This issue of
Citylife

Chiang Mai Citylife > Articles > 2015 > 2015 Issue 07 > From Rags to Riches: The B2 Hotels Success Story

From Rags to Riches: The B2 Hotels Success Story

Pichai Chawla, 46, is the owner of the B2 hotel group, a successful chain of budget hotels, soon to number 23 branches throughout Thailand and beyond.

S__58572808Pichai is a soft spoken, thoughtful man, who has turned his family’s business of selling fabric in Warorot Market into what is now a billion baht corporation. His grandfather came from India and opened a shop selling material in the market 50 years ago. But over the years, as lifestyles changed, inexpensive garments were readily available and fewer people bought material to make their own clothes. Pichai realised that he needed to branch out into other sectors if he was to continue to build his family’s future.

“The import and labour costs grew and I didn’t want to be in a credit business which I felt wasn’t viable,” Pichai told me in a B2 hotel room overlooking the mountains along the Canal Road one hot afternoon. “I left Chiang Mai with some funds and went to Bangkok to enter the property market.”

Pichai’s vision was too big, and he himself too small a fish for his first foray to succeed, but by this time property was in his blood. “I decided to take some time to really think about it and returned to Chiang Mai. What followed was years of looking at property and absorbing knowledge. I began to notice that many of Chiang Mai’s hotels suffered from low season blues when they had to cover high overheads and ran at a loss. I also noticed that many condos were renting out rooms by the day and that these rooms were keeping their businesses stable.”

Pichai would spend hours every day visiting property all over Chiang Mai and soon began to see patterns in the market. He observed what price ranges people could afford in bulk, what kind of amenities were expected and how much things would cost, which locations were thriving and which areas were doomed to failure. “I discovered the salesman market,” he said. “Salesmen come here year round. There is no low season. They have a budget of 350-500 baht per night and even if a condo has 20 rooms to rent, it is still a very solid daily income. There were many standards of rooms, and it was the unreliability of what to expect that stopped many of these businesses from truly succeeding. I realised that if I built a low budget hotel at this price range, offered no service to speak of, but basic and clean hotel standard rooms so that people would be guaranteed their expectations, it would work. There are no staffing issues and the initial investment in the building and the small amount for furniture would be quickly returned.”

“It is all about cost control and quality. With a low budget, locations are not even that much of an issue. So I began to hunt for cheap locations, the risks were low and slowly I expanded. Apart from our Chiang Mai hotels we are now in Pattaya, Bangkok, Chiang Rai, Udon, Kon Kaen and Phuket as well as two more about to be built in Pai and Mae Hong Son.”

Two years ago Pichai was asked to share his knowledge of the property market with the public by publishing a book, “Get Rich through Real Estate without Using Money” where he discussed how easy it was to make money with very little capital from property investment. It was on SE-ED’s bestseller list for six months.

“I had a good start with financial help from my family. It just excelled my process. But if I didn’t have cash, I believe I would still be here today. The journey would have taken longer. Knowledge brings money. l study it, get to know it and it is money right there. Go look at condos in your free time; I do it every day. But if you have a full time job, go once a week on a weekend and by the 54th week you will have learnt so much you will be an expert and you will know what will work and what won’t. At this point, you can pretty much get funding from a reasonable bank or family member or a friend if you write a solid enough proposal.”

“You will see a building and know why it is good. Write down the pros and cons, be structured, and this will help you learn. Once you learn you can’t help but want to invest, because you know it is a sure thing and it will make you rich.”

B2 has 80-90% occupancy in the high seasons and 70% during the low seasons. After eight years work, B2’s income sits at 100 million baht per month and its estimated total asset is valued at 2 billion. He aims to do IPO in three to six years.

“The direct profit is low at these rates but there are many indirect profit steams. It is easy to expand quickly with low risk. Once a hotel has been set up to formula, there is no need to watch the back, it is already set. Use bank loans and it is a sure guarantee paid back. It is a matter of economy of scale. You invest less, and use bank loans to help expand fast. You can then negotiate with contractors because of the scale. The quality gets better, you can hire top brass because they can be spread out over many properties _ something smaller boutiques can’t afford. It all helps to build brand value that is suitable for franchise. Once the total cost is reduced then the direct profit will increase anyway. And with bank loans the exits are much bigger with faster turnovers.”

While Pichai is the front man for B2, it is a total family affair with his two brothers working side by side: Wasant overseeing all condos and Nirand controlling all admin.

“Nirand has created great systems. For instance, you can do prepayments at 7/11s for your hotel. If you buy a 5,000 baht voucher, you can stay for a value of 5,500 baht for up to two years. This is great for our cash flow.”

When asked what he thinks of the current property market in Chiang Mai, Pichai says, “I think that property prices will be pretty static for 3-5 years before rising again. It won’t burst. But if you want to make real money you buy buildings, not units. That’s my advice.”

www.b2hotel.com