Cultura Humana
An investment proposal for the creation of a co-living
multi-space habitation for the budget conscious,
technology acquainted, environmentally sensitive,
experience driven travellers in Medellin, Colombia.
Stylianos Mollas
Catalysis S.A.
Panama
2019
Why tourism?
Facts in global tourism
The global travel industry is one of the largest and fastest growing sectors in the
world. According to references [1], travel industry and tourism in total has reached
an estimated value of $1.7tr in 2017 and the respective factoring in indirect economic
contributions represents 10.2% of global GDP.
The market has more than doubled over the last 2 decades and growth appears
poised to continue. Factors which are and will be driving growth include:
● Healthy world economic indicators for consumer spending.
● Intense airline competition.
● Healthy corporate demand.
● A global spending pattern shift from products to experiences.
Has been observed, for the first time since records, over the last decade a decline
in growth of spending on durable goods while experiential spending on
recreation, travel and eating out is trending up. This shift specifically is of great
importance and will have more implications on future travel demand.
Funding in Innovation
Innovation in travel will be a crucial factor in the years to come, as it already has
increasing role. More specifically:
● Travel growth attracts waves of start-ups.
● The flood of capital investment into innovation for tourism projects is on the
rise.
● During 2016-2017 more than $30bn have been raised in funding of travel
start-ups, almost equal to the amount raised over the previous decade.
● The potential for one of those companies to completely change industry
dynamics is likely not a matter of “if” but a matter of “when”.
● Innovation will inevitably spark growth and change across the sector in the
coming years.
Risks in global tourism
Risks include:
● Obviously, innovation and change include risks, specifically for the established
entities.
● High vigilance is required around evolving, high profile forms of risk such as
cybersecurity and food safety and source.
● Natural disasters can have a serious impact on afflicted areas and their
economies.
● Unfortunate events such as terror and hate attacks can affect the confidence in
travelling at certain cases.
Trends and opportunities
Opportunities in the hotel sector arise while certain trends are changing.
● While the outlook for the hotel industry is generally positive, brands who fail
to innovate risk losing market share. With just a few clicks in a travel app,
today’s consumers can compare more options than before and are more
experience-driven than ever.
● Hoteliers are becoming more experience-driven, but most are concentrating
innovation up-market, thus leaving the midscale segment in desperate need of
facelift.
● Customer experience and satisfaction prove to be the most important
elements in consumer choice.
● Embracing the health-conscious consumer. Health and wellness represent an
enormous opportunity to elevate the customer’s experience.
● Travel activities is the third largest segment in travel and accounts for 10% of
global travel revenue. There is great potential to create new streams of
revenue, as well as change the travellers preferences and interests.
● Strategic employee engagement programmes are the foundation for redefining
and transforming the customer experience, driving brand loyalty and growth.
Why Colombia?
Facts for Colombia’s tourism industry
Following the peace treaty achieved in 2016 Colombia has been changing into an
environment of opportunity. Despite Colombia’s natural beauty and bustling cities,
its tourism industry has underperformed in the previous years compared to its
potential. Improvements however, as shown below, are set to change this.
● Peace agreement
● Improvement of the image on international stage
● Free-trade agreements
● Investments and business travellers
● Fiscal incentives
As a result, the hospitality sector has been transforming in the late years, attracting
international hotel chains and encouraging growth in domestic market.
International recognition of Colombia’s re-structural efforts come with the very
th th
recent acceptance as the 37 member state of OECD in 30 of May 2018.
According to [oxford] and [phocus]:
● international visitors have been increased by 70% between 2010-2015 at 4.5m.
● Tourism is the second largest generator of foreign exchange.
● Tourism revenue has reached a record $5.7bn in 2016, up 8.6% from 2015 and
a staggering 87% higher than $3.1bn in 2010.
● Direct and indirect contribution of travel and tourism in the economy is
expected to grow.
Hotel offer and occupancy in Colombia
Sector growth is reflected in hotel industry development. It is estimated to have been
invested close to $1.2bn in new hotels between 2003-2016. A total of 260,000 beds
in 2016 is expected to double in the following years. The national average occupancy
rate has been steady over 50% reaching 58.3% in 2016.
