Aug 06

A “super budget hotel” at $2 a day has just opened – we meet its founder

We speak to Chototel boss Rhea Silva

Three reasons you should be watching them

1. Our mission at Chototel is to be a catalyst in ending homelessness worldwide, by providing hotel-style accommodation at $2 a night.

2. We aim to grow to 5 million rooms in the next decade, which would make us the largest affordable hotel company in the world.

3. Chototel is developing an unmanned hotel model through the use of IoT technology, enabling hotels to be managed remotely.


* Company: Chototel

* What it does, in a sentence: Chototel’s super-budget hotels, starting at $2, will use ground-breaking technology across construction, management and operations to deliver a product that will change the way the world houses its people.

* Founded: 4th December 2015, London

* Founder/s: Rhea Silva

* Size of team: 50


What problem are you trying to solve?

Chototel was conceived out of the need to provide dignified housing to a global market that fails to cater to those who have been priced out of major cities by high house prices and soaring private rents.

Today, 330 million households worldwide suffer from some form of housing poverty. If current trends continue, this figure is predicted to rise to 440 million households by 2025, or one-third of urban humanity, according to the 2014 McKinsey Global Institute report.

How big is the market – and how much of it do you think you can own?

The estimated cost to address the global housing shortage – including replacing today’s substandard housing and building additional houses by 2025 – is $9-11 trillion according to a McKinsey Global Instiute report in 2014.

Chototel, which straddles both budget hotels and social housing, is an ideal solution to this issue. It provides a solution to fill 1% of the world’s housing demand by building 5 million hotel rooms within the next decade.

How do you make money?

Chototel hotels have two sources of income: the rent – which starts at $2 a night and can surge to a maximum of $5 – and income generated from utilities, such as sales of electricity, water, gas, and services – such as the crèche and community kitchen. The income generated from the rent will be directly waterfalled to investors. And, the income generated from the utilities and services will be reserved to pay for the maintenance, contingency and wages of the hotel.

This business model ensures Chototel’s investors benefit from a regular rental yield in addition to the underlying appreciating asset, and that Chototel remains profitable at this low price point.

Who’s on your team that makes you think you can do this?

At Chototel we have a clear vision: to change the way the world houses its people. We are a dynamic, flat-structured team who are passionate about working together to achieve our common goal. Additionally, I am a third-generation entrepreneur and therefore have an incredibly understanding, knowledgeable personal network to support me.

Who’s bankrolling you?

I received a loan from friends and family to start Chototel.

What advice would you give other entrepreneurs trying to build a start-up?

Everything that can go wrong, will go wrong. Most importantly, starting a business needs persistence and resilience. You will inevitably face set-backs along the way and you have to be relentless in pursuit of your mission.

Despite the challenges, I have found entrepreneurship to be an incredibly exciting and rewarding career. I would encourage people thinking about starting their own business to not let their background, gender or personal inhibitions affect what they think they can achieve.

What do you believe the key to growing this business is?

In order for Chototel to have the large-scale social impact we envisage, we would like to scale internationally. I believe that continuing to invest in innovative technology will be key in ensuring our ability to scale. For example, Chototel has incorporated IoT (Internet of things) technology into our daily hotel operations to automate tasks that previously relied upon staff.

We are currently developing the Chototel mobile App so that guests will be able to manage billing, utility usage and check-in and out facilities via their smartphone. Technology has been key to ensuring we can supply accommodation at a super-budget price point and will remain central to our growth strategy.

What metrics do you look at every day?

Cash flow, cash flow, cash flow… Managing your resources efficiently is a vital part of every business.

Apart from balancing the books – our team is regularly on the lookout for locations to target for our next project. 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.

For example, in the UK, it is predicted that there will be a sharp increase in the number of people living on their own in the next decade. These individuals are looking for a rental housing solution without the constraints of deposits and long-term contracts, and we aim to garner much of this market.

What’s been the most unexpectedly valuable lesson you’ve learnt so far?

I have learned that social investment is not a myth. 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. However, I have found that 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.

What’s been your biggest mistake so far?

I underestimated the time that markets take to accept new ideas. Chototel is an entirely new concept – and it’s going to take time to explain our unique proposition.

What do you think is on the horizon for your industry in the year ahead?

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 opens up a new category of hotels, targeting two brand new market segments. The first being people and small families who prefer to rent, and second being the ones affected most by the skewed housing market.

Which London start-up/s are you watching, and why?

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.