Chototel brand designed to break the low-cost mold
Chototel brand designed to break the low-cost mold
06 SEPTEMBER 2016 6:53 AM
Chototel's founder sees a future in efficiently-run "super budget" hotels with ADRs of $2 to $5.

LONDON and MUMBAI—A hotel vision that accommodates traditional guests for an average daily rate between $2 and $5 and also provides affordable housing is the mission of the minds behind Chototel.

Chototel—“chhota” means “small” in Hindi—is the brainchild of Rhea Silva, its founder and managing director, who started the company in January. Chototel is now listed on London’s Social Stock Exchange, which seeks to grow the “impact investing” sector and reportedly controlled assets worth $77.4 billion in 2015.

The company has offices in London and Mumbai, India, and will open another office in Dubai, United Arab Emirates, next year, according to Silva. Its first hotel will open in late September in Nagothane, India, alongside the Mumbai-to-Goa highway and will have 240 rooms and be able to host up to 960 guests.

A second project is in construction, and Silva said the brand will expand quickly, with technology being the catalyst and driver in both the development and operations stages.

She compared the project to the ride-sharing app Uber and said she expects socially conscious hotel guests will look very favorably on the idea.

“Uber has its valuation now, and it has got rid of the need for everyone to have a car,” Silva said. “Availability and flexibility matter more. Yes, home ownership is aspirational and emotional to some, but that is far from being across the board.”

Both traditional hotel guests and extended-stay tenants, such as families seeking affordable rents who cannot afford mortgages, will be able to check in on mobile devices via an app. Some extended-stay guests will have employment opportunities and can work in lieu of paying rent at properties with child care centers, kitchens and sports facilities, Silva said.

Chototel promises clean, safe, stylish, community-based hotels that travelers will be drawn to.

“In five years, we want to be a significant solution,” Silva said. “We are not being obnoxious or arrogant, but we have an audacious goal, what in Hindi we call ‘bhag,’ to supply 1% of world housing demand within the next 10 to 20 years.”

That 1% translates to five million rooms, Silva said.

Silva, who studied law at university, is convinced “super-budget hotels” are one answer to the housing problem faced by 440 million households globally. India is so large and land and hotel costs are growing at such a very high rate, she said, that a solution built and operated cheaply and effectively by a company owning its assets and creating employment will make a significant contribution.

Normal hotel stays at Chototel properties will still be offered, and Silva insisted the project will be run on business lines providing returns to investors.

India is the initial focus, but other destinations such as Nigeria, United Arab Emirates and United Kingdom will also be targets, with the latter two are expected to open Chototel properties by the end of the year. ADR will change across geographies, but not by a great deal more, Silva said.

While properties in India will consist of between 200 and 400 rooms, the first London hotel will open with between 80 and 100 rooms, Silva said.

Chototel’s second property will be in Pune, India, and several other Indian markets including Mumbai, Ankleshwar, Bangalore and Hyderabad will be expansion targets.

“There are a lot of psychological differences in different geographies, but the idea is translatable,” Silva said. “We do not accept subsidies, and we do not give them. In India, the cost of each room, including land and construction, is $10,000, (and) in the UAE $30,000, so even if the rate of return to investors is about 10% per annum, that will mean base rent in the UAE still being only $6, which is still very affordable.”

Silva added that tourists can expect TVs, bathrooms, kitchenettes, common balconies and bedrooms with two double sofa beds. Rooms are designed with maintenance in mind, but toiletries will be the responsibility of guests.

“The properties will have both (operational) efficiencies, as we can build fast and cheaply, and service efficiencies, as we are able to run hotels very economically,” Silva said.

The Chototel model’s new-build efficiencies include:

  • On-site industrial-style dry construction methods using unskilled labor;
  • off-grid, closed-loop utility systems generating electricity, gas and water on-site from natural resources and recycled waste;
  • automated check-in, online records of all customers, security, customer tracking of utility consumption, billing, real-time money transfers, reporting and analytics; and
  • a unique financing system yielding market returns to investors that maintain low capital and operating costs.

Silva’s background is in real estate, and her family’s business, Teresa Lin, once owned hotels and then decided to pull its equity and concentrate on Chototel.

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