Despite Covid-19, Club Mahindra to push for expansion with Rs 1K cr capex

Shorter-term membership packages may be considered

Despite the downturn and the paralysis in the hospitality sector, Mahindra Holidays & Resorts, the country’s only publicly-traded company that sells time-shares for vacation packages will utilise Rs 1,000 crores in capex for new assets and enhancing existing inventory over the next two years. 

"The immediate challenges, however, do include reduced unit realisation as members go for three-year membership packages as opposed to the historical 25-year packages that the company has been selling to members", said Arun Nanda, Chairman of Club Mahindra. “The 3-year memberships will be the way forward”, he added.

What about reducing the term of membership to a more short-term duration like, say, one year which would then give the company a wider net for revenue? Mahindra Holidays & Resorts CEO and MD Kavinder Singh said that there is already a senior citizen package that gives memberships for a year. That may be extended to the general masses in due course. 

Mahindra Holidays & Resorts, the company that runs Club Mahindra counts its key expansions to include a 30-acre parcel off land en route to Goa, where a 150-room resort will be built, a new 50-room resort near Simla, a 155-room Fort resort in Goa which is expected to be ready by Diwali, and another 170-odd room to be added across three other existing resorts across the country, in addition to new land-banks near Pune, Nanda said.

Work in Goa, where the company's biggest new location is, started on the 4th of May even as design, planning approvals are in process for Theog and Kandaghat locations (Himachal Pradesh), Nanda said. "We have also started planning and design on land near Mahabalipuram and Mahabaleshwar. There will be no slowdown in our expansion plans as we foresee demand for our properties to continue to grow."

Members currently will not see a loss of their days which will be extended by the company if they are nearing the tail-end of their term given that most of the 60 resorts the firm operates are shut with a couple being open to help medical staff and doctors tackling the Covid-19 epidemic. 

Also, the company’s domestic locations have started to implement standard operating procedures, for all employees staying in the resorts, who have automatically also already been quarantined for 14 days since there is no contact, Nanda said. 

Refunds by the company are extended as per policy with a 60 percent penalty fee and rebate that works out two approximately 32 percent of the initial fee paid, Singh said. In recent times, the company saw around 10,000 cancellations out of its almost 250,000 member community. 

Does the model of time-share have a future given the manner in which hotels have seen the epidemic disrupt their business and that families may not travel too far for leisure?

Nanda says that while long-distance travel may not be on the cards for most, once a lockdown is lifted and normalcy resumes most families would actually feel safer in large villas and resorts where they are able to control factors like the kitchen and their own cooking and more. ’Shorter distances should do better than remote, “ he said. 

Given that the company operates some 60 of its 100 locations in India and 40 abroad in Asia and Europe, the overseas properties are likely to see zero occupancies in the next few months. 

Nanda says that the company has close to Rs 800 crores on its books with Rs 5,763 crores in earning that haven’t been booked yet because of the accounting laws that changed in January two years ago and require a more current as opposed to forward-looking calculation. The company's stock rose by almost 20 per cent on Monday after its results were announced.