rooms as workspaces, offering them for day use at a lower rate than a night stay. However, preparing rooms, checking guests in, and cleaning after-day uses are costly for the hotel’s locations and depend on availability.
Recent studies and industry insights underscore the growing importance of coworking spaces for hotels, which points to their potential to generate consistent revenue during off-peak seasons while attracting new customer segments, such as remote workers and small businesses. Research by JLL found that hotel coworking spaces transform underutilized areas into revenue-generating hubs, boost food and beverage sales, and position properties as versatile, multi-functional venues in the evolving hospitality landscape. Similarly, insights from The Hotels Network reveal that incorporating coworking spaces meets the rising demand for flexible work environments and enhances the overall guest experience, making hotels more appealing to modern travellers and local communities alike.
Other hotels have already embraced coworking with notable success. In 2019, Accor Hotels launched Wojo, a coworking brand, transforming underused spaces into productive environments catering to hotel guests and locals. Similarly, Selina, a hotel brand targeting digital nomads, integrates coworking spaces into its properties, fostering vibrant communities while driving occupancy rates. These examples demonstrate the potential for hotels to merge hospitality with coworking and effectively achieve strong business outcomes.
WeWork’s value proposition is its streamlined booking system, guaranteed high-quality working spaces across locations, and loyal user base. The company can bring customers to underutilized spaces that hotels traditionally find difficult to fill. By packaging its benefits as a service to make existing locations more attractive co-working spaces, WeWork could potentially see a substantial road to recovery.
From Debt to A Reset (and Not Debt Again)
WeWork’s pivot to a B2B model could provide a compelling solution to its financial challenges. Transforming underutilized hotel spaces into co-working environments would capitalize on the growing demand for flexible workspaces while aligning with modern business travellers' needs. By focusing on high-impact transformations, leveraging established hotel networks, and offering value-added services, WeWork could achieve sustainable growth while providing hotels with a profitable and innovative service. This strategic shift could help WeWork rebuild its brand, avoiding the uncertainty of commercial real estate and preventing the company from incurring additional debt.
