Sterling Holidays to turn profitable by fourth quarter

Despite the headwinds faced by the travel industry, Sterling Holidays and Resorts is bullish that the fourth quarter of FY20 will be profitable for them, unlike the previous two quarters. The holiday marketing company is seeing an upswing in early summer holiday bookings. Sterling is also set to add 500 rooms in the next fiscal year, said a top official.

Thomas Cook India-owned Sterling Holidays had reported a loss of ₹3.09 crore in the third quarter, down from a loss of ₹7.74 crore in the previous quarter.

Speaking to BusinessLine , Ramesh Ramanathan, Chairman and Managing Director, Sterling Holidays, said that the losses were mainly a long-term impact of the accounting systems adopted by the company two years ago. “So, visually we were a healthy company, we made cash, but the profit and loss account was looking bad.”

However, “we will be profitable this quarter (Q4 FY20),” claimed Ramanathan. “Our bookings for February and March are pretty good. If this continues, we could hit 70 per cent growth, in comparison to 64 per cent in the same time last year,” he said.

Summer holidays in the time of coronavirus

BusinessLine on Wednesday had reported that travel industry players are seeing an uptick in the domestic travel segment this summer holiday season and a decline in international and inbound travel because of coronavirus.

Early summer holiday booking trends for Sterling are pretty good so far. According to him, typically, occupancy in mountain and jungle destinations are higher during summers. “Surprisingly, even beach destinations like Goa are seeing an uptick this season.”

Last year during the summer season Sterling properties had an occupancy rate of 85 per cent. This year the company is expecting 88 per cent occupancy. “If coronavirus continues to impact the travel industry, domestic travel will flourish. This will give the industry an opportunity to increase its average room rates (ARR).”

Growth and expansion

The company had decided to go asset-light and take on management contracts last fiscal. It has already signed management contracts for eight properties, which are now operational. Five other contracts have been signed which will be operational by September.

“The entire expansion is going to be on a capex-free model. This will add up to 8 per cent revenue to our balance sheet without any added expense,” he explained.

Meetings, incentives, conferences and exhibitions (MICE) contributes to 15 per cent of Sterling’s revenue, but it is looking at achieving 25 per cent from that segment. For this, the company is launching a new campaign strategy called ‘MaxiMICE’. During the slowdown, MICE drove revenues at Sterling Holidays. Under the new strategy, the company will upgrade its banquet facilities at its resorts. The company’s sales team will make more efforts to promote its MICE capabilities to corporates. Currently, Amazon, and Flipkart are among Sterling’s clients.

Sterling sells its inventory through various avenues ― its website, OTA platforms, and offline. According to Ramanathan, OTAs account for 30 per cent of Sterling’s sales, offline sales 35 per cent, sales from own resorts 25 per cent, and 10 per cent from their website.

Sterling operates on the time-share model where a member is required to pay a one-time membership fee to get holidays for a certain number of days every year.

Timeshare and hotel business (non-membership segment) contribute equally to the company’s revenues.

The holiday marketing company has 90,000 members. The management is targeting to add around 5,000 new members this fiscal. Speaking on this, Ramanathan said, “We are looking at close to 4,000, it’s lesser than expected but we are making up for it with our non-member bracket.”

Sterling added close to 400 rooms this year, taking its total rooms to 2,400. It plans to add 500 rooms in FY21.

Sterling is also looking at resorts in heritage destinations. When asked if the company would be open to acquiring a management contract of a heritage property, he said, “If we get an opportunity, maybe, but it is not on the cards for the next one year.”

Sterling operates four and five star properties, while heritage properties come under the boutique, and upper upscale segment. “We will create a separate brand image for something like this, but not at the moment,” he added.

After the abrogation of Article 370 in Jammu and Kashmir, the government had invited players from several industries including travel and tourism to set up businesses in J&k.

Sterling operates houseboats in Srinagar. When asked if it would want to invest or lease properties in J&K, he said, “There is no business at all. From April we are seeing a little movement but we are waiting and watching at the moment.”

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