Family plot

How Mahindra Holidays is setting the stage for 100,000 vacationing families at its resorts by 2009.

Ask Aniruddha Haldar where the competition for his business comes from and he won't talk of other time-share companies. Instead, he'll tell you that it is either the "mother-in-law" or the "Maruti" he is fighting.

What Haldar, who heads the marketing team at Mahindra Holidays and Resorts (MHR), means is that people would rather own a car before a subscription to a holiday scheme. And, given the need to spend time with relatives, they are not sure how well they will use a time-share package over 25 years.

But that hasn't deterred the team at MHR from trying. Having convinced 60,000 families to sign up in the 12 years it has been around, the company is now aiming higher. "By March 2009, we should have 100,000 members and revenues should grow at an even faster pace," says Managing Director Ramesh Ramanathan.

That leaves MHR just two years to make another 40,000 families believe that its holidays are worth it. And to treble its top line, which was Rs 240 crore at the end of March 2007. Here is how the Chennai-based firm plans to do it.

Customers for all seasons
Two years ago, consulting firm McKinsey & Co helped MHR identify categories of customers that might have a reason for taking regular holidays. Among these were patriarchs who felt it was part of their role as providers to take the family on a vacation. Then there were people looking for new experiences, families that wanted to bond, and the romantics.

These four categories comprise 80 per cent of MHR's customers today, with the rest coming from the "show-offs" and "rest seeker" segments.

The last is a relatively new category of executives and businessmen who want to put their feet up for a few days. Says Arvind Mahajan, executive director at KPMG, "People are working harder and they are conscious of the need for regular breaks. At the same time, they are looking for a lifestyle experience and time with the family."

MHR's marketing strategy, then, should speak to this crowd perfectly. In sharp contrast to most holiday companies, MHR's communication has never been about a "Club Mahindra" holiday; instead, it promotes the family bonding experience. "We are not show-casing tourist destinations or our resorts. We are talking to families," asserts Haldar.

But MHR is also eyeing another customer group that may not be looking for family time on its holidays. These are the young people who live in the metros; aspiring, affluent couples in their late 20s or early 30s. Obviously, MHR needs to talk to this group differently, and it has.

In May, it launched a new product, Zest, that caters to this category. Unlike MHR's regular time-share package "" which offers a seven-day break every year for 25 years "" Zest offers short getaways over a 10-year period.

In the three months since its launch, the format already has 500 members and Ramanathan says MHR hopes that number will increase exponentially to 50-60,000 in five years "because people today are willing to spend on leisure."

Chalets come cheap
Which is why MHR's schemes don't come cheap: seven days a year for 25 years at any of the resorts costs Rs 2.25 lakh on average, depending on the type of accommodation and the season chosen.

For instance, an apartment for four adults costs about Rs 3.5 lakh during the peak summer and Diwali holiday seasons, while a smaller studio facility, which accommodates three, would set subscribers back by about Rs 2.4 lakh. Add to this an annual fee of about Rs 7,000, which is adjusted upwards for inflation.

Still, MHR is banking on the fact these rates are lower than those for comparable rooms in other hotels. For instance, if a night in a studio apartment at an MHR resort is priced at Rs 2,441 (present value), a stay at a similar hotel would cost Rs 4,674. What's more, at Rs 425 for three meals a day, food is extremely affordable while being comparable with a five-star spread.

In a way, that is what is urging MHR ahead in its ambitions: the existence of a large group of potential customers who expect a high level of service and comfort, can afford to pay for it and yet seek value-for-money. Haldar agrees. "We have a good proposition to attract people who would normally opt for the five-star hotels."

That's a thought seconded by Abheek Singhi, partner at The Boston Consulting Group. He believes MHR has possibly penetrated barely 3 per cent of the addressable market.

"There should be at least 2 million families today that can afford to buy such holiday packages. MHR has enough headroom to grow." Compare this with rival Sterling Resorts, which caters to the two- and three-star hotel-goer. At its peak, Sterling had over 80,000 members. That number is down to around 20,000 now.

On the mountain top
In fact, the MHR brand has been able to cash in on an increasingly indulgent upper-middle class. If its prices have gone up by close to 50 per cent in the past five years, it is both to cover higher costs and also because it has found takers. A 7 per cent hike that it took a couple of months back included a 2 per cent brand premium.

