If you don’t own land in Cambodia you need to lease it in order to build the hotel you wish to operate. I posted an article a few years back how difficult it is to find an appropriate location in Sihanoukville. Finally, after searching for about 18 months we decided on a lot that had a building for lease on it and a larger lot in the back that we could utilize to build another 10 rooms, a restaurant, a small bar, a kitchen, and most importantly, a swimming pool. Although the beach was only a 100m from the place guests nowadays want a pool to relax at.
The entire size of both lots was 1900 m2, large enough to build 2 small restaurants, one in front one in back. I designed the general layout of both buildings and the rooms’ interiors. We chose a builder that had already built our villa as we were satisfied with his work. We had a few misunderstandings about a couple of details but we could work them out amicably. One was for the size of the restaurant he wanted to build 4 by 10 meters, I only wanted 4 by 8 meters. The second one was roof overhang and the width of the small terrace in front of the rooms. He didn’t build the overhang which we had him add, and increased the veranda width by 10 cm, which we couldn’t reverse as the verandas were finished already. Naturally this affected the price and he wanted to add a hefty $50,000. We argued back and forth and in the end he agreed and let it go. The going rate per m2 was $200 at that time.

We made a couple mistakes by forgetting to have rain gutters added and using a tin roof for the bar. In the rainy season this created an almost unbearable noise there. We deflected this somewhat by putting up a layer of reed on top of it. Of course, we had them installed later on.

Sihanoukville has no drainage and sewer system, so all buildings needed a septic tank. With 17 rooms we had 4 septic tanks built. To our dismay we found out later that the builder had one built right under a guest room under one of the nightstands. When we needed to pump out that one we had to lay long pipes from outside the lot at the rear to the room through a window. Needless to say, we had to wait until all the guests were outside the hotel so they wouldn’t see what was going on and right a scathing review about that. The rainy season created additional problems as the rain water flowed in the tanks in the rear together with the use water from the guests’ bathrooms. Sometimes we had to have the tanks in the back pumped out every other week at $65 a pop.

Further adding to our frustration was the unreliability of the power supply. For the first 2 years we did not have a back-up generator as the power company had promised that there were enough power plants on the grid to supply all the power. When all the hotels were full during holidays in high season this caused immediate black-outs, which could be accepted during the day but when it happened in the dark we had a great problem on our hands. The majority of the guests took it with a shrug as they knew they had traveled to a developing country where such things happen frequently. But lo and behold, especially Cambodian guests complained the most as if they weren’t used to it in Phnom Penh. That situation got better after 2 years and we had also bought a back-up genset to alleviate the situation. It happened to be a little to weak at 45 kWa so we switched to a 65 kWa just in our final year. And badly needed it was. With all the new construction going on because of the Chinese investments and the need for a lot more electricity the power grid broke down incessantly.

The basic problem areas in a hotel in Sihanoukville are the power supply, the water supply, the quality of the equipment, the scarcity of repairmen and contractors, and the ignorance and unreliability of staff; in other words besides guests who can make hotel life in this town really hard, there is nothing that would contribute to a smooth operation where you could just focus on guest relations and improvement of services.

As with the power supply the water supply was also affected by that construction craze. Needless to say, they needed a lot of water for mixing their concrete, etc. It also happened quite frequently that some earth moving equipment punched a hole in the water main – result: no water. Our water tank was depleted pretty quickly with people in 10 rooms taking a shower simultaneously.

The quality of the equipment is so poor that we needed repairs continuously, whether it’s a float switch in the tank, a broken a/c unit, internet service disruptions due to somebody else cutting the cables (twice willfully, several times by nearby construction), cable TV problems, etc., etc. On account of all these problems that affected basically all hotels in the area repairmen were hard to come by. Sometimes it took hours, even days for them to come and take a look at the problem. For a while we a couple of good ones, other times we needed to beg them to come and take care of things. On top of it the rates they charged were higher than in the U. S. Another reason for the poor quality in my opinion was that things were pretty cheap which led me to believe that Cambodia got second rate quality from wherever they imported they equipment from, mainly China. A/Cs were particularly prone to failure which in part was due to power fluctuations which will wreak havoc on electrical equipment, not the least the power surge when the power comes back.

