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Startup of the Week: London based Chototel targets Mumbai, Ankleshwar, Bangalore, Hyderabad &Pune

Rhea1Aimed at providing affordable, secure and resource-efficient housing, London based Rhea Silva launched Chototel a chain of budget hotels starting at $2 per night. The word Chototel is derived from Japanese word Chotu which means little and hotel.

According to Rhea Silva, Founder& MD, Chototel, there is an opportunity falling into the niche between budget hotels and rental housing which is unaddressed.

Speaking exclusively to IndianMediaBook, Silva said, “The real scale exists in countries such as India, Nigeria and China where rapid urbanization is causing young working people to move towards cites where opportunity exists for them. Not all of them can afford to buy a house and renting comes with hassles like deposits, committed tenures etc. A solution like Chototel therefore makes sense.”

Chototel is all set to start its journey with its first project in Nagothane a place near Mumbai. It is a four-building, 240-unit (60 units per building) hospitality-cum-rental development with a capacity of 960 occupants spread across 1.5 acres and nearly 53,000 square feet of constructed area to be operational from June 2016.

Silva informed that there were two reasons for choosing Nagothane, firstly the site is situated on the new Mumbai-Goa Expressway, that automatically attracts tourist traffic. Also the industrial belt has over 50,000 informal workers, who are the prime target for clean and affordable, temporary accommodation.

Budget travellers and people seeking temporary rental accommodation are not very different in their expectations. They both expect a clean and hygienic environment. Both expect uninterrupted utilities and safety. Except for different degrees of luxury, all guests, across all levels of hotels, have not very dissimilar expectations when it comes to safety, cleanliness or response.

Chototel1The first Chototel’s are being funded by its core equity which is currently about USD 3 million. Silva informed that the venture is planning to close its first round of funding before September this year. When it comes to the business model, the daily rentals are waterfall directly to the investors of the hotel. The operating costs of the hotel are managed from the sale of utilities and services which are billed separately to customers.

Silva mentioned that this is an asset heavy industry and goes through the same pangs as any other infrastructure business. “The projects do take a long time to get profitable and return capital to investors. However because the cost of capital is very low in the western world and many of our co-investors really such as the social impact of what we do we are able to access inexpensive capital. We also share all the other challenges of the real estate sector including land, title, permits, local management issues etc., opined Silva.

Chototel is aiming to mark its presence in the World’s most populous cities, where people struggle to find affordable accommodation.

“Our hotels are going to be in growth centres and in locations which are on their path to become high density urban clusters in a time frame of 10-15 years. In India our target initially is to build around, Mumbai, Ankleshwar, Bangalore, Hyderabad and Pune. These locations have an optimum blend of IT industries, manufacturing and retail”, concluded Silva.

Rhea Silva is a third-generation social entrepreneur with experience in building and managing affordable housing and hotels. She is a valedictorian from St. Xavier’s College, and is currently finishing an additional degree in law.