The segment however is expected to face headwinds, since a 30-year tax exemption
has ended in 2017, as part of a recently implemented tax reform.
Air connectivity
Along with an increasing number of hotel rooms and improved infrastructure, a
competitive air sector has sustained the influx of foreign visitors.
In 2016 there was a weekly capacity of 153,000 seats from international destinations
to Colombia.
Important routes are initiated, allowing trips to be packaged with other South
American destinations, this way including Colombia with big international travel
packages.
Finally, in addition to international flights, a network of domestic air travel has been
developed to connect all domestic cities and main overseas markets effectively.
Aims of government and future expectations
It is generally accepted by international organisations today that Colombia has
modern institutional framework to foster and maintain economic stability, including
separation of government groups and functions.
The aims of the government are to keep unemployment and inflation down,
modernise the country’s infrastructure, develop its agricultural sector and further
stimulate the tourism, real-estate sectors and innovation.
Low inflation, the availability of financing and a stable investment friendly political
environment mean that many sectors of the economy remain competitive and
attractive to investors.
Why Medellin?
Touristic development in Medellin
Antioquia and Medellin lead national growth as to foreign arrivals and have the
greatest hotel occupancy in 10 years [[Link]].
The city’s average growth in 2016 has been double (24%) the country’s rate (12%)
and almost 5 times the world average.
At the same time, Medellin achieved the highest hotel occupancy rate registered in 10
years in 2016 with 65.9% and more than 700,000 visitors.
Below a table is given with visitors numbers and rates since 2008.
Year Visitors Occupancy rate (%)
2008 270,080 55.3
2009 328,252 47.51
2010 372,415 50.66
2011 381,098 50.08
2012 403,925 54.08
2013 489,938 57.33
2014 549,455 59.31
2015 608,525 63.07
2016 702,086 65.49
The government of Antioquia is prioritising tourist development under basic
components of: nature, culture, heritage, events and meetings.
To achieve growth has been partnering with local and international investors,
building a long-term brand strategy.
With the recent local and state government initiatives, this region plans to maintain
its first rank in Colombia’s tourism growth in the years to come.
Innovation in Medellin
Apart from driving the tourism sector, Medellin is leading Colombia’s innovation
drive as well.
For many years now, Medellin has established itself as a city on the up. In 2013, the
city was named the Most Innovative City by the Urban Land Institute and the Wall
Street Journal. And it is now being dubbed by many as the Silicon Valley of South
America.
As of very recently the city became the first in the spanish-speaking world to host an
affiliate centre of the Fourth Industrial Revolution network under WEF. These
centres will be developed as global clusters for innovation, combining public, private
and academic collaboration to advance emerging technologies.
Affiliation with the network will connect Medellin with other important innovation
centres, along with broader social and economic development across the region.
Points of attraction
In conclusion, the main points of attraction for Medellin are:
● Outstanding natural beauty
● One of the most developed cities in Colombia
● Excellent tourism indices and opportunities.
● With more than 3m residents, it has a good size for business.
● Friendly to international visitors and expatriates
● Rich cultural heritage
● Good educational levels
● Leading innovation and driving Colombia’s change
● Great potential for growth.
Why Hostel?
Current trends in hostels
Hostels are the biggest trend in hospitality investment of the next decade, as shown
by recent reports.
Over the last decade we have witnessed the rise of a new niche market in the
hospitality industry. After the craze of boutique and design hotels, we are now in the
era of the luxury hybrid hostels.
The backpacking do it yourself hostel product has gone hip with the times and
reinvented itself.
The simple, dormitory-style hostels, with no frills or amenities, are becoming a thing
of the past. The hostel market has undergone a transformation in the recent years
and still has a long way to go.
Hostels have turned into full-fledged hospitality concepts. It is a hip hybrid, offering
shared bunk-bed dorms and cozy private and family rooms.
The original publication had identified sweeping changes taking place in the hostel
landscape. From the rise of hostel chains and design-focused experiences to
digital-centric booking and a planned increase in private rooms, it highlighted how
hostel operators were adapting to the expectations of their guests.
