 "Makeover-time for Sterling")
Sterling Holiday Resorts (Sterling) had lost its first-mover's advantage a while back. Time-share holidays, a hospitality format, was pioneered by it in 1986. It is preparing to reclaim its lead, armed with its new owner's funds and a new loyalty programme.
Sterling's new parent, tour operator Thomas Cook, has paid Rs 187 crore for 22 per cent stake in the first of a three-part transaction that also includes purchasing stake of private equity firms and an open offer. The overall deal is valued at Rs 870 crore and Sterling will be merged with Thomas Cook.
Sterling will use the funds to add new resorts, refurbish existing ones and use Thomas Cook's cachement to attract new customers. More importantly, in the first step to leverage the networks of both, a loyalty programme is being considered to allow customers of both Sterling and Thomas Cook to earn and burn points.
Before Thomas Cook's entry, Ramanathan had already set about turning it around. "In the last couple of years, we have been witnessing healthy year-on-year growth in occupancy. When I took over the helm in July, 2011, Sterling was averaging around 30 per cent occupancy. Today, it is around 50 per cent. We expect to take the average up to around 65 per cent in the coming year," says Ramanathan.
He can now access the network that Thomas Cook brings with it. "Traffic from non-members such as free-individual-travellers (FIT) and MICE (business and offsite groups) would pick up with the help of Thomas Cook that has substantial reach and distribution in the travel industry in India. In fact, we have already begun working closely with Thomas Cook in both FIT and MICE space," says Ramanathan. The ratio of vacation-ownership members and non-members is 60:40.
There's more. "We have just begun to evaluate a (loyalty) programme...it's too early to talk about plans in this area,'' says Ramanathan.
Sterling trails Mahindra, which has more than double the number of memberships and properties than Sterling. Mahindra is also adding members faster than Sterling. Competition is growing in the field with the entry of new players such as Magic Holidays and Cirtus Check Inn, which are expanding their presence with investments in properties and tie-ups with global chains.
Sterling has 67,000 active vacation-ownership members and 19 resorts, and Mahindra 160,000 members and 44 resorts. Mahindra is more profitable with Rs 106 crore profit in 2012-13, as against a Rs 20-crore-loss reported by Sterling.
More than a makeover
The company has also earned the perception of being a 'poor cousin' of Mahindra whose properties are more spacious and plush, according to customers. But Sterling's properties are undergoing a make-over. "One by one, Sterling is renovating its properties. The maintenance and housekeeping standards have been improved. Restaurant quality is also better but the meals have become expensive now,'' says a customer with both the resort chains.
"Five of our resorts now have RCI Crown status (resort-ranking done by RCI, which offers points-based vacation exchange programme globally) after the investments we made in resort renovation,'' Ramanathan says. The equity investment by Thomas Cook is being used to upgrade existing resorts. The company plans to add 350-400 rooms to its inventory in the coming year.
"Even before the acquisition, we had made significant progress in renovation. Three of our resorts - Kodai-By The Lake, Ooty-Fern Hill and Munnar-Terrace Greens - have been revamped. In the coming year, we will finish renovating our Yercaud property and progress with renovating those in Mussoorie and Puri. By mid-FY-16, we expect to finish renovating all our existing resorts. We are also looking to expand our destination network through the leasing route and are currently evaluating four-five properties. As for greenfield projects, we are planning to break ground in Coorg in the coming year on Sterling-owned land,'' he says.
Anuj Puri, chairman and country head of real estate consultancy JLL, feels that the time-share holiday business could see some more consolidation in the days ahead. "The time-share holiday business is struggling because of economic slowdown and membership is considered a luxury. It has become less popular with the middle-class. Smaller time-share holiday companies are struggling to attract customers. Companies with larger infrastructure and better offering will benefit. We can expect consolidation in this business."
Sterling then would have to decide whether to go for the volume, middle-class segment or not, in its drive to narrow the gap with Mahindra.