Not once was there a week that went by without any problem at all – and we are talking close to 5 years. If it wasn’t the equipment or the repairmen it was the staff. People always write about how one needs to help these poor people so they can support themselves. This is all good and true but doesn’t take into account the basic mentality of Khmer people with little or no education whatsoever. I got the feeling that their Buddhist belief gets in the way. Everything in life is preordained by whatever higher being there is. Khmer people are rather stoic. The want to work, of course, but only because they really do need the money to feed themselves, not to get ahead in life (those are few and far in between). They have no ambition whatsoever. A hotel traditionally employs more women than men so consequently we had 7 or 8 female and 3 male staff. Housekeeping staff was the most unreliable. The slightest problem healthwise (and they always had a fever or bad stomach) or at home made them call in sick. If it wasn’t themselves it was their kids. One would never know whether you had your staff coming in today or not. One time we had all housekeeping staff except one quit without notice on the same day. Another time we had just paid their salary when we got a call from one saying she needs to quit for family reasons – like she didn’t know this 2 weeks before. So we changed our schedule and paid salaries on the 7th the following month. If somebody quit without giving appropriate notice we would just withhold the pay for the entire past month. A smart one though even knew how to work around that. She wanted to quit right away but knowing our system she just asked for and advance in the amount we owed her for the seven days. She needed it for her kid who was sick she said. We also had just paid her salary. Promptly, she didn’t show up for work the next day. Another irksome thing is their huffiness. You just criticize them very carefully but they are prone to up and leave right on the spot, not matter the loss of pay. Of course, you can never do this in front of others. She may be a lowly maid but losing face is a real tragedy. Sometimes they just take a day off without asking us. We also had to deal with theft a few times. We could never prove anything but we eventually found a way to get rid of that staff. Sometimes they have two jobs, one in the morning, one in the afternoon/evening. There was this one receptionist who used to disappear for his break for an hour leaving the reception unmanned at 7 pm when guests were going out for dinner or returning, or checking in. When we found out about that we gave him a warning but he even stayed away for more than 2 hours once afterwards upon which we let him go. He had 2 kids to look after in the evening until his wife came home who also had a job at a different hotel. And so on, and on, and on.

What made this entire situation with all that frustration really unbearable was the financial aspect, and I haven’t even begun to write about some crazy guests. We had invested a sizable amount of money and with all the repairs we couldn’t even break even when we paid ourselves a normal salary. The hotel did support us but nowhere near the level we were used to before. We didn’t expect to make $10,000 a month but at least expected compensation in line with Cambodian pay scales, which would have been $3,000 a month for 2. Whenever there was a profit that would have enabled us to that kind of pay we needed to spend the money on repairs, purchase of new equipment etc. It did get better the last 18 months when we finally managed to pay ourselves a bit more.

Operating a business requires working capital in addition to the actual investment, of course. A hotel our size had overheads in the amount of $11,000/month on average excluding our own pay. This is exactly the amount we thought we needed. In order to be on the safe side we put in $15,000, one year even $30,000 to tide us over those financial bottlenecks. Again, this situation eased up the last 18 months when we didn’t need any additional working capital as the liquidity was sufficient to fund the operation.
If the business had continued as in those 18 months we would have a moderately successful business worth our while. But then that construction craze encroached on our vicinity which made the location of the hotel so unattractive with two towering buildings next to our lot and accompanying noise that we feared that no Western guest would want to stay there come high season – hence our decision to get out of it; even if it meant without profit. Looking at the location right now we are just so glad we made that decision. With all the frustration we had suffered the last 4 ½ years, the financial worries, and now the prospect of no guests who would want to go on there. We made a clean cut, got our money back, including backpay, and that was it. Good riddance.

People reading this will certainly be discouraged to go into this kind of business here but what with all that is going on in this town we don’t think anybody is even remotely contemplating going into business, any business, here at all. It may be somewhat different in Phnom Penh which doesn’t have these pronounced seasons as a resort town but the sheer number of new hotels that have opened there pose a very serious problem for anybody who wants to invest there. So beware!

As mentioned in a previous article we returned the property to the owner who turned around and leased it to Chinese people at more than twice the rent we had paid. What these people want to do with this property baffles us to this day.

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