Mahindra Holidays will spend Rs 1000 crore to create 1,500 new rooms: Kavinder Singh

Kavinder Singh, MD & CEO, Mahindra Holidays and Resorts India Limited, speaks about expansion plans, Q4FY19 results and member addition plans during a candid chat with Dimpy Kalra, Zee Business. Excerpts: 

Q: Mahindra Holidays has more than 50 resorts in its kitty. How many more resorts will be added to it in the next 2 years? Also, let us know about your business?
A: Basically, we are into membership business where membership of 25years is offered to our prospects. In addition, we also offer a membership plan of 10 years for people, who are more than 50 years in age. This membership business allows people to plan holidays on an annual basis. Actually, we offer 7 nights, which can be accumulated or can be moved ahead or shifted before, as per their convenience. 

As far as resorts are concerned then we have nearly 61 resorts in our kitty at present. I would like to inform that additional 33 resorts of a company, Holiday Club Resorts, Finland, which was acquired three years back, are also available for our members. These resorts are available in Finland, Sweden and Spain. So, the number goes up to 94. Apart from this, we also have an exchange scheme under which our patrons, who are not willing to visit a Mahindra resort, can visit our partner hotels. We have partnered with 103 hotels within and outside India. So, as far as resort and destinations are concerned we have an ample number of resorts with us. When it comes up to next two years plans then we have announced a capital expenditure of Rs800-1000 crore, which will be spent in the next 3-4 years to develop new resorts. 

In fact, we have developed a plan of 1400-1500 rooms, which will be required to suffice the demand of our members, which is going up. In fact, the work has been started in many locations like Goa, where a 200-room resort is being developed. Although, we have 3 more resort in the state and this is going to be the fourth resort in Goa. In addition, a 56-room resort has been completed in Ashtamudi, Kerala. We will keep working on resorts and we will be adding new and popular destinations on our list. The best part of our business is that we are running a debt-free business and we will not have to take debt for expansion of our company. We have a strong balance sheet of Rs572 crore, at present. 

Q: What led to the decline in revenue and profit of the company in the fourth quarter, when compared to the same quarter of the corresponding year?
A: Thanks for asking this question as it provides me with an opportunity to inform you and your viewers that our profits haven’t gone down or declined but visible fall is a result of our transition into a new accounting standard, Indian Accounting Standard (Ind AS) 115. In the old accounting system, we used to take 60 per cent upfront income and the remaining 40 per cent of the membership was divided in rest of the 25years. But, under the new accounting standard, we are supposed to divide our income by 25 and that is something that makes it feel that our income and profits have declined. But, on like-to-like comparison in the same accounting standard, you will find that our profits have gone up from Rs38 crore to Rs49 crore instead of Rs15 crore that is visible at present. So, our profit has increased by 28 per cent and this was the best-ever quarter for us. We earned a profit of Rs155 crore in the year, which was 17 per cent more than the corresponding year. 

The good thing even though this shift to the new accounting system has led to a fall in our income and profit it didn’t have any impact on our cash position and unit economics, as they are the same. We will not face any problem in any capital expenditure, further. In fact, the difference in profits and income will come back to us in future and thus will have a positive impact on our profits. 

Q: Do you face problems in adding more customers to your list and what is its turnaround ratio, as in how many new customers are created through the existing customer?
A: Two-three processes are exercised to add new customers and I will provide some statistics for that. For instance, 3-4 years ago, we were adding 12,000 new customers every year to our list, then it went up to 16,000 and now we are at 18,000 and will take it ahead. The first thing is that we have been able to add 18,000 customers for next 25 years, who will just not pay only the membership fee, but they will also be paying an annual fee and F&B expenses while staying at the resorts. In addition, they, who have taken the membership on an EMI basis, will be paying interest to us. 

So, the best thing in our business is that we have a customer base of 2,43,000 customers/members at present and they are not just paying the membership fee to us but are also offering resort income as well as the annual fee and few of the new customers are also providing interest income to us. So, our business model is very strong in itself and that is a reason that we have Rs572 crore cash in our books. Last year, our occupancy stood at 83 per cent, although it faced some challenges in August due to floods in Kerala and Coorg. Normally, our occupancy stands at 85 per cent. So, if seen closely than you will find that any company in the hospitality sector faces two issues and they are debt and occupancy. 

Interestingly, we don’t have problems related to debt as we have Rs 573 crore in our books, which can be used in developing new resorts. And, our occupancy level stands between 80-85 per cent. So, our business model has been designed to please our members and make them happy, who refer us to their friends. We get several customers through referrals. In fact, a major part of our income that comes through new customers is dependent on existing customers and their experience. They provide the reference of new members if we can satisfy them and provide good experiences. 

Apart from this, we also use the digital platform to attract and add new members. So, generating new members is our work and our sales force is engaged in that. Besides, our member experience functions are involved in providing good experiences to the customer. A good experience will provide referrals. Apart from this, prospect reach out programmes is also carried out by us. We also create alliances with good brands, which helps us in providing better leads. 
In short, our sales force works to bring quality members and providing the best experiences to the patrons so that they continue referring us. This will help us in growing and adding more resorts on our list.  

Q: Let us know the margins of the company and the ratio in which it will grow in future?
A: If you have a look on our profit before tax (PBT) then you will find that 4-5 years ago it used to stand near 15 per cent, but it has gone up to 21 per cent in last 3-4 years. So, every year, we have been able to increase the margins by 1-1.5 per cent and I feel still, we have the opportunity to improve the margins through new member additions and resort income. If we have a look at our resort income or annual fee income, then have posted double-digit growth. In fact, our existing members, as well as old members, contributes to our growth.