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Chototel : Building Its First Super Budget Hotel In India

Chototel, founded by Rhea Silva on the 7th January 2016, is India's lowest eco-friendly hotel project which would be open for renting out to people who would like to stay for a longer period. It’s a pilot project & the first one in India in this segment.

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Today, 235 million households worldwide, suffer from some form of housing poverty (MCKinsey Global Institute, 2014). If current trends persist, this figure is likely to rise to 440 million 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.

Chototel, founded by Rhea Silva on the 7th January 2016, is India's lowest eco-friendly hotel project which would be open for renting out to people who would like to stay for a longer period. It’s a pilot project & the first one in India in this segment. Soaring rentals and housing prices are fuelling housing poverty, resulting in a greater number of people living in substandard housing. Chototel was conceived out of the need to provide quality and dignified housing solutions to a global market that fails to cater to those at the bottom of the pyramid.

Rhea Silva shares about her unique company in a candid conversation with Sujata Sangwan, BWdisrupt.

Market opportunity


It is Chototel’s primary belief that the super-budget hotel product, positioned between the social rental product and affordable housing is an ideal solution to this opportunity. Chototel also believes that there is a fundamental shift in the structure of the nuclear family, which is getting smaller thus driving demand for smaller and more efficient living spaces. . We are creating the world’s first super-budget hotel. Chototel will provide clean, comfortable hotel accommodation for very “little” starting price of $2.

USP & Point of differentiation

Sitting in the niche between budget hotels and rental housing, Chototel caters to those who currently struggle to find dignified accommodation, particularly the urban poor.

Chototel is different from the existing budget hotels for two reasons. Firstly, we are a super-budget hotel; unlike existing budget hotels, with a nightly rate on average of US$30-50, Chototel’s rates will start at just US$2 a night. Secondly, the way we achieve this low cost is different to existing budget hotels. The traditional budget sector is priced more as a function of its investment cos. In comparison, Chototel is using technology at every level to improve efficiency and ensure we can provide clean, affordable housing at an unparalleled price point. Firstly, we use 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, our innovative of-grid closed-loop utility system will ensure that electricity, gas and water are generated on site from natural resources and recycled waste.

Monetization model

The average cost of our rooms is $10,000, at 2$ a night , that is $730 per year it amounts to a return of 7.3% pre-tax. Our investors are happy with that number.

The costs of operations of the hotel are recovered from the sale of utilities and other services like food & beverage, crèche and leasing of bicycles for instance, which is on a pay-per-use basis. Technology is used extensively to ensure that the hotel has minimal operating costs. IoT technology has been employed to automate many tasks previously reliant upon manpower.

Operating costs covered From Utilities & Services


Because the payments to our investors are covered from the nightly rental rate, all the revenue received from utilities and services – including the community kitchen, the crèche and food and beverage profits – can be filtered back into the maintenance of the hotel. This income will be managed by self-help groups, who are elected from the non-working residents of the hotel.

Funding status

Currently, the company is being funded by proprietary capital. We are in the process of speaking to investors for our first round of funding.

Growth Strategy

Our 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 India, Nigeria, the UK & 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 & Liverpool in the United Kingdom and Ajman in the UAE.

Marketing Strategy

Our strategy in India, is to focus around urban centres that have a blend of IT, manufacturing and retail industries presently. As such, we are initially targeting locations around Mumbai, Ankleshwar, Bangalore, Hyderabad and Pune. Our 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.

Challenges

We face 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. We will always partner with local developers in every market we enter to ensure we are tuned in to the particularities of each market.


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