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First-hand account: Setting up a guesthouse in Xishuangbanna

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The big pink hotel that we'll be turning into our new guesthouse, The Balcony
The big pink hotel that we'll be turning into our new guesthouse, The Balcony

Editor's note: Yunnan-based writer Brian Keane is the co-founder of The Balcony Guesthouse in Jinghong. This is his first-hand account of setting up a Wholly Foreign Owned Enterprise (WFOE) in Yunnan's steamy south. If all goes according to plan it will be the first WFOE to operate a hotel in the province. A version of this story originally ran in the South China Morning Post's Sunday magazine on April 17th.

The three of us look up and squint into the tropical sun. The hotel's huge; six storeys high, half the length of a football pitch and all baby pink. There's me, my wife Joanna Tinhat, and our business partner, Nuhi Bunyak. We're all foreigners and we want to open our own guesthouse in Jinghong, Xishuangbanna. It's a serious project, much bigger than anything Jo and I have tackled before. To make it happen we'll have to risk everything we have.

The original three partners: Brian (l), Nuhi and Jo
The original three partners: Brian (l), Nuhi and Jo

We follow Nuhi's shaved head into the marble lobby. With the high ceiling and cool breeze, the temperature drops 10 degrees. The receptionist is slumped across the desk, fast asleep. On the wall behind her a row of stopped clocks tell the wrong time in five major capitals.

We walk through the hotel and make a list of all the work we'll have to do: tear out and rebuild half the building, decorate 50 rooms, design and install a Western kitchen, restaurant and bar. Put in a pool room, movie room, gym and a sundeck on the roof. We estimate it'll cost well over a million yuan to get the place open and another million every year to cover rent, staff, bills and legal fees.

This is the fifth building we've seen in Jinghong, and the best by far. We stand on the giant balcony three storeys up. All I can hear is monks chanting and the yodeling peacocks of Manting Park. The three of us stare out at Zongfo Temple (总佛寺) with its pointy red and gold rooftops. I can tell that Jo and Nuhi love it too. We'll make this balcony our bar and restaurant, our showpiece. It's perfect.

Zongfo Temple
Zongfo Temple

Jo and I met Nuhi when he walked into the Dali Hump guesthouse last August. We'd been running the place for half a year, and we'd turned it around, saved it from going under. Now it's constantly packed with artists, musicians, cads and bounders from China and all over.

Nuhi's just off the boat from Holland. He woke up one morning aged forty and realised that twenty more years in management consultancy sounded like a prison sentence, no matter how much money they threw at him. He wanted something fun, something new.

No doubt about it, opening a guesthouse here will definitely be something new – it's only been legally possible in China since 2009 and as far as I know we're the first foreigners in Yunnan to even dream of it.

We gave Nuhi a job as our bar manager and he saw what we could do – make a community, a place people love to be. He decided that the guesthouse business was the life for him. You couldn't pick someone better suited to it– he's always big smiles, loves people and he could talk the paint off walls.

Nuhi laughs at us going into a 10-year contract together, "We only know each other a few months, it's the biggest 'no-no' in business. People pay me to advise them not to do this." But none of us are worried. We're friends, we share the same values, and this is a lifestyle choice. Money comes second.

Jo and I met six years ago on my first day in China. Jo's from England, but she'd just been released from a six month stretch in an Indian yoga ashram - complete silence and intense meditation. She came to China on a whim and ended up working in Dali Old Town as a fire dancer. I gave up on a conventional life when Associated Press tried to transfer me from London to their Sydney office. They made the mistake of buying me a flight with a stopover in Thailand. That was four years before I blew into Dali, and after so long on the road in Asia, a DJ job in Jo's disco bar resembled a plan.

Not much later, Jo and I built and opened Dragonfly Garden – a guesthouse by Erhai Lake that became a serious live music and party venue. Newspapers and television covered the story. Even a couple of books were written about the madness.

Dragonfly Garden Guesthouse, Dali
Dragonfly Garden Guesthouse, Dali

But the whole Dali scene got too big – undercover Beijing police – People's Liberation Army - long story short, we shut it down. Dragonfly was a work of love; we didn't worry about protecting ourselves, legally or financially. We came away with book-loads of stories, great friends and a reputation as 'tourism experts', but broke.

Now we're in our 30s and we want to make a home here and start a family. We want a place of our own. And this big pink hotel in sunny Xishuangbanna is just what we've been looking for.

