Written by Florence Karaba
16 years ago, Madiha and Salim Khatib ended their trip with a stopover in Zanzibar, a tropical island in the Indian Ocean.
“It took us exactly 10 minutes to decide that we wanted to stay here,” said Khatib. The appeal to work and live in a tropical paradise is self-explanatory. But difficulties in accessing capital and skilled labor, and in dealing with bureaucratic minefields, can put any aspiring foreign entrepreneur off.
Khatib was not deterred. Today he employs 250 people in several hotels, a marketing agency and a construction company. With sales of around $ 4.5 million, he built one of the largest companies on the east side of the island. Here are six lessons other aspiring entrepreneurs can learn from Khatib:
Lesson 1: the same thing but with a twist
Tropical islands aren’t the best destination for revolutionary new business ideas. In an article on the pitfalls of strategy, Donald Sull, Rebecca Homkes, and Charles Sull find that out of 80 potential problems, 400 CEOs identified executive excellence as the greatest challenge. Developing a sexy new sunbathing app might be tempting, but power outages and inconsistent internet access are real challenges. Likewise, access to top talent.
Khatib’s first business was Casa del Mar, a boutique hotel. With tourism being the largest sector in Zanzibar, there are many potential customers and talent to hire on the island. The couple came from a family of architects and artists and decided to focus on design and finishes when it was more common, for safety reasons, to have iron bars on windows overlooking the sea. To make this vision a reality, they built a construction team from scratch as the contractors were unable to meet their specifications.
It is no coincidence that many biotech startups are thriving in Boston and fintech is hot in London. Entrepreneurs feed on the dominant industry in their region. This rule also applies in a tropical paradise. Get into the hotel business, but do it with flair! Offer something with a new twist that connects or serves the existing industry to increase the chances of success.
Lesson 2: Money matters (a lot)
One of the great advantages of foreign entrepreneurs is the comparatively easy access to capital. In Zanzibar, as in most tropical islands, angel investors and venture capitalists are a rare species. Loans come with an interest rate of 17 percent, but most people don’t get approval anyway.
The Kathibs sold their car and home in Israel and received extra money from their family. This provided them with sufficient funds to build their first hotel. All subsequent expansions were funded from your company’s cash flow.
“All of the investments I made were in zero banks,” explains Khatib. His reluctance to rely on banks led him to devise expansion plans that could be realized from their own cash flow.
“A construction company needs a lot … a lot … a lot less investment. In comparison to building a hotel, you basically don’t need anything. ”
After the first hotel, he expanded construction instead of building another hotel. That came later when enough money was ready.
More than in Europe or the US, access to cash determines what you can do and how fast. Taking money out of your UK low interest mortgage or selling your car gives you an edge in the beginning. Next, think about cash flow. Occasionally, even an opportunistic step – e.g. Importing a container of olive oil from Palestine in Khatib’s case makes sense.
Lesson 3: Happy Workers, Happy Lives
The COVID pandemic had a major impact on Zanzibar’s economy as guests dried up. Many hotels had to close, others were downsized.
Khatib took a different approach. In early April, he called a staff meeting and told them how much money was in the chest.
He revealed, “I said we have two boats here. You can go fishing for free, use the cars. And the fridge is full of fish that we bought for the summer – shrimp, lobster, and other meat and chicken. But I can’t pay you right now … we have nothing to do, no work. We come here, sit for two hours, clean and go home. ”
Employees agreed to use available resources and wait for their payment after business resumed.
Such a move was only possible because he has had a 16 year relationship with his workforce. Many were in the business from the start, while others were recommended by employees. He also did everything to find new talent. On a trip to India, he visited his IT supplier’s offices and convinced the hardworking programmer, who had solved some of his problems in the past, to join his company.
To strengthen the construction team, he visits large construction sites in Zanzibar (the capital of Zanzibar), where Chinese construction companies train their employees exceptionally well. He approaches the staff and asks, “How much do you get? You get 200, I’ll pay you four times for the quality. “A few days later they join his company.
It is notoriously difficult to build a highly skilled and loyal workforce in emerging markets. However, if you make an effort to attract top talent at home and abroad, give them a lot of responsibility, offer training, and pay well above the market price, you are likely to get the same benefits as khatib.
