Comment: Guest house business – my journey

This article first appeared on the Maldives Economist blog. Republished with permission.

Back in 2009, I started a new venture, along with a very close friend, Mohamed Shihan. Back then, it was something very new, something that nobody has started yet. We called this venture ‘White Shell’ as we rented a small house right on the beach of Maafushi. As the government opened up to allow guest houses in local inhabited islands, we were the first to submit our registration. As a result, White Shell Beach Inn, is the first guest house to be registered on a local island. So we became the pioneers in it.

Initially, we invested about MVR300,000 so that we could have 4 rooms fully furnished with AC, and very basic facilities. A small restaurant and a kitchen, and 4 employees. I was working full time in the public sector, as an economist in MMA, during my weekends – I was busy with setting up of the business, and marketing it. As I did not have enough funds for a professional webpage development, I had to learn on developing websites, and tried my luck with it. I developed our first website, uploaded it, and started the online marketing of it. Initial months of losses were borne by the monthly salary that I earned, and loans from my partner in business. We made sure the staff were paid on time, and utility bills paid every month. Some of my friends, and people from the tourism sector advised me that it would be a failure, as it is tourism without alcohol, pork, and bikinis.

Six months in business, with the various online marketing efforts, we were able to get guests from Russia, Poland, Germany, France, and the UK. With my efforts, I was able to put ‘Maafushi’ as a separate destination on various online booking sites, and travel sites. Before completion of the first year, I was able to rent the adjoining house, and later the house next to it, so that before the end of the second year, we were selling 10 rooms, and were running a successful beach restaurant. For the first one and half years in business, we were able to prove to everybody (especially those in Maafushi), that local island tourism can be successfully run for mid-market tourists, and it can be done without having alcohol, pork and bikinis.

During those months that we were the only guest house in the island, guests enjoyed their time on the beach, and Maafushi, without bikini (in covered clothes, of course), and there were no complaints from the locals. This was because, before the guests booked their holiday with us, they were given the information that it is a local island and that government regulation does not allow swimming in a bikini, just like they are aware that alcohol is not available. Hence, guests were fully informed and aware, and there was no room for complaints or dissatisfaction. Moreover, we got additional revenue because of this regulation – as guests preferred to spend their day in picnic islands, snorkeling, of fishing, and other activities, and that’s additional revenue for us.

We have altogether 20 guest houses in Maafushi now, and 144 rooms. Which means even if we didn’t consider the family rooms, that’d be 288 beds, and with 65% occupancy, that’s 68,328 bed nights per year. Assuming average duration of stay is 4 days, that’s 17,000 guests per year. With conservative estimates and past revenue records, it is estimated that about $9.7 million will enter the local Maafushi economy, and the guest houses will be paying the state – as bed tax and GST – a total of US$1.3 million (equivalent to MVR20 million).

The income per head from guest houses alone is $4,425 per head in Maafushi. The total income per head of Maafushi after adding incomes from other sectors will probably be the highest in the country. It is a perfect example of making economic growth more inclusive, and a case study for inclusive development. In fact, I presented a paper last year in Islamabad, during a South Asia Economic Summit.

With the 20 guest houses, more than 100 locals are being employed in various jobs – ranging from speedboat crew, receptionists, waiters, room boys, accountants, and guest relations officers. The majority of youth are actively engaged in economic activities, without having to spend their times in coffee shops or elsewhere, as they did before. Women with children are able to earn at least MVR10,000 a month doing laundry services. Last month we spent from our hotel MVR17,000 for laundry, which is done by a local family.

We – the White Shell – have played a key role in the expansion, and the success of Maafushi as a tourism destination through leading by example, and also assisting others in the setups. And thanks to MATATO, as we have recently been awarded the Maldives Travel Awards as the Leading Guest House, from the category introduced this year.

There is no doubt that this newly developed industry provides huge economic benefits to the local community and the government in the form of taxes. It also provides other positive outcomes like the guest houses taking charge of cleaning the beach area and streets, and taking care of waste disposal. The MWSC (water company), and STELCO are making huge profits from Maafushi, as the per unit rates are relatively higher in Maafushi compared to Malé. With more that 144 air condition units recently installed, Maafushi is spending heavily on electricity (there’s still more to be done in terms of using efficient energy sources).

There are many challenges as well, of course. With starting of many new guest houses, many have come to believe that the bikini is not a problem, and guests are being told so as well. Less seem to complain, however, as almost everybody benefits from the industry. We are yet to find an amicable solution to the issue, with serious discussions between the island council, tourism ministry, and the guest house owners. Other social issues/problems can also be addresses in a similar manner. Which means there’s still a lot of work to be done in order to make the business sustainable, environment friendly, and in order to make the this model a success in other islands. Wish you all a very happy new year.

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