We stand on the seventh floor rooftop. Jo hugs me, "Imagine this as our bar, sharing a bottle of wine looking out at the view." I can see the whole of Jinghong, stretching all the way to the Mekong and I'm a stone's throw from the city's last authentic Dai village. The location's perfect. Buildings in Jinghong are growing faster than bamboo, but our guesthouse is surrounded by the protected palm gardens of Manting Park on three sides - an oasis in the middle of a city.

Manting Park, a 1,300-year-old former imperial garden
Manting Park, a 1,300-year-old former imperial garden

On our way back downstairs we stop in a random room to see how much work will need to be done. No surprises, same as we've seen all over – bare, grubby and usually booked by faceless tour operators who whack on a surcharge and don't care that their customers' accommodation looks like a KGB holding cell. The whole building's only five years old but this room's like a nasty acid flashback to the early seventies – an attempt at classy gone horribly wrong.

The Yunnan supplier of shiny plastic gold trim and cheap quasi-wood fittings must be a rich man. Everything will have to be gutted and redone. But all in all these rooms are pretty good. In the last few months we've seen, and stayed in, rooms that could only be improved by a pyromaniac. Here, the ceilings are high and the light is great, Jo will make them beautiful. It won't even cost so much money; it just takes some imagination, planning and a smidgen of soul.

We sit and drink a Beerlao in the old Bai style garden behind the hotel and talk about the bigger picture.

It is possible for foreigners to run their own business in rural China, but there's bound to be complications. While we were building Dragonfly Garden our local Bai partner tore up our contract and fed it to the chickens. Our outdoor public toilets had to be disguised as a teahouse to bamboozle the ghosts and our building contractor hired a dwarf painter with a hole in his skull the size of a golf ball who refused to climb ladders - we 'compromised'; he did the job to my chest height, and I painted everything above.

Jinghong has big dreams but for now it's still a rural border town. I speak Chinese and know the lay of the land but I still had trouble opening a bank account. How difficult and expensive will it be to form a Wholly Foreign Owned Enterprise here? Word is that hotels are still a restricted business for foreigners in China. Then there's the financial issue; even with Jo and I emptying every bank account and Nuhi taking the lion's share, we're still short half a million yuan.

But despite all that, we get excited - Nuhi reckons Xishuangbanna is one of the last undiscovered winter holiday destinations in the world. And Jinghong is emerging as a slick central spot; a base to explore the region – no more neon KTVs or white-tiled monstrosities, it's all manicured parks and palm lined avenues, bright colourful buildings with Dai style roofs and a boardwalk with a bar street on the banks of the Mekong.

We're living in one of the most diverse places on the planet - Planet Yunnan. And Xishuangbanna is Yunnan personified – a baker's dozen of smiling, beautiful minority tribes all mixed in with the Han, Burmese and Southeast Asians. It's unique, there's nowhere like it on earth.

The government are throwing mountains of cash at Xishuangbanna, and why not? It's the gateway to Southeast Asia and with the new super-duper highway, the 2015 high-speed train and the international airport; we'll be looking at half a billion Chinese coming for a peek. There'll be bucket loads of expats, foreign tourists and Thais too. They're coming already, but they've nowhere good to stay.

There are plenty of hotels but they're all soulless - paint by numbers and as far as atmosphere and service are concerned, good luck. I met a local building contractor and the first thing he tells me is the 'clever trick' other hoteliers he's worked for have suggested: "I build your lobby to a 4-star standard. You apply for the 4-star rating, then leave your rooms and the rest of the building as they are. You can charge 4 star rates at minimum cost."

Bastards. If someone travels 2000 miles here from Beijing, I want them to have the best experience possible. Running a nice guesthouse with atmosphere makes Jo and I happy, and people feel that. This is one industry where not putting profits first actually benefits your business.

The boardwalk along the Mekong, known as the Lancang River in Jinghong
The boardwalk along the Mekong, known as the Lancang River in Jinghong

It won't be all smiles and sunshine, but we know we can make this happen. We choose a name, a vision to work towards. The Balcony, Jinghong: Guesthouse, balcony restaurant, rooftop bar, garden café.

We meet the pink hotel's landlord the next day and it turns out we already know him. Jo thinks it's a sign and he feels the same. He's a Dali businessman and philanthropist Jo and I worked with a year ago; he's about the best landlord we could hope for. He loves our idea to use his building as a place to celebrate the colourful cultures of the minority tribes. He has a Guangdong man interested in renting but he gives us first refusal. We have two weeks to decide.

