by Antonis Petropoulos & Frosso DimitrakopoulouAs is well known, the pandemic has struck small accommodation providers in nearly all destinations, and green accommodations were no exception. Seeing no quick improvement and fearing that prices may fall further if they wait longer, many owners mulling retirement or exiting the sector before the current crisis have finally decided to do so. Conversely, hundreds of thousands of employees in the tourism, hospitality and leisure sectors have lost their jobs with no immediate prospect of finding a similar position. Some had a lifelong dream of being their own boss and owning a small hotel. With realty prices falling, they may feel that this is the right time. This article is for them.
There are many types and shades of green accommodation (GA), ranging from homestays, short-rentals, to small Ecolodges, to green hotels and eco-resorts. For the purposes of this short article, we are grouping them together and trying to pinpoint some common pitfalls in relation to purchasing or setting them up from scratch. Most of the following points are based on our communications with and observations of Ecoclub Members who owned and operated, sold or purchased green accommodations.
1. Prepare for Hard and Smart Work: One should not confuse owning a GA with retirement in warmer climes. If you would like to and can afford to retire now, retire, do not try to combine with owning and operating a GA; the latter involves personal hard work and dedication, especially in the early years, an eagerness to learn new skills and be up to date with technology, as well as a solid commitment to green values. Plus, you must really enjoy communication, doing business with and the company of people from all walks of life, and looking after them, with a genuine smile on your face, 24/7.
2. Secure Adequate Funding: For a small GA, adequate funding means anywhere between USD 50,000 to 250,000 per room, depending on a myriad of factors including location, room size and amenities, the size of the land plot, any extra facilities and equipment needed (e.g. a 4x4 car), and, with existing GA, reputation and awards. You will also need an equal amount of funds to cover for low occupancy rates during the first five years, an emergency such a fire, a hurricane, an earthquake, civil unrest or, indeed, a pandemic. If you consider all the above, it may actually be cheaper to purchase an existing, operating and successful GA. All possible sources should be considered including bank loans, private loans, state subsidies, green funds and grants, time-sharing, citizenship by investment schemes, joint venture, franchise, crowdfunding and other sharing-economy models. If possible, seek partners and set up a team to share the financial burden, tasks and expertise.
3. Choose the Right, Green, Location: Successful nature-based GA are relatively accessible from international airports and usually near or, in some jurisdictions, inside protected areas sheltering a great variety of relatively rare wildlife, and near traditional villages with vibrant customs that have not been and are not at the risk of being overrun by tourism. Green considerations include avoiding building on sacred sites, appropriately compensating local landowners and determining whether the location is ecologically appropriate. If you are buying a GA, it may be better to pay a premium for one with a good guidebook and online guest reviews rather than a cheaper, unpopular one. Ask to see trading and turnover figures, occupancy rates, advertising costs, future bookings and frequent guest lists. The availability of nearby Educational & Recreational facilities affects both your and your future employees' quality of life while Health facilities will cover guest emergencies as well. Legal and taxation policies towards expatriate owners are also important. Check the mentality and needs of people and businesses in the candidate location to see if they are compatible with your plans. The right location is not necessarily the easiest one, as significant barriers to entry will shield you from future competitors. Ideally, before deciding, you should already know (or at least know someone that knows) by heart the local history, socioeconomic conditions and politics of the specific destination, the local language, customs, religion, prejudices and taboos as well as any development plans that may downgrade natural surroundings, such as new electricity lines, trains, motorways, factories, fish farms, quarries and so on.
4. Be Genuine, Be Green: If you are only thinking in terms of maximising profits and capital gains, then this particular sport or segment of the industry is not for you. A genuine GA must be financially viable but should also focus on minimising its environmental impact regarding its location, infrastructure and operation. It should meet the actual needs of the local community, combat poverty, and reduce income inequality. It should respect human rights, employee rights, and animal Rights. It should promote inclusion, social justice and non-violence. It should contribute to intercultural understanding, environmental education, knowledge and enlightenment, open minds & open hearts. If you disagree, please stop now and save many years of unhappiness.
5. Be Realistic & Diligent: Drafting a realistic feasibility study and business plan, will allow you to stay within your budget and timeframe. You should conduct a due diligence review, including extensive marketing research, prepare for extremely negative and positive scenarios so as to both expand and contract capacity accordingly. Never invest more than you can afford to lose and remember that with a GA you may lose all your investment and more if you are not adequately covered against guest accidents. You must become familiar with the cost of materials, professional services, land prices, administrative fees, licenses and permits, lengths of bureaucratic processes. You should have a deep understanding of a destination and the weaknesses of its tourism model, of the local history, politics, travel advisories, environmental and health issues, public and private development plans, including mining, oil extraction and forestry. If possible, consult a local expert or partner. In all cases, follow the local news and live a few months in the target destination if possible during different seasons, before deciding to go ahead.
6. Look, Listen & Learn: Be humble and listen to local wisdom and expertise. Avoid a messianic approach and do everything by yourself. Build local partnerships and alliances instead.
7. Have a Plan X: You need to have an Exit Strategy even before you enter. Consider that it may take up to five years to sell your GA at a fair price and that there may be significant sale and capital gains taxes to be paid. Selling or donating a share of your GA to the community, to your local manager, to all your employees and to loyal guests are some alternative, altruistic options.
8. Minimise Risk & Increase Security through Cooperation: Cooperate with, share and sometimes give work to your neighbours, read the local news, get to know the local authorities, the police, the fire brigade, the local clinic, key stakeholders, anyone that may be of assistance to you or your guests. You also need to check if you can obtain adequate buildings and contents insurance, income insurance and hotel staff and guest accident cover, sometimes insurance is offered at unaffordable rates or not at all. If there are other, directly competing green businesses try to reassure them by indicating your willingness to cooperate in cases/seasons of great demand, for joint destination promotion, and community projects.
9. Acquire Skills & Nurture Talent: You will need to learn or to pay for diverse practical skills ranging from building a composting toilet, to maintaining food hygiene and producing a financial statement. If possible, volunteer for a few months in another GA in a similar location, or ask the previous owner to stay on for a few months to show you the ropes. Striking a right balance between hiring local workers and foreign volunteers is also important to create job satisfaction, valuable skills-transfer and positive online coverage. Ideally, you should treat your employees as equal partners, provide a fair wage, a career path, and training opportunities.
10. Go Local & Go Ahead: You need to overcome any language & cultural barriers. Being accepted by the local community depends on your character, your involvement in the life of the community, and on your ability to bring prosperity by sourcing supplies locally and providing quality jobs. Documenting and preparing for all things that can go wrong should NOT convince you that they will (Murphy's Law) or that they all will simultaneously (Drucker's Law) and put you off from going ahead. You can always adapt rather than abandon your project.
A new career as a Green Accommodation Owner-operator can be ethically and financially rewarding with the right, green attitude, guidance and cooperation. Good luck!