The Second Edition of Phoscuswright’s Global Hostel Marketplace 2016-2020 shows:
The hostels sector is showing higher online penetration than hotel or vacation
rental categories, new research from Phocuswright highlights;
Digital natives ranging from ages 18 to 34 have fuelled rapid adoption of
online and mobile hostel booking.
The research shows the USD5.5 billion global hostel market in 2017 will grow
to an estimated USD6.4 billion in 2020;
The online hostel market is predicted to grow its share from 7% to 11%, rising
from USD3.5 billion to USD4.6 billion as OTAs become leading booking
channel.
CHART – Phocuswright predicts a growing demand for hostel
accommodation with the online market taking a far greater share of
bookings
Millenials and investments
And even as hostels conjure up images of young backpackers, industry publication
[Hotel Management] has reported that investors are increasingly being drawn to the
hostel industry, due to the appeal they have to “Millennial” travellers often described
as:
diverse and open-minded.
adventurous and keen to experience alternative cultures and lifestyles.
environmentally aware.
interested in artistic pursuits such as music and photography.
Importantly, Millennials are believed to value experiences over assets and products.
They also make up 70% of hostel guests. And this segment is the fastest growing in
terms of money spent on travel and associated activities. Indicative is the fact that
hostel travellers spend more in absolute terms ($4,5k) than the average traveller
($3,2k) yearly.[[Link]]
As such, one might think that hostels would be popular with millennials only. But
statistics show otherwise. According to MediaPost, Generator reported that 15-20%
of the guests are older than 30, while European hostel chain Christopher Inns the
percentage is 35-40%. 50% of the American members of Hosteling International USA
(a nonprofit youth hostel operator) are over 25, and 10% are over 55.
Therefore it is obvious that the hostel trend is going mainstream, making it even
more interesting for investment.
With all the buzz in the media around the reinvented hostel concept, more and more
investors are diving into this market. Global investment funds and institutional
investors are being involved and examples of big hotel chains going into the hostel
industry, like Hilton and Accor, are already visible, as it is predicted to be one of the
biggest travel trends of the next decade.
Comparison with traditional hotels
In comparison with hotels of same space, hostels have many advantages.
In more detail:
Hostels require lower investment in set up, than hotels.
Hostels have lower rate of revenue/guest but can out-scale this with the
number of guests they can receive.
The cost of services/guests, as well as the ratio of staff/guests are significantly
lower for hostels.
More guests means more potential clients of other auxiliary revenue streams.
Due to the lay-out efficiency, the revenue per square meter can be staggering
compared to traditional hotels.
Hostels are trendy!
Hostel travellers travel and spend more annually!
In the near future
It is believed that the future of hospitality evolves around movements like the
sharing-economy. The communal aspect of travel, offers opportunities to bundle
authentic experiences and local interaction.
In the not so distant future, hybrid models combining concepts like co-acting,
co-living, co-owing, will drive change and choices not as a question of “if” but “when
and how”.
Intended outcome – The aim
The intended outcome is to create a multi-space, culturally enriching for both visitors
and locals, inspirational hostel which will incubate the growth of sharing ideas,
knowledge, means and experiences within global society.
This is to be achieved as the CulturaHumana (hostal/cultura/incubacion)
project, comprising clearly of 3 sectors.
Hostel
Covering all aspects of sleep, clean, eat, be healthy requirements.
25-35 sleeping beds
2-5 private rooms
bathrooms/ showers
operating communal kitchen
health support
Culture
Including aspects of entertainment, learning and local support.
Operating bar/restaurant
Tours and activities
lessons and seminars
events in general
support to local community with subsidised or sponsored actions
Incubation
Is about making things happen for all involved in a solution-oriented manner.
co-working space
meeting room
tech centre
shared knowledge and networking
legal support
start-up support
Principles and drives
Principles that inspire us and will be followed in action include:
Open democracy management.
micro-living
co-living, co-acting, co-owing (collaboration between visitors, employees,
investors.
sharing economies
social entrepreuneurship
environmental awareness and sustainability
Focus in design
The following aspects will be included in the design and planning of our space.
Thematic hostel of human cultures and ideas.
Local art and culture to outline all.
Wood and natural material will be prefered, sourced ethically.
Disabled access is one very important aspect.
Design intended to attract bright minds.
