How to Create a Small Costa Rica Hotel or Cabina Rental Business for Under $400K

by Geoff McCabe

Ananda cabina at Anamaya Yoga Resort

This week, four different clients came to me with various versions of the same dream: how do I build and operate a small hotel in Costa Rica?

Over the past ten years that I’ve been doing this, hundreds of people have asked me this, and I’ve become better each year at advising them, especially after doing it successfully myself (www.anamayaresort.com) and watching so many people do it well, or fail and leave Costa Rica only to sell their property for a loss.

So finally I’m going to write it all out for you here so you can use this guide to help get your plans together.

Step 1: Choosing a Theme

There are plenty of hotel here for the amount of visitors coming to Costa Rica, so with so much already-established competition, you should do something special to get their attention. You can pull new guests to the area that haven’t even considered Costa Rica if your idea is cool enough. For example, a hotel made of geodesic domes was built by one of our clients in Santa Teresa (Alma Geodesic Bungalows.)

Both surfing and yoga are of course very popular themes, but there are so many places with that focus. Perhaps you can find an unsaturated niche. Horses, bicycles, a hotel for artists, treehouses for rent, or bungalows shaped like mushrooms… who knows, but if you do something special, it will be more memorable.

Having an interesting theme helps you to market in niches besides just hotels and rental houses. It also makes your place more newsworthy and thus likely to be written about by journalists, or added to various “top ten” type lists that Google loves to put at the top of its search results. Getting added to these types of lists is very good for traffic to your website and for your SEO too.

Step 2: Choose the Property

Upgrading Existing Construction: One option is to purchase an existing house and bungalows that’s for sale. If the style is boring enough, the current owner wouldn’t have many rentals and could be selling the property for less than the value of the land plus construction. If you have good design sense, you can add color, some photogenic design elements, a super cool chill space, and thus for little investment make an eye-catching place. You may notice that most of the multi-bungalow properties on our website are pretty boring. It’s not a coincidence that the colorful cute ones, designed with style aren’t for sale. That’s because they’re making money and their owners are living their dream here with successful businesses. I can’t emphasize enough the importance of style and design with regards to success in booking guests.

Land with a View: Another option is to buy a piece of land that has good potential. The easiest places to rent have wide open ocean views, but that’s very expensive and usually these pieces of land have little building space and nowhere to park or turn a car around. That can be okay if you know how to build well on a slope. Most of the cabinas I designed and built at Anamaya are on a 45-degree slope, such as this one: Ananda Cabina. You don’t have to have an ocean view to make a spectacular cabina. One option is to put it on the edge of a steep slope looking into the jungle, then have a full wall of glass, so the guests feel that they’re really high up in a treehouse. This is what I did with the Jungle Cabina at Anamaya, which has no ocean view but is one of our favorites at the resort: Jungle Cabina. So if you don’t have an ocean or valley view, you can position your cabinas on a slope and trim back the trees and bushes in such a way so your guests can see down and into the jungle, and it will have a great tarzan-like effect. Almost any piece of land can make for a spectacular layout if you know how to use it, but very few people have the spatial ability to visualize this in their heads. That’s why it’s helpful to visit the land with someone like me, or another professional designer who can give you great ideas if this isn’t your particular strength. If the property you love doesn’t have a view of anything, you can build something beautiful to look at, such as a gorgeous pool area with tropical gardens. There are many 5-star hotels in the world that are solely beautiful based on their design, irrelevant of their surroundings.

Legal Rules about Hotels: In order to have a registered legal hotel, your business must be on a public road or on a “servidumbre de paso” which are at most something like 52 meters long. Most of the properties for sale at reasonable prices aren’t in this category. So your alternative is that you can build bungalows on an agricultural lot (minimum 5000m2 = 1.23 acres) and rent them without calling it a hotel. You can legally do this if you are living on the land yourself. This is the best way to get the most “bang for your buck” when it comes to buying land, because you can usually find a great lot in this category for a reasonable price. On the Tropisphere website, the properties have some data about “access”. If it says “private road” or “agricultural easement” then it’s probably going to be this type of land.

