Mahindra Holidays and Resorts India is banking on the progress that the domestic leisure holiday segment is expected to witness within the coming decade as it plans to invest Rs 1,200 crore in adding 1,500-odd rooms to its current portfolio of 3,700 rooms over the next three to 4 years.
Kavinder Singh, MD, and CEO, Mahindra Holidays and Resorts, observed that Covid-19 had altered people’s holiday plans, and most would be unwilling to travel to international destinations for at least two to 3 years, which opened up opportunities for domestic leisure tourism. The resort company has already seen a sharp surge in its occupancies, with the newest February numbers hovering around 84%. The occupancy levels had dipped to 30% within the July-September period, before improving to 75% within the quarter ended December 2020.
The company reported a 63% year-on-year increase in profit after-tax at `41 crore, whereas the EBITDA (earnings before interest, tax, depreciation, and amortization) margins surged 750 basis points YoY to 33.8%, in the third quarter ended December 31, 2020. The company’s earnings were impacted due to a fall in resort earnings in comparison with the last yr and declined 8% YoY to Rs 246 crore. However, it reported that resort earnings had improved month on month and grown significantly from Rs 7 crore in Q2FY21 to Rs 45 crore in Q3FY21.
The company that operates on a membership model has its latest member count at 2.6 lakh. It used to add 12,000 members annually, six years ago, which increased to 16,000 and then to 18,000-member additions yr, earlier than the pandemic hit. However, now, the company is anticipating to top its last count, with hopes of adding more than 18,000 members as it sees opportunities to tap the burgeoning middle class that will want to spend on leisure. “I see big opportunities in growing this business. I see an opportunity for scaling up like never earlier than both in terms of member and inventory additions and most importantly creating experiences which people will value far more than what they valued earlier, which include outside experiences,” Singh informed.
Whereas the company is looking to grow its room count and will spend Rs 1,200 crore for building more rooms on its own and also acquisitions, the changing dynamics of individuals’ holidaying behavior and the company’s sharper focus on financial prudence are guiding its future expansion plans. Singh stated the company would be following a healthy-mix of owned and asset-light strategy, whereby 55-60% of rooms will be owned by the company and the remaining 40%-odd will likely be on long leases.
Singh stated not all of the 1,200 crores will be spent on building rooms on its own. “We’d also acquire, and that too at distressed prices, so that will be better utilization of cash,” he stated.
The company is out there in search of acquisition alternatives in resorts based on the right location and the right price. “Even if the resort is not up to our standards we are able to correct it, however, location is key,” he stated. The company is exploring western and eastern India, particularly, because it sees potential to create new destinations and experiences more there, whereas being open to opportunities within the North and South as well- market where the company is already well-entrenched.