Sterling's new parent, tour operator Thomas Cook, has paid Rs 187 crore for 22 per cent stake in the first of a three-part transaction that also includes purchasing stake of private equity firms and an open offer. The overall deal is valued at Rs 870 crore and Sterling will be merged with Thomas Cook.
Sterling will use the funds to add new resorts, refurbish existing ones and use Thomas Cook's cachement to attract new customers. More importantly, in the first step to leverage the networks of both, a loyalty programme is being considered to allow customers of both Sterling and Thomas Cook to earn and burn points.
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Over the years, Sterling had lost out in popularity and business due to legal hassles and financial loss for not being able to service its customers (nineties) and competition from robust peers such as Mahindra Holiday Resorts (Mahindra) that runs the Club Mahindra brand. Mahindra after initial hiccups, had rationalised its customer base by cutting out defaulters added by overzealous salesmen and added a maintenance fee, making for a more credible brand with sustainable servicing. But Sterling now has the same man under whom Mahindra had taken those steps - Ramesh Ramanathan - as its managing director.
Before Thomas Cook's entry, Ramanathan had already set about turning it around. "In the last couple of years, we have been witnessing healthy year-on-year growth in occupancy. When I took over the helm in July, 2011, Sterling was averaging around 30 per cent occupancy. Today, it is around 50 per cent. We expect to take the average up to around 65 per cent in the coming year," says Ramanathan.
He can now access the network that Thomas Cook brings with it. "Traffic from non-members such as free-individual-travellers (FIT) and MICE (business and offsite groups) would pick up with the help of Thomas Cook that has substantial reach and distribution in the travel industry in India. In fact, we have already begun working closely with Thomas Cook in both FIT and MICE space," says Ramanathan. The ratio of vacation-ownership members and non-members is 60:40.
There's more. "We have just begun to evaluate a (loyalty) programme...it's too early to talk about plans in this area,'' says Ramanathan.
Sterling trails Mahindra, which has more than double the number of memberships and properties than Sterling. Mahindra is also adding members faster than Sterling. Competition is growing in the field with the entry of new players such as Magic Holidays and Cirtus Check Inn, which are expanding their presence with investments in properties and tie-ups with global chains.
Sterling has 67,000 active vacation-ownership members and 19 resorts, and Mahindra 160,000 members and 44 resorts. Mahindra is more profitable with Rs 106 crore profit in 2012-13, as against a Rs 20-crore-loss reported by Sterling.
More than a makeover
The company has also earned the perception of being a 'poor cousin' of Mahindra whose properties are more spacious and plush, according to customers. But Sterling's properties are undergoing a make-over. "One by one, Sterling is renovating its properties. The maintenance and housekeeping standards have been improved. Restaurant quality is also better but the meals have become expensive now,'' says a customer with both the resort chains.
"Five of our resorts now have RCI Crown status (resort-ranking done by RCI, which offers points-based vacation exchange programme globally) after the investments we made in resort renovation,'' Ramanathan says. The equity investment by Thomas Cook is being used to upgrade existing resorts. The company plans to add 350-400 rooms to its inventory in the coming year.
"Even before the acquisition, we had made significant progress in renovation. Three of our resorts - Kodai-By The Lake, Ooty-Fern Hill and Munnar-Terrace Greens - have been revamped. In the coming year, we will finish renovating our Yercaud property and progress with renovating those in Mussoorie and Puri. By mid-FY-16, we expect to finish renovating all our existing resorts. We are also looking to expand our destination network through the leasing route and are currently evaluating four-five properties. As for greenfield projects, we are planning to break ground in Coorg in the coming year on Sterling-owned land,'' he says.
Anuj Puri, chairman and country head of real estate consultancy JLL, feels that the time-share holiday business could see some more consolidation in the days ahead. "The time-share holiday business is struggling because of economic slowdown and membership is considered a luxury. It has become less popular with the middle-class. Smaller time-share holiday companies are struggling to attract customers. Companies with larger infrastructure and better offering will benefit. We can expect consolidation in this business."
Sterling then would have to decide whether to go for the volume, middle-class segment or not, in its drive to narrow the gap with Mahindra.