Friday, December 4, 2015

The Hotel - All of It

“You have to live spherically - in many directions. Never lose your childish enthusiasm - and things will come your way.”

― Federico Fellini

The story starts way back in June, maybe July, I can't exactly remember. Before I get to far in the story, let me give you an insight: When Ralph and I moved to Oaxaca, we had no specific goal in mind as to what exactly we would do here. We knew we wanted to run a business, make money, likely we figured something in the tourist industry, but other than those fleeting, nebulous ideas, nothing more. We met a guy in Costa Rica once and his theory was that you either found out what you wanted to do in life, and then found a place to do it, or you found a place you loved, and then figured out a way to live there. We were opting for the latter, wholeheartedly.

Arturo (our Spanish teacher and friend) showed up with an opportunity. Were we interested in renting (and subsequently operating a small hotel? 18 rooms. His landlady was the owner. I said we would think about it.

Ralph and I talked about it. Only if it was turn-key, we decided. If we did not have to dump a whole bunch of capitol into it to get it to be functioning. We spoke to Arturo and told him we wanted to go look at it. In true Oaxaca fashion, we were invited over within the hour.

(Side note: If I have learnt anything from living in Oaxaca, it is that you just have to be willing to go with whatever is happening - a parade blocks the street you need to cross? Stop, enjoy, take pictures, wait, and be where you were originally headed 45 minutes late. Still drives Ralph a bit nuts.)

The hotel was lovely. Reasonably maintained, a bit dated but not terrible, three floors with lovely plants and a third floor kitchen and a rooftop patio with great views. We talked to the owner, and the meeting was typical Oaxacan. I asked if she had records, for the past five years. Oh, of course not, she said, it is just too much paper to keep. Of course, I said, I completely understood, we had just moved out of a house we had lived in for 15 years. I could give a class on efficient paper shredding.

And so we went through the hotel. Room by room. And then we came home and gave it a hard think over a bottle of Malbec. We had two main issues:


  • Lifestyle: It was be a 24/7 business for at least the first few years. We like to travel, ski, beach - none of that for a few years.
  • Money: They wanted 50,000 MXN in rent, per month. Seemed a bit steep.

Before I go any further, you can google "Hotel Cazomali" and the hotel website will come up.

We both believe there is a ton of opportunity to make that hotel awesome. We also both felt it would take us at least 2 years to get it heading in the awesome direction.

Next steps? We sent them two pages of questions - basically expenses, insurances, guest registries, anything that might help us get a handle on the financial piece. We half expected them to tell us to piss off. Two weeks went by and we got an email, requesting a meeting. The meeting went as I anticipated. They gave us some expense information, no guest information and confirmed what we had suspected.

They run their business as many a Mexican runs his business, taking advantage of the common value that it is OK to do some things under the table. Maybe more than some things. Maybe things like paying all the staff in cash, having no employment contracts, charging nationals no tax if they pay their hotel bill in cash, and the list can go on and on. I explained we would not have the luxury of running our business the same way. I lived in Oaxaca as a Permanent Resident at the pleasure of the government. I am here as a guest. Not complying with laws means deportation for me. Not an option.

At this point, Ralph and I were headed on our 2 month jaunt across 4 countries over two continents, and they too were heading on an extended vacation. We agreed to next steps around the middle of October, when we returned.

Upon return, we met with a lawyer to have a preliminary discussion about law similarities. First right of refusals for purchasing, survival of contracts upon death, inheritance, etc. Nothing special, all seemed reasonable and we liked the lawyer.

We then met with the owners and they did not want to use a lawyer, they wanted to only use a notary, and they wanted to start the process with their own contract. I explained that as a foreigner, unfamiliar with the laws, I felt better with a lawyer. They could certainly draft a contract, or I could ask our lawyer for a draft.

We ended up sending them a draft, which was convenient, because it allowed Ralph and I to look up all the Spanish words and phrases we did not know. When we showed up to review the contract with them, they presented their own.

I had initially proposed a three year drop in initial rent. They disagreed, and felt we were buying an established business. We disagreed. They had not had a review on trip advisor since 2011, nothing notable elsewhere.

In spite of going back and forth several times, I eventually withdrew us from negotiations. The rent they were looking for was just beyond what we could reasonably expect to be successful with, and I was not interested in funding their retirement at the cost of my own nest egg.

We had friends visiting while the thick of negotiations were going on, and bless them, they were so patient and listened and discussed and reviewed and researched and shared their thoughts. We had told many of the potential.

Are we disappointed? Not really. We would have loved the adventure, but we feel good about where we left off. Another friend expects they will be back. We are OK either way. What is supposed to come, will come, and it will be good and right.

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