$2 million to start a 50-room hotel, says AAHOA President.
By Deepak Chitnis
WASHINGTON, DC: Mehul Patel, the current president of the Asian-American Hotel Owners Association (AAHOA), came with his family to the US when he was 14 years old. After moving from Gujarat to Texas, he graduated high school and went on to earn his associate’s degree in business from Richland College, located in Dallas, in 1998.
Patel then earned a bachelor’s degree in 2000 in Computer Information Systems from the University of Texas at Arlington. He and his brother acquired their first hotel property when Patel was just 17 years old. Like his father before him, Patel discovered he had a knack for maintaining hotel properties, and has thrived by doing so. He is now the CEO and Chairman of Sagestar Hotels, Ltd, in Dallas.
At AAHOA’s annual Fall Legislative Summit in Washington, DC this week, Patel sat down with The American Bazaar for an exclusive interview about the hospitality industry, AAHOA, and the increasingly indispensable relationship between the two:
What are some of the biggest challenges AAHOA is currently facing?
Right now we’re affected by Obamacare. [It’s] here now, and not everyone is happy about it. The challenge we’re facing is that, for the past 100 years, it’s been standard to call 40 hours a full-time work week. Now with Obamacare, they’re changing it to 30 hours. That comes with a big logistics challenge because now, people who were working 40 hours a week now have to be told to only work 30 hours, so we [hotel and motel owners] have to hire more workers, which creates a whole set of headaches. If people are only supposed to work 30 and then work more than that, we have to pay them overtime. So now [for example] if we have 20 people, with Obamacare we’ll need 28. But more importantly is that now our employees will have to get a second or third job, because we can only pay them for 30 hours of work. So in order for them to make ends meet, they’ll have to take on additional employment, which creates headaches in commuting, in scheduling, and so on. So Obamacare has become a real nightmare for us.
How much does it cost to start a hotel or a motel in the US these days?
Well that’s a very broad question. It depends on what segment we’re talking about; let’s say an independent hotel [with] 50 rooms. That would cost around $2 million. If you’re talking about a franchise hotel like Holiday Inn Express, Hampton, which has around 80 rooms, that could cost about $6 million. A lot of it depends on the location, because in the US, different locations have different costs levels, so what I’m giving you is a very broad estimate. You do usually need at least $1 million equity to put into the hotel.
Currently AAHOA controls more than 40% of the lodging industry in the US. Our members own 20,000 hotels [and] $150 billion in assets, so franchisers really want to do business with us. They see that [AAHOA] controls 70% of their industry, so they know our members are very good operators, are very professional, and they want to do business with someone who has experience. So it’s very easy for our members to get brand-name franchises if they want it.
There’s a perception that mostly Gujaratis are in the hospitality industry – is that true? Or are Indians from other states making a name for themselves as well?
I think it’s something like 80% of [Indian-American] hoteliers are Gujarati, but there is still migration happening. A lot of other racial minorities are getting into the lodging industry after seeing Indians do so well. They see that we have a niche business model, and that we’ve been able to attain so much success in very little time. AAHOA has only been around for 25 years, but today we control almost 50% of the lodging industry; that’s a huge accomplishment, and other ethnicities see that and want to emulate it.
Talking about the dominance of Indians in the hospitality industry, are second and third-generation Indian-Americans getting into the hospitality industry as well?
Well that’s a very big twist. Five to seven years ago, [Indian-American youths] probably did not see the big picture in terms of what we [Indian-American hotel owners] have accomplished. Normally with [the] second and third-generation, they go into corporate America: they work 40 hours a week [and] make $100,000 a year. But when you’re a hotel owner, you’re able to make more money, you expand quickly from one hotel to five hotels; initially, the younger generations didn’t see that, but now they do. If you look around here today, we have 250 people here, and a lot of them are second and third-generation hoteliers. About 50%-60% of AAHOA is made up of second and third-generation Indian-American hoteliers.
What can you tell us about the 2014 AAHOA Annual Convention that’s happening in Philadelphia?
It’s going to be a great conference. This is the first time in AAHOA history that we’re going to Philadelphia. We’re celebrating our 25th anniversary, and it’s a great place to celebrate that because it’s also the birthplace of America. So we’re going to have great entertainment, great trade shows, and it’s going to be an event to remember.
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