Mahindra Holidays and Resorts plans to aggressively tap India's tier II towns to expand its membership base as it aims to boost sales, and arrest fall in its profits.
More and more companies across sectors like auto, FMCG and retail are tapping the increasigly affluent people in small towns, where sales have been growing faster than in big cities. The Mahindra Group company too seems to be following that trend.
The vacation home provider's revenues have risen 22% to Rs 578.11 crore in fiscal 2012 over fiscal 2010, but profit has declined 13% to Rs 102.33 crore over the same period.
MHRL's fourth quarter net profit declined 7% year-on-year to Rs 37.23 crore as a rise in expenses offset net sales growth.
In January-March, the Mahindra Group company's net sales were up 13% from a year ago to Rs 173.5 crore.
MHRL was in a consolidation phase for the last two years, and costs are likely to reduce going ahead, Arun Nanda, Chairman, said in a post earnings conference call.
MHRL operates luxury resorts under the Club Mahindra brand and a member is entitled two weeks stay every year for 25 years at any of its resorts.
Currently it has 42 resorts, 1,43,258 members and had 77% occupancy in 2011-12.
MD Rajiv Sawhney said, the company so far had been more focused on metro cities to get more members, but was seeing increasing potential from tier II towns like Rajkot, Kanpur and Allahabad for new memberships. Till now over 60% of its members are from metros.
Presently, the average vacation ownership price is at Rs 3.1 lakh, up about 8% than a year ago, according to company officials.
While it focuses on increasing its membership base, it will also continue to be aggressive in inventory addition, Sawhney said, so that members have more choice in selecting their holiday destinations.
MHRL added 485 rooms last fiscal. In fiscal 2013, it is adding 150 rooms near Coorg in Karnataka and a new resort with around 160 rooms is also coming up at Tungi, near Lonavala in Maharashtra.
The company has already received first occupancy certificate for the Tungi resort and has started bookings on invitation basis. It hopes to get the final occupancy certificate by next month, following which, the resort will be formally opened, he said.
Last fiscal, it added 10 more destinations - Sikkim, Mussourie, Mahableshwar, Kumarakom, Jaisalmer, Kanatal, Goa and Rishikesh - to its network.
Sawhney said, MHRL will aggressively exploit its land bank and the focus will be on opening resorts in India, although it will also look at some neighbouring countries for expansion. Apart from India, MHRL currently has resorts in Thailand. It also offers rooms at a resort in Malaysia and Austria, on paying international exchange fees, according to its website.
MHRL shares closed down 0.7% at Rs 290.35 on NSE on Thursday. The stock is down near 24% over the last one year.