Step 3: Design and Build

How to design a tropical cabinaTourists to our part of Costa Rica are searching for lodging that’s unlike what they have at home. You should be trying to fulfill their fantasies of a vacation in a tropical paradise. Great elements that work well here are:

    Large covered deck spaces for dining, with many hammocks

    Very large windows or even floor-to-ceiling glass

    Outdoor garden-style bathrooms

    Interesting pool shape and water features such as a waterfall for the kids

    Treehouses

    Bamboo or raw polished wood for columns

    Edible gardens, herbs, and fruit tree orchard

    Nicaraguan natural palm roof structures

    Bright interesting wall colors that photograph well

The typical renters are going to be single people and couples, perhaps with one child. A good cabina design will have a queen or king bed, with extra-high ceilings and sleeping loft for one or two kids. That gives you a ton of options in a small cabina. A gorgeous small cabina can be made for $40,000 so the costs work out like this:

Here are a few local businesses that have GREAT STYLE that tourists love:

    Anamaya – Look here for examples of beautiful cabina design

    Bungalows Sol y Luna – Gorgeous use of style and color

    Kalapiti – Incredible design, and note that the owners started with a very ordinary property with no view

The design doesn’t need to be Tarzan style. Ultra-modern designs can work beautifully too if they have a tropical flair, and be consistent with the style throughout.

For more ideas about eco-friendly cabinas and eco houses, you can look at and borrow/steal my designs from these two websites:

http://www.solar-vistas.com/house-options/

http://www.puravidasunsets.com/house-options/

If you’re interested in sustainable tropical design (and you really should be) then you can read my articles that will help you here:

http://www.puravidasunsets.com/green-building/

http://www.anamayaresort.com/sustainable-products-hotels/

Small Hotel Cost Analysis

    $80,000 – Land

    $160,000 – 4 Cabinas with 1BR/1BA

    $20,000 – Shared salt water pool

    $60,000 – Small 2BR House for yourself

    $15,000 – Shared Chill Space, yoga deck, and BBQ/outdoor-kitchen

    $20,000 – Gardens and Extras

    $30,000 – First year’s living expenses

    $15,000 – Miscellaneous

    =$400,000 Total

If you want to do this with an Ocean View, then add $100,000 for the land (minimum) and you’re up to $500,000

Step 4: Marketing and Sales

It used to be “location location location” but now it has to do with good digital marketing skills. If you consider yourself a technophobe or want to avoid using a computer and the internet as part of your personal Costa Rica fantasy then forget even trying to have a tourist business here because you’re going to fail. Here’s a set of really important points for how to market your property online:

Great Photography is Key – Tourists ultimately choose mainly based on the photos they see. We are very visual, so it’s well worth the money to hire a professional photographer to take photos of your place to use for your website, blog, facebook page, rental sites, etc. Once you have your photos, always post them in large size on your website’s photo gallery. Most websites use photos too small and that’s disappointing to prospective guests who want to be excited by what you’re offering.

You should have a great website done with WordPress – Have your website built in WordPress so you can easily make changes yourself without waiting and paying a web designer to do it for you. A wordpress website should also have a blog built in so you can write new articles occasionally highlighting great guests who visited you, or fun stuff to do in the area.

Rental Websites – Most of your clients will probably not come through your website but will come through Trip Advisor and various rental sites. Here’s a list, ordered from most important to least important, of which ones to use:

    VRBO.com

    Homeaway.com

    Airbnb.com

    Flipkey.com

Also important is to get yourself listed on as many local websites as possible that are free to list. With these you pay a commission of 20% or so if they send you a client. Make friends with the people who have these sites and they’ll send you business.

Respond with Lighting Speed – Many guests will ask several places about availability one right after the other, so when an email comes in, you should drop whatever you’re doing and CALL them on the phone to get them to commit to booking. You can even set it up so that when an email comes in, you’ll get a text message on your phone immediately so you can respond quickly. Getting back to people within a few hours rather than waiting 1-2 days will probably double your occupancy rate.



by Geoff McCabe

Geoff McCabe is CEO and co-owner of Tropisphere. He has been working in real estate in Costa Rica since 2003. Currently he lives on his organic farm, Rancho Delicioso. Geoff enjoys surfing, fire dancing, photography, and spending time with his friends here on the Southern Nicoya Peninsula.



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