Mahindra Holidays Plans Inventory Build-Up, New Products To Optimise Returns, Ward Off Risks
Mahindra Holidays and Resorts India Ltd, the leisure hospitality arm of the $19 billion Mahindra Group, has embarked on a multipronged strategy to achieve the optimum level of member/room dynamics and maximise returns. As part of this, it plans to add properties and locations, expanding capacities and signing inventory arrangements with other properties along with introducing new membership schemes and innovative guest experiences.
Under this, it will add up another 600 units to its current capacity of 3000 odd rooms in the next 18 months. The capacity expansion that was initiated since 2015, will have several green and brownfield projects coming up in India as well as international locations by 2019 with a total investment of Rs 600 crore.
"We have already completed a portion of the targeted growth in capacity by adding new projects and expansion at existing properties. More projects are under progress now and we have also signed inventory arrangements with two other properties in Kochi and Srinagar," said Kavinder Singh, managing director and CEO, Mahindra Holidays, in an exclusive interview with BW Businessworld.
The new projects to increase the room capacity include those at Goa (250 rooms), Ashtamudi (100 rooms), Kandhaghat (150 rooms) and Naldehera (110 rooms).
According to industry analysts, Mahindra Holiday's plan to add another 600 rooms along with a new member addition policy is with an aim to keep the member/room ratio at a stable level of 65. The company which has launched a new product -- Bliss, targeting potential customers above the age of 50 years, is also planning to improve quality of member-adds by increasing the proportion of down payment and discouraging the existing 48-month EMI programme in certain segments.
"While Bliss, which is a shorter duration product (10 years) that provides greater flexibility to members, is getting good customer response, the improved quality of member-additions with higher down payment proportion and changes in EMI tenure will help reduce cancellations and improve realizations over the longer term," added Singh.
The company, which is banking on its unique selling point that is experiential vacation, wants to provide wider choices to its members both in terms of locations and variety of experiences by this enhanced capacity in new and most potential holiday locations.
"We are also constantly looking at opportunities for inventory acquisition in new and existing locations," added Singh.
Mahindra Holidays, which offers family holidays mainly through vacation ownership (VO) memberships, was started in 1996. Its flagship brand Club Mahindra Holidays has a customer base of at least 2.25 lakh members and more than 53 resorts spread across India and abroad. This time share company has now set a target of becoming the top 5 VO companies in the world in terms of member base by the financial year 2020.
Hospitality sector, which is always prone to economic recession, geo-political issues and regional impediments etc., had gone through serious recessionary trends in the last few years. But, from the start of 2017, the industry did comparatively better.
Global consultant Delliotte had predicted at the beginning of 2017 that the world of travel and hospitality is entering a new era of growth and transformation. "Renewed consumer confidence, along with a shift in household spending from goods to services and experiences helped leisure travel gross bookings sustain a growth rate. Healthy booking growth is projected to continue across the leisure and business fronts in 2017," it said in a new year outlook.
At the same time, it also cautioned that the past few years taught established industry incumbents to never again underestimate a seemingly innocent travel start-up. "A combination of forces, including shifts in the global economy, game-changing innovation, geopolitical turmoil, natural disasters, pandemics, and rising consumer demands reshaped the travel landscape in 2016. Expect a similar climate in 2017. Most smart travel leaders have come to accept this frenetic pace of disruption as the norm and must try to remain vigilant, as the winners in 2017 will likely be those most responsive to change," the consultant wrote in an early 2017 report.
In the second quarter of 2017-18, Mahindra Holiday's member additions had seen a slight reduction. According to brokerage AxisDirect, this was primarily due to the management's plan to increase down-payments and curb the EMI tenure.
"This would ensure long-term customer persistence while reducing member acquisition cost. We continue to believe in MHRL's exceptional business model with, both CapEx and opex funded by members and demonstrated benefits (membership growth+referrals) from well executed on-ground initiatives. However, given the recent run-up in stock price and possible near-term growth challenges we maintain the status of 'Hold' for the stock and we trim our FY18 and FY19 PAT (net profit) estimates by 9-10 per cent," the brokerage wrote in a November report.
Mahindra's Singh seems confident about sustaining growth amid challenges like market disruptions by innovative startups and online aggregators with cheap and best models.
"Matching our holiday experiences is not going to be easy for the competition especially the newcomers. And, we ensure that there are unique and innovative experiences at our facilities every time for every age group during family vacations," he says.
