Higher upgrades aiding average realisations: Mahindra Holidays

Mahindra Holidays is already seeing good traction in the spa business and is now considering moving from rejuvenation to wellness says Chairman Arun Nanda.

Nanda was speaking on CNBC-TV18 on the occasion of completion of 20 years in business Tuesday. Nanda say prices have been increased by about 5 percent on a blended basis and the overall trend in average realisation is positive given higher upgrades by customers.ewer products are likely to aid margins due to operating leverage, he says.

He also shared details on new resorts under construction, the company’s target on new member additions and new products on offer.Below is the verbatim transcript of Arun Nanda’s interview to Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: Give us an idea of how things are panning out in terms of how many additional members you are expecting, say over the next five years what is the annual membership addition that you all are planning on your 20th year?A: I don’t give guidance but I will give you some data. It took us 13 years to get the first 100 thousand members. It took us seven years to get the next 100 thousand members and I presume it will take less than seven years to get the third 100 thousand members. In the last quarter which ended in June 2016, we had an 18 percent growth over what we had in the first quarter of 2014-2015. So, the trend looks to be good. I think the good news is that more than 50 percent of our new members are coming from referrals from our existing members. So, the cumulative effect of that you will continue to see over the significant period of time. However, if you ask me what is my dream, my dream is that we are today the largest vacation ownership company outside the United States along with our Finnish subsidiary. Our dream is to be the most revered vacation ownership company in the world in the next five years.Sonia: Wanted to ask you about the new additions itself? In the quarter gone by on an average year run rate has been about 15,000-16,000 new additions per quarter or rather annually. What is the expectation as we go ahead? What kind of new additions do you hope to see say in FY17 and FY 18? You spoke about 100 thousand in less than seven years. But in terms of just new members added fiscally what can we hope to see in FY17 and FY18?A: I just told my friend Latha that I don’t give guidance but I did tell you that it took us 13 years to get our first 100 thousand, it took us seven years to get the next 100 thousand and it will take significantly less than that to get the next 100 thousand. Let me talk of resorts, we have three resorts under construction on Greenfield sides one is in Assonora. Assonora is in Goa which is a very beautiful resort. It o=is over nearly 50 acres of land, it will be a very different experience something Indian tourist have not seen before. Totally family focused. There is one coming up at Naldehra which is near Mashobra and there is one which is soon to start work in Maharashtra, but we are going to significantly expand capacity in destinations in Kandaghat in Ashtamudi which is one of our most favourite resorts. We are actually more than doubling the capacity. So, these projects are on. There would be some expansion of capacity also at the Emerald Palm in Goa. However, we are actively pursuing five parcels of land indifferent destinations. There are two of them in Maharashtra, one in Uttarakhand and couple of them in the south. So, in short we plan to add 700 rooms in the next three years that is our plan. However, what is very exciting is that the Finnish acquisition has been very satisfying. Together with the Finnish acquisition we have 46 resorts under Mahindra Holidays including three overseas Dubai, Bangkok and Kuala Lumpur and with the Finnish we have six resorts in Spain, two in Sweden and 23 in Finland. So, together we are closed to 77 resorts.Anuj: I have two questions first is business related and second is a bit of a personal question and also a lot of feedback on twitter as well. First is on the Svaastha Spa what is the plan in that direction in terms of any kind of value unlocking there and second what is happening with your Lonavala property it has been soft launch for many years now and not been opened to your website. When is that going to happen?A: Svaastha Spa are doing well we have them in more than half of our resorts. As you see the customer is graduating from and we are actually ahead of the game. There is a very conscious philosophy at Club Mahindra that we are not a accommodation and food only properties. We are here for the families to get together. It is a family binding, it is magical moments and the spas are doing exceedingly well. People enjoy the spa. Honestly, speaking I am surprised at the booking that we get in the spa because Indians are generally little conservative when it comes to spending money on themselves specially the bread winner. I come from that generation where people were little hesitant but we are seeing very high traction in that. There is a desire to move from just rejuvenation to wellness and that is something which is work in progress that we moved from just rejuvenation and pampering yourself to wellness and it is a project which is under consideration not yet launched. Regarding your second question on Tungi; when you are a company with our sorts of values you have some issues which you have to deal with and the issue is very minor. The issue deals with the neighbour who has been creating problems to blackmail us and we have not been giving into blackmail but the resort is opening. So, this is life, we live with it. Sonia: Just a couple of more numbers if you can share with us? Your average realisation per member is quite high at 3.5 lakh can you tell us what the expectation is going ahead and also in terms of CAPEX you said that you are doubling your capacity?A: The number is dependent on two things one is the price increase which has been modest. I won’t know the exact numbers but they are around 5 percent or something. However, the number keeps also going up because as you know we have four seasons and three types of properties and we are seeing that as the families are growing and as a younger people, children are going to school, so both people are upgrading on say the studio owner is upgrading to one bedroom and the one bedroom is upgrading to two bedroom and the white and blue are upgrading to red and red are upgrading to purple. So, it is an actually a combination of both and actually you will see that number growing in the future because we are seeing more demand for the higher seasons and larger capacity. In the newer resorts allocation for one bedroom and two bedrooms is higher than what it used to be in the past. Latha: What is the extent of old membership that will move out? Because I would assume they came in at very cheap rates so are your margins set to improve because you all are hitting 25 years and the first set of members will start probably renewing at higher rates or just moving out?A: There are two things we have done – we have now introduced a 10 year product for senior citizens. So, that is something which is seeing good traction because as people grow older they don’t want to commit for 25 years but we sell the 10 year products to over 55 years. This product actually you can gift to your children’s, so financially it is going to be a big bonanza because we will not have to build inventory because it will be the same inventory which will be sold. The selling cost will be lower because it is the existing member who is renewing. The second is that there is no inventory cost, so it will have a significant impact on the profitability. However, let me correct one fact that although today we sell 25 years when we started we used to sell a 33 year membership, so this impact will take a few years to come.