State of the art sleeping boxes.
Minimal yet with comfort and ease of use.
Plants and hydroponic food production would be a very desirable aspect.
Water retention, filtration and recycling in all stages.
Projects towards energy self sustainability.
Possibility of jacuzzi which would then lead to aquaculture is an option to be
researched.
The option of sponsored/branded rooms/spaces is very intriguing.
Services offered and actions run
Normal bed box.
Double bed box
Private box.
Breakfast
Meals
Health insurance
Toiletry
Bits and pieces
Tours and affiliate marketing
Rentals
Lessons
Events
Drinks
Memberships (daily/monthly)
Co-working space
“Connect global” station (news, events, ideas in global)
Operating bar/restaurant
Composting (seminars)
3-d printing
Plastic recycler
Hydroponic food production
Water recycling
TV closed circuit only for emergency
App for connectivity and group making
pool, tabletennis, table games
Gym
Cycle electricity
Wii game room
Only organic cleaning agents (no chemicals)
Economics
Bathrooms : 3-5 guests/bathroom
Showers : 3-5 guests/shower
Kitchen: 6 guests/cooking spot
0.5 seat/guest
Gym: 7 guests/ training spot
Library: 5 guests/ working spot
Space requirements (sq.m.):
Bedbox (normal) : 2x2.5+1= 6
Bedbox (double) : 3x3+2 = 11
Private room : 4x4+2 = 18
Bathroom: 2
Shower: 2
Kitchen: cooking spot 3
sitting space 2
Patio: 4/guest
Common space: 2/guest
Library and working space : 4/working spot
Gym: 3/training spot
Reception: 2
Laundry room: 10
Storage room: 3
Warehouse: 10
Bar/restaurant: kitchen 9
bar 9
sitting space 15-80
Hypothesis build-up of space requirements
A hostel of 20 normal beds, 5 double and 2 private rooms needs in space:
Sleep: (20x6)/2 = 60
(4x11)/2+11 = 33
2x18 = 36
Therefore, for dormitories are required: 60+33+36 = 129 sq.m.
Clean: 4 guests per bathroom/shower
2 guests per double bed
3 guests per private
Therefore are needed (20+10+6)/4 = 9 bathrooms and showers
> 9x2x2 = 36 sq.m.
Eat: for 36 guests
36/6 = 6 cooking spots
36x0.5 = 18 seats
Therefore are needed 6x3 = 18 sq.m. for cooking
18x2 = 36 sq.m. for sitting
A total of 18+36 = 54 sq.m.
Be well: 36/7 ~ 5 gym spots
5x3 = 15 for gym
36x2 = 72 for common space
36x4 = 144 for patio
Therefore are needed 87 sq.m indoor and 144 sq.m. outdoor of comunal living
space.
Entertain: 9 for kitchen
9 for bar
20 indoors and 30 outdoors for seating space
Therefore are needed 39 sq.m. indoors and 30 sq.m. outdoors for the
bar/restaurant. Common space and patio can be in part used.
Co-work: 36/5 ~ 7 working spots required
7x4 = 28 sq.m. for library and working space
Additionaly common spaces and bar space can be used.
General use: 3 for reception
2 for storage
10 for washing machines
10 for warehouse
Therefore 25 sq.m. of general use space are required.
