Revenue Occupancy (Cash/Economic Occupancy)
Revenue Occupancy (Economic or Cash Occupancy) refers to the proportion of Actual Membership (or Desk) Revenue realized as a percentage of the Target (or Potential) Revenue.
Target or Potential Revenue represents the maximum possible income if all available desks and private offices (the entire coworking inventory) were fully occupied and utilized.
Membership Revenue is the current monthly recurring revenue generated from all occupied resources.
Revenue Occupancy is calculated as (Membership Revenue / Target Revenue) x 100.
Why is revenue occupancy the most critical metric for coworking and flex spaces?
Revenue Occupancy is becoming the most popular and widely adopted metric to track the health of a coworking space. It’s better than the standard Desk Occupancy because it considers whether a resource is sold (occupied) or not and at what price. There’s an old saying that you can always achieve 100% occupancy by giving your space away for free. But then your Revenue Occupancy will be 0%.
Other factors include:
- Financial Health: This metric helps assess the coworking space’s financial performance, indicating how well the space is being monetized.
- Operational Efficiency: Understanding revenue occupancy allows operators to identify underutilized areas and optimize space allocation and pricing strategies.
- Benchmarking: It is a benchmark for comparing performance over different periods or against other coworking spaces, providing insights into market positioning and competitiveness.
How can you improve your Revenue Occupancy?
There are many tactics to increase your revenue occupancy. Of course, the most important one is to attract more members.
- Focus on your Community: A strong community helps you attract more new members and provides fewer discounts.
- Dynamic Pricing: Implement flexible pricing strategies based on demand to maximize revenue.
- Enhanced Marketing: Boost marketing efforts to attract more members and increase occupancy rates.
- Service Diversification: Offer additional services and amenities that can generate supplementary revenue.
Revenue Occupancy in coworking spaces measures the percentage of potential revenue earned based on current occupancy.
It is a critical metric for assessing financial performance, operational efficiency, and strategic planning and can be improved through dynamic pricing, marketing, and service diversification.
Example
If you have 70 full desk memberships in May, 10 discounted memberships, one membership starting on May 15th and one ends on May 20th (full price is $200 and discounted is at $150), your Prorated Desk Revenue will be (70 + 15 / 31 – 21 / 31) * $200 + 10 * $150 = $15,461.29 – if we use the specific month pro-rata.
If your Target Desk Revenue is 100 desks by $200 = $20,000, then your Prorated Desk Revenue will be 77.30%.