We need to gather information and find out if our business works on paper. We set up shop in the Mekong Café. We put the word out to everyone everywhere about what we're doing. We might be a half a million short, but all the projects I've done with Jo have been successes despite the odds. It's always the same: have faith, and the means will present themselves. This time there's three of us, and our plans start to come together even faster.

Nuhi writes a business plan and needs somebody to check it - a German business consultant who works for McKinsey walks into the café, examines and approves it.

We need an accountant to review our financial planning - a Kunming professor of accountancy joins us for a beer. Eight hours later, with a head full of numbers, he assures us that the plan is sound.

We need to know if a bunch of laowai will be granted the opportunity to invest in Jinghong – we're introduced to Xishuangbanna's Director for Foreign Capital Registration, the hand that holds the final red stamp. "Mei you wenti, no problem," he slaps me on the back.

Friends in Kunming put us in contact with CMS, a reputable Italian-owned company who have experience setting up WFOEs in Yunnan. They've never done a hotel but tell us China recently overhauled their corporate law code in accordance with WTO regulations and it's now possible for a WFOE to operate a guesthouse. It'll cost a lump of cash, but a lump well worth swallowing.

We're good to go. All we need is time. It'll take four months minimum to establish the WFOE. We can't earn a single kuai until we're legal and we can't afford hundreds of thousands of yuan going down the drain on dead rent. Our only option is to ask our landlord for an eight-month grace period. I think it's a long shot but we contact him and arrange a preliminary contract negotiation.

On the soon-to-be guesthouse's eponymous balcony
On the soon-to-be guesthouse's eponymous balcony

Nuhi and I meet the landlord in Dali at his Bai Cultural Heritage Centre. It's like a fairytale palace - huge grey stone Bai fortresses with elaborate curved roof tops and intricate dragonheads carved in the structural wood beams. The grounds are big enough to stage a war. It must have cost tens of millions of yuan and it's mostly a non-profit affair. Our little deal is nothing to this man; we might as well be haggling over beans.

The landlord sits on his tall Bai wooden throne in his tailor-made Western suit; his feet barely touch the marble floor. It's freezing, we sip pu'er tea. Nuhi sits quietly in the corner; if the negotiation goes south he'll play the good cop and demonise me. The landlord listens while I speak. I try to appeal to his humanitarian nature.

I talk of our plans to implement fair working hours and wages, profit sharing and bonus systems for staff. I tell him we'll turn his second floor conference room into a library, education and cultural centre. I explain we'll be donating 10 percent of profits to set up pro bono projects in Xishuangbanna to promote local artists, craftsmen and musicians.

Then I show him the initial plans of the work we'll do. The half a million yuan we'll spend on new Western bathrooms, wood floors, a kitchen, bar and lounge and the beautiful balcony restaurant. I give him our elevator pitch; 'The community feel of a guesthouse with the sophistication of a hotel'. We'll turn his building into an amazing place, one we can all be proud of.

If he keeps the building a while longer he gets the profits during Chinese New Year, Water Splashing Festival in April, and the May public holiday. We only want control of the property from June 1st, and we need it rent-free for a two-month reconstruction and decoration period.

The landlord's expression gives nothing away. He doesn't speak, so I keep talking. "We need an office and operations room to get the show on the road," I say. "Can we move into your hotel's 6th floor penthouse apartment on February 1st?" He doesn't break eye contact. I know it's not sounding good and finish with "We want our annual rent to begin on August 1st, eight months from now."

The landlord stays silent, and gives one slow nod. That's it. He agrees to all my requests on the condition that we pay a 100,000 yuan deposit now and a full year's rent before we start building. We all sign the contract. The big red stamp comes out and we pay.

Now we just have to find another partner. One with money, and an inclination to spend the next 10 years running a guesthouse in the middle of nowhere.

Back in Jinghong, Nuhi, Jo and I celebrate at Mei Mei Café with steak and red wine. At the next table, a blonde guy sits bare-chested, the white bandages and sling on his right shoulder are in sharp contrast to his copper tan. We get talking and Joachim Kaessmodel turns out to be German. He was cycling from Lisbon to Ho Chi Minh City to raise money for the HCWF, a child welfare organisation working with orphans and children with AIDS. He sees himself as a bike ambassador - cycling to share culture. He has a video camera on his helmet and puts all the footage on his website www.bike-ambassador.com.

