The Business Owner: Rhea Silva, Chototel
Offering super budget hotels for as cheap as $2 per night, Chototel provides housing to those unable to afford their own homes
Founder: Rhea Silva
Proposition: Delivering high-tech, budget hotel-style accommodation globally for individuals and families priced out of the private rental sector
Describe your business model:
Chototel hotels will have two sources of income: the rent – which, in India for example, starts at US $2 a night and can surge to a maximum of $5 – and income generated from utilities, such as the solar panels and water plants, and services, such as the crèche and community kitchen.
The income generated from the rent will be directly cascaded to investors, while the income generated from the utilities and services will be reserved to pay for the hotel’s maintenance, contingency and employees’ wages.
How is your business different from what’s already out there?
Nothing like our model currently exists. We’ve designed a low-cost, high-tech building than can serve the accommodation needs of people who cannot afford to rent privately.
Rooms in our first project, in Nagothane, near Mumbai, cost $2 a night, and can sleep up to four people. We charge utility bills separately, but these don’t cost more than $0.50 a day because the building is completely off-grid and uses renewable and sustainable forms of energy, such as solar power. Further cost savings are delivered by automating various hotel services via bots and a smartphone app.
The business is globally scalable and we’re looking at expanding into the UK and UAE next.
How did you finance your business?
We raised our first $2m from friends and family to kick-start the business. We are currently undergoing a raise of $5m to fund our pilot project, based 75km outside of Mumbai, India.
What is the most important thing to keep track of in business and why?
It is important to closely track the market you are entering, to be aware of growing trends and stay ahead of competitors. For example, Chototel is responding to the significant changes that are taking place regarding the way people live. Households are shrinking, attitudes to homeownership are changing and people want more flexible housing solutions.
What is the biggest day-to-day challenge you face?
Our largest daily challenges are the limitations in scaling. Markets have many regulatory hurdles at many levels and are often time consuming to implement.
What marketing techniques do you use to attract new customers?
Our marketing techniques have evolved as our understanding of the sector has developed. Initially, when I founded Chototel, I was reluctant to speak about the social mission of the business and the impact we hoped to achieve. I was wary that profit, scalability and social impact would not be regarded as compatible, and instead focused my efforts on emphasising the financial returns of the project.
On the contrary, however, there has been a significant shift in attitudes towards profit with purpose companies, and impact is no longer regarded as a taboo in investment circles. Chototel is confident to speak about the core social purpose of the company, alongside the innovative technology that is making our vision possible.
Do you think it’s important for small businesses to export, any tips?
In order for Chototel to have the large-scale social impact we envisage, it is important for us to scale. Our mission is to supply 1% of the world’s demand for affordable housing by 2025 and build five million super-budget hotel rooms in the next decade.
In order to achieve scale, it is important for small businesses to think globally. Alongside targeting locations in the UK affected by the housing crisis, we are also planning to expand further in India and to the UAE.
What’s the business app you couldn’t do without?
The company uses whatsapp extensively as a communication tool for between employees and vendors.
Describe your company’s culture in three words:
Ambitious. Focused. Goal-orientated.
What would you like the government to do for small business?
With the recent turbulence in the UK economy in the run-up to, and immediately after, the Brexit vote, the government needs to work to assure small businesses that the UK is still open for business. Recent measures such as The Bank of England’s decision to cut interest rates to 0.25% are promising in this regard.
Who’s your biggest small and medium enterprise hero?
Flexible rental solutions such as welive and Fizzy Living are exciting to watch, as they too are responding to the changes in the way people live, and our shifting attitudes towards homeownership. They have recognised that the homes of the future will need to be flexible, community-centred and technologically-driven.
With our low-cost housing solution, we hope to apply these same concepts to the global housing crisis, by providing a flexible rental solution that is affordable to everyone.
Where do you want the business to be in three years?
Chototel provides a service that is somewhere between a budget hotel and social housing – which is a new concept and therefore holds the niche in the market. We don’t have any direct competitors and when markets realize the scale and impact of what we can offer, we believe we will be able to gather phenomenal momentum.
Chototel’s global growth strategy is to have a presence in fast-growing urban centres where the demand for affordable accommodation is predicted to rise within the next decade. We are monitoring locations where rapid urbanisation is taking place, or there is a shift in the way people live.
In the next three years, we intend to have a presence in India, the UAE and the UK. In five years, Chototel could potentially be the world’s largest hotel company with at least a million rooms.
What’s your top tip for keeping it lean and making profit?
Managing your resources efficiently is a vital part of every business. Continuously monitoring cash flow and balancing the books should always be a priority.