Total space requirements are as follows:
129+36+54+87+39+28+25 = 398 sq.m. indoor space (11.1 sq.m./guest)
144+30 = 174 sq.m. outdoor space (4.8 sq.m./guest)
398+ 174 = 572 sq.m. of total space (15.9 sq.m./guest)
Hypothesis of possible service turnover
Envigado, Medellin
30 normal, 5 double beds, 2 private rooms
60 % average occupancy throughout the year
Dormitories:
40 k, 60 k, 80 k prices of dormitory respectively in Colombian pesos ($)
40,000x30x0.6x30 = $21.6 million monthly
60,000x5x0.6x30 = $ 5.4 million monthly
80,000x2x0.6x30 = $ 2.88 million monthly
Therefore, in total revenue from dormitories :
21.6+5.4+2.88 = $ 29.88 million monthly
Toiletry:
$ 3,000 in price and 30% of guest usage
3,000x36x0.6x0.3x30 = $ 0.583 million monthly
Bits and pieces:
$ 5,000 in price and 20% of guest usage
5,000x36x0.6x0.2x30 = $ 0.648 million monthly
Health insurance:
$15,000 in price and 20% of guest usage
15,000x36x0.6x0.2x30 = $ 1.944 million monthly
Rentals:
Bike rentals at a price of $7,000 and a 15% guest usage
Scooter rentals at a price of $10,000 and a 15% guest usage
Car rental at a price of $ 20,000 and a 10% guest usage
Rentals can be affiliated or outsourced
7,000x36x0.6x0.15x30 = $ 0.680 million monthly
10,000x36x0.6x0.15x30 = $ 0.972 million monthly
20,000x36x0.6x0.1x30 = $ 1.296 million monthly
Therefore in total revenue from rentals:
0.680+0.972+1.296 = $ 2.948 million monthly
Affiliate marketing on tours and local businesses
A profit of $ 10,000 on affiliated services with 25% guest usage
10,000x36x0.6x0.25x30 = $ 1.620 million monthly
Lessons and services
A profit of $ 15,000 and 15% of guest usage
Lessons can include arrangements for locals, possibly sponsored
15,000x36x0.6x0.15x30 = $ 1.458 million monthly
Working space
7 working spots at a price of $ 5,000 and a 60% occupancy
5,000x7x0.6x30 = $ 0.630 million monthly
External memberships for use of utilities and space
30 daily memberships at a price of $10,000 per month
5 monthly memberships at a price of $ 50,000
External memberships can be subsidised or sponsored
10,000x30 = $0.300 million monthly
50,000x5 = $ 0.250 million monthly
Therefore in total revenue from external memberships:
0.300+0.25 = $ 0.550 million monthly
Bar/restaurant
Will be offering services both to hostel guests, at a discounted rate, as well as
to local market.
The percentage of guests to locals shall be assumed 70%-30% respectively.
The prices assumed have been deducted of the raw materials costs
Breakfast offered with profit of $ 3,000 and 40% of guests purchase
Meals offered with profit of $ 7,000 and 30% of guests purchase
Drinks offered with profit of $ 3,000 and 30% of guests purchase
3,000x36x0.6x0.4x30 = $ 0.778 million monthly
7,000x36x0.6x0.3x30 = $ 1.361 million monthly
3,000x36x0.6x0.3x30 = $ 0.583 million monthly
Therefore total revenue from the guests at the bar:
0.778+1.361+0.583 = $ 2.722 million monthly
Adding to this the revenue from locals as 30% more, the total revenue shall be:
3.722x1.3 = $ 3.539 million monthly
Therefore total revenue from services offered in total:
0.583+0.648+1.944+2.948+1.620+1.458+0.630+0.550+3.539=
= $ 13.92 million monthly
Therefore total revenue under the circumstances mentioned:
29.88+13.92 = $ 43.8 million monthly
Personnel
1 manager
1 receptionist/deputy manager
1 receptionist
2 cleaners
1 maintenance-cleaner
National and municipal taxes
Annual income statement tax of 33% of the gross income from the previous
period.
This rate is possible to be lowered to 9% for the first 10 years if situated in a
municipality with less than 200,000 inhabitants.
The VAT tax rate for Colombian citizens is 19%. Bars and restaurants however
pay 9%.
A monthly tax of industry and commerce is paid at a rate of 0.2-1 % of gross
income.
An annual registration of commerce is to be paid of $ 1,100,000 CP.
Employment costs
Employee’s social benefits
Minimum salary of $ 828,116 CP monthly or proportionally.
Increase of 35% for nightshifts and Sundays.
An interest on earnings of 9 % for the employee.
15 days of paid holidays annually or proportionally.
In addition the employee is entintled to 15 days of compensation annually or
proportionally every 30th of June and 20th of December.
Finally, the employee who has earned less than 2 montlhly salaries
($1,656,232CP) is entitled to an amount of $97,032 CP as transport support.
Social security contributions
For health insurance a rate of 8.5 % of total earnings of the employee is paid.
For pension is required a rate of 12% .
A rate of 0.522 % is paid for the office of proffesional risks.