Says Ramanathan, "Last summer our rack rate for non-time share customers was Rs 7,500 per night for a studio room at the Munnar property. That indicates the kind of brand premium we can command."

MHR spends heavily on advertising the brand "" marketing and sales account for 28-33 per cent of costs, including the sign-on discount of 4 per cent. Spends on print and TV are equal, at about 30 per cent of advertising costs.

"The TV commercial sets the mood for a holiday," explains Ramanathan, adding that the campaign focuses on the MHR brand rather than on any particular destination.

KPMG's Mahajan believes the positioning is correct and that a TV campaign will enhance the brand quality. "MHR is making the product aspirational and, at the same time, the message is that this is money well spent," he says.

Of late, MHR has also started selling on the Internet, advertising on sites such as myiris.com and rediff.com, sites likely to be visited by its core customer group. Haldar claims that the click-through rates on some of these have been three times the industry average.

"Our spends on the net should go up to at least 20 per cent in the near future," he adds. A fifth of the marketing budget is used for below the line initiatives: events for families in malls or a direct marketing exercise in alliance with Standard Chartered Bank for the latter's customers, for instance.

It's raining services
Of course, not all its potential subscribers will be equally prosperous. In order to expand its market, MHR offers an instalment-payment plan as well; earlier, Citibank and HDFC Bank partnered the company for these initiatives, but now MHR handles it independently. The instalment plan is also an additional revenue stream.

Ramanathan explains that, internationally, time-share resorts earn up to 15 per cent of their revenues from financing schemes. "Most people here, too, prefer paying in EMIs," he adds. BCG's Singhi, too, thinks the EMI option is a smart move. "Going ahead, this is what will drive MHR's business."

While that happens, MHR is offering value-added services to make it easier for subscribers to avail of its facilities: after all, it isn't enough to bring in the customers; MHR needs them to visit the resorts and spend there as well. The company is launching a travel service to take care of members' ticketing, transport and even accommodation in case they need to stop over en route to the resort.

Says Ramanathan, "We need to make sure people take their holidays. And unless we keep pushing people, occupancies tend to fall." At present, occupancies are around 75 per cent, with the average holiday lasting 4.5 days.

Building top-of-mind awareness is, therefore, a priority. Apart from well-timed direct mailers "" for instance, lawyers are sent mailers just before the court holidays "" MHR also offers special events and promotions to entice members to take a break. The effort seems to be paying off. Over a fourth of members polled recently said the reminders helped them plan their holiday.

Next on the cards is a CRM initiative "" Project Sunshine "" planned for the Diwali season. The objective is to meaningfully predict customer requirements by mapping out their activities at the resort.

Explains Ramanathan, "Without invading their privacy, we are trying to find out what guests would like. It could be something as simple as a harder bed."

Giving guests what they want also means anticipating their wishes. So MHR offers varied menus, changing them often to reflect guests' tastes. For instance, stricter dietary norms are followed and more vegetarian dishes offered after Diwali, when the resorts host groups of Jain guests.

Of course, customised choice is not restricted to the menu. MHR is tempting members and potential subscribers by offering variety in location and type of holiday as well. Apart from log huts and tents at some properties, it is also expanding: in the next three years it will add another five resorts to the existing 20.

Besides, MHR now manages and rents properties overseas as well, in Thailand and Austria "" the company's arrangement with Resorts Condominium International (RCI) already allows members to stay at RCI's hotels abroad.

Says Steve Borgie, who headed rival time-share company Sterling Resorts from 1996 to 2003, "There is a big shift in customers' attitudes: they want new experiences continuously. So managements have to be on their toes."

Cruising along
Better usage of its resorts will not just enhance MHR's brand salience, believes the management. It will help bring in new customers through referrals. And growing the customer base is important because, as Borgie points out, time-share resorts need to build scale, apart from having a national footprint to survive. "Unfortunately, that is the way the business works: it is the bigger players that survive," he observes.

Once they gain scale, however, it is less of a climb. Explains BCG's Singhi, "The economics of time-share resorts tend to be better than those for hotels, because revenues are less volatile. In the US, time-share businesses have done better than hotels."

That should encourage MHR to keep going. With revenues growing at a compounded 50 per cent in the past three-four years and net profits rising at even faster to hit Rs 41.76 crore in FY07, MHR's growth is gaining momentum. But this holiday-maker simply cannot afford to take a break.