The Hindu Business Line : Banking on leisure

It’s a quiet Sunday afternoon. In the tastefully appointed conference room of Country Club’s Zen Garden in Chennai, Y. Rajeev Reddy, Chairman and Managing Director of the Hyderabad-headquartered Country Club India Ltd, is scrolling dow n a list of names on the small laptop screen. In the last few months, he has been busy zipping between cities in India and abroad either to launch a new property or negotiating to buy out one. He’s just back from Dubai, after completing some legal formalities involving the company’s recently acquired 100-room property, Chelsea Hotel, there.

The conversation begins over a glass of apple juice. “It’s actually my long-held ambition to own a property in Dubai,” he says. Country Club acquired the property recently for Rs 175 crore. The plan for it is to make it the company’s global headquarters to garner international members who will be induced to come here and make use of its facilities. “It will give us a shot in the arm,” he says. Chelsea is the second property of Country Club abroad. It has one at Kandy in Sri Lanka.

Country Club India Ltd, the Rs 300-crore BSE-listed leisure infrastructure company, came up with the idea of creating a chain of family clubs when most clubs in India were not open for membership. Besides, clubs here are stand-alones or are run by Government institutions such as the Railways. Acquiring a membership at these clubs is either very expensive (if they are at all open for membership), or is restricted to localities or employees of those institutions. There are not many club chains except a few such as Club Mahindra, owned by Mahindra & Mahindra, which focuses mostly on the holiday segment with properties in tourist destinations alone.

Country Club, with a chain of 200 clubs across the country (of which 43 are owned while the remaining are affiliated and run by the company), focuses on social clubbing apart from catering to the holiday segment, medical tourism and theme parks. It runs clubs right in the heart of cities for daily recreation for its members and also at tourist destinations.

Clearly targeting the burgeoning middle and upper middle-class, it has pegged its membership fee upwards of Rs 35,000. There is a new socio-economic landscape emerging in the country, creating significant opportunities for lifestyle providers. With increasing disposable incomes and a new mindset fuelled by changing economic and social factors and, as a result, fast-changing lifestyles, people are constantly on the lookout for different experiences. This in turn spurs demand for these kinds of service providers. Corporates too, as they are hard-pressed to retain talent, extend club membership cards to their employees as part of the compensation package.

According to Reddy, “For Country Club, a chunk of its revenue, almost 60-70 per cent, comes from membership fee.” Its current membership base is a little over 1.5 lakh. It adds, on an average, 100 members a day. And, its corporate clientele include biggies such as Dr Reddy’s Labs, Ashok Leyland Finance, Britannia, Citibank, Crompton Greaves and Bank of India.

Its tie-up with banks such as ICICI, ABN Amro and HDFC Bank for interest-free loan facilities to pay the membership fee evinces better response from potential members. “This strategy really gave us a leg up. We now hope to double our membership base in less than two years,” says Reddy.

Country Club’s facilities, be it in cities or tourist centres, have rooms, a gym, a lounge bar, a multicuisine restaurant and banquet halls. Most of them have swimming pools and children’s play areas too. The company recently rolled out a chain of neighbourhood hangouts codenamed CK27, which Reddy describes as satellite clubs. “It, with all key facilities such as gym (Moksh), bar (Pulse), indoor games and restaurant (Spice), works like an ATM,” he says. It now has close to 10 CK27s in cities such as Ahmedabad, Pune, Noida, Surat, Kolkata and Bangalore.

‘Country Condos’ is another area the company is currently focussing on. Country Condos is “an eco-friendly, signature project of Country Club that is designed to meet international benchmarks of RCI Gold Crown specification, mainly to cater to rich foreign visitors and the elite,” explains Reddy. The company is developing one such project, called Country Club Coconut Grove, on 1,000 acres in Karnataka, on Tumkur Road near Bangalore. It will have facilities such as an open-air theatre, restaurants, floating bar, a large swimming pool, helipad, spas, Jacuzzi, a wedding pavilion, sports stadiums, golf course, luxury cottages and deluxe rooms.

The company is also exploring other areas of clubbing such as health spas, golf courses and theme parks. For health spas, it has tied up with Kerala’s Kairali group, which will manage the spas with trained ayurvedic doctors, therapists, dieticians and cooks. CCIL will invest in creating the necessary infrastructure. “There is enormous business potential in medical tourism as a large number of foreign tourists are keen on authentic ayurveda treatment,” he substantiates.

It launched its first spa in Hyderabad, and is developing similar ones in Mumbai, Bangalore and Chennai.

CCIL currently has two water parks – one each in Hubli and Surat, and a 18-hole golf course – Country Club Golf village - at Mangaon in Maharashtra.

However, industry watchers say that though CCIL’s concept of clubbing is good and may initially sell well as there’s no competition on this scale and spread, it may be difficult for it to sustain this membership. “As Country Club targets a lower-middle class audience, it may be difficult for it to get those memberships renewed year after year. Hence the growth may not be sustainable,” one said. “When it comes to clubbing, members’ reputation and their socio-economic status will be in the forefront,” says another, implying that those from varying socio-economic strata will not want to mingle. Even a member who moves up the ladder may not want to be spotted at the same place, he adds.

Reddy, a first-generation businessman, started his business career as a realtor in 1980. In 1989, he acquired the palace of the Prime Minister of the erstwhile Nizam of Hyderabad – Vilayat Manzil, in a dilapidated condition and converted that into ‘The Country Club’. “As it turned out to be an instant success, it triggered the fire in me to set up a chain of clubs,” he recalls. The company went public in 1994 and mobilised Rs 3.76 crore. The company’s concept of clubbing and its focus on the expanding middle-class also attracted global investors looking for exposure to the increasingly affluent Indian market. Country Club is now flush with cash, thanks to investments by Fidelity Investment, Goldman Sachs and New Vernon. In January this year, CCIL mobilised Rs 486 crore through GDR/QIP issue priced at Rs 770 per share. These institutions picked up 9.88, 6.59 and 4.94 per cent stake respectively. Armed with that, the company acquired 15 properties in cities and towns including Surat, Pune, Kodaikanal, Chennai, Mumbai, Bangalore and Chelsea Hotel in Dubai, in the last six months. The expansion is almost completely through the inorganic route. Most of these properties were existing clubs or hotels.

Country Club is also on the look out for properties in Poland, Mauritius, Singapore and Malaysia. In Poland, though the company has identified a castle, the talks with the Government are yet to conclude. “The Mauritius Government has invited us to invest there. We are planning to acquire land and put up a greenfield project there. That apart, we may also go through the inorganic route,” he says. “We have also zeroed in on two more resorts, in Phuket and Bangkok. The company is keen on spreading its wings wider, across countries,” he says. Though the resorts identified in Phuket and Bangkok are small ones, they are RCI-affiliated.

With Rs 50 crore budgeted for the year for marketing, the company recently launched its TV commercial across regional and national channels. “We also focus on the print and out-of-home medium, apart from below the line marketing avenues to promote the brand,” says Reddy. It closed the last fiscal with a turnover of Rs 306 crore and a net profit of Rs 65 crore against Rs 147 crore and Rs 34 crore in the previous year. Its scrip closed on the BSE on July 14 at Rs 402.20.

The conversation comes to an end and Reddy turns to his laptop again, examining what we are told is a list of potential candidates for acquisition.

Related Stories:
Country Club’s tally hits 50
Country Club to buy 2 more resorts abroad

More Stories on : Strategy | Resorts & Amusement Parks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Driving innovation

Heard outside, on radio