The Hindu Business Line : The Club that Mahindra built

Ulrich Wolffram, who took over as head, resort operations, at Mahindra Holidays & Resorts India Ltd, had quite a task on hand when he joined the resorts company a couple of years ago. “We had to invest and get everyone on the same mattress, literally,” he says. Before one raises an eyebrow at this statement, Wolffram, an Austrian, with decades of experience in the hotels business, clarifies that it was all about getting the fundamentals in place at all Club Mahindra resorts so that guests got a uniform experience. “We had to level out the experience, so linen and crockery had to be uniform and even had to make sure the mattresses were not of varying thickness. Only by paying attention to such detail can we create delight at our resorts,” he explains.

This anecdote defines the attention to detail and an offer of a great consumer experience at its resorts that has helped Club Mahindra, the Mahindra Holidays brand, grow to 30 resorts in the little more than a decade that it has been around. “If you compare our resorts with top hotel brands such as Hyatt or Four Seasons, physically the investments which go into a resort like ours are much less than hotels of that nature but our strength is in the software; we have a great team of spirited people who will make up with smiles any shortcomings in the amount of marble in the lobby,” elaborates Wolffram.

With 18 of its own resorts, 12 leased, with almost 1,000 rooms (80 per cent of the rooms are owned) on offer to its customers, and an avowed plan to acquire more resort property, Club Mahindra is on track to cross the one lakh membership mark in the near future. Along the way, this past year, the resorts company acquired a couple of properties — a heritage property in the heart of hill station Ooty and the Taj Garden Retreat at Thekkady in Kerala, renaming it Tusker Trails. Its allied brand Zest, targeted at young consumers, now in its second year of operations, has four properties up and running now while it has also kicked off Mahindra Homestays, which enables tourists to experience local cuisine and hospitality at a home. Ramesh Ramanathan, Mahindra Holidays’ Managing Director, is emphatic when he says Club Mahindra’s model is pretty unique and now at a scale which would be difficult to replicate.

Says he: “We do member acquisition, member management, resort creation and operations which ensures the experience. We don’t have a cookie cutter model; each resort is unique.”

Ramanathan, a former President of Sterling Resorts and the founding MD of Mahindra Holidays (he moved out of the company for a stint in other corporates before coming back in 2004) attributes the growth of the Club Mahindra brand over the past few years to the fact that it looked at the business from the viewpoint of the customer experience. While, he says, there were always many resort properties all over the country, they never looked at the business differently, as something which required separate inputs, focused efforts and primed to deliver an experience. “Hotels don’t look at individuals in the family while resorts can take care of whole families as separate individuals, from kids to adults; they are no longer represented by the head of the family. That is the biggest difference we have brought in. Whatever membership we have, consumers are actually four times as much, consumption is actually individual and we have catered to that.”

Fun for the family the driving principle.

With that in mind, each resort has a fun zone which does a variety of exciting things for kids — from magic shows and pottery to games and movies while the restaurants have special kids’ menus. Food and beverage at the resorts, called Fun Dining, is also a big driver of revenues for Mahindra Holidays and each resort has developed gourmet packages intended to leave guests sated while not pinching the pocket too much. At resort level F&B contributes around 40 per cent to revenues.

While growth has been rapid for the resorts brand over the past few years, given a buoyant economy then and a leisure-seeking and affluent class of consumers, the paradigm has changed dramatically over the past few months. Holiday packages are, after all, discretionary spends. Put this question to Ramanathan and he says, “Yes, it is making things difficult, sales are not as easy to come by as earlier, but it is making us more nimble on our feet and we also think of opportunities to change our entire interaction with customers and make it better.”

However, he points out, traditionally, time share resorts do well in such an environment because the time share concept was born in a period when conditions were poor — when people couldn’t sell condos, they sold time intervals (weeks). “It’s really an inflation-beater. Imagine, for old members, costs have gone up but they are still getting the benefits of using new resorts. The frequency and intensity of stay increases as people realise that when all else is going up they can still enjoy a holiday at old rates. So we gain both ways; when the market is buoyant and when sentiment is weak too. What we are doing is working cleverly to increase the experience at each touchpoint to make it more memorable.” With the change in environment, its ads earlier used to talk about the quality of experience; now the ads talk about the anti-inflationary aspect of the product. “We changed track, we are constantly at it,” he adds.

