In March 2020, Bengaluru-based co-living startup StayAbode was thriving. It had 96% occupancy across its 2,000 beds nationwide. Monthly revenues had touched Rs 2 crore ($270,000). Unfortunately, that would be as good as it got. The pandemic hit, and StayAbode’s slide backwards was shockingly rapid.
In two short months, its actual occupancy rate dropped to a dangerously low 15%. A good chunk of rooms were still booked, keeping official occupancy levels high, but the properties resembled ghost towns. And a month later, in June, it was acquired in its entirety by Hello World, the co-living arm of Bengaluru-based rental management platform NestAway.
A similar story played out with Delhi-based student housing platform YourShell, which had over 600 beds in University of Delhi’s North Campus area. It was swallowed up by Bengaluru-based student housing provider Stanza Living in September to strengthen Stanza’s presence in the city. Prior to this acquisition, Stanza had 400 beds in North Delhi, says an employee of a rival co-living platform who was earlier associated with Stanza.
Founders of both companies tell The Ken that the acquisitions were already in the works when the pandemic hit. StayAbode’s Viral Chhajer says the company understood the need for consolidation due to increased competition in the space. “For rapid expansion, access to capital became hard as larger players raised more money. Hence, we started exploring avenues and decided to land with NestAway,” Chhajer explains. YourShell had the deal signed and ready since 2019, but was unable to see it through as courts prioritised more urgent cases due to the lockdown.
Despite having the deals sewn up—or maybe because of it—StayAbode and YourShell may have been the exceptions in this new post-pandemic reality. Most of them have now had to recalibrate their business models.
Co-living companies found an edge over their unorganised paying guest (PG) counterparts due to their focus on streamlined services. They offer perks such as fully-furnished rooms, security in the form of CCTVs and fingerprint locks, common spaces designed for students and working professionals, regular housekeeping, and more.
Still, these companies have had to cut variable costs, such as staff salaries or perks for tenants to make up for increased focus on sanitisation. They also renegotiated contracts with property owners, going from a fixed minimum-guarantee model to revenue-share agreements. This shifts the balance of power from the former to the latter, working out better for the property owners in the long run.