Sterling Holiday to start work on greenfield projects early next year

Written by Sajan C Kumar | Updated: Sep 7 2013, 08:18am hrs
The mood at Sterling Holiday Resorts is upbeat as it has recently reported first quarterly profit after a long 16 years. The company is now busy chalking out strategies for the next level of growth. Accordingly, it is introducing a slew of value added services in its resorts. The company will also be kickstarting its proposed greenfield projects at the start of calender year 2014. Sterling Holiday Resorts MD Ramesh Ramanathan spoke to Sajan C Kumar on his achievements since taking over some two years ago, and the way forward. Edited excerpts:

You have been able to report profits after 16 years in Q1. What was amiss all these years, what were the strategies that have paid off and how satisfied are you with the results

The company has potential to do even better. When I say the company has the capability to do even better, it means the combination of the market potential and the capabilities within the company. According to me, what we are seeing today is just green shoots. We have corrected a whole lot of things. The existing customers were not coming to us and we were faced with a funny situation. Roughly during the seven quarters, since I joined in July 2011, we have been taking stock and rectifying many things. Now, we are a function-driven company, divided into many verticals such as sales, marketing, resort operations and projects.

Can you tell us what things made the company really turnaround in the June quarter

We have done a lot, in fact a combination of things. The time share companies has multiple sources of revenues. The most major one being enrollment of new members. The second: All the members give the company revenues in two to three ways. Out of it, the annual maintenance fee and the money they spent on eating and other activities constitute a major chunk. The third large revenue stream is from the interest we earn from the EMIs of funds we give the new members while enrolling them. When we sell to new members on EMIs, it is from our own book we do that instead of going to anybody else. The fourth revenue stream is from selling vacations to non-members. In the June quarter, all these things kicked in. We were also able to control our costs on sales, marketing and employees. The company has 2,500 people on the rolls.

Will it be right to say that redoing resorts did a lot to bring back customers

Yes, it is a major factor. For each room we spent close to R20-22 lakh. We spent R85-90 crore on refurbishment of our resorts so far and in the process we got 450 rooms redone. Till date, we have done half of the refurbishment and by FY15, we will complete the entire process. I must say wherever we have done our redoing, the average room rates (ARRs) have gone substantially up, say from R2,200 to R3,500. The ARRs are expected to go up further. As far as capex was concerned, we got R121 crore form promoters, out of which R85-90 crore was used.

How many members you have added during the last two years

In the last two fiscals, the company added around 6,000 new members. The main task for us was to get the existing members back. Many deserted us because of the pathetic condition of our resorts. The occupancy rate was at dismal a 18% to 19%. Then we started doing refurbishment as well as leasing out of new resorts and it made a big difference.

What is the occupancy rate now

During the latest April-June quarter, the occupancy rate was at 65%. If you take the whole last year, the occupancy rate was at 42% and going forward we are aiming to have at least 10% to 12% higher occupancy rate this year.

What about the proposed greenfield projects you were planning for quite some time

Yes, we are planning to start work on our own greenfield projects one at Coorg and another at Goa early next year. We are in the process of getting clearances with regard to land and other licences. Both at Coorg and Goa we have six acres each and it will have 100 odd rooms costing around R50-60 crore. All the funding will be done through internal accruals. After the two projects, we will be taking up projects at locations including Mahabaleshwer, Perumedu, Ooty, Thekkady, Kodaikanal and Munnar, among others.

What value additions are you planning

The company, at present, has 1,659 rooms and we will add another 300 rooms during this fiscal by adding three to four more resorts. So the number of resorts will go up to 23-24 from 19 at present. All the new resorts will be leased out. In south, we are planning to add one more resort in Kerala and another one will be in western north of the country.