Radhika Shastry, Managing Director, India, Group RCI, the global leader in exchange holidays, explains that the timeshare business model builds resilience into the business model of any hospitality company. “You have consumers that pay upfront for holidaying with you for the next 25-30 years. Customers are not only beating inflation by committing to this arrangement, but also committing themselves to make holidaying a habit. This is a very compelling proposition in today’s hectic world.” Many Club Mahindra resorts are recipients of the RCI Gold Crown Award, an annual award given by RCI to resorts rated highly by members.

Shastry says that with fuel prices coming down, airline tickets costing less and the railways also offering incentives to travellers, one can only see timeshare owners putting their purchase to even more use during the current scenario. “In 2008, the average utilisation of all the inventory in Indian resorts with RCI stood at 80 per cent. This is what is expected of the timeshare business model,” she adds.

Nor does spiralling costs in acquisition of new properties worry Ramanathan. In most places, outside of cities, land costs are just 5 to 7 per cent of the project cost. Morever, Club Mahindra is buying projects for members today, so they pay today’s prices. “The whole thing of this product is that we have not assigned resorts to anybody but even if you notionally assign it, an old customer is still paying maintenance at today’s costs (linked to the urban non-manual WPI) and new customers are paying for properties at today’s costs.”

Mahindra Holidays’ revenues have grown from Rs 241.29 crore in fiscal 2007 to Rs 377.19 crore in fiscal 2008 while net profits have almost doubled to Rs 84.04 crore from Rs 42.53 crore. The company has made its second sortie at filing a draft prospectus last September with SEBI for an initial public offering as the first one lapsed. But given the state of the markets now, the company is waiting for the markets to stabilise.

Ramanathan says the company is debt-free and doesn’t really need funds at this stage but seeks a listing as it would be easier to expand in markets such as the US as a publicly listed company. The company also intends to open resorts abroad for its members; it’s looking at South Africa or in West Asia.

A former senior executive of the company points out that the success of Club Mahindra’s business proposition is to compel or motivate a family to take a regular holiday. Also, a high level of fiscal discipline has helped the company prosper.

Club Mahindra memberships don’t come cheap at almost Rs 2.5 lakh apiece depending on the season opted for. Says he: “A substantial portion of this needs be put away and you can’t deploy long term funds for short-term use. A huge distraction for time share resorts is to go after the FIT (fully independent traveller) rather than focus on member experience, which Club Mahindra has not done.” Ramanathan says that members pay Rs 8,500 now towards annual subscription fees which takes care of maintenance.

While blogs on the Net are brimming with carping criticism of Club Mahindra (bookings not available when we want, promises not kept and so on) there are an equal number of members who gush about a great experience they have had at the resorts. However, Ramanathan says that this happens only in a few weeks at a time, only at peak times, otherwise it is 75 per cent occupancy off season across the year in all resorts. The holidays company is looking to engage its members at all levels and has even started Clay (Club Mahindra & You) a travel and holiday blog.

As this former executive points out, for Club Mahindra the challenge is the ability to find new holiday destinations and maintain financial discipline while keeping enough inventory of rooms. “Also, there are huge options in leisure for today’s consumer; they need to keep this in mind,” he adds.

As RCI’s Radhika Shastry says, Club Mahindra’s strength lies in its brand equity, its passion for creating delight and its ability to deliver on its promise to all stakeholders. “They are also a vertically integrated company and therefore, have control over all aspects of the business. Their opportunities lie in exploring newer segments of the market.”

Related Stories:
Bengal, Mahindra Holidays sign MoU for new tourist spots
Mahindra Holidays expanding overseas
Mahindra Holidays to invest Rs 600 cr

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