Mahindra Holidays sees growth in domestic leisure tourism, plans Rs 1,200-cr infra boost

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March 18, 2021 5:15 AM

Singh said 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 be on long leases.

Destinations within driving distance are seeing more traction of tourists, however, Goa is an exception, he said.Destinations within driving distance are seeing more traction of tourists, however, Goa is an exception, he said.

Mahindra Holidays and Resorts India, the hospitality arm of Mahindra and Mahindra (M&M) group, is banking on growth that the domestic leisure holiday segment is expected to witness in 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 four 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 three years, which opened up opportunities for domestic leisure tourism. The resort company has already seen a sharp surge in its occupancies, with the latest February numbers hovering around 84%. The occupancy levels had dipped to 30% in the July-September period, before improving to 75% in the quarter ended December 2020.

The company reported a 63% year-on-year increase in profit after tax at `41 crore, while the ebitda (earnings before interest, tax, depreciation and amortisation) margins surged 750 basis points YoY to 33.8%, in the third quarter ended December 31, 2020. The company’s income was impacted due to fall in resort income compared to last year, and declined 8% YoY to Rs 246 crore. However, it reported that resort income 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 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 a year, before the pandemic hit. However, now, the company is expecting 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 opportunity for scaling up like never before 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 outdoor experiences,” Singh told FE.

With models like work-from-home and work-from-anywhere here to stay, Singh is already witnessing a change in the spending and staying habits of people. There is also a change, as people are more keen to have different kind of experiences and explore more outdoors. Destinations within driving distance are seeing more traction of tourists, however, Goa is an exception, he said.

The average length of stay has increased from three nights to four-4.5 nights now, while longer stays starting from 14 days lasting to about a month is also what he is seeing in his resorts. “This was not there earlier. I think there would be a set of people who would be looking at this going forward too. People will stay longer at our resorts as they are in a position to work from anywhere and that is definitely a trend that I am seeing,” he said.

As people are sceptical about eating at smaller or cheaper options, Mahindra has seen spends on food also increase at the restaurants in the resorts. “Earlier, guests would stay at our resorts but would go out and look for cheaper options to eat. We used to discuss this internally and had to make efforts like undertaking guest tours of our kitchens to show the hygiene standards followed. Now, none of that is required, people want to eat in the resort and that has led to increase in spends at our rooms,” Singh said.

While 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 people’s holidaying behaviour and the company’s sharper focus on financial prudence are guiding its future expansion plans. Singh said 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 be on long leases.

“We are not an asset heavy business even today. Our cash is about Rs 850 crore and our receivables are at about Rs 1,600 crore, so our liquid cash is about Rs 2,500 crore and our assets are at about Rs 2,500-Rs 2,700 crore. On our asset mix also we are more on current assets than fixed assets, which is the liquid assets and cash. However, the core idea is to have own resorts and have experiences built to a certain level,” he said.

Singh said not all of the `1,200 crore will be spent on building rooms on its own. “We might also acquire, and that too at distressed prices, so that will be better utilisation of cash,” he said.

The company is in the market looking for acquisition opportunities in resorts based on right location and right price. “Even if the resort is not up to our standards we can correct it, but location is key,” he said. The company is exploring western and eastern India, particularly, as it sees potential to create new destinations and experiences more there, while being open to opportunities in the North and South as well- markets where the company is already well entrenched.

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