Practical questions about running a mini hotel in Sri Lanka
In the comments to the post "Path to the Oasis. Part 4. Life and business on the island" I received a fairly detailed question. The answer may be interesting to many people, so I am publishing it as a separate post.
https://pikabu.ru/@Ktotopotam asks:
Hello. If you can write about it, it would be interesting to read about the practical side of the matter. For example:
1. Was the villa bought by your partner or rented? For how much? What were the costs of bringing the villa into a condition suitable for renting out?
We rented the villa for about 800 dollars a month (later the price was reduced a little), with a deposit for half a year and monthly payment. This was a very low price, but in its original condition neither the house nor the garden were suitable for receiving guests. There was no necessary furniture or equipment, cosmetic repairs were needed, and before that the house had to be cleared of a pile of unnecessary things. Not counting the later investment in the hostel, about 6,000 dollars were spent on the house and garden. Later I spent about 3,500 on the hostel.
Several thousand more went into registering the company and resident visas.
2. How did you look for villas to rent out? I mean this: "Besides the hostel I rented a couple more houses and a villa for the season"
I found the first house online, on the most popular local rental site. It is not aimed at foreigners, so there are more interesting price offers than on similar sites for visitors.
As for the additional ones, at first I was not looking for them at all and did not even think about it. But one way or another you get to know locals, and at some point people came to me with an offer to rent another villa for business. I refused to rent it then (and wrongly so), because I did not think I could personally handle more than one, but I offered simply to send guests to them by placing information about the villa on my resources, and later on Airbnb. After a few successful check-ins I began to look at interesting places myself and talk to owners, but rather passively. For active work I needed a partner-assistant, but I never managed to find one.
One house in Moragalla I liked very much, mostly because of the owner, who found me on Facebook himself and also offered his house for rent. That one I rented with full prepayment for the whole season (it was my last year in Lanka).
3. Did the owners know that you would be "subletting" their villas? Did they require a deposit? What kind?
Yes, I told the owners about my goals from the very beginning.
4. How do occupancy and prices change depending on the season? Are there serious drops?
Occupancy changes from complete zero in May-June to 100% at New Year. Prices are at the discretion of the owners: some lowered them slightly for the low season, some significantly.
5. Who did the cleaning? Were there problems with staff not showing up for work? How many cleaners were there?
One of the main criteria when looking for villas was good service from the owners. In some places it was included in the price, in others I paid extra for it. I personally had almost no problems (there were guests who were lovers of sterility), although in my own house I often had to do the cleaning myself. In general, on the island there are constant problems with staff.
6. Did you do minor repairs yourself or involve locals?
Minor repairs ourselves; for something more serious we involved locals. And one could write a separate post about how locals work. If it is interesting, I will describe a few cases.
7. If there was local staff, how did you find them? How did you hire them, with a contract?
Payment in cash. It never reached the point of contracts or permanent employment. And that is not especially common there.
8. Can you give financial calculations: startup expenses, current expenses, income, profit?
A little is in the first answer. There was no profit from my own house, unless you count the small salary I allocated to myself to support my life there. Other places did bring profit, but it varied significantly. I would not call exactly this approach a business; rather, self-employment. To run a business and count on profit, you need another format and investment. I learned that already in the process.
9. What VKontakte and Instagram groups gave 65% occupancy? I used to travel a lot myself and would never have thought of looking for accommodation that way. Either Booking or by myself on the spot.
My wife ran Instagram, and it had more than 10,000 followers. The VK group is even still alive, though not maintained: https://vk.com/anilau. The site http://villa.anilau.com/ru/ also brought decent traffic from search engines (we made the content ourselves). A few foreigners even came from a Facebook group.
10. What visa did you have? Did it give you the right to work officially, or was everything solved thanks to some loopholes known by the lawyer?
A resident business visa. It gave the right to work officially, but only in my own company. Many people work without it too, but some were caught and deported. Plus, the resident visa allowed me to stay for years without leaving the country, so I did not spare the money and did everything properly.
11. Were there cafes or shops near the villas? How did residents solve the food issue? Did you offer breakfast?
We offered breakfast, but demand was low. Possibly because our tourists were mostly budget travelers and there was a kitchen for them. In other villas, guests more often ordered food. There are plenty of cafes and shops in Hikka; the nearest ones to our house were 500 meters away, essentially on the beach.
12. Are there ways to increase income per tourist through additional services or sales of something?
Yes, if you deal with it. Food, tours around the island (only through locals, foreigners cannot work as guides), scooter rental, event organization (weddings, birthdays, just some activities). Possibly something else too, but I did not do it. If people asked, I could send them to one of my trusted acquaintances. In return they sometimes dropped by with gifts.