Partners four and five: Joachim (l) and Nico; Joachim is recovering from the broken collarbone and punctured lung that brought us together
Partners four and five: Joachim (l) and Nico; Joachim is recovering from the broken collarbone and punctured lung that brought us together

He came off his bike and broke his collarbone a few kilometres outside Jinghong. It was a serious accident and he'll be bandaged up for a while. "When it happened, I told myself, there has to be a reason for this," Joachim says. He shows serious interest in our project.

The next day we show him our building – he loves it. He looks over the business plan – he thinks it's too conservative. He asks what kind of guesthouse we're aiming for – our ideas are the same. Joachim tells us he has a degree in hotel management, another in marketing and he speaks five languages fluently. This guy's a character. We like him.

We invite Joachim to join us living in the hotel's penthouse apartment, and learn his brother Nico is a carpenter and furniture designer for the Hilton Group. Nico's travelling in Thailand and considering a career move. Between them they could make up the extra capital we need but they need to discuss the deal in person. Joachim flies to Bangkok.

A week later we get the call. The Germans will be our new partners.

And then there were five.

The Balcony Guesthouse will open on August 1st. In that time we have to complete our plans: six storeys of interior design, hire contractors, build our website, write advertising, start a massive marketing campaign, pitch our story to GoKunming, draw up a proper contract, buy a million and one things and set up a WFOE so that we can legally pay our first year's rent and begin construction. Otherwise we lose our deposit. Let the games begin.

I asked for another guesthouse and for my crimes I've got one.

To be continued...

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Comments

d

best of luck to Brian and his partners! it sounds like an amazing adventure and I look forward to visiting if everything works out...

James

I met these guys on my last trip to Kunming - great people who are about to make something beautiful happening.
Good luck for all and can't wait to be your guest
James

Ryan

Great story Brian, and best of luck with the place — it sounds amazing!

My girlfriend and I shared Christmas Dinner with Nuhi, Brian, and Jo at Mei Mei Cafe and I can tell you that they are "good" people.

I wish you all the best and am looking forward to staying at your hotel/guesthouse. I know that it will be a success. Now all you need is a French cook :-)

It's so nice to read this article here.

I have been to the hotel and I can say, indeed, the location is fantastic and the view is great from the top of the hotel. The most important, the "hosts", Nuhi, Brian, Jo, Kim and Nico, are really friendly and nice people.

Good luck with your business!

Good luck Jo, Brian and Nuhi! :)
-Ian

Hi guys, good luck to the process of the WFOE. I am one of the owners of SLEEPYFISH LODGE in Dali, we have been running our guesthouse as a WFOE since April 2009. Process here was very clear and only took us a few months to complete. Hope all goes as well for you guys!

GREAT read, thanks!

Does anyone have contact info for the Italian-owned CMS mentioned in this article?

Thanks for your support, it's great to get such a positive response.

The Italian company CMS - you can contact Marco Conti at www.chinamultiservice.com.

@maxdali - It's really encouraging that the wfoe was so smooth for you guys. Sleepyfish is a beautiful place. We'll be sure to come and visit you

next time we're in Dali

Look forward to seeing everyone in Jinghong some time...

X Jo

tom352

What an inspiring story. How great to live your dreams, with just the right person wandering into cafe at just the right time. And supremely qualified in the bargain. Contracts? Who needs 'em? What could go wrong?

Please continue the blog. And thanks for the inspiration.

Dear Oyarsa,

I am Pietro from Chinamultiservice Consulting Co., Ltd. (CMS) please feel free to contact me if you think you may need our help.

Regards,

Pietro Barucca

Email: pietro.barucca@chinamultiservice.com
Tel: 0086-871-3628227

ally

beautiful pictures

Hi Jo and Brian! We met last summer at the Dali Hump. I was just surfing the Internet to read latest news from China and by chance came across this article, just splendid in style :) I'm so happy for you to hear all geat news. Wish you luck and all the best! Hope to visit China again as I've been trully enchanted by that place :) Lucky you!!
- Biker girl :)

Mel

This is good news indeed! I stayed at the Dragonfly Gardens in 2008, and found it hard to drag myself away - I spent around 3 weeks there - a more fantastic atmosphere, I've yet to find. I'm sure they'll create something magical, and hope to be able to drop by some day in the future.

And so... has The Balcony opened? It sounds great and I plan to go to Jinghong soon.

Heard that the project isn't going to happen. Kinda sad, I think this crew could have made it happen.

