Ryan Simonetti, CEO and cofounder of Convene, joins “The Sherman Show” to discuss the future of commercial real estate, particularly in the office and hospitality sectors. Convene designs and services premium places to meet and work. Founded in 2009, Convene has transformed the workplace and meeting place by bringing together trends in technology, service and amenitization, which is the lifestyle movement that transformed hotels and luxury fitness clubs.
Convene also set out to provide businesses with a more-flexible and better-aligned real estate model. Key to Mr. Simonetti’s approach was to provide businesses “access” to workspaces without the need to own them or enter long-term leases. The ownership/long-term lease model, he realized, leaves companies with either too much or too little real estate. “If I was a company,” he notes, “would I rather design, build and manage all of my own hospitality space, my own meeting event and conferencing facilities that I use a few times a year? That’s not really my core business. Do I want to lease an extra 50,000 square feet of space that I may or may not need? Or do I want to sign a 10-year lease when I’ve only got a business model that gives me visibility for the next 18 to 24 months? … [I]t’s a shared consumption model, right? It’s outsource over insource; it’s shared infrastructure over owned infrastructure, and I believe pre-COVID and then coming out of COVID, access is the new ownership.”
Due to the COVID-19 pandemic, Convene, like many firms, had to close its locations in the U.S., and plans to open operations in the United Kingdom have been postponed. The process has been a tough one, but Mr. Simonetti and his team used the opportunity to reassess their strategic vision of the future of their economic sector.
“We had to close our entire portfolio in early March,” Mr. Simonetti tells podcast cohosts Jeffrey Sherman and Samuel Lau. “We’ve only chosen at this point to open up a portion of that portfolio. And we had to make all the really tough and hard decisions that companies that are, you know, I think kind of at ground zero of this crisis have had to make around cost cutting. And I’m sure for you guys, even as leaders, like the hardest conversations to have are the human ones. And this has been really, really tough on our team and our leadership team. But I’d say the hard part for us is over. We had a strategy called Survive and Thrive when we started, and I’d say the first 90 days was really about survival and doing the hard stuff like cutting costs and closing locations, raising capital restructuring deals that we had with landlords.
“And the last, I’d say, 90 days has been this amazing opportunity that I think most companies never get, especially at our stage. I mean, we were high flying about to do a pre-IPO around growing 60-plus percent a year. When do you ever get to take a giant step back and really question everything you’re doing and you just don’t? And so I think what we’ve done is really taken this as an opportunity to really ask ourselves in a post-COVID world, knowing that there’s going to be new challenges and new opportunities, where do we really strategically want to take the business? What are the core competencies and capabilities that we can leverage knowing that although the world is not going to be radically different, it’s going to be different enough that we need to think different? And where are the opportunities where we can invest in innovation to really position us while moving forward? And I’m really appreciative of our team and our board for not letting a good crisis go to waste, and I think have really positioned the company to be successful coming out of this.”
Based on the data that he tracks, Mr. Simonetti believes recovery from the economic shock of the pandemic will probably take from 12 to 24 months, with the outcome largely dependent on COVID-19 vaccine development. “And also unclear to us is what’s the real residual economic impact coming out of this,” he says. “And a lot of that depends on stimulus plans and support from the federal government, which I think we did a good job early. But most of my peers in the industry now, there’s really no access to additional support or stimulus dollars today, and you can’t run a restaurant at 30% occupancy and survive…. And I think that there’s a lot of businesses and industries that if we can’t get additional stimulus dollars out in the next six months, you know, that there’s going to be a long-term impact on the economy because those small businesses don’t bounce back.”
This podcast was recorded on Sept. 29, 2020.
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