Interview with Rhea Silva, Founder & MD of Chototel, London
The Peoples’ Hotel
Sitting in the niche between budget hotels and rental housing, Chototel caters to those looking for affordable housing. The name “Chototel, is formed from the Japanese words “choto”, meaning little, and hotel.Rhea Silva, Founder & Managing Director, Chototel is a London based entrepreneur with experience in both affordable housing and hotels. She explains the concept of these super budge hotels.
Global presence and operations
The 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 have identified that the greatest demand and possibilities for scale exist in developing economies such as Nigeria and China where rapid urbanization is taking place, as young people move into cities in search of better job opportunities. These individuals are looking for rental housing without the constraints of deposit and committed tenures, and a solution like Chototel is in high demand. A similar demand for hassle-free, affordable accommodation also exists in developed economies worldwide. Consequently, we are also looking at sites in Bristol in the United Kingdom and Ajman in the UAE.
Reasons for setting up pilot “super-budget” hotel in India
The first hotel in India is located in Nagothane near Mumbai, and is expected to welcome its first guests in June this year. The hotel will provide clean, comfortable accommodation with uninterrupted utilities from just US$2/day.India is the world’s fastest growing economy and has the smallest urban population with respect to the overall population. India’s 1200 million people are all moving towards the urban clusters and they will need accommodation until they can eventually buy a home. India was ripe with opportunity considering the sheer demographics and its underdeveloped rental housing sector.
Brief about the project
The first hotel at Nagothane in India is expected to welcome guests in June this year. There are two main reasons for choosing Nagothane as our first site. Firstly, the site is situated on the new Mumbai-Goa Expressway. This location enables us to take advantage of the passing tourist traffic and increase income received from providing secondary amenities, such as food and beverages. Secondly, the Roha industrial belt has over 50,000 informal workers. Consequently, there is a high demand for clean, affordable and temporary accommodation in this area.
Every room is spacious and has generous lighting and ventilation. Each 290sqftroom contains a furnished multi-purpose area, two sofa beds, study/dining table, a kitchenette, bathroom with western commodes and a common balcony. All rooms have standard electric and bathroom fittings, colored television and are Wi-Fi enabled. Every room can accommodate four guests comfortably and the $2 rent can be split amongst them.
In addition to the rooms, the hotels will offer a range of services to our guests including 24/7 security, a Community kitchen, a Crèche, a walking trail, an infirmary , cable TV, internet & a children’s garden and access to uninterrupted utilities. These hotel facilities will be managed and maintained by self-help groups consisting of non-working members of the resident community, who will run the facilities with income gained from utilities and services.
The target market for this project
These hotels are expected to appeal to individuals and families who are currently affected by housing shortages and are in need of affordable accommodation. At Nagothane in particular, the target market for the hotels will be the 50,000 informal workers who work in the Roha industrial belt. Our robust social infrastructure – including a crèche, children’s play area and community kitchen – is designed to appeal to the families and non-working dependents of these workers.
Innovative technologies used for cost effective operation & management.
Technology is embedded into every level of our hotel operations, to improve efficiency and ensure we can provide clean, affordable housing at an unparalleled price point. Firstly, we used an innovative construction method – dry steel-frame construction- to build inexpensively and keep working capital cycles short. Next, we have incorporated IoT (Internet of things) technology into the hotel operations to automate many tasks that previously relied upon staff. Technology is used to manage billing, utility usage and check-in and out facilities, amongst other services. Additionally, the innovative off-grid closed-loop utility system will ensure that electricity, gas and water are generated on site from natural resources and recycled waste. Technology therefore enables us to minimise costs across construction, management and maintenance.
The challenges faced in implementing the project
We faced the typical challenges that all hotel companies face, starting with land acquisition, permits and contractors. These issues are common to every market and our experience in the real estate sector means we have developed ways to overcome them. Using local expertise and management in every market we enter will ensure we are tuned in to the particularities of each market.
Difference between Chototel and a regular budget hotel
The budget sector is priced more as a function of its investment cost, which means that the hotels are built in subprime areas with lower real estate costs. The hotels facilities are basic to ensure a low price point and the nightly rate is typically between US$30-50 a day.
In comparison, Chototel is using technology at every level to ensure we can provide clean, comfortable accommodation with uninterrupted utilities for US$2 a night. We use technology to build quickly and inexpensively, that keeps the working capital cycles short; we have a product that needs little or no maintenance, technology is used to manage billing and basically operate the hotel as a near to, unmanned operation.
In both developed and developed regions worldwide, chronic housing shortages are on the rise. Today, 235 million households face the affordable housing gap, defined as the difference between the cost of an acceptable housing unit and what households can afford to pay using 30 percent of income (MCKinsey Global Institute, 2014). If current trends persist, this figure is likely to rise to 440 million households by 2025, equivalent to one-third of the global urban population. The estimated cost to address this demand – including replacing today’s substandard housing and building additional houses by 2025 – is $9-11 trillion. As the pioneer in the super-budget housing sector, Chototel aims to garner much to this market.
Future growth plans in the country
Presently, our initial target locations are around Mumbai, Ankleshwar, Bangalore, Hyderabad and Pune. The second project is targeted near Pune, one of India’s fastest growing industrial corridors, predicted to create over five lakh additional jobs over the next decade.Our plans for expansion in India reflect our wider global growth strategy: to focus around urban centres that have a blend of IT, manufacturing and retail industries present. Chototel will supply the demand for affordable housing from the 437 million households that will be facing the affordable housing challenge by 2025.