A single payment is to be required for the office of family compensation at a
rate of 9 % of earnings.
Cost of employment on a working week of 48 hours
1 manager paid 2 x basic salary = 2 x 828,116 = 1,656,232
increased by social security contributions and benefits by
= 9% + ((15/25 of salary)/12) + 8.5% + 12% + 0.522% + 9%
= 39% + (0.6 of monthly salary/12)
= 645,930 + 82,812 = 728,742
Therefore cost of manager = 1,656,232 + 728,742 = $2,384,974 CP
1 deputy manager paid 1.5 x basic salary = 1.5 x 828,116 = 1,242,174
increased by = 484,448 + 62,109 = 546,557
Therefore cost of deputy manager = 1,242,174 + 546,557 = $ 1,788,731 CP
1 receptionist paid 1.2 x basic salary = 1.2 x 828,116 = 993,739
increased by = 387,558 + 49,687 = 437,245
Therefore cost of receptionist = 993,739 + 437,245 = $ 1,430,984 CP
2 cleaners paid basic salary = 2 x 828,116 = 1,656,232
nightime increase of 35% for one = 289,841
increased by = 758,968 + 97,304 = 856,272
Therefore cost of 2 cleaners = 1,656,232 + 289,841 + 856,272 = $ 2,802,345 CP
1 maintenance/cleaner paid 1.5 x basic salary = 1,242,174
increased by = 484,448 + 62,109 = 546,557
Therefore cost of maintenance/cleaner = 1,242,174 + 546,557 = $ 1,788,731 CP
Therefore the total monthly cost of employment will be :
= 2,384,974 + 1,788,731 + 1,430,984 + 2,802,345 + 1,788,731
= $ 10,165,765 CP
Rent of space
The expected cost of rent for the space required is $ 6,000,000 CP.
Utilities
For the time we can assume the cost of utilities (electricity/water) to be equal to half
the cost of rent, that is $3,000,000 CP
Profit before taxes
If total revenue, as calculated above having extracted the cost of goods,
is $ 43.8million CP monthly,
subtracting the operational costs = 10,165,765 + 6,000,000 + 3,000,000
= 43,800,000 – 19,165,765
Therefore the profit before taxes is = $ 24,634,235 CP
Taxes deductible
If based in a municipality of more than 200,000 inhabitants, then the taxes
owed are as follows:
basic rate 33%
commerce rate 1%
annual registration 1,100,00/12 = $ 91,667 CP montly
Therefore tax owed is = (24,634,235 x 34%) + 91,667
= 8,375,640 + 91,667
= $ 8,467,307 CP
If based in a municipality of less than 200,000 inhabitants, then the taxes
owed (10 year period) are as follows:
basic rate 9%
commerce rate 1%
annual registration 1,100,00/12 = $ 91,667 CP montly
Therefore tax owed is = (24,634,235 x 9%) + 91,667
= 2,217,081 + 91,667
= $ 2,308,748 CP
* to be checked if the investment is subtracted from costs and how tax is calculated
Profit distribution
All profits, taxes deducted, shall be distributed as follows:
10% will be returned or invested to people employed on the operations.
10% will be directed to local community through subsidised activities.
10 % will be used for advertising and communication purposes.
20% will be re-invested in the development of operations.
5% will be used to fund new ideas internally developed.
45% will be returned to share owners and investors.
Rates of return to initial investment
If the initial investment is assumed to be $ 350,000,000 CP
The yearly profits before tax are = 24,634,235 x 12 = 295,610,820
If tax is 33%, = 8,467,307 x 12 = 101,607,684
Therefore net profit yearly is = 295,610,820 – 101,607,684
= $ 194,003,136 CP
or 55.4 % of initial investment
If 45% of profit is distributed to investors and share owners
= 194,003,136 x 45% = $ 87,301,411 CP
or 24.9% of initial investment
If tax is 9%, = 2,308,748 x 12 = 27,704,976
Therefore net profit yearly is = 295,610,820 – 27,704,976
= $ 267,905,844 CP
or 76,5 % of initial investment
If 45% of profit is distributed to investors and share owners
= 267,905,844 x 45% = $ 120,557,630 CP
or 34.4% of initial investment