Lesson 4: Embrace Your Inner Uhtred of Bebbanburg
Uhtred of Bebbanburg is the protagonist in “The Last Kingdom”, a highly entertaining Netflix series in early medieval England. Born as a Saxon, but raised by Vikings, he lives between two different worlds. His network connections and the ability to understand both cultures allow him to play a unique role and turn impossible situations to his advantage.
Islanders often find it difficult to really understand foreign customers (remember those barred windows? They make sense for locals who are concerned about safety but less so for foreign tourists looking for ocean views). This makes it difficult to open up new opportunities. Foreigners, on the other hand, struggle with personnel issues, bureaucratic hurdles and contractors.
The great opportunity for foreign entrepreneurs is to gain a foothold in different worlds. Khatib studied in Germany and speaks the language. This makes it easier for him to connect to his largest customer group. His first client for the construction company, for example, was a German guest who loved the hotel’s architecture and was confident that someone living in Germany would deliver the quality he had promised on time. He also has strong relationships with other entrepreneurs in the expat community, e.g. This enabled him to set up a marketing agency that handled bookings for many foreign-owned hotels.
The language is also the starting point for building a good reputation with the islanders. As a Palestinian, Khatib speaks Arabic, which is highly regarded as the language of the Koran in Zanzibar. He also quickly learned Swahili and funded local projects.
The danger for foreign entrepreneurs is to see the tropical paradise as a post-colonial meeting place. Real opportunities arise for those who find a role as bridge builder, as Khatib did.
Lesson 5: It’s the Little Things …
When you arrive at the restaurant at the Fun Beach Hotel – Khatib’s latest addition – you have passed a huge pool and are looking out over two endless pools. The design is a mix of modernist and traditional Swahili architecture. With the white sand and turquoise ocean behind it, a wow factor is guaranteed. The price per night: approximately 130 USD for two people per night. Comparable hotels easily charge two or three times as much.
Khatib is obsessed with delighting his customers – customers rate the hotel 9.2 out of 10 on bookings.com – but he doesn’t let that stand in the way of expansion either. Half the hotel was completed while it was full of guests.
On days when noisy machines were used, guests were given advance notice, free meals and access to water sports equipment. Since this meant most of them spent the day at the bottom of the property, away from the building noise, everyone was happy.
His attention to detail also made Khatib an opportunity for his marketing and booking agency. During busy times, hotels leave significant revenue on the table as it can be difficult to match customer requests with available rooms. A couple may want to book five days at a particular hotel, but only find two available. Another hotel, also managed by Khatib’s agency, may be fully booked on those two days but will be available for the remaining three days. If you accept the booking but don’t tell guests until they arrive – a not uncommon practice – they are unlikely to enjoy themselves.
Bookings.com – which is where most of the traffic comes from – doesn’t take such tricks well either. The solution: take the booking but call the customers immediately (i.e. before they travel) and give them a reasonable discount in a more exclusive hotel (the group has villas with private pools, for example) for the days that are not included match the original booking. The logistics of the moving hotels are done and a bottle of champagne awaits the guests in the new hotel. This tactic increased utilization significantly.
Business success – on tropical islands as elsewhere – depends more on the details than on the great idea. Adam Goldberg and Wayne Ting founded the CU Community (later Campus Network) a year before Mark Zuckerberg launched Facebook, but failed to offer anything too complex while Facebook was simpler and more intuitive.
An eye for detail and an endless thirst for improvement will make a huge difference as execution is more important than the great idea.
Lesson 6: Passion is important
It’s a bit of a cliché, but the entrepreneur’s passion and persistence is probably the most important part of success. The obstacles were numerous, but Khalid’s ability to bring others on board and find solutions that work for both the local community and his company is stellar. Some of his experiments didn’t pay off – he tried growing chickens for the hotel, for example – but he was still ready for the next idea. His latest project is making bricks from recycled glass, and his skilled construction team is accomplishing this. Always persistent, always positive, always encouraging.
Even if you manage to follow the first five lessons, remember, not everyone can do what Salim Khatib did. He is a maestro among island entrepreneurs.