First of all, Thais are foreign tourists too if they are outside of Thailand. Anyway, nice article, I wish these people lots of success. I think it would be nice if there were more westerners (and foreigners in general) travelling in Xishuangbanna, because right now it's a world away from neighboring Laos and Vietnam. In fact, even though it's so restrictive, I find it easier to come across other travellers in Myanmar than in Xishuangbanna...why is that? I look forward to the day you can find a central backpacker district in Jinghong that looks like its equivalent in Laos filled with hundreds of western backpackers.

Geezer, where did you hear this? Would be really sad if it was true. I too have thought about such a business and indeed have also considered xishuangbanna, which is one of the nicest parts of all of China. However, all things being considered, I find it much easier to set-up something in SE Asia.

@Yuanyangren
"I look forward to the day you can find a central backpacker district in Jinghong that looks like its equivalent in Laos filled with hundreds of western backpackers."

really? was that sarcasm?

Yuanyangren

No...China should be like the rest of SE Asia and I don't understand why it isn't. Xishuangbanna feels so foreign compared to SE Asia and so I don't get it why no one travels there when it's got such beautiful temples, history and of course it was part of the Thai Lue kingdom of Sipsongbanna, which parts of neighboring Laos, Myanmar and nearby Thailand where also part of. It's eerie because as soon as you cross that border from Laos or Vietnam, nobody speaks English and you suddenly feel like you are a modern day version of Marco Polo....people stare and say "hello" and you feel really out of place. Seriously, apart from the three foreigners mentioned above, has anyone ever been to Jinghong?

Yuanyangren

I mean, I commend these people for jumping on the backpacker bandwagon by trying to open a guesthouse in Jinghong. Who would have thought that in 2011 you can still find a place in Asia (close to SE Asia too) where westerners (actually foreigners in general) are as rare as hen's teeth? It's not as if China is closed off, but I guess a lot of travellers just think China isn't fun, so they cross Xishuangbanna off their list of places to go (what a shame, because it really is a nice place).

i think i see where you're coming from, and i largely agree.

Yunnan's lost its ties with southeast asia, and for so long was (and to some extent still is) considered a backwater of China. it's 'somewhere in the middle', and while it's gradually being reconnected to the rest of China, the same integration is not happening with southeast asia. it'll come soon enough, but it won't happen overnight. e.g. there are plenty of southeast asian students in Kunming gaining Chinese language skills.

regarding tourism... i think Jinghong has long been on the tourist trail (i first went there in the late 90s after reading about it in the Lonely Planet, so it's not exactly hidden) but it hasn't seen the volumes that the likes of Luang Prabang and Ko Phi Phi have seen... China's still far from being considered an 'easy' destination.

here's an idea: what if China issued visas on arrival at Yunnan ports of entry, restricted to travel within Yunnan?

Yuanyangren

Sure, I agree about China not being an easy destination since it does require a lot more planning, determination and patience than neighboring countries such as Laos, despite their widespread poverty.

China already issues visas on arrival to certain nationalities for entering Hainan island, Guangzhou and Shanghai (usable only within those provinces), so i suppose Yunnan could be next? Well, if the train project between Kunming and Singapore via Laos takes off, we can only assume that entry requirements will be simplified once it's complete (or at least, let's hope so). Still, the requirement for most travellers to Vietnam to get a visa before arriving hasn't seem to have put off too many people as it's merely a formality, but simplifying immigration matters certainly helps bring people in.

I think that it won't take long (give it maybe 10-20 years) before Chinese tourists outnumber the currently large numbers of tourists from mostly western countries, Japan and South Korea amongst others, in countries such as Laos, Vietnam, Cambodia and Thailand. Given increasing wealth, more relaxed restrictions on travelling abroad and the growing size and influence of the Chinese economy, plus declining populations (think Japan and parts of Europe), and declining economies and/or economic troubles (think the USA, Japan and many parts of Europe) and the conditions are right for the Chinese influence to extend into international tourism aswell. These days Chinese tourists already make up the top three markets in countries such as Thailand (number 2) and Singapore (number 1 last year I believe) but this will likely increase exponentially in terms of numbers over time...so maybe Jinghong won't have enough time to absorb lots of western tourists, but instead the domestic Chinese tourists will come in their hordes on their way to SE Asia.

Let's see what happens...

Has The Balcony Guesthouse opened for business? Would be very curious if there was an update to the article, which was excellent reading.

I suppose it will be hard to get a response to this thread also but, like AlexKMG, I'd love to know if this hotel did open. I would like to go there soon but can't find it in any search engines. Help???? I'm guessing it didn't work out but hoping that it did.

The hotel did not open. Although I do not know why, I do know the project was abandoned.

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